Ladies and gentlemen, good day and welcome to the Mold-Tek Packaging Limited Q3 FY 2026 earnings conference call hosted by Emkay Global Financial Services 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.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Dodeja. Thank you, and over to you, sir.
Yeah. Hi. Good evening, everyone. I would like to welcome Mr. Lakshmana Rao, Chairman and Managing Director, and thank him for this opportunity. I shall now hand over the call to him for the opening remarks. Over to you, sir.
Good afternoon, everybody. Thank you very much for joining our Q3 results call. You might have already seen the results published on BSE and NSE that we have the EBITDA up by almost 20% in the nine months compared to the previous nine months, and sales are up by around 12% in value terms. However, in the Q3 to Q3, the sales volumes are up by 6% and the EBITDA is also up by 14%.
Traditionally, every year, Q3 is our weakest quarter but things started moving up right from January itself. We have more than double-digit growth in January this month, yes, this January. And order book looks very strong for February also. Going forward, I think we will be back to normal level of 12%-15% volume growth which is possible in Q2 and Q4 and Q1.
So going next six months is our busy season. So things will start looking up, and we hope to catch up with the busy demand as we are well geared up in all terms. As I mentioned in my press release, we have completed mostly the consolidation of manufacturing units in Hyderabad, where we used to have five units.
And now there's going to be only two units, unit 1 and 10. The printing unit is also now accommodated in one of the blocks of Sultanpur Hyderabad unit. And unit 4, which is a small unit catering mainly to Asian Paints, is also moved to Sultanpur B block. So now the five units are going to be only just two units. Already two units are absorbed, but the unit 4 will be absorbed from March onwards.
This will reflect better operational efficiencies, cost controls, direction and movement of goods, and also personnel. These impacts will be visible hopefully from next quarter. Also another positive sign is the Vibe Generation, with whom we have signed a MoU for developing their product patents and ideas in India for projects and other applications.
We have received the first two component drawings, and designs have been started, and pilot molds will be ready by end of this month. One of them will be ready by end of February, one by March, and their commercial feasibility will be tested thereafter.
Hopefully by end of Q1, we will be having commercial molds producing these components for not only European markets, but these products can also be sold to Indian market under our MoU with Vibe. This is another development.
Coming to pharma, we now have more than 25 clients cleared our premises, audited our premises, and cleared them for production. However, only less than half of them started commercial pickup, and the rest will start in the next coming months, ensuring a good volume growth in the coming quarters for pharma as well. This is the future outlook, and I think more can be discussed over the question and answer session. I put this call back to Anishka to arrange for the question and answer session.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press Star and two. Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Dipak from Nirmal Bang Institutional Equities. Please proceed.
Hi, I am audible?
Yes, please.
Okay. Hi. Thanks for the opportunity. Sir, the first question is on the MoU that you have signed with Vibe Generation. If you can just speak a little bit about the nature of the product, what is the scale size that you have signed it? Does it have anything similar to do with the glue products where the leakages are very critical in terms of that we deliver, in terms of safety of leakages, even in terms of the dust particles?
If you can just elaborate a little bit on the nature of the product. Secondly, on the MoU signed with Swiggy, do you see that kind of a product more often, the churn would be materially higher compared to the churn that we have, say, on the other categories of foods? These are the first two questions.
Yeah. Vibe product details now I can't divulge because under the MoU we need to develop the molds, establish the product quality before we make any announcement. But I can tell you that this product also has applications in India, in our client segments as well. This is adding quite a bit of a value in terms of application and user-friendliness.
Once these products are established and developed, probably by April or May, when we discuss our Q4 results, probably I'll be in a position to throw better light. But I can tell you these products are extremely user-friendly, adding high value, and they're patented by Vibe,
And we have the right to use the patent here in India, and we see applications very much welcomed here also in Indian industry. However, I don't say that this is hundreds of crores of worth of value, but certainly it will be tens of crores, which over a period of next one year, we can see its potential.
Got it, sir. Secondly, coming to the overall volume number, at the starting of the year, we heard of the view, say 43,000- 45,000 total volume we can achieve. Nine months, we are, say, 31,000. Now, looking at Q4, even if we go, say, a little bit of only double digits, is it fair enough we would be, say, of the guided range of 43,000- 45,000, we would be on the lower threshold of the guided range?
Or you think, since you highlighted the momentum is strong at the starting of the year, that we can have a little bit of a better quarter than expected and Q4 numbers can be relatively better than what we had in Q1 in terms of volume?
Probably we will be matching Q1 and Q4. We may not be able to cross it. Q1 is pretty strong. We had 11,400 tons production and sale in that quarter. Hopefully, we will match it and bring it to 42.5 thousand as against 44,000, 45,000, what we initially projected. Still, that will be somewhere around 11% volume growth, a bit less than what I anticipated due to extended rainfall especially in the second quarter.
Got it, sir. On the pharma side, if you see the cash in remains strong and only nine months already you have done, say, INR 25 crore. I just want to understand with Q3 seasonality trend that we have, does it apply to pharma as well? Given that, Q4, we should go back to the, say, normal run rate of INR 10 crore, INR 11 crore that we had. Again, given that INR 35 crore kind of yearly target that we had should be, I think?
Yes. We will be achieving INR 35 crore, though we are at around INR 25 crore in the first three quarters. As you correctly said, Q3 is a dampener for pharma as well. This time it is a little more because of the uncertainty of tariffs from U.S. There were some uncertainty of volume pickups from the pharma industry. I think now that it is clarified, it might start picking up really good.
Whether it is done or not for the Indian market also, winter months are low for Effervescent tubes, which are the major segment which have been impacted in Q3. Looking at the strong order book in middle of January onwards, we feel we may able to cross, or at least reach the figure of INR 35 crore for the full year. Next year we kept a target of INR 50 crore to INR 55 crore.
That is again a 40%-45% growth on the current year number we have taken. That will be adding visibly to the bottom line as well because we are now way above the break-even point.
Got it, sir. Last question before I hand over to you. On the lube side, if you can call out, on the volume side, we are seeing continuous decline. We know this is a space where we are exposed to some challenges, but any incremental sign as per the discussions that we had with clients of volumes growing little bit on the higher side or improving year on? Just a last question. Thanks for the opportunity, sir.
Yeah, lubricants, we are noticing a considerable dip actually. Even in this quarter, we ended up with a minus 10% volume growth in lubricant. It is basically because we are not actively participating in the very low-grade lubricant market of DEF lubes, which are mainly urea-based lubricants. Those areas have become very low-cost product range where Mold-Tek is not inclined to keep its capacity.
That is one of the reasons. General trends in lubricant this year is down. I do not know much about how the lubricant company per se has performed, but due to 5- 6 months of extended monsoon this year, the movement of goods and hence lube consumption has dipped is what the news I have.
Whereas the clients like Castrol, we still have positive growth. There are clients where we are noticed a dip in their volumes. That may be universal reason. Another reason, as I said, is we are letting go some of the low-end lube opportunities.
Got it, sir. Thank you.
Thank you. We take the next question from the line of Singhal from Eraya Capital. Please proceed.
Hello Oh, yeah. Hi, Sir. Thanks for taking my question. While you have shared some color around how the growth trends are shaping up, can you just share more color around, as you said, that 11% volume growth, but what kind of sales growth we can expect in Q4? If you can share a further outlook for next year, if you are in a position. That's my first question.
Yeah. This year we may close the year at INR 870 crores top line. For next year, we certainly have a target to cross INR 1,000 crores. That is a capital. I mean, the internal target is to cross INR 1,000 crores comfortably. That's close to 13%, 14% volume growth. Going by the trends of the Aditya Birla Group, ABG, which has grown around 21% in Q3, we are confident with their Mahad plant also going full stream.
We may continue to see a good double-digit growth in Grasim. With the RCP issues with Asian Paints being settled, we also started seeing volumes of Asian Paints picking up from January onwards.
The RCP, they want 40%- 50% recycled plastic in their paints due to the government statutory obligation. We have successfully developed that formula and able to start supplies from December.
And in January onwards, it will give them confidence that Mold-Tek Packaging will be a pioneer or at least one of the first paint manufacturers to meet the statutory compliance. With that being done, we hope Asian Paints, which is hardly 3%-4% volume growth, can go into double digits in the next financial year, which will be a big pull for the rest of our other segments, which are all definitely in the healthy double digits.
We are confident next year also, we are aiming 12%-15% volume growth, and once we achieve that, we may probably cross the benchmark of INR 1,000 crores top line. This year, EBITDA will be, now as you know, for the nine months, it is INR 125 crores, and hopefully we close this at around INR 170 crores is the target for the current year, up from INR 144 crores last year. That is again a 20%-22% EBITDA growth. Next year, we will comfortably cross INR 200 crores or maybe INR 215 crores, INR 200 crores to INR 210 crores EBITDA.
Understood. Thank you for such detailed information. From EBITDA to PAT, can you share some color around growth? Like where this operating leverage you are expecting to flow in from EBITDA to PAT level?
Yeah. In these nine months, we have declared 18% PAT increase.
Great
up from 44.3 crores in the last nine months to 52.25. Earnings per share also gone up from 13.3- 15.75. We have healthy growth at PAT level also, which is around 18%. Hopefully next year it should hit 20% growth. This is for the nine months period.
Hopefully for the full year, we will be in a position to reach somewhere around 70, 75 crores, 73- 75 crores PAT up from 60 last year. That is around 20% PAT growth, similar to EBITDA growth. Similar growth we can anticipate for next financial year as well.
Understood. You are saying that similar 20% growth we can expect for both for this year as well as next year at the PAT level. Is that correct?
Yes.
Got it. Can you share some color around the CapEx that you would be closing this year? Are there any changes in your guidance as you stated earlier in CapEx for if you have any estimation for next year?
Yes. We have made our budgets during the last month for the next financial year. The good news is the CapEx is going to come down considerably next year because all greenfield projects are more or less completed, but for a little bit work at Mahad. Next year, the major expansion will be in pharma, wherein we anticipate to spend at least around INR 25 crores.
We may enter into a couple of new products like eye droppers and maybe nasal droppers towards the end of the year, nasal sprays. These two products, already eye droppers is in a pilot form development stage, but the project will be out only in the second half of 2026, 2027. Towards the end of the year, we hope to enter into nasal sprays based on our market research if there is a positive demand gap.
But for ophthalmic, we are definitely going ahead. Already pilot models are under development. As we go forward, pharma will at least keep growing at least around 30% thereafter, after we hit INR 50 crores, INR 55 crores next year. Thereafter, we have a target of 30%- 35% volume growth coming from pharma.
A very heartening thing is majority of our clients who have started buying commercial are very happy with our quality and timing supplies. A couple of them are even asking us to set up warehouses near their plants to enhance our business. So these trends give me a lot of confidence that we can become a reasonably big player in pharma in the next two to three years' time.
Understood. Can you just repeat the CapEx rupees and the-
Yeah, CapEx for the Sorry, I didn't tell that. Last year, CapEx was INR 140 crores. This year it will be close to INR 120 crores, and next year target is INR 80 -INR 85 crores.
This year will be at INR 140, and next year is INR 80 -INR 85 crores.
No, last year was INR 140. This year it is closing at around INR 120, and for next year the target is INR 80 -INR 85 crores.
Understood. Okay. Thank you, sir. With that, I will move back to the queue.
Yeah.
Thank you. We take the next question from the line of Abhishek Navalgund from Centrum Broking. Please proceed.
Yeah. Hi, sir. Thanks for the opportunity. The first question on ABG in paints. In the last earnings call you mentioned that, I think in one edge we have done around 2,900 tons of volumes, broadly 30% of the total paints volume.
And you have guided for around 6,500 tons by end of the year, I mean, full year number. So where are we after 9 months? I mean, what is the number in broadly 3Q? Because you mentioned about some 21% growth in this quarter, ABG.
Yeah.
But broadly, tonnage-wise, where do we stand now?
Yeah. ABG this quarter was around 1,480 tons, and so far it is around 4,400 tons, and we hope to hit the 6,000 mark by end of this year.
Sure. The 10,000 tons capacity that we mentioned about ABG, so this includes even the Mahad one or it is only the existing two?
It's including Mahad.
Including Mahad, right? Okay.
Yeah.
Okay.
Currently this year we may be utilizing only 60% of that capacity.
Yeah.
We hope next year onwards it will be above 70.
Sure. Since you will be moving ABG to Mahad, have we got some indication from Asian Paints also? Because you mentioned the RCP thing. Apart from that, I mean, the Satara plant was underutilized for quite some time earlier. Do you expect that the ramp up from Asian Paints will be far stronger from maybe upcoming quarters once you move the production for ABG to Mahad?
Yeah. Once the RCP issue has been resolved, the numbers started going up, and we could develop a recipe which is adopting 40% RCP, which is the government statutory compliance. Thereafter, we are now seeing the numbers moving up and we hope we will gain a double-digit growth in Asian Paints in the coming year.
Sure. Any possibility for market share gains there? Because you said you are the only player who has cracked that 40%.
No, it's not necessarily. The others also will be simultaneously cracking that recipe because obviously the suppliers will go to all the manufacturers. Hence it will be couple of weeks plus or minus, so it won't be a great advantage as such. But once this particular thing is being done, we are confident that we'll get back our old percentage.
Okay. The CapEx for Mahad broadly out of INR 80 crore to INR 85 crore, how much would be for Mahad broadly?
Mahad is hardly anything because already those machinery have been installed at Satara.
Right.
What is happening there is only the shed and auxiliary equipment worth around maximum INR 5 crores. But the other plants, tool room itself, replacement of molds itself around INR 20-25 crores for every year. Injection molding machines worth around INR 9 crores are planned for all the plants put together, especially for north plant where we are seeing a good traction for our Thinwall and QCups.
That is causing our confidence to go up to capture the north market. There is injection molding enhancement of capacity in Panipat, not for ABG, but mainly for the sake of QCups and food and FMCG products. Around INR 25- 30 crores will go towards pharma. That is why the next year CapEx could be controlled within INR 80- 85 crores.
Sure. Last question from my side. I mean, since you mentioned Panipat F&F facility, where are we in terms of the client engagement there? Have we finalized any clients there for QCups and-
Yeah. Several clients, not one. We have at least eight to 10 clients already started buying from us. In this season, we expect it to go up to 25- 30 clients in both QCups and Thinwall put together. We are expecting that numbers to double in this coming season.
Any categories which you would like to highlight, if not names?
All the categories, be it confectionery, be it yoghurt, ice creams, protein powder, edible oils, cashews, basmati rice, like Kukeh in the case of Kukeh. There are several, ghee. All these features we are introducing to start with six Thinwall products immediately and another six by June/July.
That is for the festival season. So there will be 24 molds that is 12 sets operating in the north by June, which is currently four sets. So there will be huge increase in the F&F in that segment, I am expecting.
Already we are seeing a very good trend in Kukeh sales, which are established six, seven months ago. And you all know that Thinwall started only in September, October, so that also is picking up and we see a good improvement in the coming season.
Okay. So the element of seasonality will be relatively lower, right? From Panipat F&F?
Not necessarily. Again, Q3 will continue to be our least season, because all the consumption of paint, cuminate, or sweets or ice creams, they all come down in winter. So generally, Q3 continues to be our weakest quarter.
Next weakest will be Q2, but this year it was pretty little worse than previous growth rates because of extended rains. Otherwise, Q2 also would be moderately good. And always Q3 is the worst quarter, and that is over now. So hopefully next three quarters we will be seeing a good volume rise.
Okay. I am sorry. Sultanpur capacity utilization as far as F&F broadly, would be 50%, 60% or lower?
It is around 60% now, and it will go up now.
Got it.
Yeah. It has to go up now because all the machinery have been erected in one premises and there will be fungibility in case of some machines are idle. Easily molds can be put on, and then other products can be produced. So this gives a lot of fungibility and better capacity utilization at Sultanpur.
Sure. Thank you so much, and all the best.
Thank you.
Thank you. We take the next question from the line of Pratyush Damani, an individual investor. Please proceed.
Hello, sir. Am I audible?
Yeah.
Thank you for the opportunity, sir. Just one question. Once all the greenfield plants are up and all your factories are running, what would be the peak revenue potential?
At peak level, with the current machinery and plant itself, we can reach INR 700-INR 1,150 crores. What happens is, the capacity utilization won't be steady beyond 75%. Typically, beyond 75%, 80%, you will tend to have mismatch of jars and caps. Typically, in injection molding, anything above 75% is excellent.
I can safely say with the machines that are currently there, INR 1,000 crores can be reached. We are adding 21 more machines in the next three months and for first six months of next financial year. That will further add another 10%-12% of the capacity. That means up to INR 1,150-INR 1,200 crores. INR 1,200 crores you can easily say is possible with the existing and planned machines.
Okay. But, sir injection.
Sorry?
Yeah, injection molding.
Sorry?
Hello?
Yeah.
Yeah. I am saying you mentioned that around 75% plus is a very good number for injection molding. Just wanted to understand what kind of difficulty do you face, or do manufacturers face to scale up utility beyond 75% in injection molding?
Yeah. What happens is the product mix won't be perfectly matching your machinery capacities. Jars and lids are not completely fungible. Fetching a lid and a jar machine
Okay
is not viable. You can do it, but it is expensive and won't give the yield. Sometimes you may have to use a bigger machine for a smaller component, thereby capacity utilization effectively will come down. That is where anything above 75% injection molding capacity is considered good.
Also you don't use the entire machine's capacity. For example, a machine is rated to produce 1,200 grams component. You may produce from 700- 1,200. Effectively, your output volume will not be as good as your capacity.
Sometimes the width of the mold or depth of the mold component is different, then you need to use a bigger machine, but you get a lower productivity. All this makes injection molding capacity utilization anything above 75% is a very good deal.
Okay. In pharma, what would be the ideal capacity or utilization level?
Same. Again, there also injection molding and IBM machines are used. IBM means-
Okay
injection molding machine. There also you have similar limitations, so anything above 75% is a good utilization.
Okay. Thanks, sir. Thank you. All the best.
Thank you. We take the next question from the line of Akshay from Canara Mutual Fund. Please proceed.
Yes, sir. Thank you for the opportunity, sir. Just one question which is regarding the MoU that you have signed with Swiggy. Sir, can you just talk a bit more about it, like what is the incremental opportunity that you get from here? What kind of margins can we expect from here? Would it be like, say, an FMCG kind of a margins or it would be like a paint kind of a margin?
Which one you are talking about? Vibe?
Swiggy, sir. Swiggy.
Sorry?
Swiggy, sir. Swiggy MoU that you have done.
Oh, Swiggy. Swiggy will be similar to our food and FMCG margins. Basically, they are buying restaurant packs and food packs for their brands which they promote. They have put us as a preferred vendor for packaging products.
They will be directing their restaurants and partners to buy the packs from Mold-Tek. We have been selected as a preferred vendor for Swiggy restaurants. That will be similar to our restaurant packs, that is, food and FMCG EBITDA, which is around INR 70- INR 80 per kg.
Anyway, volume estimate or assumption that we can have from this, 100 tons or so for the next year?
Volume. Next year, again, we are planning, hoping to do around 12%-14% volume growth. That is why from INR 870 crores, we are hoping we will be crossing the INR 1,000 crore benchmark.
Okay. I was looking more from the Swiggy perspective, like what incremental volumes can come from Swiggy.
Swiggy, I cannot say now because it is just a very recent MoU. They have to spread the news and some of the restaurants have to be contacted, and it will be like one more client. I do not think it will be a very huge addition.
Unless we see it for the next couple of quarters, I cannot comment on it. But the reach will be very big, and this will enable us to reach more and more restaurants and food delivery partners more rapidly. We have to wait and see. It was done a month ago, 15, 20 days.
Okay. Thank you so much.
Thank you. We take the next question from the line of Shiv, an individual investor. Please proceed. I would request Shiv to unmute and then speak. We will proceed with the next participant. We take the next question from the line of Amit Khetan from Laburnum Capital. Please proceed.
Hi, sir. Thank you for taking my question. You talked about the decline in lubricant segment. How much of that is sort of cyclical and should come back next year? How should we look at the volumes in the lubricant segment for FY 2027?
See, actually, I missed one point when I answered that question. Here, I want to add it. One of the reasons why we have a drop in the lubes segment is we lost the tender for BPCL. The BPCL tender was completed last year, and this year, BPCL tender has not come in our favor.
That is one of the reasons why there is a decline in the lube numbers, especially in this quarter, because till last year, second quarter, I mean, a few months ago, the tender has been completed and we couldn't get the tender for the current year. That is one of the reasons for the lube drop. But I think overall, nine months, the drop is not as steep as 10%. It is somewhere around 6%-7%, I guess.
Hopefully next year we should come back to at least recover this loss because we have added Veedol recently, and they started picking up volumes for the last couple of months. It may not be as big as BPCL, but to some extent it can fill up the gap.
Understood. Can you talk a little bit about the competitive intensity in general and specifically in the food segment?
See, as I mentioned to you in the last couple of quarters ago, there is a competitive activity in IML segment now, but with our variety of robots and huge range of products and multi-locational supply, we are in a position to retain most of our clients and even add several of them in this current year.
Last year, we suffered the shortage of printing capacity, which we have completely eliminated by adding quite a bit of capacity in printing and lamination, which has now become handy and enabling us to deliver goods in time, which has again gained the confidence of even smaller and midsize companies. The growth is again back to mid-teens.
Going forward, with Mahad coming in picture into production full swing, we will be sure of mid-teen growth in F&F, while tube packages continue to grow around 25%-30%, basically because the court cases we have put on our competitors copying our patented design are bearing fruit. Recently, a high court bench has given an order in our favor, stopping three of our competitors who have infringed our patented model.
Understood. Lastly, it would be very helpful if you can share what is the EBITDA per kg for the different segments. Just a rough thing.
I think I have been sharing that. For the paint and pails and even tube packs, it is in the region of around INR 30-INR 35. F&F, it is close to INR 70-INR 80. Pharma, it is about INR 120-INR 140, depending upon the product range.
Lubricants would be higher than INR 30-INR 35, right?
Little better than paints.
Okay. All right. Thank you and all the best.
Thank you.
Thank you. We take the next question from the line of Chirag from Keynote Capitals. Please proceed.
Thank you for the opportunity. My first question is related to the paint segment. What will be the volume growth in paint segment ex-ABG?
Overall growth is 10.3%. In that, ABG alone has contributed about 21%, that is around 250 tons. Out of ABG contributed 21% of the 50%, no? It will be 10 units for Q3.
Sir, if you could provide the volume of ABG and last year.
Yeah, it is over 4,800. 250 means about 5%. Out of the 10% growth, 5.5% growth has come from ABG. Rest is from Asian Paints and others.
Got it. Sir, second question is related to the same. Will the RCP, which will be added into the raw material for us, would lead to a decrease in EBITDA per KB in paint segment?
No. What will happen is the RCP will be purchased at a little lesser price and the same benefit will be passed on to the client, so it will not impact our EBITDA at all.
Okay. RCP currently is available at a lesser price than our current raw material?
Yeah, of course. More than at least 10%-15% cheaper. That's one of the reasons why we were not so competitive, because we could not effectively use 40%. Now with the new recipe, we are able to do that.
Got it. Fair enough, sir. My next question is related to the F&F segment. Just wanted some understanding related to once the printing press came into or once the printing capacity came into picture last quarter, what has actually restricted us for growing at more than 15% in this particular quarter?
Yeah. This time it is around 11% growth in F&F, 54% in bulk packs. So put together, it is close to around 12% volume growth. But Q-Pack we grew at 25%. The F&F also is a tepid quarter, Q3. But Q4 looks pretty strong.
Already in January we found it's more than 17%, 18% growth we achieved. Going forward, the season starts for ice creams and yoghurts as the summer picks up in March onwards. So right from February, we expect a takeoff in Thinwall sales.
But I guess there is some issue related to the numbers that you have said. The growth in Q-Pack was around 34% for the quarter year-over-year basis. You have-
For the quarter you're talking. I'm talking about nine months.
Okay. My bad. Okay. Got it, sir. Next question is related to the labor law cost that you have included in the employee benefit. Was the entire cost included for this quarter itself, or it is going to be an incremental cost which will be coming in the next few quarters?
No. The initial employee costs are already absorbed. There is no extra coming up. It will be for.
So one time expense has been taken in employee expense?
Yeah, it has been already taken.
So going forward we are expecting. Can I expect that going forward the employee cost would be comparatively lesser than current quarter?
Yes, maybe. Comparatively it will be lesser because this quarter absorbed a little bit extra provisions of the previous 2 quarters. So going forward it may marginally come down.
Fair enough. Just for the understanding perspective, like we have signed an MoU with Mitsubishi. Generally, the plastic containers would require a significant volume from the client purchase. Just wanted to understand, with this MoU, has been there any kind of talks that they are asking you to set up certain planted machinery into certain parts of the geography of India?
No. At current level they are also not very clear how the volumes pick up. Maybe in future once the volumes really pick up, our north plant, our west plant is also equipped with capability to produce Thinwall products.
What mainly they will be looking at is restaurant packs, and in that we are actually introducing some more variants in this March, April. Probably as their volumes grow up and if they really want to have capacities, we have plants across India now. So additional capacities or molds can be created and production can be effectively made from those areas. But I think I would wait for a quarter to comment upon this.
Fair enough. Sir, one last question from my side. In the oil business, we used to do annual volumes of about 9,500- 10,000 MT. Currently, if I look at the run rate, which is around 1,800, it has significantly dropped from that levels to almost 7,000- 8,000. After losing.
Sorry, what you said 9,500 is what?
We used to have an annual run rate in MT for oil business around 9,000- 10,000. Quarterly run rate of 2,400- 2,500.
Oh, you mean the edible oil part of Q-Pack sale?
No, sir. The oil which is included in the lubes one. The lubes.
Oh, lubes you are talking about. Okay.
Yes.
Yes.
Lubes are-
Lubes is now currently. Per quarter, this quarter we have 1,800 tons.
Around 1,800.
Yeah.
Yeah.
That means already nine months we did 6,900 tons.
Earlier the run rate used to be. After using Bharat Petroleum Corporation Limited after Q2, what kind of run rate should we expect? It would be around 2,000, so we would be doing around 8,000 volumes from lubes for the next year?
Yeah, we will be somewhere around 8,000 tons for lubes. That is all.
Got it. Last question. Are we seeing a pickup in volumes from ex-ABG in paint segments in high single to low double digits now?
I would say from just one month onwards, we are seeing good numbers from Asian Paints, which are more than 10%. From Berger Paints and Kansai Nerolac Paints, we have maybe 5%, 6% kind of growth. But there is an indication from Berger Paints that they may move into some of the IML packs. If they do that, probably with that also we can expect a double-digit growth.
Then, thank you so much, sir. That is it from my side.
Thank you. We will take the next question from the line of Shankar from Miraya Capital. Please proceed.
Hello. Thank you, sir, for taking my question again. You said that we lost a tender to BPCL this year. Can you highlight any particular reason for that? Was the price any reason for that?
Yes, price is the only reason, because we do not want to go below a certain threshold of profitability and pricing. There may be some couple of aggressive bidders who wanted to go at a lower price. That is the reason.
Are we seeing similar competitiveness in other tenders and contracts from other companies?
No, only from BPCL.
Or is it a?
Because these are government tenders. Today, more or less our government lubricant sales have become zero. Not even Indian Oil, not even other lube oil companies, none of them are buying from us. HPCL , BPCL. BPCL was the last to go. We let it go. Actually, in fact, we may start adding another private sector vendor.
Last year we added Veedol. This year, one more client is in the final stage. Their CEO also visited our plant recently, and if that happens positively, probably next quarter onwards, we may have one more private sector lube company joining our list.
So what kind of growth are you seeing in this segment for next one year or two years down the line? Are we seeing it flat?
I would rather think it will be more stagnant or growth of the private sector lube companies will be indirectly related to Mold-Tek Packaging, because now public sector is completely. I don't think in future also we may able to compete or get into that kind of price war.
Probably we'll stay out of it, unless we get an opportunity. Having said that, I would be neutral on lube growth. It will be again back to 2%-3% annual growth. That is what is common with the private players.
Understood. Just following up on my previous question around PAT and EBITDA growth. You told that the PAT will be in line with EBITDA around 20% levels only. We are now expecting the depreciation would also be on similar levels that it is right now around 20%, 25%. When can we see depreciation coming off, or will it stay at similar levels? Is there something that I'm. As you said that CapEx will be significantly low next year. Another year after that, can depreciation come off, or will it be around at similar levels only?
Yeah, I think another couple of years, the depreciation levels will be high because of the huge CapEx we did in the last four years. It may taper down now because, next year, it will be around INR 80 crores. I think in future it will be equivalent to depreciation, which is almost INR 70 crores, INR 65, INR 70 crores per annum.
At the current level, it is around INR 15 lakhs crores per quarter. Around 60. I think it is peaking up now. It may stay around that level or maybe little higher for next one year, and then it will start coming down or at least equal to stay at this level.
Understood. Got it. Thank you, sir.
Once we reach there, the PAT growth will be better than EBITDA growth. Probably instead of 20%, if EBITDA grows 20%, the PAT might grow around 25%.
If your depreciation comes off, and if that comes off at, let's say 2 years down the line, then we can see a higher PAT versus EBITDA.
Yeah.
Just one last question. Can you share utilization levels of your current capacity in totality and across segments as well?
Yes. As I mentioned, our overall capacity utilization is around 67%, I think. In Q3 it is less than 70% for sure. One second. Let me check. It is now down to around 62.5%. It was 74% in Q1. It fell down to 62.5% in the last 2 quarters. And hopefully in Q4 it will cross 70%+. And next year, due to increased utilization of all ABG facilities and North Thinwall and Q-Pack, we hopefully stay above 70% for the next full year.
Thank you, sir. That was my last question.
Thank you. We take the next question from the line of Deepak from Sundaram Mutual Fund. Please proceed.
Thank you for the opportunity. Am I audible?
Yeah.
Yeah. Hi, sir. Sir, I have two questions. My first question is regarding this MoU which we have signed with Vibe Generation. Could we just elaborate what is the commercial arrangement in this MoU? What is the margin profile of this safety caps and closures? When do we expect the revenue to flow through in our P&L from this arrangement? Is it mostly related to, let's say, pharma segment of this caps and closures? That's my first question.
No. It is mainly to chemicals, lubricants, oils, high-end chemicals. Also lubricants. It is nothing much to do with pharma. Maybe pharma chemicals, what you call it, ingredients may use it, but not for pharma application. But it is also used in lubricants. And these caps and spouts are high value-add products.
I guess at least the EBITDA will be in the range of 80 to 100, or can be better. But the volume pickup will be progressive. It will not happen overnight because the developmental time is longer. Their patents need to be developed first into pilot molds.
And once the pilot mold samples are approved, we have to go for commercial molds. So the first two products started pilot mold development. End of this month, one product will be out, and second month, probably end of March, we will have both the products, which are related products.
They will be ready by end of March. And once we start marketing effort by Vibe from April, probably its commercial values can only go out in Q2. So from Q2 is the numbers start coming in. By end of the year we can see, or at least in the Q3, Q4, we can see some numbers adding in few crores. That will be the beginning.
But once the relation is established and they gain confidence on us, there are several products to offer and we are also eager to do it because they are very challenging products. Also good value-add products.
Even in Indian application, under the MoU, we are allowed to sell them in India by paying them some small amount. So that enable us to explore the Indian lube market or Indian chemical market, where some of them are still importing some of the closures.
Not in huge volumes, but it is picking up in India. And if it is in lubes, the volumes are tremendous. So there is a good opportunity, but it is little time-taking. And value add, it is pretty good value add.
Okay. So the EBITDA per kg, you said it is between INR 80- INR 100 per kg, correct?
At least.
Okay. And sir, I just wanted to understand, as of now, then how much of these products are import-dependent and how much is catered through domestic manufacturer? And who will be our competitor here, let's say from a local manufacturing point of view?
No. Currently there is nobody in India making this or using it in a big way. Even in the lubricant industry, our competitors are current competitors. But this product, what we are developing, once the details are completely out and we are able to demonstrate its capability, it will be definitely a different ballgame in terms of its functionality, and which may give us good growth back in lubricant industry also, if it is adopted by them.
Okay. And sir, one final question on cost item. This quarter we have seen that other expenses saw a sharp decline of 8% quarter-over-quarter. Just wanted to understand what led to this. Is it one-off or is it more sustainable number going forward? I mean to say in terms of operational efficiency.
These are definitely due to operational efficiencies. You will keep seeing it improving. What do you mean by other expenses?
Sir
Prabhu, can you help me with that? Why did the other expenses come down, he is saying.
There is some power incentives rebates we got. That is what? That might have brought down the other expenses. As I said, once the units are consolidated, the inter-unit transfers will come down considerably. That is also classified under other expenses.
Okay.
We are also going for solar. More and more solar plants have been getting operational with all the units. Hopefully by June, July, most of our units will come under solar power, which will also save us power cost.
Yeah. Thank you, sir, and all the best.
Thank you. Before we proceed with the next question, participants, please limit your questions to one per participant. We take the next question from the line of Dipak Saha from Nirmal Bang Institutional Equities. Please proceed.
Just one question. What would be the mix for IML and non-IML for this quarter?
Yeah. It is around 75% IML and HTL to label containers. 25% is non-IML, plain or screen printing.
Got it. Thank you.
Thank you. We take the next question from the line of Pratyush Somani, an individual investor. Please proceed.
Yeah. Thanks a lot for sir. Sir, just one question that I see that we have been giving dividend for the past three, four years, maybe around INR 15 crore-INR 20 crore per year. So which is around 0.4%, 0.5% in terms of dividend yield.
But if the same dividend was directed to repayment of interest costs, maybe we would have saved INR 5 crore-INR 6 crore in interest costs annually. So that would have added 1%, 1.2% to ROE.
So can you just once explain the rationale and trade-off between paying dividend and repayment of debt? Because I think shareholders might be a little happier with repayment of debt, so that free cash flow and return on equity is better for us.
Yes, we have taken that suggestion from various investors, not only individual investors, but also funds. And if you notice, the dividend outflow has come down considerably in the last three years, and to safeguard the ROE and also to reduce the debt. So the similar trend will continue in future too.
Okay, fine. Got it, sir. Thank you.
Thank you. The next question is from the line of Chirag from Keynote Capitals. Please proceed.
Thank you for the opportunity. Sir, just one question. Since last eight quarters, ex pharma, if I am able to see all the three segments, food, Q-Pack, and consumer goods, what I am able to see is that our realization or revenue per kg is on a declining trend. This quarter, it is at the lowest of the last eight quarters. Just wanted to understand, is there any kind of raw material cost passing taking place? Or is it because of the competition that is happening?
See, there is a reduction in the overall cost per kg, I agree with you, in the last few quarters. But if you look at our raw material cost, the mix is also coming down. The raw material cost in Q1 was INR 94 per kg, has come down to INR 86.67 now, almost INR 8. And the sale price has come down by around INR 9. So the delta is hardly INR 1.
In Q1, generally our F&F will be highest as a percentage of sale compared to Q2 and Q3. Whatever is the raw material recipe cost come down, we are generally passing it on to the clients to stay competitive. We are not going beyond into our own means to reduce our profitability. Otherwise, we can't sustain growth in EBITDA per kg.
If you look at the EBITDA per kg, last year, nine months, it was 37.6, and this year nine months it is. Last year full year is 37.6, and this year nine months is 40.24. That's a clean INR 350, INR 250 increase in the EBITDA per kg. That shows the company's ability to sustain its margins in spite of competition.
Sir, I totally agree to the point that our EBITDA per kg is remaining constant and in an upward trajectory. But if I am not wrong, in the last conference call, you have mentioned that you are facing some kind of a competitive intensity in the food segment particularly. It is a follow-up question, man.
Yeah.
Yeah.
Definitely competition in all the fields is increasing, there is no doubt about it. Our ability to retain the clients comes with our timely supplies rather than pricing. Because most of the F&F companies are seasonal demand in nature, and they want in-season good service from the suppliers of packaging products.
There, they cannot bet on anybody who has two or three robots and running few product range when compared to Mold-Tek with more than 120 robots and 200 injection molding machines in 10 plants across India.
So definitely, our ability to service them is much better. But for last year, when our printing capacities have been somewhat misplanned. Going forward, we may very rarely lose a client. We certainly lose here and there, but we are able to add much faster also.
Thank you so much, Lakshmana sir.
Thank you. Ladies and gentlemen, due to time constraints, we take that as the last question for the day and would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you very much for all the participants actively participating in our third quarter results investor meet. I also thank Emkay Global for arranging this call. Also thanks to Anishka. You all have a great day. Bye. Thank you.
Thanks. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.