Ladies and gentlemen, good day and welcome to JK Paper's Q1 FY23 earnings conference call hosted by IDBI Capital Markets & Services Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Archana Gude. Thank you, and over to you, ma'am.
Thank you, Lizanne. Good afternoon, everyone. I'd like to welcome Shri A.S. Mehta, sir, President and Director, and Shri Veerappan K.R., sir, CFO, and other key members of JK Paper Limited, and thank them for giving us the opportunity to host the earnings call. I shall now hand over the call to the management for the opening remarks. Over to you, Mehta ji.
Thank you. Good afternoon, everybody, and Ashok. You can talk.
Welcome all to this investor conference call Q1 2022-2023. We have already uploaded our investor presentation for Q1 2022-2023. We can start with some opening remark of Mr. A.S. Mehta and directly with quick question for this session. Sir, I request you maybe you can briefly update about the Q1 performance and then.
Okay. Thank you, Ashok, and thank you, Veerappan, and everybody. Wherever you want to pitch in, you can just pitch in. Briefly, I would talk about what has been the quarter and what is the outlook. Thereafter, if you have any question, you can ask the question one by one. This quarter has been a better quarter from different perspectives. One is that from manufacturing perspective, plants operated much better compared to last year, the same quarter and also the preceding quarter. It's Odisha Plant, Telangana Plant, and Gujarat Plant. All the three plant operations were good, quite efficient.
Of course, we took annual shut in this quarter at our Odisha facility, because after the COVID, this was now the time available for us for annual shut, so which we did in May end and June first week. So that was close to 10 days annual shut, which normally we take once a year. Other than that, plant operations were quite efficient and good. At Gujarat facility, where we commissioned our new packaging board line, pulp mill and also the other utilities. Very happy to share with you that we already achieved 90% of our new board machine and close to 100% of the new pulp mill at Gujarat facility.
From that new board mill, the volume came up in this quarter and that is why you see that the turnover doubled, more than doubled. The two factors, again, the volumetric growth close to 82% and the price realization and also the mix change, which gave us something around 20%+ . That is how the turnover doubled. The normative costs and some pulp costs and also the commodity prices and also the chemical costs, the input cost has gone up. Energy prices have been very high this quarter again. Those were factor influencing our cost increases. But at the same time, as I said that the NSR has gone up because we could pass on the cost increases in the market on the robust demand outlook.
The margin we could maintain, rather we could improve our margin to some extent. On the same margin at double the volume has resulted in the significant increase in our operating profit. Also our finance cost has been much lower because of some gain also. That is the reason that our PAT is higher by close to 150% compared to last year, the same quarter, and also much higher compared to the preceding quarter. As far as the outlook remains strong on the different categories of paper. It's writing printing paper, office paper and packaging boards. The new education policy and also the full-time working in the offices are driving the demand for the writing, printing and office paper.
The FMCG sector, pharma sector and also now, the food sector. I mean, all these sectors are doing very well. On that front, packaging board demand is fairly robust. In fact, the new capacity has fully been absorbed in the market, our new capacity. Also the export market is fairly remunerative. Pulp volume is also going in the export market. This is all the outlook I see for two months. As far as the cost is concerned, I would say that broadly the cost is now at a stable level. Some costs have come down, but there are some other cost increases still there. The energy costs, I don't see any respite for this current quarter. Thereafter, maybe some respite. This is all about now we can.
Actually, in that we can now open for the question answer, so that it will be better to directly take question and answer.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, please press star and one on your telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jatin Damania from Kotak Securities. Please go ahead.
Good afternoon, sir, and congrats for the good set of numbers. I just wanted to check, I mean, as we said that we are able to pass on the entire cost increase in the market.
There is a lot of echo. I am not able to hear clearly.
Sir, now it's proper.
Sure better.
Yeah. As you said that we are able to pass on the cost increase in the market given the strong demand. I mean, are we for the entire year in terms of volume? I mean, I just wanted to understand the long term contract and the short term contract. Because if I look at the last three quarters or three years numbers, we have gross profit margin at 16% first quarter and then average 16% in the subsequent quarters. Just wanted to know your view on the same.
Okay. See, in the paper industry, the contracts, I mean we don't have the long term contracts. Certainly there are understandings with some of the people that, I mean, this is what going to be the volume and this is what, I mean, their requirement may be. There are no formal long term contracts for the volume. This is one part on the contract part. As I said that the output is strong, so, I mean, we are not worried on the volume part. Whatever we are able to produce from our plant, the market is there. This is one part.
As far as your question is that the Q1, Q2, Q3, Q4, the volume volatility is always there in the paper industry because, the Q1 slightly after the month of May, the offices and the high courts and all other things, so the office paper demand comes down. The second quarter, slightly from August, it is down for the printing sector. The third quarter is, I mean, the third quarter when I'm talking it is October to December. This will be a third quarter. It's considered good for writing, printing, good for office papers, but part of the quarter for packaging board, there is some downward because the festival and all other things are over in the month of October or mid-November. The last quarter is better for office paper, better for printing and also reasonably for packaging board.
This has been the traditional trends. This year, I don't see this trend. I mean, there may be many reasons, because in the first quarter we have not seen a downward trend of demand in case of office paper, which normally used to be. It was fairly strong for all of the quarter. Q2, I don't see any impact in the printing sector, which earlier we used to see. Because right now also the printing sector demand is huge and very good traction for the paper demand. At this point of time, I would not say that there will be a major volatility as far as the quarterly trends are concerned for this fiscal.
For this one, because I mean, if you consider that you don't see any impact in the Q3, Q4, is it fair to assume that we won't see a significant impact on the gross margins as a gross profit margin as well in the coming quarter?
As I said that when the demand and outlook is good, there should not be a major impact on the profit margin. If there is a cost, I mean, the cost, we should be able to pass it on.
Okay. Sir, one more question, and I'll come back to you again. You said that export market is remaining true. I mean, can you help us in terms of what is the export contribution to overall revenue and what is the margin difference between the export and the domestic market?
Right now our export volume is close to 8%-10%. I mean, it depends on the domestic market demand. Right now, since the domestic market is fairly strong, we have reduced it. At one point of time we were as high as 15% of the total volume, but we have managed it at something around 8%-10%. I mean, going forward also in coming months, we may restrict it to 5%-8% because the domestic market is fairly strong. It's not a question of the margin in the export. Export prices are remunerative and they're as good as the domestic prices.
Our commitment to the domestic customer is much more critical, and that is why our priority to the domestic market is number one.
Okay. Yeah. Thank you, sir. I'll come back in the queue again. Thank you.
Thank you.
Thank you. The next question is from the line of Harsh Shah from L&T Mutual Fund . Please go ahead.
Hi. Thank you. Good afternoon, everyone, and congratulations for such a solid quarter. Just one thing you just mentioned that the demand continues to remain strong. In this quarter on a volume basis, we were more or less flat versus your Q4 of last year. We're entering Q2, you think that volume will get better on a quarter-on-quarter basis since the demand has continued to remain strong and pricing is also strong?
Yes, I would say. As I said that, when you compare the volume or the total top line for Q4 to Q1, as I said that the Q1 this time we took annual shut. Despite 10-day annual shut, I mean, this is the volume. Now you can think of that in Q2 and there's no going to be annual shut. Certainly the volume is going to be higher.
Okay. Sir, on an average, for this three main categories that we operate in, unbleached pulp and virgin fiber, how much was the pricing fees, on an average that we have discussed in this quarter?
See, as I said that compared to previous year, the same quarter, the average NSR increase is close to 20%.
Okay. Entering the Q2, you think that the prices have remained steady so far? Because I think July and August has also witnessed quite a bit of price hikes by many players, globally as well as in India.
See, now the global prices of pulp and paper, they are fairly, I mean, I would say they're stable at this level. Also we don't foresee a major input cost rise, so there is no reason for a major price correction at this point of time. Yes, minor price changes, minor price correction, and also the mix change would impact the NSR. Impact NSR in the sense, in a positive sense, maybe shared better. Otherwise, I don't foresee any major price correction in coming months.
Okay, sir. Sir, if we assume a better mix and a normalized cost environment, with power and fuel and everything else, do you think that our margins can increase from here also?
I would say that, we need to understand, the industry has been operating at 20%-24% operating margin for many years. At that operating level, industry used to have a ROC of close to 12%-14%, depending on the capital structure and other things. Operating at 30% margin or 30%+ margin is a decent margin. If you are able to maintain this, that would be very healthy. In fact, I would foresee a major or further improvement in the margin, but the top line improvement and also the volume improvement firstly should give us absolute increase in the operating profit as well as the net profit. We should be happy and satisfied on this front.
Great, sir. No, this is extremely reassuring, to be very honest with you, considering how the industry dynamic is played and how each of it has been performing. So yeah, that is extremely reassuring, sir. Just last two data points.
Sorry to interrupt. Mr. Shah, we request that you return to the question queue. There are customers waiting for their turn.
Sure. I'll do that. Thank you.
Thank you. The next question is from the line of Deepak Lalwani from Unifi Capital. Please go ahead.
Hi. Thank you for the opportunity, and congrats on good numbers. As you-
Mr. Lalwani, can you speak a bit louder? You're sounding very soft.
Hello. Is it better now?
Much better. Thank you.
Yeah. As you mentioned that you don't foresee any correction in input prices in the immediate time, how do you view the situation on dumping to inputs? If you can give any sense from that. On the coal, you mentioned in the last quarter that we are getting only linkage coal in the Songadh facility and we're buying from outside on a different charge. Has that situation improved as of now?
Okay. See, as far as the dumping is concerned, I would say that very small quantity is coming as an import in the country right now. Domestic prices and international prices are more or less at par, so the people are finding no reason to import sizable quantity, substantial quantities except the coated paper. The coated paper traditionally 50%-60% has been imported in India, and it will continue because the availability of coated paper in India from domestic manufacturing is limited. Other product categories, we don't find a major import is taking place because the domestic prices are maybe slightly lower than the landed cost of imported products, so there's no reason for people to import such products. There's no dumping right now.
That's not a, well, concern at this point of time. Also, from first of October, the import monitoring mechanism will be in place by Government of India, and there will be some kind of a restriction on the wrong practices being followed by the importers. That's a good thing for the paper industry, and it will help. This is on dumping. As far as the coal, your second question was on the coal. I would say that compared to last quarter and compared to the month of April and May, and also July, June, I think there is a minor improvement in the situation. Availability of the coal from Coal India and their subsidiaries, it has slightly improved, but we will still remain dependent on the imported coal in time to come.
I would say that the costs which I have seen in the quarter one, it has slightly come down, or it may remain at the same level.
All right, sir. That was useful. You mentioned that the domestic prices are slightly lower than the global prices. How much would that difference be, and that is on account of what, if you could give the reason for that. Lastly, you mentioned in your initial comment that we had a gain in our finance cost and also our tax rates are lower. Any explanation on these two numbers please.
The prices, your first question on the difference in the prices of landed cost of imported product and the domestic prices, I would say is that with the different product categories, the difference is a different one. Let's say the office paper. I would say that the people are talking about the landed cost of copier paper something around INR 85-INR 90 per kg, whereas the domestic prices would be close to INR 76-INR 80. That's the price difference. The packaging board, I would say the difference would be close to INR 3-INR 4 per kg. Coated, I mean, there's no point in comparing. The writing and printing paper, the difference may be INR 1 or INR 2. This is the price difference.
The difference or the lower price is because I would say that predominantly we are integrated player. Our prices are not driven, based on the market pulp because globally there may be number of players, those who are not integrated players, so their product prices or paper prices will depend on the pulp prices. Whereas in our case it will not be entirely on the pulp prices and will be based on the demand supply scenario and also with the landed cost of imported products.
Regarding that, sir, in response to what you have mentioned, there is a gain on that, the derivative structures whatsoever we have taken because since our loans, ECB loans are in euro, so we have gained in terms of currency treatment as well as the derivative structures that we have taken on that also we have gained in this quarter. Also there is some rate reduction in our existing term loans that is coming from this quarter. There is a potential gain in this quarter also.
As far as the tax rate is concerned, it is because, as in case of consolidated result, the lower tax rate is because we have the unabsorbed business losses of Sirpur, and we are not subjected to tax on the Sirpur income. That's the reason.
All right, sir. That was useful. If you could give the numbers for the accumulated losses, that will be my last question.
I mean, it may not be necessary at this point of time, and we don't want to disclose at this stage how much is the accumulated losses. Right now we still have some accumulated losses.
Okay. Right. Got it, sir. Thank you.
Thank you.
Thank you. The next question is on the line of Amit Doshi from Care PMS. Please go ahead.
Yeah. Thank you. Congratulations on the great results. Sir, as far as margins are concerned, while we were always already operating on more than 100% capacity since last two, three quarters already. I believe it is more to do with probably this packaging board contribution as well as Sirpur mill utilization. If that were true, which, you know, your margins in packaging board is less than the copier paper, et cetera. How that margin is improved? If my assumption is right, can you just clarify this doubt of mine?
See, you are right, but the packaging board margin is also improving because when you utilize 90%, 95% of your packaging board capacity and there is some price corrections, so there also the margin improvement has taken place in packaging board. Of course, yes, it is lower than the writing printing paper. The margin in copier has further improved. That is why as the company as a whole, writing printing paper, office paper, their improved margins has contributed for a company level margin improvement and stabilization.
Sir, this our wood procurement, you know, there has been significant jump from 32,000 acres approximately to 45,000 acres. So this, of course, it will take its own time to get this benefit. So next five years if I see our trend of the number of acres is around whatever, 25,000, 30,000 acres. So do you believe this increased capacity and this per hectare increase which has happened just last year, so would there be a couple of years where we would be short of our requirement as far as the wood pulp is concerned, or it is enough?
No, no. We will not be short because for our capacity of total pulping, in fact, 15,000 hectares-18,000 hectares of plantation is good enough.
Oh, okay. Okay.
We are doing more than that. I mean, I'm saying 15,000 hectares-18,000 hectares. When you convert into hectares, acres, to my mind it would be close to 30,000 acres-35,000 acres of plantation is good enough. Also because now the productivity has gone up, so it's good enough. We do purposely higher because 100%, the planted woods, you cannot guarantee that you will receive because the farmers can sell to other players or for the other application also. Purposely we do close to 35% or 40% additional plantation so that we don't foresee any difficulty in our sourcing. Right now also we are not foresee any difficulty in going forward.
Our effort will always be to do over 40,000 acres of plantation so that we don't face the problem of sourcing.
Okay, great. Sir, regarding this interest which you mentioned, there is some rate reduction. In this rising interest scenario, what is the debt reduction if you can explain, and with this visible cash flow that we have generated and we will continue to probably generate going forward, is there any change in some debt repayment plans about net debt and what is the debt repayment schedule for this 2022, 2023 ?
Rate reduction in two fronts that come into play. One is regarding that even the short-term also the kind of instruments which we are raising, there is a reduction in that also. That whatever that commercial paper, other things. As well as in the long terms also that whatever that existing rate that is charged on the interest rate we are renegotiating. Within the term loan also we are getting some good line as option on the fully converted hedge line. There are various kind of innovative things we have done on interest rates. It's a mix of this.
Okay.
Sorry to interrupt, Mr. Doshi. May we request that you conclude the question, please. There are participants waiting for their turn.
Yeah, yeah. I'm just asking for my balance question answer.
Sir, there are participants waiting for their turn. May you conclude the queue?
Okay.
Thank you.
Please go.
The next question is from the line of Nirav Seksaria from Living Root Capital. Please go ahead.
Yeah. Hi, I'm Bharat here. Sir, a couple of questions. I want to understand that you're already operating at good capacity across all your units. I think in the new one you mentioned you're at 80%-85%. Is there scope to ramp up volumes further from here?
Of course. As I said that the Q1 we had an annual shut, so-
Yeah.
Now, the rest of the month there should not be any shutdown for the 10 days at Odisha facility. We'll give the additional volume that is one part. Sirpur, we have been operating at 80%, 85%. There is scope to go up at least 90%, 95%. The new board facility we have been operating at 90% and ideally we should run at 100% of that. There is a good scope to further improve the volume.
Correct. When you are increasing your capacity in this particular segment, you're not basically going to put in any CapEx to increase your volumes from here, correct? Whatever CapEx is there, you're going to utilize something.
There's no need of putting a CapEx. I mean, please understand and appreciate that only last year we put-
Right. Of course.
INR 2,000 crore of the CapEx and also something around INR 50 crore-INR 60 crore at the Sirpur Paper Mills.
Yeah.
No question of any additional CapEx for at least two to three years for the volume.
Okay.
It is better that we utilize that capacity fully.
Mm.
In a more optimum manner to extract the volume.
Is it correct to understand that you're generating good cash flow right now? Is it correct to understand that you would be repaying the debts or would you be also distributing some dividends?
No, no. Dividend we have been paying. Last year we paid 55%.
Yeah.
We will be paying dividend. Certainly, our debt repayment. There will be accelerated repayment of the debts.
Which means that from here on, from what I understand, there'll be no borrowing as such and debt levels will come down over the next couple of years since you have no CapEx plans going ahead and you want to increase volumes as well.
Your understanding is right. There will not be any major borrowing.
Yeah.
There will be more repayment to reduce the net debt position.
Right. Finally, what is the regular payment every year for the borrowings? For this year, what are the regular payments and how much more do you expect to pay back?
It will be close to INR 325 crore-INR 350 crore kind of repayment because.
Right.
The green line also getting replaced, starting to implement. Which will go up to INR 400 crores, like 2023, 2024.
Okay. Thank you so much and all the best.
From the line of Sourav Dutta from Minerva India Under-served. Please go ahead.
Thanks for the opportunity. On the BCTMP part, I wanted to understand the status of the new BCTMP mill that has come up in Songadh. Also, as far as the BCTMP use is concerned, how does the current breakdown between hard and soft BCTMP at this point? Any reason to believe that this mix could change going in the future?
The BCTMP pulp mill, we did not put up at Songadh. We put up a bleached pulp mill there. BCTMP pulp, we are still importing, whether hardwood or a softwood. It is used close to 50% of the packaging board. I mean, it goes 50% bleached pulp and close to 50% of the BCTMP. Right now we are importing both softwood and the hardwood BCTMP. We have not done anything on this. We are still working on whether to put our own BCTMP pulp mill or continue to import.
Understood. What is the current breakdown between the usage of hard and soft BCTMP?
Depends on the product to product. I mean, it varies. Every mill to mill it varies.
Okay. Any overall percentage if you could give me a rough idea?
We don't disclose this kind of a breakup because it's confidential, and it's a very business call for a product to product, and the sensitivity is involved. You will appreciate that.
Understood. Secondly, wanted to understand what percentage of the paper board that we're making would be food grade and what percentage would be non-food grade?
The paper board we are producing, I would say that close to, right now we are producing something around, 90% would be the food grade. Close to. I mean, the food and pharma grade. The pharma grade board is also food grade. Only 10% or less than 10% would be for the wedding card or some other applications where, I mean, the food grade standard is not applicable. I can tell you that whatever board we produce is entirely can be a food grade because all the property parameters and the metrics are taken because it's a virgin pulp. No recycled paper or recycled board fiber is involved. Also whatever the coating materials we use, I mean, everything is food grade.
Understood. Just one last question quickly. Given the current currency headwinds and limited softwood availability next year, do you see some sort of a shift towards recycled paper board versus virgin fiber, let's say, in the next three to five years from now?
No. See, the shift depends on the ultimate end product. It is not a question of availability of the softwood pulp or other things. If a company, let's say FMCG or any cosmetic company, if they want to launch their product and they want to maintain the aesthetics and the premiumness, they will use the virgin board only because of the print quality, because of the touch and feel, smoothness, brightness. That depends on the end product, not the availability of the recycled fiber or recycled board.
Understood. That's it from my side. Thanks a lot.
Thank you.
Thank you. The next question is from the line of Venkatesh Subramaniam from LogicTree . Please go ahead.
Good afternoon, sir. Good set of numbers and great explanations as well. Just two questions, sir. Which is, one on what kind of scenario do you foresee, let's say, for the next two to three years? Broadly, the kind of performance that we are delivering, is it? If nothing really upsets the apple cart, are we in a good scenario to sustain our performance, some sort of guidance? What kind of challenges do you foresee? Is it input costs or logistics? What is it that you think can go wrong?
First and foremost thing that I'm afraid of giving any guidance.
Okay, sir. I won't hold you to this, sir. Can you give me broad idea of how things can be if everything goes well? That's what I'm asking.
I agree. Please understand that, I mean, the regulators and the regulation in the country.
Right, sir.
You people know much more than what I know, but very hesitant to give you any guidance on this. I can certainly give you the outlook what I have painted is for this fiscal year and going forward also. Country, I mean, India being the good growing economy.
Right.
A young country.
Mm-hmm.
Focused on education, focused on so many other things.
Mm-hmm.
There's no reason for a muted growth of paper, right? Also the developing society where, I mean, there is going to be a major shift in the food what we eat right now and food what we will be eating going forward because the younger generation will more and more use the packaged food rather than the home-cooked food.
Mm-hmm.
When that trend will remain, the packaging board consumption will further go up. The pharmaceutical sector will boom and that will provide the driver for growth for the packaging board again. The FMCG is likely to grow, so again it will provide a driver for a growth for the packaging board. I don't foresee any major driver of de-growth. That's one on the guidance I can say for next two to three years. For any industry, if the demand outlook is favorable.
Mm-hmm.
I mean, that would be a good period for industry.
Agreed, sir. What is our current realization, sir? Per ton.
I have no idea. I mean, I can just tell you the broad, it would be close to INR 70,000.
Average blended NSR
70-75.
It is 75,000.
Yeah.
Compared to that, what was the previous time this one was given, it was 62,000.
75,000, isn't it? That's probably where I'm getting it. Did you see this kind of sustainable over the next, say, couple of years?
As I said, there's a global pulp and paper crisis.
Right.
Global energy crisis, if they remain the same level.
Mm-hmm.
This NSR will also be sustainable. If the energy prices come down.
Mm-hmm.
If the commodity prices come down.
Mm-hmm.
If the cost goes down.
Yeah.
There's no reason to keep the same NSR.
Agreed, sir. Yeah. Yeah.
Everything will depend on these two factors, energy and the commodity prices.
Right. Okay, sir. That's good enough, sir. Thank you so much.
Thank you.
Thank you. The next question is from the line of Viraj Parekh from Carnelian . Please go ahead.
Good afternoon, sir. Congratulations. Great set of numbers. Just to follow up on the previous question, you said that NSR is close to INR 73,000 per ton, and you mentioned that the export market has been quite remunerative. Do you have a break up for export and domestic NSR?
No, we don't share this, NSR export and, domestic, but as I said in my own way, that some product categories, the domestic NSR is lower by 2%-3% in different product categories.
All right.
Export NSR is high in some product categories. It varies. It depends on country to country, time to time. At one point of time, the export NSR was much lower and the domestic prices were higher. Right now the export is higher compared to domestic, so it varies.
It is also the impact of that rupee depreciation.
The rupee depreciation.
That has played in our core export market. We purposely continue to do that in the export market to maintain our presence and that's not 100% only to gain that higher realization, but other strategies also. Because during the COVID time that export market has really helped us to develop our capacity as a strategy of the company to remain present with the customer.
All right. This second question is on the lines of Sirpur, where you said we are currently at 80%-85% capacity. Out of the current quarterly INR 1,430 crores, how much has come from Sirpur? And if you can share the NSR for Sirpur as standalone entity, what would that be?
See the turnover, when you see the quarterly turnover close to INR 200 crore comes from Sirpur. That you can also see from standalone and the consolidated, the results. It's close to INR 200 crore.
INR 200 crore.
Yeah, it's close to INR 200. I mean, maybe ± some amount. The NSR for the product, the same product manufactured at Sirpur and our own mill is more or less on the same line because the quality of product from the Sirpur is now as good as the product coming from our JK Mills.
All right. That's it from my end. Thank you so much, sir.
Thank you. The next question is from the line of Harsh Shah from L&T Mutual Fund. Please go ahead.
Yeah. Thank you for taking my question again, sir. Just quickly since you did mention that there will be no significant CapEx in next two years, since you've only done it. Are we going to do any small CapEx for debottlenecking any of the capacities?
No. That will always continue and, as you have seen that every year without any major CapEx, 2%-3% volume, we increase from our existing facilities and that's only by debottlenecking. That will continue. That will continue.
How much are we doing on job work basis currently?
What job work? We don't do anything job work right now.
Okay.
I mean, we produce our own.
Okay. Okay, sir. Just last question, sir. One data point. As on Q1, what is the debt and cash that we have on our books?
On a consolidated level, we have around INR 2,572 crore of debt and cash equivalents around INR 918 crore.
Sorry, I couldn't hear you.
INR 2,572 crore of total debt we have on a consolidated basis. On a standalone basis. On a consolidated basis, we have INR 3,035 crore.
Cash?
Cash will be around INR 900 crore-INR 1,000 crore.
Okay. INR 900-INR 1,000 crore of cash on a consolidated basis and INR 3,572 crore of debt on a consolidated basis. Is it right?
No. INR 3,035 crore, not INR 3,500 crore.
Okay.
In fact, last year when I was making comments on this net debt, I said that by end of March 2023, our target is to reduce the net debt by INR 2,000 crore. I mean, to INR 2,000 crore. But I think now we have already achieved this in this quarter.
Yes, sir. It will further go down as we end the year.
Of course it should.
I'm sure, sir. Okay, sir. That's it from my side. Thank you, and all the very best.
Thank you, Harsh.
Thank you. The next question is from the line of Rajesh from B&K Securities . Please go ahead.
Yeah, good afternoon, sir, and thank you for taking my call, and once again, congratulations on a great set of numbers. Sir, I had a couple of questions. You gave the market share data for coated paper and packaging board and slide number five, and you mentioned the packaging board market share is 19%. From this I understand you're talking about just the VFB market, right? Which is about 1 million tons. Are you talking about-
Rajesh, yeah. Can you repeat that? What's the market share you're talking about? Packaging board.
I'm seeing on page five you've given some market share data on packaging board, 19%. You're referring to the virgin fiber board market only, right, sir?
Yes, yes. Virgin fiber board.
Virgin fiber.
Virgin only.
That is the only board we are making, Rajesh.
Right. My next question is, therefore you are addressing a 1 million-ton market where other people are also expanding now from what we hear. This opportunity type will actually go away in a couple of years. Over a longer term basis, have you identified any other market segment that you would like to make an investment? Because writing and printing paper or say kraft paper is something we would not like to enter at this stage, which leaves a large part of the market not accessible to you. Any other segment area over a five-year time frame we have identified in terms of future growth that will make us get into it?
See, your question is right. In fact, sir, that is the reason we have already entered into the business of corrugation and through wholly owned subsidiary, and the first plant is being put up in Ludhiana, and in this year, fiscal year itself, we will start production there. This is a new business we are entering and, when we are entering, I mean, that is just one first plant. Once we learn this trade and then we expand. Our major investment is going to be either the corrugation or the packaging board. When the market further grows, we will see how we increase our board production, and we'll see if we need to put up one more machine. We'll decide in a due course of time.
Okay. Give us the color of the corrugated market in terms of the margin. Do you see margin evolution in terms of currently where we are?
See, that's a different business, but it is not a very capital intensive business. And it's a very, very growing business, so we need to enter into this business because ultimately, unless we participate in the growth, I mean, what will we do? Tomorrow you are going to ask the same question to me. That, "Sir, why are you stagnating?" Ultimately, I mean, we need to be partnering the growth story and the corrugation is growing pretty well.
Right. Low CapEx, high ROC, is that a right assumption for this?
Of course.
For the corrugated business? Though it may be EBITDA margin low.
I would say, this is what I'm saying, that we just entered into it. We need to learn this trade. We need to, I mean, to further sharpen our understanding, because at this point of time it's very difficult to say that it will be high capital-intensive, I mean, the high ROC business or whether it is a low capital-intensive business. I mean, it will depend. Let's first operate the first plant, learn from this, and then we'll see the other plants, how do we reduce the CapEx, how do we improve our profitability. That will depend on our learning from the first plant.
Okay, sir. Thank you. My second question is, sir, on the retail industry, we have seen historically also the JK Paper, the whole plants, particularly Odisha, et cetera, has gone up to 106%, 107%, even 109% utilization . Is it conceivable that on our INR 7.61 lakh we can actually technically do up to INR 8 lakh tons or somewhere around there? I don't want an exact figure. I just want a direction in terms of where we can go.
No, of course. Our expectation is to do INR 8 lakh tons next year. Yes.
Okay. Thank you. Thank you, sir.
Thank you. The next question is from the line of Danesh Mistry from Investor First Advisors. Please go ahead.
Hello, sir. Hi. Congratulations on a good set of numbers. Actually, my question, one of my questions was answered by you through the previous caller's question. I had one more question, sir, which is on the NSR, which is there. Number one is that if you can explain to us a little bit how this pricing is decided? Is it versus import parity or something like that? And second, up to what level do you think we can continue to take it up? Are we facing any pushback from the customers or the industry as of now, sir? Basically in pharma and food and all of that. Thank you, sir.
See, the pricing decision is always based on the many parameters. It is not just one. I mean, we make it at par with the imported product. No. As I said, right now the landed cost of imported product may be higher, but we are not keeping our price that way. The prices are decided based on the demand supply scenario, affordability, and also R&D . Certainly, customer would always resist for any higher price increase.
Mm-hmm.
Any higher price. I mean, you and me, we will also resist for any product we are buying in the market.
Right, right.
Resistance is one. Because anybody would like to purchase at the cheapest level and would like to sell at the highest level, because this is what is happening.
Correct.
We always keep our price moderate, keeping in mind the input cost, keeping in mind our own desirability of the profit margin, and also the imported material cost or prices in the global market. All these factors are kept in mind, and that is why we keep our price like this. As I said earlier also in a different question, I don't find any reason for further any sizable price correction because at this level it gives a decent margin, decent ROC. I mean, why should we increase the price even if the global prices move up, unless there is a further spot push into the market.
Got it. Sir, just one to two questions from my end. This was very helpful. Sir, in terms of in the industry, are we seeing any new capacity additions coming up, sir, in the next two to three years or so?
See, the industry capacity addition will go on when there is a robust demand.
Mm-hmm.
There's no major capacity announcement right now in the public domain.
Okay.
We can only keep a track of the capacity announcement available in the public domain. At this point of time, we don't find any major capacity announcement by any major player. In the country there are many small players and they keep doing something which may not be in the public domain.
Got it. That would not be a major part of the overall industry then, the small players maybe.
Collectively, if the smaller players collectively do many things, I mean, it can become a sizable, but they are not in the public domain. Any major paper company, those who are part of the IPMA association, there are 17, 18 companies, major companies are part of this association, and I find no major CapEx by any of them.
Understood, sir. Understood. Thank you, sir, and wish you the very best. Thank you very much.
Thank you.
Thank you. The next question is from the line of Akhil Parekh from Centrum Broking. Please go ahead.
Actually, last question.
Thanks for the opportunity, and congratulations on a very strong set of numbers. My first question is on the cost item, right? If I look at it on a per ton basis for FY 2022, there are certain line of items which are short of significantly, say employee cost per ton or other expenses per ton and power and fuel per ton. Going forward in 2023, probably do we see any certain line of items where we can see a pull-off in terms of in per ton?
In terms of that challenge, some item like power, fuel and raw material may be higher because we have taken a shot in this quarter, as well as some expenses related to power, forex that is occurring, that other expenditure. Company is conscious wherever that reduction is possible. We are taking our efforts to do it. It is in the same line of that where, as the volume grows, that means that it is to be incurred.
Okay.
Because of that, also that coal charges has some impact is there in also that raw material, chemical charges. That impact is occurring in other line item also. Thank you.
Even in employee cost per ton, wage-wise, if I look at it, historically it has been below INR 6,000. Rather I would say FY 2019 was, you know, a peak of cycle at around INR 5,000 per ton, but now it is up to almost INR 6,400 per ton. So how do we see that line item basically for next two years?
You are comparing on a consolidated basis or a stand-alone basis?
I'm comparing on a stand-alone basis.
No, no. You have to compare with the consolidated basis, then you will get a right picture. Whatever the highest volume of the Sirpur, that also making it happen from JK Paper as well. And also whatever the fixed cost because of that new packaging board line has come. You have to take it on a consolidated basis, then you will get a right picture. In terms of the percentage, if you see that, yes, like it has been, there'll be a reduction. If you see that compared to the previous corresponding quarter, there'll be a reduction from 10.5%-6.5%. There's no reason that in absolute number it will go up. If you compare that, it's doing better than that because of this COVID situation or that.
In fact, all these factors, you also have to build up while calculating your position.
Sure. Got it, sir. My second question is on our NSR numbers, if I look at it for Q4 of 2023 vis-à-vis FY 2022, it's up by almost 15% odd . Plus, if I look at our volume run rate, it looks like we probably can end it around this year at around 750,000 tons. Would that assumption be right? Like, if we assume, say, sales realization growth of 15% for this year vis-à-vis last year, plus the volume at around, say, 750,000 tons basically FY 2023.
Volume growth already we have declared our capacity with overall consolidation 7.6 lakh tons. Currently as sir has mentioned, we are running our plant at peak capacity. The volume should be around that level. High realization growth, as of now we can't give you that confidence in the sense that that growth will continue. This is the market sector which that in the current quarter that has been affected.
Okay. Last, has there been any price correction in the brown paper, kraft paper ?
No, we are not in the brown paper, so we don't want to give any comment on this. It will be unfair on our part to tell you, I mean, the pricing of the brown paper.
Okay. Okay. Got it, sir. Thank you so much.
Tha nk you. Thank you so much, and everybody showing keen interest. Hope that we have clarified all the questions and the explanation, whatever you wanted.
Thank you, Archana ji, and thank you all for participating in the call. We will be certainly interacting with you in wherever we get that opportunity. Thank you.
Thank you. Ladies and gentlemen, on behalf of IDBI Capital Markets & Services, that concludes this conference call. We thank you for joining us. You may now disconnect your lines. Thank you.
Thank you.