Q4 20/21

May 7, 2021

Ladies and gentlemen, good day and welcome to Q4 FY 2021 Earnings Conference Call of Apotex Industries Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sondpal, CEO of Aloram Advisors. Thank you. And over to you, Mr. Sonpal. Thank you. Good afternoon, everyone, and a very warm welcome to you all. I hope this I hope everybody is safe and well. My name is Anil Sonpal from Valorum Advisors. We represent the Investor Relations for Apkotex Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's Earnings Conference Call for Q4 FY 2021 and the financial year ended 2021. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's earnings conference call may be forward looking in nature. Such forward looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward looking statements In making any investment decisions, the book of today's earnings conference will be purely to educate and bring awareness about the company's fundamental business and financial quarter under review. I would now like to introduce you to the management participating with us in today's earnings call. We have with us Mr. Abhiraj Chokshi, Managing Director And Mr. Anand Kumasi, Company Secretary. Without any delay, I request Mr. Anand Kumasi to give his opening remarks. Thank you, and over to you, sir. Thank you, Anush. Good evening and welcome everyone to this earnings conference call for the Q4 and for the financial year ended 31st March 2021 under review. Along with me in today's earnings call, I have our Managing Director, Mr. Abhiraj Chokshi. I hope you had an opportunity to review the financial statements and earnings presentation, which have been circulated and uploaded on the website and on the stock exchanges. To brief you on the financial performance for the Q4 of the financial year ended 2021, I'm happy to report that this quarter the company has achieved its highest ever quarterly revenue, EBITDA and flat numbers with export also achieving the highest ever numbers. The revenue from the operation grew by about 61.7 percent on a year on year basis to around INR186.9 crores. The operating EBITDA stood at INR 30 crores with EBITDA margins reported at 16.05%, which is an increase of 9 22 basis points. The net profit stood at INR 23.6 crores and part managed stood at INR 2.09 percent, which is an increase of 941 basis points. There was strong demand across most industries. The company scaled up the production and sale of SMP latex, which is used for manufacturing by hand grows from existing plant with both pumps are in at full near to full capacity. The customer product mix has been optimized in the quarter With the better procurement of raw materials and implementation of a cost saving project over the last few months and during the year, which assisted in grossing the margin. The company has finished the company has filed a fresh petition for antidumping against Russia, Japan, France. The hearing has been completed and final recommendation from DGTR are expected during Q1 FY 2022. On the CapEx front, there has been a delay in commissioning of the construction of a new CapEx for XMP, let's say, for the gloves due to delay in obtaining the statutory clearance from the environmental department. For the financial year ended FY 2021, the revenue from the operations stood at INR540.6 crores with operating EBITDA margin of INR68.5 crores, EBITDA margin of 12.67 percent, which is an increase of 5 94 basis points. The net profit stood at INR 44.2 crores and bank margin stood at 8.18 percent, which is an increase of 4 83 basis points. Also, the company declared a final dividend of INR 2 per share of INR 2 each for the financial year 2021. With this, I'd like to open the call for question and answer. Thank you. Thank you very much. We will now begin the question and answer session. Participants are requested to use handsets while asking a question. Ladies and gentlemen, We will wait for a moment while the question queue assembles. First question is from the line of Ankit Kanodia from Smart Sync Service. Please go ahead. Thank you for taking my question and congratulations on a good set of numbers. We have had this discussion over the last 2, 3 quarters like On this metric of EBITDA per tonne, I think it would be fair to say that we were on one way up over the last 1 year or 12 months as we see. So on a broad range, if it is possible for you, how much percentage would you ascribe to these aspects Like better product mix, raw material price movements and customer profile in terms of your EBITDA per ton moving up over the last 1 year. Thank you. Thanks, Ankit. So it's very hard to actually because there are a few reasons why This quarter was good, so it's very hard to attribute percentage to each reason. So as we mentioned in our opening remarks, there was strong demand. There was scale up of new product line. We were able to get to 100% capacity utilization, Better optimized customer and product mix as well as there were certainly tailwind with lower good raw material buying. So and of course, on top of that savings from some of the projects that we've undertaken over the last couple of years have all come to tuition and obviously we're maximizing it as we increase So honestly very hard for us to attribute to all these 4 or 5 points. But what I would perhaps It could help you is what I can say is besides the fact that look raw material prices are volatile and we had good buying, the rest of them, The team is pretty confident that this is sustainable now going forward. There might be EBITDA margins may Vary from sort of industry to industry because as you know we cater to 7 or 8 different industries and they are fairly well diversified portfolio that we have now. That may vary from quarter on quarter a little bit, but by and large, besides the tailwinds of very strong demand and good raw material buying, the rest of it is fairly sustainable going forward. Sure. Thanks. That helps. And regarding this EBITDA pattern, would it be fair to assume that we are currently near the peak EBITDA pattern? Or are we Confident that we still have a lot of room to improve going forward. Look, I think obviously it's been a very good quarter for us. There is obviously room to improve as we go along. As we mentioned in our opening remarks that we are almost at 100% capacity utilization. We are in the course of the next 3 to 6 months. Also, there will be some amount of debottlenecking that will happen, which will allow us to further improve Volumes and therefore EBITDA per tonne will also improve because the fixed costs don't increase at that level. So we are hoping we can at least for the following year, we can make do with these debottlenecking exercises that we have taken up and investments that we've taken up. But really after that we would need significant more capacity in at least a couple of our products and which is what we're working on in now both One plant in Valia, we've already announced this project for X and V Latex for gloves, which unfortunately we've not been able to start the Sachin, and now it looks like it will only happen now post the monsoons because we're very close to the monsoon. So that project is definitely delayed. And in Taloja as well, we're at almost 100% capacity utilization and so we are going to invest some more To increase the capacity in Taloja, again, I will be announcing that perhaps in the next quarter. We're working on the details of that project. Again, both these projects are now likely to be commissioned only early next financial year. Okay. And Regarding all the products which we are catering to right now, we are probably number 1, 2 or 3 in almost all the segments which we are catering to. But we also have a decent market share also. But the overall market size as of now currently appears to be a little small. So how do we see that I'm talking about the domestic market as of now. And how do you see export playing role as we grow over the next say 2, 2 years, 5 years? So, some of again, it's very difficult to pinpoint exactly because different industries have So paper and paperboard packaging is growing quite well, growing at higher than GDP growth rate. Similarly, tires is growing at higher than GDP growth We've had some tailwinds on the tire business as well because the government announced some anti dumping on tires. So there was more manufacturing of tires now in India versus it being imported from China, that has resulted in demand for our products, our VP Latex, which goes one of our polymers that goes into tires going up. So we expect that at least the industry we are in construction, paper, tire, carpet, We think that all these will grow over the next couple of years, 2 to 3 years. However, we are also focused on the export market and I'm happy to report that In Q4, in fact, we've had our highest export sales and even in terms of percentage, it's at around 20% of our sales is now exports. So we do want to diversify in terms of risk, while India will remain for a while will remain our strategic market And the focus will be here, but we do want to export and diversify for reasons like what's happening now. COVID is raging in India much more than elsewhere And the uncertainty of what will happen in India over the next 2, 3 months is much more than some of our exports markets. So it gives us a good flexibility to divert Sales in case India slows down or we see some issues with the demand in the short term? Right. And last question in terms of the anti dumping duty, which we have been discussing over a long time now. So how confident we are that in the as we have mentioned that in our presentation that things will get We done in the quarter 1. Unfortunately, we've actually, we had 2 antidumping cases. 1 was against Korea and that was actually the DTR recommended an antidumping duty. Dutty, unfortunately, the Finance Ministry has not notified it. So for whatever reason and we are Representing there and figuring it out how to do that. In the meanwhile, we have also had in the meanwhile last year, we had also filed against these 3 or 4 other countries. And we are quite confident that the case was is quite strong. However, as a company, we don't want to rely on duties, Whether it's customs duty or anti dumping duty and at this stage and don't forget, this is only for the NBR business, right, which is only about 30% of our total sales. So while it's Significantly, these numbers are without any antidumping duty. In fact, the antidumping duty lapsed in December. And Jan, Feb, March, we were able to do without any doubt. That's not to say the dumping is not It is happening today, but obviously we've been able to diversify and make our assets more flexible and then Focus on some other products as and when the margins are difficult and there are some countries that are still dumping even till today still dumping It is quite high margin. So we expect that certainly some antidumping duties will be levied by DGTI, which falls under the Commerce Ministry, But the finance ministry is a different thing, I'm not sure. Anyway, in the longer term, don't you think that should be I'll request you to come back in the question queue for Sure. But let him finish, Noel, since he was just I think we'll just finish his antidumping matter, if you don't mind. Go ahead and ask your last question, please. Sir, he is out of the queue. Okay, fine. The next question is from the line of Parthav Jay from NBS Brokerage. Please go ahead. Yes. Hi, sir. Yes. Hello. Yes. I'll just take the Gentlemen, a question for on the antidumping duty. Just wanted to understand, once What do you expect once this anti dumping duty is in place and everything, what kind of boost it would give you to the top line, basically? Top line, not really. Frankly, we are still selling. We are selling at the we have to compete and we'll sell. But certainly bottom line, we will see a reasonable increase. Again, Given where we are in the company, it's and the way we have adapted, it may not be a significant loss or Significant boost either way. I'm trying to understand how to I'm just trying to maybe in terms of percentage points, maybe 1 or 2 percentage points more. That is what I would Perfect. Sounds good. Yes. Not a significant one. So just wanted to understand once the all the CapEx, whatever you're planning internally, I mean, Streamlined over next and b) bottlenecking is streamlined over the next 1 or 2 years, whatever it takes. What kind of growth In the top line, you expect to witness from say FY2023 and onwards? So of course, the big fill up will be the new X and B Latex plant that we put up and from And as we grow, the total top line should go up by about Another INR 350 crores to INR 500 crores. Of course, it could not be overnight, but INR 350 crores to INR 500 crores Over 1 or 2 years. Okay. And I just wanted to understand, So what is that overall like the you explained the previous gentleman also, but just wanted to understand what is the overall future demand, what you Steve, domestic and even in international market, and what kind of a growth opportunity what you can see? Look, we think India and our company both are poised. We're at an inflection point. So assuming this COVID issue, We assume that 3 to 6 months ago, maybe there was a wrong assumption, but frankly, we when I say we, I mean, I meant the country as a whole, we thought it was over. But luckily, as a company, we decided to sort of build our assets to be more flexible over the last And we continue to do that and invest for the next 3 to 6 months. So we see great growth opportunities in most of the industries we are in. In India, even though we have high market share, all these industries are growing at a These are growing at a reasonable clip now. 2019, 2020, we saw it was a difficult year for a few months, but At least in the last 6 months, we've seen really good growth rates in India. And as you know, because of the specialized nature of our products where there are only 1 or 0 Companies manufacturing similar products in India, we think we'll continue to grow at the rate of these industries, which is paper, construction, When I say paper, it's largely packaging. So packaging, construction, tires, all these are growing quite well, auto. Auto is one thing that has been up and down, but by and large, the Indian market is growing well. And in exports, we are really not we are a very low So the opportunities are very large. It's up to us to take advantage of those opportunities and really work out some of the issues, whether it's logistics, Convincing customers, which takes longer sometimes in exports. So, yes, so we are quite bullish about it For the next 2 to 5 years. Okay. So you're bullish about next 2 to 5 years, yes? Yes. Okay. Perfect. Thank you so much and best of luck for the upcoming quarter. Thank you very much. Thank you so much, sir. Thank you. I request all the participants. Please proceed to your question for participant. The next question is from the line of Farooq from Aviso Fund Management. Please go ahead. Yes. Hi, Abhiraj and Anandji. Congratulations on the really stellar numbers and I think it's a good validation of All of your efforts over the last couple of years. Thank you. Thanks, Farooq. I just I had a couple of questions. Firstly, on the margins, I think the last time we had these margins was in March of 20 So it's been a gap of some time before we saw this level of margin. And at that time, if you look at the gross margin, the gross margin today is significantly higher, I think I think about 350 basis points, 400 basis points higher than what it was at that point in time. Yet that Increase in gross margin hasn't translated into the EBITDA margin. Now I'm talking about 2018 March and today Because the EBITDA margin is up maybe 100 basis points or a little more than 100 basis points relative to the much sharper increase in the Gross margin. So if you could just explain that difference and while explaining it, if you could give a sense of I think you alluded to it in the previous participant question, also of the cyclicality of this margin that we can So the hope to deal with going forward? Yes. So I assume you're talking about Q4, you're talking about quarter on quarter numbers, right? No, no. Yes, quarter on quarter Q4 of 2018 was that one set of high margin numbers that we saw. And then again, in this quarter, we've done well and we've got reasonably high margins again. Right. So a couple of things, one is that at least compared to FY 2018 versus FY 2021 Q4, In terms of overall quality of the EBITDA margins, I think the Team is quite confident of carrying on with the quality of these margins. In the sense, what I mean by that is we feel confident at that Maybe there was and of course there were tailwinds in Q4 of this year as well and there were at that time as well in raw material buying etcetera. But we still feel confident of doing about 14%, 15% even quarter on quarter. Now there may be as I've told you in our business sometimes it does drop to even lower than that. As long as through the year we have 14%, 15% margins and we feel that it's going forward that's going to be we feel reasonably to be able to do that given where we are with our current business. Now I'll have to look at the numbers and frankly I have not compared Q4 of FY 2018 with Q4 of FY 2020 and we'll come back to you. If you say that the gross margins were Much higher this time around versus Q4 of last year and yet EBITDA margins were not as high as they should be. One of the things I can think of is we have had some fixed cost, Some repair works, a lot of things in the last 3, 4 months that we've had to do, which we couldn't do in the from March to October, just March November, I would suggest because of COVID. So a lot of higher fixed cost has come in into Q4 and maybe continuing into Q1 as well. That may have been the reason for EBITDA margins not going up as much as the gross margins. But as I said, this is just something I'm venturing a guess, but I'd have to look at the detail numbers. Okay, great. Also, you mentioned the Dhein, ex NBR. So and also, I think in the presentation, You have a slide which shows 3% to 5% 3% to 5x Of asset terms. So on incremental investments, am I to understand that on incremental investment, we should look That range of 3x to 5x of asset terms. And specifically with regard to the X NVR project, Now that we are talking about the Q1 of the next financial year, is that again a time that we sort of Feel good that we will be able to deliver by that point in time. And on the NBR expansion, if indeed We do see the antidumping come through. Then again, is that a sort of focus area? And will we be looking Again, at that the larger size of project that we've spoken off in the past? Right. So yes, the first question is 3 to 5x turnover is for this new X and B Latex plant also we would be targeting that in fact with current prices we're looking at about 4x Plus minus a little bit more. The second question was on the timeline of the project. Look, we are ready. We're ready to go. It's Quite unfortunate that it takes it's taking very long and I mentioned that I think you had asked that question last time and Absolutely. And they will ask me what the risk was, if I recall correctly. And I said, look, one of the risks of in this business or what we are trying to do in expansion is really the only risk That I can foresee is just this environmental clearance is not coming on time. And unfortunately, because of COVID now, we're not even able to visit these offices personally. So That's causing a delay, but other than that we're ready to go. We are we finished detailed designing of the project. We feel very confident that as soon as we have it, we will start construction October and we can deliver it in 6 to 8 months. So we are targeting for Q1 of next year now. And as I said, we are also Not only in Gujarat, but we are also looking at a smaller expansion in Taloja for current set of products because we are running you for that utilization and for that also we have applied to Maharashtra Pollution Control Board for permission. And as I said, I'll talk about that in only in the next Once we have a little bit of details on those numbers, but both these we want to do in the first or want to complete in the Q1 of next Yes, ideally, we feel very, very confident that we can do it given this one permission that we need or both these permissions that we need from And your 3rd question on NVR, certainly we are also it's on the card. In fact, we're just It is part of this provision that we would need. So anti dumping is one aspect of it and it's certainly on the card. As I said, we have sort of kept it on hold because there's a lot of opportunity right now elsewhere as well. So we are looking to sort of conservatively grow and we'll take that call in the next few months on doubling our NBR capacity. Right. And Related to that, what is our cash position as of are we sort of net cash or are we net What is our net debt position or net cash position as of? Yes. I think the balance sheet has been published. So I think from that you will see that our we only have about INR 7, INR 8 crores of long term debt and we are Barely utilizing our working capital limits. I would say we have close to 0 debt and we do have cash in the books of about INR 80 crores, So the current market value. So I think we are of course net cash right now and we are waiting to deploy it. Thank you. Thank you. So quite a healthy balance sheet. I'll request Farooq sir to come back in the question queue. I The next question is from the line of Nikhil Chaudhry from Credit Portfolio. Please go ahead. Yes, sir. Thank you for the opportunity And congrats on a great set of numbers. Raj, just one question. Probably last time, same time during the year we saw COVID first wave and Now we are seeing wave 2. Just wanted to understand the demand from industries, how was it last year visavis how we are seeing it this year? Like Is industry more prepared or are we despite having a very severe wave? Just wanted to get a sense on that perspective so as to assess the demand going forward? Look, last year was very different from this year's wave. In the sense last year, I would say COVID was Fairly in India at this time, right, it was just a lockdown that caused all the disruption. This time around, at least as far as manufacturing It's concerned there is no government mandated lockdown. But yes, the wave is the COVID wave is a lot more intense. The demand of certain industries is certainly going to be impacted. Difficult to say how much, I think anyone can give you numbers, no one really knows what will happen. Certainly, auto is something that could be affected, we feel. But some of the other like Tires, which is largely linked to commercial vehicles. Commercial vehicle movement has not really reduced much. Similarly, packaging is doing well. The glove industry that is the newer product that we have is in fact doing much better because of COVID in India and worldwide. So difficult to say what's going to happen to the demand, but it's a very different type of Waive this time than it was, let's say, or different type of situation than it was a 1 year ago. So at least from a supply point of view, we feel confident that it won't be an issue at our We will be able to continue to running our plants as we have been for the last few months even through this COVID second wave, we continue to run it. But yes, I'm not sure about the demand and what will happen in this image. Got it, got it, sir. And sir, last thing on my side is just wanted to understand, With this entering of gloves division and all, probably we are making our revenue more stable going forward. Is my understanding correct? Because Probably the demand from the auto, the building material segment is tend to be volatile and goes along with the cycles. So probably going forward as and when we do the gloves CapEx is on stream. Can we expect certain stability in the revenue going forward? To some extent, yes, because every time we introduce a new We call it pillars. We have now different pillars. We have paper, paperboard, construction, carpet, a lot of specialty products That go into various applications in the Latex side, we have auto, we have non auto for our synthetic NBR. We focus too much on auto, but that's only 1 third of the Indian Frankly, for NBR, there is a price roll, there is industrial application. So and we've added this glove product for the medical gloves industry and obviously that will give us another pillar. And as I said, we have tried to make our assets more flexible. Having said that, there will always be Some amount of variability quarter on quarter or month on month, but we feel pretty confident of doing reasonable set of numbers going forward. The company is more well positioned in terms of where we are and on a much healthier and qualitatively in a much healthier position than it was at the year Got it, got it, sir. Thank you, sir. I wish you all the luck and that's it from my side. Thank you. Thank you. The next question is from the line of Ankit Kanodia from Smart Sync Service. Please go ahead. With your question. Can you hear me now? Yes, sir. Sorry. It was thank you for your follow-up. It was regarding the anti lumping duty. Sir, please let me understand maybe my Understanding of this is not very clear. So what I wanted to understand is over the long term frame, is it right to assume that we should be willing to work with this dumping thing because we can't always Think of helping getting the help from the anti dumping duty because that is something which is out of our control, right? Absolutely, yes, I agree. Yes, so our contention has been and this is what we have been telling DGTR or the Commerce Ministry as well is that today We are the manufacturers of NBRs in India and we just wanted some time, but from a scale perspective, we are much smaller than some of our global competitors or a couple of our global competitors. In India, with if we want to be self sufficient and I think we would all agree that in India we would want to be self sufficient. We just wanted some time to be able to invest more money And double our capacity so that we reach somewhat at least by doubling our capacity we'll be at somewhat global scale, still not Very huge global scale, but still somewhat global scale right now, 70% to 75% of NBR is being imported into India and the remaining Apkotex is Catered into. So we wanted to double our capacity and be able to cater to about 50% to 60% of the current market, which is growing anyway. So And so that was the idea, but you're absolutely right. And as we grow and as we become double, our cost per ton will come down, our EBITDA margin would improve and it will just give us a little bit of time. You're absolutely right. In any business, you do want to be cost competitive without any duty. Why only anti dumping even without customs duty? So we are very clear on that we're quite competitive as far as cost is concerned, but we to be as competitive as some of our global peers, we need to double our capacity and we need And we need some time and some breathing space and that's why we are asking for anti dumping duty for another 5 years. So just to Speak about a scenario wherein even if this antidumping duty doesn't come in our favor, whatever changes which we have done in our business life, we have focused A lot more on the glove slates part. So do we say can we believe that in the next 2 years we'll be able to slowly build up our Yes. As I said, the decision on whether to double or not has not been taken. If the antidumping comes, then for sure the comfort factor that the Board and the management has will be much More than we have 5 years to invest and recoup some of our investments. Then the other thing will come about is do we spend the same Amount of in fund on this product or do we spend those funds on other products And maybe those are better opportunities and better return. So we'll come down to that. But obviously, we feel there's a great opportunity where we only have 25% to 30% of the market in India, And we do want to we feel that we are well positioned to We are the number one supplier in India for NDR. And it is a good opportunity as well. Got it. So CapEx will be determined by this anti dumping entity, if I got it correct, for the CapEx on NDR, right? Yes. I mean, let me put it this way, the antidumping comes, it will definitely give us the confidence to go ahead with it right away. If it doesn't come, then We would reconsider. We may still go ahead with it. We don't know. Okay. Thank you so much. Thank you so much. Okay. Thank you very much. The next question is from the line of Harish Bhatia from MC Global Financial Service. Please go ahead. Yes. Thanks for the opportunity and congrats on the great set of numbers. Just to highlight, what would be the projected budget for CapEx in FY 2022 given that we have shifted the Exenbya Latex project To I think FY23, if I'm not wrong. Thanks. No, no, no, no. We would so we hope to start That project as soon as the monsoon is over and we hope the next 3 to 4 months we'll get this environmental permissions that we need. So we would it's a good question and we are looking at significant amount of CapEx happening in the current financial year. Assuming that does come through obviously a large chunk of the CapEx that project is likely to be about INR 100,000,000 to INR 110 crores now. It would be over FY 2022 and Early FY 2023. In addition to that, there is a maintenance CapEx every year that we're seeing is about 12 crores, 10 to 15 crores now maybe this year we may invest more. And looking at a new project in Taloja to enhance capacity there. And as I said, that's something that that we'll announce shortly. But we are looking at anywhere between, in my estimate, somewhere between IN 100 That's really helpful. Just to address it from another point of view, If you are earlier seeing some sort of revenue potential from this project that we were supposed to put up, How much of you how much that would you think has been deferred into FY2023? I'm talking specifically from the gloves project. Well, the entire thing would be deferred, right? We are not going to be ready with the project by FY 'twenty two. Yes, I mean quantifiable if that's So, we expect about Around INR 350 to INR 400 crores revenue. Once the plant starts and of course it's not going to be overnight, right, once The plant starts, it takes time to build up the sales, but at full capacity, it's about INR 350 to INR 400 crores. Got you. Thanks. Just one last question from my end. Did we see any supply chain issues both on the procurement as well as Sales side? Yes, fantastic question. Yes, absolutely. Absolutely, that's been a real challenge, I would say. Fortunately, Our company has managed it quite well. Some of our competitors really had major problems on supply chain. We have also had some challenges with various materials because We've had obviously current recently 1 or 2 months COVID has hit some of our customers. So they've had to Our customers' customers in some cases, where they've had to shut their plants. You might have heard some of the auto companies already announcing reasonably long plant shutdowns. How that's going to affect demand in the next 2 to 3 months remains an uncertainty and that's yes, that is a risk and that is an Going forward because of the COVID situation in India. But on the raw material side, things are improving compared to let's say 3, 4 months ago, It's definitely improving because for the rest of the world where imports were coming from those there the cases are well in Control now and COVID is well in control. So we don't expect major issue in raw materials going forward. Right. Any commentary on Appco Build? No, it's going well actually. As I said, it's a small part of our business. I've always said so and we'll write some We have a note on it in our annual report this year, but it's going well. It's a very it's still a Very small part of our business that's why we don't really focus on it and it's a profitable part of our business. It's a small brand that we have started a few years ago And we have actively grown it and it's a good profitable brand, but it's still a small part. It's regional, it's in the Western region. We're focused And we're growing externally. Thank you, Abhiraj, and wishing you the best. That's it for us. Thank you. Thank you very much. Thank you. The next question is from the line of Saurav Shah from QRC Investments. Please go ahead. Yes, hi. A couple of questions from my side. So I think in the last call, we had mentioned that we were Undertaking a small debottlenecking of about 10, 15, just kind of issue from us during May or June of this year. That's right. It's the current time. Has that come through? And if that's high, what does that do in terms of the Given that we are running at 100% utilization, I'm just trying to understand the volume growth potential. You're right. Absolutely. So this will be done in Q4. It will be completed in Q4 and exactly what you said, we'll have around 5% to 10% more From sorry, in Q1, it will be completed in Q1 and we'll have 5% to 10% more from the debottlenecking. Of course, the kind of demand that we saw in the last 4, 5 months, it caught us by surprise and we're happy we're pleasantly surprised. And For the year, of course, if you will look at FY 2022 versus FY 2021 numbers, of course, they will be much better because the first 3 months of 1st 3 to 4 months of the financial year 2021 was very tough because of lockdowns. Obviously, things will be much better, but in the quarter wise, we have Very little headroom right now. And it will be it will come through the debottlenecking exercises. After that, it will be through these 2 projects. 1 is this Latex project that we are looking at in Valea, XNB Latex, plus we are looking at a Latex project in Teloja as well, which will help us to some extent increased capacity in Teloja as well. So that as I said, it's a little premature to announce, but I will perhaps hopefully make that announcement in the In addition to that NBR Line 2, which is the big project to double our NBR capacity, which Decision we have not taken, but hopefully we'll take it in the next 6 to 8 3 to 6 months. So, Abhijat, in fact my next question was that for It's to be a viable size. What is the minimum size that you think you need to put on it whether the duty comes or not? Because you said that for us to be sort of globally You think that we need to double our size, but let's say that No, no, no, sorry, not double our no, no, sorry, just to correct you, not double our size, but double our NBR production. Yes. So, NBR from 21 to 40, let's say. Yes. Is that sort of the minimum Plant size or addition that you think line size that you need to do to make it sort of cost competitive rather than doing it piecemeal 2, 3, 5? Exactly. Exactly. Okay. That's helpful. And secondly, just sort of looking at the full year numbers, Do you have sort of other expenses lined up because we don't have the breakup yet, the annual report is not out? Do you see other expenses sort of go up from INR 75 crores, INR 76 which was the case in say FY 2019 or FY 2020 to about INR90 crores this year. Is there any sort of one off in this? Like you mentioned that maybe you took some sort of repairs or maintenance work, which was expired in October, November or even some of it in this quarter. I'm just wondering if there's some of it is not going to get repeated because that is sort of one line, which Seems to have heard the EBITDA jump this year. I think, Arun has that question and maybe that is part of the answer. I'm just trying to understand If you could quantify that, if indeed there is a one off? Well, one and I'm not sure of these numbers exactly, again, I'll have to look at the details, but obviously Our volumes have been higher in the last 6 months, really the last two quarters. And therefore, I don't know if The utility costs like power and fuel, water and so on, obviously, that's part of it or not. But obviously, that has gone up. But in addition to that, yes, we certainly had some one off expenses that we could not take up between March October and therefore they've come in the last 3, 4 months, I would say. And also remember FY 2019 2020, I know I'll finish that and I know you're comparing Financial year and even in financial year 2019 2020 it was a difficult year for us in terms of margins falling, dumping was Very high at that time for NDR. So we had held off on some expenses, which then we approved in the last few months. So yes, there are some one off expenses for sure, but I would have to go back and look at the details. Frankly, Right. Don't know these numbers exactly what you're saying. So if you can send us a small email, then we can clarify this. Sure. And one final thing from my side. So gloves is sort of a relatively new pillar as you said that we've started. Just to get a sense over the last 3 to 5 years, Anything other than that has been a new sort of product either innovation or a launch for us or the geography like this one big change we are seeing is this 20% In the current quarter being export, anything else that is sort of a relatively newer business for us which has the room sort of ramp up other than gloves or other latex for gloves? Well, our current Businesses as well, we have obviously introduced new products, right. We don't talk about it because of different grades in the same product line, which has also allowed us To grow, we've added new customers both in India and abroad. And of course, this gloves is a new industry that we We're focused on, but over the last if you ask me last if you see the last 5 years, one is we made this acquisition of the OMNOVA plant and the Valia plant. In addition to that, we added products in Valia. We've added products in Taloja. We've expanded our geography and this new pillar of We've done multiple things. And the main export markets were for this quarter in particular? Southeast Asia and the Middle East remain our main export markets. We also export into Europe and as far as America and everywhere else, but a large chunk The business comes from these two geographies, Southeast Asia, Middle East, North Africa. Got it. Thank you very much and wish you all the best. Thank you. Thank you very much. Stay safe. Thank you. Thank you. The next question is from the line of Karan from Asian Markets Securities. Please go ahead. Hi, sir. Thank you for the opportunity. Thank you, sir. Sir, just wanted to understand the Pricing differential between our NPR products and what is there on the imports from Korea? And what quantum of duty are we expecting this time? Look, The pricing there is no pricing differential in that sense, right, because we have to compete with whatever they price Whatever they dump, that is Korea, Russia, China, wherever it's coming from. So we have to somewhat compete, but obviously we think that the price And DGTR for the Korean case, they recommended dumping duty in terms of driver to convert it into percentage of Between 3% 25% for 2 Korea depending on the supplier, 3% to 4% was for 1 supplier For another supplier was upwards of 20%, I think it was 22%, 23%. According to us, look, A fair duty again, it would depend from country to country. Some countries, I think the fair duty would be 20%, some countries the fair duty would be 10%. That's up to the DGTR to decide, but we think somewhere around 10% 20% depending on country and is definitely required. Right, thanks for that. And also on the margins, if I have to remove The inventory gains, what could be the sustainable margin, maybe you can provide for Q4 or for the full year FY 2021? Look, I've always said that if we implement our strategy well and we have done that quite well in the last 1 or 2 quarters, Around the 15% 14%, 15% margin on average is definitely doable. We have of course done better than that in Q4. And we expect that for the year as well, there will be some ups and downs, some hits and misses, but We hope to do in the mid teens sustainably. Right, right. Thank you. That's very helpful. I'll get back to the queue. Thank you. The next question is from the line of Dheeraj from Philip Capital. Please go ahead. Yes. Good afternoon, sir, and thanks for the opportunity. Sir, as you earlier said that you are working at almost 100% capacity and maybe you are doing some kind of a debottlenecking. But do you feel that in FY 2022 we will be doing double digit kind of a growth, volume growth? Of course, FY 2022 compared to FY 2021, we'll do we're definitely doing more than double digit because don't forget for the 1st 3 months of the year, we were shut for the 1st 2 months and our Q1 was really We had a lot of challenges. So you know our first quarter numbers. That is help. But of course, if you compare quarter 4, quarter 4 is We were working at almost 100 percent capacity variations. So quarter on quarter compared to quarter 4, we have a little headroom to grow. Okay. But compared to FY 2021, our numbers will definitely be much better. Okay. And sir, when you're talking about the CapEx, so kind of incremental ROE, ROCE are looking after that? Look, as a company, we don't do any we wouldn't make any CapEx investment, if it were not 20% to 25% ROCE, right? But obviously, in we would want to do better than that. Okay. Got your answer. That's it from my side. All the best, sir. Thank you. Thank you. The next question is from the line of Sameer Dallal from Netwodala and Sun Stock Brokers Private Limited. Please go ahead. Yes. Hi, Abhiraj. Hi, Sameh. Two questions. The first one is you mentioned that we will grow at what I mean our growth rate will be that based on certain industries growing at what percent. Is there any sort of breakup you can share in what percentage of your sales of products Go to which industry? Yes, I think we've mentioned that approximately, yes, we can I can tell you now, approximately 20% is Paper and paperboard, which is a large chunk of that is packaging? Some of it is for paper applications as well, but a large chunk of it is for packaging. Another 10% or so is the tire industry, another 10% is construction, another 10% is the 10% to 15% Carpet and Specialty Products. Footwear is again another about 10% to 12% now. Then we have Auto, which is about maybe 15% and a range of other rubber applications, which is another 15%, 20%. I don't know that's Approximately adds up to about 9,500, I think. So I hope that gives you a sense. That's more or less of what we want. So it's a fairly Certain growth rates on both industries. Exactly. So it's a fairly equal distribution. I mean, fairly, I would not say equal, but diversified distribution and we're not I mean compared to let's say 6, 7 years ago when we were highly skewed to the paper and footwear industry, that's definitely come down. Sure. The dependence on the industry. The second question has to go around this NBR plant that you're talking about where you're wanting this antidumping duty. Is it that that plant right now is delivering fast significantly lower ROEs and ROCEs than the rest of the business and putting a drag on the overall margin? Is that Fair to assume. And if that is the case and you feel that the operational efficiencies that come through if you double up would help you Get the higher ROEs, ROCE, then why not still go ahead with it unless the ROEs are really, really I mean, I'm just trying to understand what's happening on that. No, you're right. You're right. So number 1, what's happened with this with the NBR businesses, there have been Years and quarters where the ROE has been very good and then there's been 2019, 2020 where we saw that the ROEs were largely dragged down or the Results of the company were largely dragged down due to NBR. As a result of which we've done a couple of things. One is we have worked on luckily we've had Few cost saving projects that we've implemented, which has definitely helped improve the NBR margins with or without dumping. Number 2, we have made our plant more flexible to actually make other products from the same plant. For example, the Can be latex for gloves. We've been able to make it in the same reactors where we make the nitrile rubber, the first part of the nitrile rubber process. So we made our plants more flexible. And to your point, it may still be and that's the decision we have not taken, it may still be with or without antidumping, it may still be worth it to go ahead and do that Expansion, the only question is, do we use those funds for NVR or can we utilize those funds better for Some other opportunities. So it will come down to that. It may perhaps may not come down to whether the ROE of the NBR plant is Viable or not, the answer may be yes, it may be, especially when you double and especially when you reduce your cost per ton by doubling and you get economies of scale. But it will be a question of where we want to spend our funds, where we want to invest our funds. What kind of cost would that NBR plant be? We have estimated around INR 180 crores right now. So it's a fairly large investment. It is a large investment. Exactly. So I hope you understand now why we have a little bit of a concern. I'm trying to understand that's what I was wondering which you explained very well. Thanks a lot, yes. If I have anything more, I'll definitely be interested Good going guys. Thank you very much. Thank you. The next question is from the line of Ankitchen, a shareholder. Please go ahead. Good evening. Congratulations on good set of numbers. Thank you, Mr. Jain. Yes, I hope you and your staff all are safe and taking care. Well, so far, thank you. Yes, I mean, we've had a lot Thank you for asking, but we've had quite a few COVID cases in the company, but fortunately everyone has recovered without any Serious disease. Unfortunately, we've had a few family members of our employees who have who Unfortunately, we lost, but none of our employees so far. Okay. It's nice to know that. So I have 2, 3 questions. One is on this CapEx part where you have planned 3 different CapExes. 1 is debottlenecking at Taloja plant. Then second is the gloves project at Qualia. And of course, proposed, it's still not approved for the LBR project Again, that's all. Yes. That's right. And the 4th one that I've alluded to today is additional capacity in Taloja, but I will be giving details of that project only perhaps in the next quarter on call. Now what I wanted to know was Once we have done through all these projects, will we have sufficient space for future expansion at both the location? You mean after these projects for more expansion? Yes. We may I mean, we'll have to See how things work out once you've implemented it because one of the other things we're cognizant of is also not just putting up a plant, but the logistics required For moving material, both incoming raw material and outgoing finished goods, it is going to be get more difficult So all these projects are implemented. And yes, from that point of view, we've also started thinking of a 3rd location for our So long term growth, which is 4 to 5 years down the road. Okay. Fair enough. The second thing I want to know was Some years back, we had done we had made some products for the paints industry. But unfortunately, at that time, It was found out that the margins were not remunerative and there was severe competition or so. Is that status agreement even the same is it remains same even now? What we did is we are, by the way, still supplying to the paint It comes under the specialty portfolio, what we call it. So we're only supplying some specialty product to the paint industry, where We have a certain edge and where we are getting the margins that we feel are healthy and sustainable for growing the business. But yes, as a strategy, we tried it out. We felt the margin. We have a range of products we have developed, which we can Manufacture any time, but I think there was a lot of competition in that industry. So we decided to sort of take a take it a little slow and only focus on Certain product. Okay. So that means it has remained even now severe competition is there? Yes. Okay. Next about this corporate industry where we have developed exclusive products for the Gams region. I believe I think it was more than 8 to 9 years that we had done. And that time the potential given was around INR 800 crores. Now if you see the export part, you have said that around 20%, we should also include gloves. So I don't have how much percentage of revenue goes to the carpet industry. So even on a thumb rule, if I take 10% also, That works out to be less than INR 60 crores. So INR 60 crores out of INR 800 crores potential that time is still less than 10%. So is there any particular reason why we are not going aggressive there? No, actually we have done a very good job and we are one The key suppliers, and you're right, it's a very big market. It may be even much more than INR 800 crores. Now I'll have to rework it now. But as I said, look, strategically India so what's happening is there are only A handful, I would say less than in single digits, less than 10 big customers for the carpet industry and the Competitive pressures there in the margin were much lower than some of the other customers, industries, geographies. So while we continue to do business there and anytime we want we can increase the sale as well. It's a question of Where the margins are more lucrative and especially in a time line this when we're working at 100% capacity utilization, one of the things I mentioned was better product and customer mix Our optimized product and customer mix. So we optimize that, what is strategic and we focus on those customers, but we may not want to grow significantly in those customers. There are also payment issues and all those other things that we have to worry about. So given all that, we will we continue to focus on that, but we may not Have aspirations to become number 1 in that geography for that industry. Okay. And my last question is, you had mentioned about having implemented the flexibility in the production in both the plants At value and Paloja, does that include even for this rubber, HSR rubber, there We have around 7,000 metric ton of capacity. Yes. That's correct. So that's correct. Okay. So that also we can Make are the other latates or other products based on the demand? No, Sorry, so I meant HSR, we are able to make in both locations, but due to the nature of the reactors that we have, we can only as of now, we can only make HSR on those reactors. We are looking at replacing a couple and making it more flexible, so we may do that. But as of now, we can make HSR in both our plants. But those specific that those specific plans are not that flexible as of now. We're trying to make them more Yes. Okay. Sorry, if I could squeeze in last question. We supply this VP later to the tire industry. That's right. So that can be used even for the radial tire? No, that is mostly so It mostly goes into biased tires as far as the truck and bus is concerned, but for passenger cars, it goes into passenger and 2 wheelers, we can use it in all They choose across the board. For passenger, you mean to say even at a real time also? Yes. So other than us, Do we have any local manufacturer for this product? I'm pretty sure you can do the research. Google will tell you all the Okay then. Okay. Thank you very much and all the best. Thank you very much. Yes. Thank you very much. Ladies and gentlemen, due to time constraint, that will be the last question for today. I will now hand the conference over to the management for closing comments. Thank you. Thank you very much, Nirav. Thank you to everyone for We look forward to seeing you all in at the end of Q1, we all hope that it will be a better year for all of us. I know it started off very difficult for India. And we can hope and pray that we can come out of it. By the time we meet next time, hopefully the situation is much better. Thank you very much. Thank you very much. On behalf of Equatex Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.