Ladies and gentlemen, good day and welcome to the Q3 FY 2025 earnings conference call of Mold-Tek Packaging Limited, hosted by Emkay Global Financial Services. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Gupta from Emkay Global Financial Services. Thank you, and over to you, Mr. Gupta.
Thanks, Michelle. Good evening, everyone. I would like to welcome management and thank them for this opportunity. We have with us today J. Lakshmana Rao, Chairman and Managing Director. I shall now hand over the call to him for his opening remarks. Over to you, sir.
Good evening, everybody. Thank you very much for your interest in our quarterly and nine months results. I am glad to inform you that there is a considerable improvement in the performance this quarter compared to the previous two quarters. The sales are up by 15%. In volume terms, it is up by 7.5%, in rupee terms, it is up by 15.25%. EBITDA also gone up by almost 12%.
But due to higher depreciation and interest, the PAT has dipped by 3.9% compared to Q3 last year. The one significant improvement what we are going to see in future is our entry into pharma is well consolidating. We are in position not only to add several new products and several new clients, but commercial supplies to some of them started as late in December, and it is picking up pace in this quarter, that is Q4.
For example, our sales were hardly INR 1.5 crores in pharma, compared to INR 2.27 crores in pharma against INR 1 crore in Q2. But in the month of January itself, we have crossed INR 2.1 crores due to the commercialization of the samples that were approved during the last several months. Within a year, less than a year, company could come to a considerable capacity utilization of pharma facilities. Currently at INR 2 crores, it is almost occupying 40%, 45%, 40% of the capacity. And steps have been taken to enhance the pharma capacities also. During the question answers, we can have more detailed discussion. I go over to the moderator to start the question answer session.
Thank you very much, sir. We will now begin with the question and answer session. Anyone who wishes to ask questions may press star and one on their touch-tone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Gaurav from Capital Farming Consultants. Please go ahead.
Yeah, thanks for giving an opportunity. I hope I am audible.
Sir, I request you to use your handset. It is a little bit muffled.
Okay. I hope now it is better.
Yes.
My first question is, some of the clarifications vis-à-vis the last quarter when we were conducting this conference call. We mentioned couple of challenges from supply side within Mold-Tek. That was like, for example, printing machines were not available, which impacted our, I think, paint packs supply. Then certain molds were not also available, which impacted our pharma confirmed orders, right? And same way in food and FMCG segment, we were expecting that the supplies will start from majorly January onwards, right? In all the three segments, either availability of machine or molds or supplies from Panipat plant in January, if all of them have started or some of them are still facing challenges?
Yeah, that's good that you're following it up very closely. Yes. One of the challenges we have been facing for last several months is the printing capacity of IML and procuring the IML in time, which is impacting our supplies in food and FMCG sector, and also to some extent in the paint and roofs. These printing machines have just arrived, a couple of them, one from Italy and one from Delhi.
Both the machines are in transit. Actually, the Italian machine landed in India, and in this week it will be reaching our plant. As we anticipated end of January, but they're reaching by, say, 10th of February, and probably the erection will take another couple of weeks. By certainly by end of February, we are ready to have almost 35%-40% increase in the capacity of IML print labels, which will also die cutting.
Which will enable us to face the upcoming season, which generally starts middle of February and goes up till July, June ending. These next four, five months is crucial, and thankfully, we are ready with the enhanced capacities. Coming to the pharma, the molds which have been developed for pharma are all approved, and I'm glad to inform you that we are not even one year old in pharma because the plant was inaugurated only in February last year.
Within one year, I'm glad to say that we have developed 12 new bottle SKUs and two more child-resistant featured products for pharma industry in India. I'm also glad to inform you that recently, in the month of December, we have taken up a challenging project for one of our Hyderabad-based MNC company exporting to U.S.
A product which has been applied for patent, and that product supplies also have started at the trailing batches of about INR 2 lakh pieces, worth around INR 25 lakhs-INR 30 lakhs per month, but with a potential that can more than triple in the next financial year. That product, we are applying for the patent because there's a lot of IP and design concepts have been incorporated in it, and we'll appreciate with the client for quick development within five weeks.
That product showcases our ability to develop new packaging solutions in the pharma industry, which has been highlighted in our course of audits by various other companies also. These molds are now ready, and supplies also have started, and we are gaining up additional capacities in pharma within the premises, what can it accommodate in the next three to four months. For the new premises, construction also has been initiated, which will be probably starting from next calendar year.
That's great. Coming to the presentation that we have uploaded for nine months, this quarter result also. Overall volume, we have mentioned that there is an increase of almost 7.29% from 26,590 metric ton to 28,530 metric ton. If you can give in this nine months volume, what exactly is the volume of paint packs vis-a-vis last year nine months?
Yeah. The paint packs volume has grown up by almost 14% this year, thanks to Aditya Birla Group starting commercial production at JR and Panipat, and recently at Mahad. Paint is up by 14% in nine months to nine months numbers in terms of value. But in terms of quantum, that is in tonnage, 8.4% is the growth in paint, 7.3% in food and FMCG, 18% in Qpack, that is our square pack. Pharma, of course, is contributing minus small numbers. Then rest is loops, is down by around 1.5%. Overall growth is around 7.31% in tonnage.
Understood. Would you be able to give the absolute number of the paint segment in metric tons this year nine months vis-a-vis last year nine months?
For the nine months, it is 13,733 tons, which is 48% of our overall volume.
Last year it was?
Nine months. Loops is 24%, food and FMCG 12.7%, Qpack is 14.6%, and pharma is 0.35%.
Sir, I am asking last year nine months volume of paint packs.
Last year nine months volumes. Do you have them?
Last year.
Okay. Last year it was 12,670 paints, 7,006 in loops, 3,368 in food and FMCG, 3,546 in Qpack, and pharma zero.
Sir, considering the nine months volume of paint segment last year vis-a-vis this year, and considering that we have grown substantially, considering the supplies that we have made to the Aditya Birla Group, right? If we exclude the Aditya Birla Group number, I am assuming that it will be somewhere around 1,500 metric ton or 2,000 metric ton in nine months volume. So there seems to be degrowth in the paint packs on a nine-month basis, right? If my understanding is correct.
If you remove ABG, it is a negative in other paint segment. ABG alone has contributed.
Is it because of the Asian Paints or some other players have also contributed the growth?
Major reduction is from Asian Paints, because they are one of our largest customers even today. So there we lost almost 10% volume. And others like Nerolac and Berger is not much of a downfall. It may be 4% - 5%. But the major reduction is from Asian Paints.
Would you be able to elaborate what are the reasons why such kind of a degrowth, almost 10% in our volume share with the Asian Paints is there?
One of the reasons is, I think they also have tepid growth, one. I don't have the exact numbers, but there is a tepid growth in their volumes. There is also redistribution of volumes between the vendors based on pricing. We are little sticky on our pricing. Probably that is one of the reasons why we are losing some part of the business.
Okay. Sir, last question from my side, if you may allow. In one of the last con call also, you mentioned the same challenge, that redistribution of the volume by Asian Paints to some of the other suppliers also. One of the supplier is their related party also, right? You mentioned in the con call. Since we are backing up on the Aditya Birla Group, specifically this Birla Opus in a big way. We have spent a lot of money in the CapEx, right? Do you foresee the same kind of a challenge going forward, that in their scenario also there might be some related party to whom this volume distribution can happen and our entire CapEx that we have done over a period of time, it might not give that kind of a ROIC?
You see, we are neither related to Asian Paints nor ABG. We are just a professional company doing our best services and our quality is what is giving us the opportunity to serve these kind of giant companies. Having said that, ABG has all the suppliers other than High-Tech. Rest of the all paint manufacturers you name in country are associated with ABG one way or other. That is not the reason. Like our association with ABG won't make Asian Paints to reduce our volumes. Definitely, I don't think so. It is maybe redistribution or pricing that could be the reason is what I guess. Because Jolly Containers or other than High-Tech, you name all the players in the paint segment, they're all working for ABG. So that's a common feature.
No, sir. My question was slightly different. Let me rephrase it. Like, because there is a related party which also supplies to Asian Paints, and because it is also a listed entity, as far as I recollect, and the numbers that they have reported, they have taken a substantial chunk of volume as well as value-wise from Asian Paints, right? Since we have invested for Aditya Birla Group also a lot of money in terms of CapEx, do we foresee that a certain related party of ABG group maybe in near term can also get into, if not already in this vertical, maybe get into this vertical and then our supplies might be curtailed somewhere down the line two, three years?
Oh, you mean, think that Aditya Birla might start on their own into plastic?
Some of their related party group company. Do you foresee that challenge?
No, I don't foresee that because there was no such talk or even a thinking of mentioning such plans in Asia.
As per your industry knowledge, sir, if Aditya Birla Group is having any such company which is also in this paint manufacturing segment or not at all? Because you know the industry very well as compared to us.
As of today, because we certainly have information about that. As of today, there is no entry of Aditya Birla Group directly or indirectly in any of the plastic molding lines.
That is great. That is all from my side. I will come back in queue. Thanks a lot.
Yeah.
Thank you. The next question is from the line of Sunny Gosar from Axis Securities. Please go ahead.
Yeah, thanks for taking my question, sir. I am trying to understand the EBITDA per kg trajectory. If I can remember correctly, we are expecting to cross the EBITDA per kg of INR 38 by the year-end. But as of now, it seems to be somewhere around INR 36.7. What are our expectations for the full year and when do we see us crossing the earlier target of INR 40 per kg?
Yeah, probably in the Q4, we may see the number crossing 38, as the pharma contributions are substantially improving compared to the previous quarters. But for it to cross a level like 40, maybe only in the next financial year we can aim at it because pharma will be in big numbers compared to what it is in this current financial year.
From INR 2 to INR 2.5 crores what we did in the first two quarters put together, pharma probably would do another INR 5.5-INR 6 crores in the Q4. That takes the overall total to about INR 8 crores for the year. So from INR 8 crores, we are aiming at almost INR 30-INR 35 crores turnover coming from pharma in the next financial year. That substantial improvement of high-margin business should enable us to move above the, or at least close to the 40 mark next financial year.
Okay. And one small question. This quarter, we increased the volumes by 7.5%, but the revenue was higher by 15%. So there is clear improvement in the realization per kg. Is this the current level is more or less that we will be able to hold or do you think it will improve further in the coming quarters?
Yeah, there is an improvement due to two reasons. One is raw material price also has gone up marginally. It's not really gone up. If you take nine months, it's gone up by around INR 4. So the selling price could go up by around INR 8. So that is why we are able to sustain the EBITDA improvement, which is almost 11.9% for the quarter and 6% for the overall nine months, in spite of increase in staff costs and labor costs due to the new plants that have been installed and are commissioned in this year.
All the capitalization benefit, not benefit I would say, capitalization of expenditure is now getting impacted in the P&L. So that way the underutilization of these new capacities is causing a challenge in increasing the EBITDA. But going forward with the ABG numbers improving and pharma numbers also improving from probably next quarter onwards, we would be able to see the EBITDA per kg improving.
So sir, I am asking on realization per kg. So I think it will be a product of raw material prices and demand.
It is a product of raw material and also combination of the product mix. As we grow in pharma per kg, realization could be more than INR 300 to INR 350 whereas our current average is INR 206. So even if pharma becomes a 5% of our sale price, sale volume, it would be taking up our sale average price from INR 205, INR 206 today to INR 215 level. So that can substantially improve the pricing, hence margins also.
Understood, sir. Very clear. Thanks a lot.
As of today, it will not be able to pull it up right now. But as I said, the Q4 is promising. We are almost doing more than double than what we did in the first nine months in this quarter. So that way, little improvement can come in Q4, but substantial improvement, I am sure will start showing from Q1 of next financial year.
Thanks a lot, sir. Thank you.
Thank you. The next question is from the line of Mayank Agarwal from Scientific Investing. Please go ahead.
Yeah, thank you for the opportunity. So I have question on the margin pressure on the revenue book from the paint and the FMCG segment.
Okay, go ahead.
Yeah. So how much of the revenue book has margin pressure, especially in the paint and the FMCG segment you are facing right now?
See, almost paint segment contributes to us even today, 48% of volume and lube is 24%. In terms of lube, we are reasonably all right because the product quality is very demanding in lube compared to paint. So the competition is not so severe in lubes, hence price pressure on lube packs is not so much. But in paints, being a very thick product and lot of suppliers are already existing in the country, there is always a price pressure on paint industry, sales to paint industry. In food and FMCG, as we are progressively adding new products, for example, this year, one of our biggest catch is Surf Excel, which is now coming in. You might have seen in the markets that it is a four-pack Surf Excel. I think it is each 1.5 kg or 1 kg.
They are packing in our 10-liter square pack, and that has become a very big hit in the market, and their volumes are increasing, and the indications are whatever we sold this year might at least grow by 40%-50% next year. So Surf Excel is a big catch. We have been talking about Horlicks for last two years. Now the clearance have come for Horlicks and their numbers what they indicated are also very encouraging. So in food and FMCG going forward, better utilization and the molds were made more than a year ago for Horlicks. In the case of Surf Excel, the molds are added recently, and that product is also doing good. So going forward, even food and FMCG, we anticipate double-digit growth from 7.3% this year. It should be in the range of around 10%-12%.
Okay, thank you. On the new paint CapEx we have done, will it work on the same margin or more or less like as it was before?
In paint or?
The new paint CapEx we have done.
See, in the paint industry, as of today, the EBITDA margins are below our overall company average. Increasing the paint industry growth, only in the case of Aditya Birla Group and Asian Paints, where quality and IML being highly used, we have decent EBITDA margins. Other industries where we still use screen printing, there the EBITDA margins are not so encouraging. That is one of the reasons we let go some of those opportunities and concentrate more on high value add like FMCG, food, and now pharma.
Okay. Can you give more light on how you are doubling the capacity for the pharma segment?
See, in pharma segment, it always goes with starting with audit and then followed by stability test and then machine trials, and then batch test. After that, commercial supplies will start. I am very glad that 12 of the reasonably big pharma players in India have already audited our premises in the last 10 months, and all of them cleared our premises for the next steps.
That is stability, and even some of them completed trial lot supplies. Commercial quantity started from somewhere in end of December. Their reflection is shoot up of turnover in January because some of the products have become commercial. Same trend, if it continues, we hope good numbers to happen in Q4 and even from Q1 onwards for next year. Another thing is three more products I have mentioned in the press release today, squeeze lock, CRC, 28 mm CRC.
We are working on two more SKUs for another large MNC in India. These four, five products are in the anvil. The molds are in the final stage. Samples have been approved. Now line trials are going on. Maybe April onwards, they will get into commercial production, shooting up our numbers in the Q1. If things go well, pharma can be a star contributor in the next couple of quarters. That is not the end. In fact, it is the beginning because, as you know, pharma packaging is a very huge market of more than INR 3,000-INR 4,000 crores per annum. So what we are looking at is INR 30-INR 40 crores next year is not even 1%. Also added to that, we are very I wouldn't say fortunate. We have been identified even by a U.S. company to procure canisters from us.
I have been talking about our products, which are unique compared to our competitors in India, especially in the canister segment. We have single-use canister with laser marking on it, whereas others are still using paper label and double-use canisters. These are what canister models which are used in U.S.A. In fact, right as we are talking today, one consignment of 1 million pieces of canisters are being exported to U.S. directly.
So that opportunity also opening up our ability to aim at U.S. market directly instead of going through Indian pharma companies. We are even exploring those opportunities. I wouldn't say that is very huge as of today, but going forward, the numbers also will be, this segment is another area which can add value to both in terms of revenue and profits to the company.
Okay. If the last question I finally ask, are we sticking to the old growth and the margin targets given?
Yeah, we thought of reaching better than this, but probably we may end up somewhere close to 8%-10% this year because what we thought in terms of Aditya Birla Group, we lost in Asian Paints, half of it at least. That is what has caused difference in our numbers projected and what numbers we are achieving. But still, we will be close to a higher single digit in this year and definitely be in double digits next year.
Okay. Thank you so much.
Thanks.
Thank you. We will take the next question from the line of Richa from Equitymaster. Please go ahead.
Sir, thank you for the opportunity. Sir, it seems that the pharma is shaping up well, and you had planned some kind of capacity expansions. If you could give some kind of CapEx target for FY 2025, for FY 2026, it would help. Also, with the current capacities, is the depreciation and interest cost the same run rate can be considered with whatever CapEx was planned for FY 2025?
Yeah, because we have depreciated almost like we are going to depreciate, I would say almost INR 50 crores in this current financial year. So far, already INR 36 crores has been depreciated. Probably another INR 12 crores, INR 13 crores would go off. So next year, probably it will inch up a bit, but the new addition of plant and machinery, I do not think will be to the tune of INR 120 crores, INR 130 crores, which we have been investing in the last three financial years. Because next year plan is only to augment pharma capacities, which may not be like INR 60 crores what we did in phase one. It may be to the tune of INR 30 crores -INR 35 crores. But that is enough to double the capacity because the land and building is already in place.
Only for issuing machines and molds, the investment will be definitely less compared to greenfield project, what we invested last year. So additional INR 25 crores -INR 30 crores investment will certainly happen in pharma going forward, but that will not be still enough. Maybe we may have to go for expanding, adding new buildings in the Sultanpur premises by spending another INR 8 crores -INR 10 crores.
So that addition, that has not been decided, but looking at the trend, what is happening, we may have to start that immediately to catch up with the growing demand for our products. So if that too happens, probably investment in pharma can reach up to INR 40 crores. So INR 25 crores - INR 40 crores is investment we are planning for pharma next financial year. And the rest of the investments are only balancing in nature. Either at Cheyyar or Panipat or Mahad, we already made substantial investments.
Mahad may have some investment of INR 10 crores, INR 15 crores, but rest of the plants, it is only balancing equipment. So I am thinking, or at least on the paper, what it looks like, our investment next year may come down substantially from INR 120 crores for the last three years, including this year, to around INR 60 crores, INR 65 crores for the next financial year.
Okay. And sir, my next question is on the food and FMCG segment. It seems like this used to be a key driver with more than 15% growth and almost 20% kind of growth used to be the guidance. I think you mentioned in response to some question of 10%-12% kind of growth, which seems quite low. It will be difficult to push the volume growth at an overall company level given what's happening at the paint segment and the lube segment. Could you just elaborate on what's happening? Has the competition increased or have you acquired new customers? Is this the best that we can expect, 10%-12% in food and FMCG?
Yeah, I answered this last quarter also. Yes, there is an increased competition, especially in the nooks and corners of the country, small players with a couple of machines and a few product range they are entering, especially in ice creams and dairy products, where there's a need everywhere. So that is one certainly a reason.
But our confidence for better growth next year is because our plant at Panipat will start manufacturing thin wall products or food products from April or max May this year. So that will start contributing. Another confidence piece, good numbers of these Horlicks and Surf Excel products, which we are going to manufacture already for which the orders and molds are ready and supplies have started in the case of Surf Excel. Other products might start sometime in the next couple of months.
That is why I am confident next year, thin wall sales also can be in double digits. Yes, I agree with you, like in the paint industry, probably the trend may not be so sharp in terms of using products from existing paint companies because they are also shifting into IML. The good news is last few months, shifting to IML is improving in the paint industry.
That makes Mold-Tek as a better choice for players like Asian Paints or even Kansai Nerolac Paints and Berger because of the robotic capacities, what we have, our in-house IML capacities and our ability to develop new designs and challenging artworks. So that makes Mold-Tek obviously a better option. So we anticipate at least, if not a growth in the other paint companies, we may not lose our share in the next financial year, is our strong belief.
If that happens, Aditya Birla Group will continue to grow because they have expansion plans and they are indicating big numbers to happen in the next financial year. If they are partially true or at least reasonably true, we may see a reasonable 10%, I mean double-digit growth in paint segment as well. If that happens, our prediction to cross 10%-11% growth next financial year shouldn't be a problem, but I keep my fingers crossed on that.
Okay. And sir, you mentioned your capacity was 50+ , but if you could give the exact capacity and utilization expected this year, that would be
Capacity utilization is still around 70% overall company level, but the plants at Cheyyar and Mahad, especially Panipat which have been created in anticipation of ABG's growth, there the percentage are in still 60% compared to the initial capacity. But we have been adding machines there in anticipation of their growth next year. So if you consider that also, it is below 50% utilization. So once that start moving up to 60% or 70%, we will be seeing the overheads distributed over larger output and the margins.
Okay. But what is the base capacity, sir? What is the base capacity? I know it is 50 +
The base capacity is more than 53,000 tons as of today.
Okay.
Per annum. This year we may hit close to 40,000.
Okay.
We are already at, sorry, 28,500. Probably we will be hitting somewhere close to 39,000.
Okay. Thank you and all, sir.
Thank you. The next question is on the line of Ashutosh Khetan from Asian Market Securities. Please go ahead.
Yeah. Hi sir, I wanted to ask the contribution of IML in value and volume terms for this quarter and in terms of value, paints, lubes, FMCG and pharma contribution.
Yeah. In terms of IML, the numbers are going up because the paint industry also started adopting IML in a reasonable way. Of course, Hindustan Unilever is also part of it. So overall labeled containers have grown up from 64% last Q3 to 73.4%. Overall for nine months is also substantial, 63.6% - 69.3%. So almost a 10% improvement in the labeled containers compared to last year. There is an improvement. Coming to volumes, I think I already mentioned to you, paints contribute in this Q3, 45.5%, lubes 22.2%, food is 18.4%, Qpack is 12.7%. So put together, food and Qpack is almost now crossed 31%. Pharma is 1.19% in terms of percentage in the turnover side. In the volume side, paint is still 48%, lube is 24.6%, food and FMCG is only 12.4%, Qpack is 14.4%, pharma is 0.6%.
Okay, sir. What will be the volume guidance for FY 2025?
FY 2025, we thought we will be in the region of 10%-15%, but probably it looks like we might end up close to 8%-9% growth overall in this-
Volume growth
Concluding in March. Coming to next year, we are confident we will be in double digits because what I explained to the previous question.
Okay, sir. Lastly, on the pharma, what will be the revenue potential for 2027?
Yeah. See, ideally we wish to see a double digit coming over there, but that may be too ambitious. It is possible, it is not impossible because the way pharma market behaves is their approval system, their trial system is pretty long. Sometimes it takes almost one year to get into real commercial supplies. That phase is being completed for almost 10 - 12 clients and they are in the process of giving us trial orders, some of them giving commercial orders. That is why there is a shot up in the performance in January. If that accumulation starts from, let us say next year, the numbers can double at least, if not triple. If we achieve INR 30-35 crores in next financial year in pharma, we can aim INR 60- INR 65 crores for the following year. That is 2026, 2027.
Got it, sir. Thank you.
Thank you. We will take the next question from the line of Roshni Galani from ICICI Prudential AMC. Please go ahead.
Sir, thanks for the opportunity. One thing I wanted to ask was with respect to the capacity addition that we are doing in Panipat for FMCG, do we have active commitments from our clients because we have already lost some market share there?
Yeah. Actually, some of the products will go to Hindustan Unilever's Baddi. There is almost, which we are sending all the way from Hyderabad. So part of this can be moved there, part of the molds can move there. Even Horlicks is also finished in the north. A part of that can start. Qpack is open for us because, as you know, we have the patent and able to push the patent right in the Delhi High Court and several other high courts. So the Qpack demand is still improving there in the north, and those will be met through Panipat plant. Coming to the regular ice creams and dairy products, we certainly have our own sway in terms of our quality and consistency, and especially when volumes are involved. We are the most reliable supplier for anybody.
We certainly feel that starting in north will give us a better momentum in food and FMCG growth.
Okay, thanks.
Thank you. The next question is from the line of Jaiveer Shekhawat from Ambit Capital. Please go ahead.
Sure. Thanks a lot. First question, if I track your guidance on volumes over the last couple of quarters, this year you are expecting to possibly end the year at low teens, and the guidance for the next year was possibly somewhere around mid to high teens. But I think over the last few quarters, we have seen that there has been consistent decline in the overall volume growth guidance. Are there any structural challenges that you are facing because of which now even for FY 2026, last quarter, you were talking about possibly mid to high teens, and now you are possibly down to double-digit growth. Any structural challenges that we are facing, or do you think you will be able to get back toward mid-teen growth next year in terms of volumes?
See, to be very fair and clear, I mean, answer to you, we never anticipated a drop in Asian Paints' volumes in this year. That growth, they contribute almost 30%, 33% of our sales even today, 30%. A big 10% drop in their volume has hit us by almost 3 percentage points. That is one of the reasons why we have not reached the projected volume growth in the current financial year. Aditya Birla Group numbers were picked up well in the first six, seven months, but they are a little tepid now. But of course, for any brand to sustain and grow, it will take some time, and we are bullish on that because their commentary and their indication to us is good number growth coming in right from Q1 onwards.
Our two things, majorly, one of them is our misplanning in printing capacity or a rejection of a printing machine in a vital time has made us lose some part of business both in Qpacks and thin wall. That is one reason. Second reason I state is Asian Paints' loss of business. These two are the major reasons why we couldn't reach at least close to 12%-15% bracket, which I thought we would definitely meet.
These are the two reasons, frankly, I should admit. Having said that, with the addition of print capacities in February, which is starting of the season, and that capacity is also substantial. It is not like 10%, 15%. We added almost 40% extra capacity now, which will smoothen our supply situation in IML labels, and won't disrupt any supplies to clients with whom we have to say no in the last season.
I hope that is one big correction we have taken. I would like to be cautious this time, because we don't know how things will happen in the paint segment going forward. Keeping that in mind, I'm talking of lower growth. But internally, we are still aiming at at least 15% growth for next financial year. But I'll be glad even if it is more than 10%, mainly fueled by pharma. If it's fueled by pharma, that will be much better satisfaction in terms of revenue and profitability also.
Sure. Sir, since you've already mentioned you're targeting anywhere between INR 30 crore-INR 40 crore next year in terms of revenues in pharma. That contribution would possibly still be sub-5% of your overall revenues. I think majority of the heavy lifting will still have to be done by your existing segments. When you say that 10%-15% volume growth, how do you see the volume growth across different segments?
See, as I said, I am not very confident about the paints. As far as Aditya Birla Group is concerned, I am confident their numbers will definitely go up because the indication given to us is, they are talking about 40%-50% increase in our pickup, if not their overall demand, from pickup from our plants, they indicated. So that will be a substantial improvement for us, if that happens.
But Asian Paints, we are not very sure how their plans of procurement are going to be. But definitely, we will never lose beyond, if we lose 5%, 6% or 10%, or probably we may get same level of demand from them next year because they are moving more and more into IML. Currently, more than 10 packs are shifted to IML and where we are standing to gain in terms of volume business.
Hopefully we may stabilize with Asian Paints this year, and Aditya Birla Group might add decent number to pull it up into double-digit growth in paint segment as well. But lubes will never be such a player. Lubes will be hardly 2%, 3% either side. As you correctly said, the growth has to come from paint, food and FMCG, and Qpack. In Qpack, we are confident because Surf Excel and a couple of other opportunities we got which are going to be in big numbers. We have also expanded the product range, added 2 liter and 3 liter pack in square, and molds are ready and samples are being tested by few big clients. So those numbers might start adding, and Horlicks numbers will certainly add next year. And Panipat. So I am positive about a double-digit growth in food and FMCG.
Only one area where we may not see double-digit is lubes. If other product lines can pull it up, we will be definitely in a decent growth next year.
In case of thin wall packs, over there as well, given your commissioning capacities both in north and west, what is your expectation for your high-margin thin wall packs overall volume growth?
We should be close to 15% in the thin wall packs next year.
What is really driving that? Because we have actually not grown much this year, possibly in low single digits. What is driving your confidence for a 15% growth next year?
This year, tonnage-wise, it is 7.3% for the first nine months. Hopefully we will close this year by around 8%, 8.5% in thin wall. That is improvement in the last quarter and this fourth quarter because of, as I said, Horlicks and Kissan jams started, and those numbers will shoot up in the next Q1 onwards. I am confident of a double-digit growth or maybe, I would say 10% for sure. It can also be 15% if our north plants go as per our plans, if things go as per our plans. Coming to Qpack, I am confident it will be again, an 18%, 20% kind of growth next year. That is one number which will pick up the lube or loss of lube, because in terms of value addition also, lube and square packs are almost similar. That way, Qpack growth might take care of lube.
All depends upon how we fare with Asian Paints next year. If our numbers at least stay where they are this year, we can aim at definitely a double digit and a decent better numbers, which we will see only next year.
Sure. Last question. If I see your other expenses, why these have increased by around 30% while your volumes have only grown by 7%? Could you highlight what's leading to this increase, substantial increase in other expenses?
What do you mean by other expenses? What are all the items in that you have taken?
As you disclose in your BSE filing itself, the line item, other expenses, just below depreciation and amortization expenses. These other expenses are about INR 36 crore-INR 37 crore this quarter as compared to about INR 28 crore in the quarter last year.
Yeah, a couple of reasons. One is to sustain our patent rights, we have been filing cases and spending on legal expenditure. That is one reason. And legal expenditure is more than INR 1 crore, where we press the various courts to get the injunctions and close the operations of three or four competitors who have copied our Qpack. INR 96 lakhs to be precise in the first nine months. That is one reason for expenditure increase. And general expenditure, that includes travel and trade fairs. We are now participating in trade fair in Chicago. We have participated in, sent a team to Europe for our CPHI, that is a pharma exhibition and shows. So we are now participating in all the pharma shows across the country. These are the other reasons for increased other expenses.
Sure. Thanks a lot, sir, and all the best.
Thank you.
Thank you. The next question is from the line of Manan Madlani from Kamayak ya Wealth Management. Please go ahead.
Yeah. Hi, Lakshmana. Thanks for the opportunity. Assuming the next year Asian Paints volume grows back to normal level, do you see any problem regarding the off take from the Asian Paints? Will there be any switch from our company to their related party companies or anything like that?
No, I don't want to comment like this. Actually, it's not that our volumes are going to their related party. I'm not saying that. It is our maybe pricing inability, or some other advantages what they foresee in other suppliers is causing a loss in our volumes for the last couple of years. Going forward, I don't think it would happen further because as I said, IML adoption is improving in Asian Paints. Earlier it used to be almost nil. It is now currently at least 10%-15% of their volumes what they're picking up from us is in IML. Going forward, if those numbers increase, of course, others also will follow suit and develop their IML capabilities. But we being the leaders in IML and able to work on challenging artworks and challenging label technologies, we may stand to gain.
That is what positive we see in Asian Paints going forward. How they decide the market share or dividing their share is definitely based on competitive pricing and their commitments. In both commitments, they're always stable with us. The variation in the business distribution also won't become zero. It will become, let's say, it's between 15%-25%. If your pricing is competitive, I may get my 25%. If my pricing is not so competitive, I may get 20%.
I'm very costly, they may get still 15%. So that way they are very fair in business allocation. Some reasons can still be there why we may be losing, but I think pricing or our costs of manufacturing being little on the higher side because of our R&D efforts, our design team, our robotics costs. We are a little expensive than other players. Maybe that is one reason why we also internally should agree why we are losing a part of our business.
Okay. In terms of Grasim, what kind of commitment they have given for next year?
It's not a commitment. Their volume growth, they are projecting 40%-50% compared to this current financial year. We are ready with this machinery and molds. We are almost ready. Most of the machines have arrived. A couple of them are in transit. By February end or March end, we'll be ready with that volume. If their volume start picking up really what they are predicting, we will be benefiting considerably.
For Grasim, how much of the total volume is IML?
About 20%. About 15%-20%.
So it's twice what Asian Paints is getting?
Asian Paint today also, I don't think it is above 10%.
Okay
I don't have correct numbers, but I guess it should be around 10.
Okay. One last question on the pharma side. Do you see in next 3-5 years getting market share of somewhere around 5%-10%? Do you foresee that kind of ambition or high?
Yes. We are definitely nurturing such ambition because what I'm really excited about is in the pharma industry, new product development is a long process. I don't want to comment about the competitors because they're well-established and doing a pretty good job themselves. But coming to the new product development, we can cut corners really fast because of our in-house tool room and our big design team.
Developing a new concept, for example, the dual chamber product what we developed for one of big pharma company in Hyderabad, it is really a challenging task. Within four weeks we developed two sets of molds, and those two components have to be assembled together to make a single piece, which will serve the dual purpose of low volume air inside and big handling, ease of bigger size for handling.
That challenge we have solved with our own internal design, for which we have now filed a patent. That shows within a year, less than a year's time, Mold-Tek is not only establishing the confidence, gaining the confidence of more than 10, 12 pharma companies, are able to file a patent application. That is where I see in pharma we can make a big change because anybody who want to develop a new product, they will look at Mold-Tek now. Already second client, who has been very happy with one fast development, has already given us three, four products for development and two more products that we have completely developed and started commercial supplies in January, and he's given two more products.
When they see the speed at which Mold-Tek is able to develop molds, develop corrections, and give them a product, which they have to go for stability test, send it for trial, supply trials, transit trials, where they have lot of time wasted. If we save the development time by couple of months, that is what makes pharma to look at Mold-Tek with interest. We are using world-class facilities. Nowhere we are compromising on quality or cleanliness. In fact, if you guys come and visit our plant, you will think it is a pharma company. That's the kind of facility we have created. World-class facilities, world-class tool room, and fast development and innovation is what we are bringing to the table in pharma packaging. I'm really excited that is going to be the game changer for next, at least for a decade for Mold-Tek.
Okay.
That's my individual expectation.
Okay. Fair enough. On the pricing side, do we still on the premium side for pharma segment as well compared to other peers?
See, wherever we develop a new product, we can command a very good pricing, because obviously the risks of tooling and assembly machines, what we invest definitely need for, call for a higher return and, always all players are ready to pay it. For product which are already established, obviously there will be some pricing or productivity gains you have to show to attract. Both the deals we have taken care.
One, on the innovative product side, we are able to gain good numbers and good pricing. On the conventional products, we have gone up with higher cavitation molds. See, somebody is having an eight-cavity or 12-cavity mold. We have started 24 or 36 cavitation. Obviously our per crore investment, per day production will be much better. It will not go in the same proportion.
We have gone up with high cavitation, high speed assembly machines to beat pricing if necessary in the conventional products. In both sides, I think we have an edge.
Okay, fair enough. One last part. Given we want to grow this much in next three to five years, do we have enough bandwidth or we need to improve that? Second, what would be the ROIC on the pharma side of the segment?
ROIC, what we generally monitor is definitely much better in pharma. In terms of EBITDA, I can say if it is 38% or 37% in current product mix, anything above 100%- 150% is possible in pharma. Every kg of pharma would be adding decent numbers to our overall average. In terms of ROIC also, it should be more than 28%, 29% if our product range goes into reasonable utilization. For example, in the products like canisters, the return or EBITDA is much higher. It even crosses 50%. Their sales are picking up, are yet to see big numbers, and those volumes are yet to pick up. Now, one U.S. client we are supplying 1 million pieces a month, and a few more clients in India have given clearance for trial lots.
For them to become commercial lots and become a regular product, it may take three to four months. Going forward, if the canister sales increase, our numbers will shoot up. I cannot see where it will be right now, because unlike paint and lube industry, we are very new in pharma. How the numbers will shape up, only time can tell.
I also mentioned this six months ago, but today I can say with confidence, because what we have seen in January is a testimony of our confidence. Going forward, if couple of such things happen and four more new products we are introducing, molds are almost ready. Some of the samples are under testing. These products become commercial, let us say by April, May. From June onwards, we can see another spike in pharma numbers.
Like this, every addition of a new commercial product will be adding numbers in pharma. We are taking the challenge of new product development as an entry point into big pharma companies. They are definitely delighted to see the speed at which Mold-Tek is able to develop a new product or alter an existing product to suit their lines.
This is where we pitch in. For example, I tell you, somebody want a regular 40 ml bottle, which is kind of a commodity nowadays. A 40 ml bottle with 12 g is what is there with the mold makers all across India. Somebody want a 14 g because the client insists on some WVTR test or something where he want more thickness. While the other suppliers take two, three months to get that core rods changed and cavities changed, we do it within two weeks.
They cut time, and they will be able to give samples faster than the other company where they are competing with, and they will be able to gain advantage with their end client. That is where they see value with Mold-Tek. That is happening with couple of clients. That itself given us a confidence that if it happens with 10 clients, if not all, it can really shoot up our demand.
Thank you so much, sir. That is it from my side. Wish you all the best.
Thank you.
Thank you.
The next question is from the line of Mehul Panjuani from Forty Cents. Please go ahead.
Hello, sir. Thank you so much for the detailed answering of all the questions. Am I audible, sir? Yeah.
Yeah.
One question, because I am new. I am tracking this company very lately. I just want to understand a couple of things. What is the difference in IML and the normal other for paint industry? Why does a paint manufacturer go for IML? I am very layman in this question, so if you can elaborate a bit.
Yeah, it is a very basic question, but I think as you said, you are late in following up with this industry. You do not have the full knowledge. Typically, the decoration of a paint is done by screen printing all these years. Then the next step was heat transfer label. That means you print an artwork on a label, and by heat, you transfer the ink onto the container. That is HTL. That is a step forward. But in 2010, 2011, Mold-Tek is the first company to bring in-mold labeling concept to India, along with robotics and even in-house manufacturing of IML we started soon after. Because for every container, you need a label, it is impossible to import these labels.
We have developed the technology to even print and die cut the labels in India in 2011, 2012, and that has introduced the concept of world-class IML decoration in this country. In this, you can print photographic finish. You can take a picture and develop it in multicolor printing, and print it on a label and die-cut it exactly to the developed surface of the product.
Then with robotics, you put the label before the molding, and molding happens underneath the label, and it fuses. The label fuses to the container. Thereby, when the product is molded itself, it is completely decorated and ready to go. No human contact, no post-operation, no contamination. That makes IML world-class over any other way of decoration.
And it covers the entire area of the container, unlike HCL, where you have to leave at least 20% of the area for the squeezing, heating area. You will end up covering the surface only 80%, whereas in IML you get 100% or 95%, 98% surface coverage. And it is permanent, whereas HCL, by some acidic or alkaline contact, the paint may go off, because it is obviously a transfer from a label to a container. Whereas in IML, you are printing it beneath the label, and the label is stuck onto the container. Somebody need to remove the label means he has to really scratch it vigorously, even then it will not come out. So it is a permanent decoration compared to other modes. I think I given a detail.
Yeah. Thank you so much, sir. A follow-up question on this, and then one more question. First, I will go with another question. Sir, I mean, again, this may be a layman question again. Throughout the call, you are talking about that we are entering pharma and we have entered last year. I think maybe three, four quarters back, we have entered the pharma space, and we are progressing very well. That is a very good sign. But I have a question, which is again basic, that why have we not entered pharma? Because Mold-Tek has been there for maybe more than a few decades. So why is it suddenly we are entering pharma right now? Is there any particular reason or opportunity?
No reason. It was basically we are growing in IML, and there was a lot of things on hand, including ABG projects were given to us, and it is like more of a bird on hand. So concentration was all the time on these products and IML products. I wish that time goes back, and we can start pharma five years ago, but that is not being a possibility. Whatever we could do, we did it last year. Actually, it took us one year to set up the plant, and it went commercial about 10, 11 months ago. Anyway, it is always better late than never. So having started, we are now finding that our strengths of mold making, concept designing, product development, has a long way to go in pharma than any other segment. The beauty in pharma is the stickability is very high.
Once we are with you, in terms of new product especially, their dependence on you is still high, as high as your dependence on them. The stickiness gives you comfortable growth wherever you could prove your mettle. So that gives us a more challenging and better margin space also. Obviously, we are more excited in that field.
Right. Sir, thank you so much for your candid reply. Now, regarding pharma, the opportunity size may be three, four times what is there in paints. Is it fair to assume that or even more?
Three, four times of what?
More than paints, the opportunity size for Mold-Tek.
No. As of today, paint segment, in my opinion, is much bigger than pharma. Because most of the Indian pharmaceutical products are still in, what you call that? Metal film packing and what is it called? That aluminum foil packing. Whereas abroad in U.S. and Europe is where containers are used for tablet packing. Powders, tablets, even liquids are in kind of HDPE and PET bottles.
So in India, it is a long way to go. But once the Indian pharma, now the rules are changing. You might have read recently in Baddi, they stopped some 25 units which are not following pharma standards while manufacturing medicines. So government is also tightening belt on the way pharma products are being produced in India. If the changes come in, there will be more and more demand for pharma containers compared to what it was few years ago.
But comparatively, in terms of rupee size, still, in my opinion, paint packaging is at least 50%-100% more than pharma.
Okay. Right now paint is 50%. Can we say that if everything goes well and we are grabbing lot of opportunities in pharma space, can we say that in five years, 20% of our sales would come from pharma?
In five years, yes, it is possible.
Okay.
Definitely possible, because it's a big-
Big opportunity.
Pharma segment, more than INR 4,000, INR 5,000 crores. What we are talking about is even after five years, we are, let's say, close to INR 1,500, INR 1,700 crores. Reaching 20% means about INR 250, INR 300 crores, maybe INR 300 crores turnover in five, six years is definitely possible.
What kind of competition is there in the pharma segment, sir, for Mold-Tek?
Yeah. Shriji Polymers, Gerresheimer, Gopaldas. There are three, four well-established players in pharma sector. Shriji, I think, is the largest. Pravesha was there, but it's an Aurobindo in-house company, which has been acquired recently by PAG. I think PAG or one of the FIs has acquired Pravesha's packaging business. Even Manjushree was acquired by them. So that way, there are two big players I can consider, is Gerresheimer, that's a German company having plants in India, and Shriji, which also has three, four plants across India. These two are major players. Gopaldas and Doctor Pack, to some extent, Vericaps, some products. These three companies are also reasonable size, say INR 100 crores-INR 200 crores, I think. I'm guessing. 200 crores turnover.
Okay. Thank you so much, sir, and wish you very best. I really appreciate the way you are responding to all the questions in a very detailed manner. Thank you so much.
Thank you. Thanks for your interest.
Thank you. The next question is from the line of Akhil Parekh from BNK Securities. Please go ahead.
Yeah. Thanks for the opportunity. Sir, many congratulations on the pharma side of the business. Sir, my question is on the paint side. You mentioned that we have almost lost 10% from Asian Paints. Just wanted to understand thought process of the management, given that Asian Paints is the largest paints company of India. Does it make sense to sacrifice a bit on pricing and continue to get higher volume share from Asian Paints? Or, will it certainly help in fixed cost absorption, right? If you are able to get higher volumes from Asian Paints. Given that we are already scaling up in pharma, so whatever negative impact it can have will probably get offset by the pharma segment. That is my first question.
Yeah, it is a business call we have to take based upon our long experience in this field. I am sure you will give us that credit. We also do not wish to lose volumes. But the pricing delta is also something which will hurt us in case we follow their advice. But sometimes we too do that to gain volumes. It is a balancing act, believe us, that we are taking.
Okay. Just a supplementary question to it. I have been reading Manjushree is getting aggressive in the paints business, right? They are the largest rigid packaging player. We have not seen, I believe, such kind of a volume drop from Asian Paints in our last two to two and a half decades of dealing with Asian Paints. Would you be able to share some light? Is it because of likes of Manjushree who are competing hard on pricing front?
I do not want to comment about them because I do not have their details with me, how they are competing, but that is not the reason that we are losing our business. Manjushree is definitely not a big player in pails. They are very big in PET and blow molding, as far as my knowledge goes. In pails, yes, of course, they made couple of acquisitions or one acquisition for sure, I know. They are supplying to Aditya Birla Group also from one of the plants. So they are trying to enter in the pail segment, for sure I know that. They are also aggressive in pricing for whatever reasons they deem fit. But that is not the only reason why we are losing. It is a combination of our pricing and Asian Paints' expectation and other pricing.
That dynamics is what creating this loss of business, which we are trying to impress upon Asian Paints because of our quality, because of our consistent new design development. For example, when they want to reduce their weights and go for cost saving, it will be Mold-Tek first. We will develop the molds and prove the concept, and then others follow. So we take always the lead. Even today, we work with Asian Paints very closely for their new IML products, which they are advertising now in the cricket matches you see Ultima Protek and all. We are the lone suppliers as of today. So that way, our relation with Asian Paints is pretty strong. It is balanced between their competitiveness, what they anticipate, and pricing, what we expect. Some plus or minus happens, but as a business relation, we enjoy a really good relation with Asian Paints.
Sure. Thanks a lot. Just one last bookkeeping question. We have 1,500 tons of pharma capacity, right? At this point of the time, and it should be able to, sorry, 1,500 ton, that should be able to, at optimum utilization, we should be able to clock INR 30 crore of top line from that capacity. Is that correct?
No. The minimum pricing of our average on combination of all products, our pricing will not be less than INR 300 to INR 350 per kg.
Okay. Got it. That's all from my side. Best of luck for coming quarters.
Thank you.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Yeah. I take this opportunity to thank Emkay and Mr. Nitin in particular for arranging this conference call. I also thank all the participants for their interest and time they spent in knowing about our company and our quarterly results. I thank you also for your good wishes. I wish you all a very happy year ahead and good luck. Bye-bye.
Thank you, members of the management. On behalf of Emkay Global Financial Services, that concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.