Ladies and gentlemen, good day and welcome to Mold-Tek Packaging Limited Q2 FY 2025 results conference call hosted by Emkay Global Financial Services. As a reminder, all participants in line 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 over the conference to Mr. Nitin Gupta from Emkay Global Financial Services. Over to you. Thank you, sir.
Thank you, Shifa. Good evening, everyone. I would like to welcome J. Laxman 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 Q2 conference call. As mentioned in the press note, sales volumes have increased in the first half year by 7.2%, and EBITDA is up by 3.6%. Similarly, in Q2 on Q2, the sales volumes are up by 7%, and EBITDA is up by 4.5%. This growth was achieved through improved sales of paints packs, which have grown by about 5.11%, whereas lubes have decreased by 5%, and Food & FMCG grew by 6%, Qpack by 35%, resulting in an overall growth of 6.9% on Q2- on- Q2. However, the pack has been impacted due to higher provisioning of depreciation and interest costs on the huge investments what we made during the last two and a half years, resulting in a profit down by about 10% compared to the Q2 last year.
This is basically the highlights, and I would like to continue the conversation with a question answer session. Back to operator.
Thank you so much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Gaurav from Capital Farming Consultants. Please go ahead.
Hi. Thanks for taking my question. I hope my voice is audible.
Yes.
Yeah. Thank you. Sir, if you can guide that how is the progress happening on, basically in the paint segment, the major work that we are doing right now with Aditya Birla Group, how is the demand picking up from there vis-à-vis Q1?
Yeah, the demand from Aditya Birla Group is improving and even indicated as to ramp up our capacities by end of this year. So expansion is happening both at Panipat and Cheyyar plants and Mahad plant production has just started. From our Satara unit we are supplying the initial lots because there will be some delays in the construction of Mahad plant. So they allowed us to supply from Satara which is just about 150 km, 200 km from Mahad. So our Satara plant capacities have been enhanced to meet this demand and maybe in few months down the line, few quarters down the line, Mahad plant will start taking up supplies.
What was the utilization level in the Panipat plant and the Cheyyar plant?
Currently, slowly it is improving. It was less than 50% in the first quarter, but currently it has reached somewhere around 55%-70%. I can say around 60% on average on the initial capacities. Now the new capacities are also being added.
Okay. Second question is with respect to the pharma segment that we have started. What was the volumes and the revenues in Q2 specifically for the pharma products that we are supplying?
As we told you that pharma products sales have just started. In the last quarter, we have done about INR 1 crore sale to some of the tube, effervescent tube segment and also in the main pharma segment. I am glad to inform you the numbers are improving. In the month of October, we did close to INR 75 lakhs sales in pharma alone. Going forward, those numbers will increase because now Marksans, MSN Labs, Gravity, Pulse, and also Nutra-Life and many other companies have cleared their audits and started taking our commercial line trials and small lot supplies. Once these lots are approved and they found our products are acceptable, the numbers will ramp up from Q4 onwards.
Sure. Last question, if you may allow me before I come back to the queue. In cash flow statement, we can see that you have almost made an expenses of INR 55 odd crores in CapEx side, right? Any colors that in which direction, whether it is towards the augmenting the production capabilities for the paint segment that we are doing or it is Food & FMCG or towards the pharma? If you can just give a breakup that in which segment this major CapEx has been done in the last six months, that is from April to September 2024. Yeah. Thanks.
Last six months, the capacity is happening in all the segments, but overall pharma investment is close to INR 90 crores, which is yet to really start contributing. Hardly 10% capacity is running now, but it will pick a pace and hopefully from Q4 onwards, it should reach at least 25%-30% capacity utilization. In the next few financial year, we hope it will be more than 50% capacity utilization we will be able to reach in pharma. The current year, the overall so far investments are INR 62 crores, and another INR 25 crores we have committed in purchase orders, and there is INR 31 crores. Again, it will be crossing around INR 90 crores investment in the current financial year because of the expansion of Panipat, the expansion of Cheyyar, and also small additions in the pharma units for balancing the capacities.
Thank you. I will come back to you.
Thank you so much. We have next question from the line of Jenish Karia from Antique Stock Broking. Please go ahead.
Yeah. Thank you for the opportunity. First question is with regards to your gross margin on a per kg basis. We see that that expanded to INR 86 per kg. If you could just help us explain where this expansion is coming from. Is this product mix improvement, and is this sustainable?
Yeah, it is sustainable, because as the volumes of production improve in all the plants, the per kg conversion costs or production costs will come down. If you notice, maybe you don't have the breakup as of now, but there is consumables and staff costs especially have shot up by 20%, more than 29% in the case of staff costs. Basically, because people in the different divisions have been added in the pharma. But they are yet to start giving results, but their costs have been absorbed in the P&L. Consumables are increased because of two reasons. One is our printing is under severe pressure now because of increased IML conversions. There is a sudden spurt in IML conversion. To cater to that, some of the IML, we are getting it printed outside. We are even buying from outside.
Our flexible purchased sizes have gone up, increasing the consumable conversion by about 20%. All these things will be controlled later in the year or maybe towards the end of this year once our printing and die-cutting facilities are added. As I told in the previous meetings, previous conversations, we are bringing all the printing under one roof in Sultanpur, Hyderabad unit, and that process is still going on. We have moved 70% of the machines, but another 30% we are not in a position to move because of the increasing demand for IML, and this we'll be able to do only in January once additional machines are received. Going forward, those economies of scale can be achieved once we are under one roof and all the operations of printing are done in one location rather than three locations currently happening.
This will improve the consumable control, that is, waste control, and reduce the consumables cost in the next couple of quarters. That should improve the EBITDA. Another major reason for the improvement in EBITDA and positive is our growth in pharma sales we anticipate from Q4, especially some of the orders we received. The molds are getting ready, and the molds will be arriving in December, some of them in January. Commercial supplies might start in Q4. Starting from Q4, we see pharma contributions improving. That should result in better EBITDA.
Okay. If you could just help us understand the volume and value wise breakup in each of the segment for this quarter and last year same quarter.
Yeah. In terms of volume, paints have improved a bit from 50%- 50.8%. lubes also improved actually. Sorry, it is the other way. Last year it was 50.8%, and it is now 50% paints. Last year lubes was 24.6%. It's now come down to 21.9%. Food & FMCG stayed at 1,040. Sorry, I have to come in terms of percentage. 11.85% to 11.77%, and Qpack from 12.72%- 16.2%. Pharma is 0.26%.
Okay. Qpack has increased from 12% to around 16%, and it's a low per kg margin product, right?
It is average. I would say it is average of paint and lubes.
Okay. This was in volume terms. If you can just help in revenue terms, the similar numbers.
In revenue terms, the growth in Qpack is 44%.
For paints, lubricants, and everything, sir.
Sorry. You want for everything?
Paints, lubricants.
Paints, lubricants, 13% revenue.
Okay.
Lubes 0.9%, food by 3.43%, and Qpack by 44.4% in terms of revenue.
Sure, sir. Sir, similar numbers for IML, non-IML?
IML went up considerably this quarter. Now it is around total labeled products are 72.57%, up from 66.7% last year.
72%, you said?
72.5%.
Sure. Sir, next is on your guidance. We had earlier guided for a 15% volume growth for full year and INR 40 per kg of margin. Do we still maintain that guidance considering the first half performance to be slightly off?
Yeah, I think we are a little off from the projection, basically because of little delay in the take-off of our Mahad plant. Volumes have just started now. We thought that we would be starting in May, June, but the supplies are starting only from September, October, maybe a small way, and it might pick up speed only from December onwards. That is one reason, and also delay in our printing facilities has also kind of constrained on our sales growth because we are not able to develop IMLs as quickly as it is required in the market now. But the facility is coming in January. From January, we will be ramping up our IML capacity further, and that will enable us to catch up with growth. But I think, as you correctly said, reaching 15%, I don't think will be possible from the current 7% growth.
Probably, we are still aiming at double-digit growth for the full year, and probably the EBITDA average, which is now currently at INR 36.73, probably it will land around INR 38.
Sure, sir. And sir, just one last question. Could you just explain the reason for us postponing our new Mahad plant, specifically for Grasim and supplying it from Satara plant?
There are some issues related to local pollution and local approvals. They got delayed, and that is why, because the plants got delayed, ABG agreed supplies from Satara for next few quarters. Probably in the next two, three quarters, we will set up an alternative, either an alternate location or the same location, the plant in Mahad. Until then, we will be supplying from Satara.
Sure, sir. And sir, full year CapEx guidance you gave of INR 90 crores. Is that understanding correct?
Yes. This year also, it will come close to it. Already INR 70 crores has been committed, and we have some more printing and other equipment being ordered, which will arrive before March. So the overall cost and investments could be in the range of INR 85 crores-INR 90 crores.
Sure. Just one last one on CapEx, sir. We were planning to expand our pharma capacity once we receive the certification and auditor done. So any update on that front, or we can expect
INR 70 crores also includes some of the pharma molds and machines, and this remaining INR 15 crores, also part of it will go into pharma. This year, almost INR 34 crores has been spent on pharma equipment. Apart from last two years, INR 55 crores. So INR 90 crores is the overall investment, and it will probably go up to INR 100 crores by the end of this year. Overall investment.
Sure. Thank you so much, sir, for answering all the questions. I will follow back up with you.
Thank you very much. The next question is from the line of Sidhant Chhabra from Minerva Asset Advisors. Please go ahead.
Yeah. Hello, am I audible?
Yes, sir.
Yeah. Hi, sir. I wanted to ask my first question on the pharmaceutical segment. Without IML, what kind of levers would we have, which would help us gain business in the pharmaceutical sector? Because if we see without IML, the kind of products that we do, the market is very fragmented. There will be a lot of players in EV tubes, canisters. What advantage except IML would we have in the pharmaceutical segment?
In EV tubes, there are not several players. There are hardly three or four players. None of them have IML capability as of now. That is one big USP. Apart from that, the quality of the tubes and their age resistance, which they frequently test, we are at the top end of the quality. At that range, there are hardly anywhere one or two players who are capable of giving that quality tubes. That is why we are already getting orders from some of the leading players in the EV tablet segment. That is one. In the canisters, ours is a single-piece canister, whereas the others, majority of them are in two piece. This will give them a lot of benefits in not only cost, but also in safety and non-breakage of the canisters during usage.
These two benefits will go a long way in able to penetrate into the market. Already in EV tubes, we are seeing that. With canisters, our suppliers are being tested in what you call trial runs, and hopefully bulk orders will start coming in from December.
Okay, just to summarize what you said, without IML, in basically the quality of in-tube, it is our quality, and in canisters, we are doing single-piece canisters, so there would be more safety and less breakage of the canisters.
Yeah.
Right. My second question would be again related to pharma as well. Could you give me some idea about the need of IML in pharmaceuticals? Based on some of the conversations that we have had with pharmaceutical people, how would you say, there is not much a need or a focus on going towards IML in packaging, but rather they are more focused on cost-cutting and with IML being a more expensive alternative to traditional labels. What would be kind of the reasons why a pharmaceutical company would need to go towards IML? Could you give me some idea on that?
No, I am not saying that the pharmaceutical companies will go for IML. Only the EV tubes segment and to some extent these nutraceuticals and vitamin bottle companies will be interested in IML. None of the basic pharma companies will be looking at IML because they have a lot of statutory obligations of labeling and all that, which the vendors will take care of.
Okay. So it could be, then again, only catered in EV tubes and nutraceutical bottles.
Yes.
Okay. Yeah, that is all from my side. I will join the queue.
Thank you very much. We have next question from the line of [Sandeep Modi], an individual investor. Please go ahead.
Hello? Yeah. Am I audible?
Yes.
Yeah, yeah. We are.
Hi. Yes, sir. Good afternoon. Sir, I wanted to know one thing. What are the new clients we have other than Pharma and FMCG this quarter?
Your voice is not clear. Can you say it again?
Yeah. What are the new clients we have other than Pharma and FMCG in this quarter?
Sorry for interrupting.
Sorry, your voice is not clear.
Yeah, one second. Hello?
Yeah.
Yeah. I wanted to know what are the new clients we have added in this quarter.
Nutra-Life is one of them. MSN Pharma . Quite a few clients have been added in different Food & FMCG. Some of them are Marico and Reckitt, even SKS, and in the Bioplant Life Sciences, Nutralike Formulations , Unived Healthcare . It is there in the press note. You can have a look.
Okay. Any CapEx we are planning in Pharma for the next year, 2025?
Yes. Even in this year, there is a further CapEx of more than INR 10 crores happening in Pharma, INR 10 crores-INR 15 crores. Actually, some of it for the last year erections were done this year. So overall investment in Pharma this year is INR 34 crores.
Okay.
So the total by end of this year, the Pharma investment will be close to INR 100 crores.
Okay. Thank you very much, sir. Thank you.
Thank you so much. We have next question from the line of Gaurav from Capital Farming Consultants. You may go ahead, please.
Yeah. Thanks for allowing me to take up a follow-up question. Sir, in some of the last concalls, you were highlighting that the Panipat plant that we have established, that will also be used for Food & FMCG products that we deliver. Right? So is that plant ready? Because we were targeting that the festive season, somewhere around that we will start supplying to the clients based out of the North India out of this plant. So was that done or not yet?
Yeah. Just in the month of October and a little bit in November, we are making some supplies of Qpack from north, but the real quantities would start only by end of December. As I said, the printing concerns will be coming out by end of this year, that is December, and then we will be in a full-fledged way to provide the IML containers from January in the north also.
If you can share some kind of-
For general products for north, we will be starting sometime in April. That is for the next season.
Okay. If you can share some kind of a color that what kind of clients we are targeting based out of north to supply products from this particular plant or-
The same client base. Same clientele of edible oil, ghee, pharmaceuticals, nutraceuticals, protein powders. All these similar companies. Even detergents. All these companies who are there in north will be saving transport costs, also timely dispatchers. They will be glad to have supplies from our north plant.
Okay. There were also some talks from your side in some of the last concalls, projects related to Iodex, Kissan Jam or Horlicks, they were all in pipeline.
Kissan Jam and Horlicks have started, but Iodex is still pending because there are some changes in their filling. The assembly line they have adopted, which have kept all the mounts. Of course, the mounts are invested by Iodex itself. They are lying idle for last six, seven months. They are yet to complete their CapEx on the assembly line. Also, assembly line starts sometime maybe next quarter. We will be in a position to tell you some more details.
Right. Next question on the paint segment again. In the beginning of the year, we were saying that expected volume with the ABG group is somewhere around 5,000 tons per year, but even if they take approximately half of that will give us a 10% kind of a growth. So what percentage of volume they have picked up from us in the first six months of this financial year? Any color on that?
I am not able to share the exact number, but we are in line. H1, maybe the volumes are around 1,500-1,600 tons. Probably in the second half it may go to 2,000+. We are online. About 70% of the capacity we have utilized. The initial capacity set up is about 5,000 tons for them, including Mahad. Maybe around 70% of that we will be able to achieve.
That is great. Last question from my side, if you may allow. When we take up a decision to invest in the CapEx, right? Since we are a manufacturing company, it would require a lot of upfront CapEx to be done. Do you have any visibility that, let us say, asset turnover ratio is going to be so and so much? For example, if you invest X amount of money in the plant set up, then what kind of a turnover you expect out of that investment? That is my last question. Thanks a lot.
Our asset turnover ratio always used to be around 2x-2.5x. Currently it is low because of very high investments that have been made, which are yet to become completely utilized. Going forward, we should be able to cross 2x-2.5x asset turnover ratio. Currently it is below 2x.
Okay. Thanks a lot. Thank you.
Thank you very much. The next question is from the line of Jaiveer Shekhawat from Ambit Capital. You may go ahead, please.
Sure. Thanks for taking my question, and good evening, Mr. Rao. Firstly, on the paint segment, I think if you see the growth in volumes as being only about 4%-5% in the first half, you've not really seen the benefit of volumes that possibly we are supplying to ABG and also Asian Paints had also doubled their capacity at Mysore plant. Possibly next year, what are your volume growth expectation and for the entire year of FY 2025, what do you think would be the overall growth expectation from the paint segment?
Paint segment was negative last year, but this year I'm glad it is around 5%, in terms of half year, the growth is around 4.9%, which was last year was a negative. Hopefully this year we'll end up with 7%-8% growth in paint segment for the full year, because the ABG numbers are going to go up in the second half. That is the reason. But lubes was down by about 2.5% in the half year, which were positive last year. That is a bit of disappointment. Food & FMCG is up about 5.2%, and the Qpack is 39.7% up in the half year. Going forward, paint this year we expected around 10, but I think we'll end up at 7%-8%.
Once all your plants are operational for ABG as well, then the benefit of doubling your capacity at Mysore plant also comes in. What kind of volume growth expectation only in the paint segment do you expect from next year onwards?
Next year onwards, we should be in the position to reach somewhere around 10%-15% volume growth. This year we thought so, but due to a couple of reasons I explained, we may end up this year close to 10% growth only, volume growth. Next year I am more confident today because ABG is doing good and they are asking us to expand the capacities, and pharma will be catching up because quite a few of our products have been accepted by at least four large pharma companies. Two or three products are under development now, which will be going into production from January, and they have committed volumes to us, which are reasonably good. If those products also added, next year pharma sales will be considerably good. With that confidence, I am hoping next year at least we will be able to see 10%-15% volume growth.
Sure. Second on the F&F thin pack side, I think you mentioned this quarter there was only about a 3% year-on-year growth. For the first half, there was a 5% growth. What exactly is happening in that segment as to why is it that the growth has been so moderated? Do you see that reviving from next year onwards, or are there structural challenges here?
Sorry, your voice is little muffled.
Sir, on the F&F thin pack side, I hope you are able to hear me now. I mean, the growth has been very muted, only about 3%-5% as you mentioned. Are there any structural reasons as to why that growth has been moderated, and how do you see that growth possibly from next year onwards?
You mean in the paint segment?
On the F&F side, sir. On the food side, on the thin packs.
Yeah. Food & FMCG side, unless our north plant comes to, we may not able to see more than 10% growth because as I said last quarter, there is quite a bit of competition in the small product segment, in the south, and in the north we are completely absent. Leaving such a big geography has led to this kind of distraction. We are now concentrating to set up the facility there by March next year. But at the beginning, we started with our Qpack there. Already response is good. A couple of clients we are able to supply some Panipat itself. But our capacities will be enhanced only from January. From January, more and more number of food products will be, food packaging products will be manufactured in Panipat.
By March, April, we'll have even ice creams and dairy packaging products will be supplied from Panipat. Then probably we'll be seeing a double-digit growth in Food & FMCG segment also.
Sure. And sir, lastly on your pharma packaging segment, I think we have been tracking your company and your commentary as well. I think there have been considerable delays in terms of how we have been able to ramp up or get the approvals in place. I mean, possibly two or three years out, how do you expect that revenues to sort of shape up for the company?
Yeah, I agree there was some delay in projects, especially the printing expansion project has been delayed due to construction delays and then machinery supplier delays. However, we have initiated the process bringing the all printing activity under one roof. Almost 75% of the equipment is now under one roof. But others, we are not in a position to move because of our lack of capacity and increasing demand for IML products has made us to hold on to the shipping because it will disturb the production by about one week, 10 days. So we are waiting for our next machines to arrive in January and then take a call on the shipping of these machines. One of the reasons why we have clocked the lesser growth in this year is, I should admit, is our printing capacities being a little delayed in setting up the printing capacities.
Otherwise, we could have been at least at 10%, if not more. Anyway, having lost that time, we want to catch up at least in the off-season. December, January is generally our off-season. That's the time to shuffle the machines and create the extra capacities also. Then we may probably see better growth.
So sir, my specific question was on the pharma segment. How do you see that scaling up over the next two to three years? What are your expectations there? Once all the approvals are in place.
Yeah, I am certainly confident about pharma because already our products and facilities have been approved by four major pharma companies, and at least another four or five are online to visitors and auditors, including companies like Sandoz, Alkem. We are in talks with them. MSN, Marksans , Gravity, Pulse have already approved. Nutra-Life has approved our facility. Bioplus has approved. So almost eight to nine or maybe 10 companies have already approved and started taking the small quantities. Line trials are completed. ETVR trials, extended testing has been approved, more or less all the companies. So I am confident that going forward, the numbers will improve. But it will take time because pharma companies go through a lot of testing and stability tests before they will take volumes. At least a couple of them started taking one or two products in volumes now.
That is why the numbers are picking up from October onwards. In October, we did almost INR 70 lakhs, INR 75 lakhs sale, which was a quarterly sale of last year in one crore, last quarter was INR 1 crore. So in October alone, we did INR 75 lakhs. And going forward, probably from January onwards, it may cross INR 1 crore- INR 2 crores per month. So as these are cumulative in nature, all these orders should go up as we go into next year.
Sure. So sir, by FY 2025, you think you can at least hit INR 50 crore, INR 100 crore in revenue? What is your ambition there?
Yeah, at least we will see INR 30 crores- INR 50 crores. It could be INR 30 crores or INR 50 crores. It all depends upon how products that are being launched will be taking off. These products are launched based on the approvals from the client and the commitments from the client. So these are more of a sure shot than trying in the darkness. So now we are able to gain the confidence of some of the clients in giving new product development to us. That is a proof that Mold-Tek's ability in mold making, product design, will definitely help us in slowly conquering a decent market share in pharma segment.
Sure, sir. All right, sir. Thank you so much and all the best.
Thanks.
Thank you. We have next question from the line of Pranav Doshi from Ardeko. Please go ahead.
Yes. Thank you, sir. Thank you for the opportunity. My first question is on the paint side. Sir, the realization per kg for paints was about INR 215 per kg two years ago. Nowadays, it declined to close to INR 180-INR 190 per kg range. Can you tell me what is the reason for that?
See, there are two reasons. At that time, the raw material price went up to INR 120, INR 125. Currently, the raw material price is around INR 105. More or less in this year, the price was stagnant there. Also, in the paint segment, like any other segment, RCP, that is recycled plastic usage has become mandatory. Slowly, companies are adopting 15% to 20% or maybe 25% RCP material, which is available at a cheaper price. This also brings down our entire overall selling price. These are the two main reasons, and there is some competition in the market, especially in the paint segment. There is also some pressure on pricing. That is not the main reason. The main reason is raw material and RCP.
Okay, sir. Okay, understood. On the paint side, if I heard it correct, the volumes from Grasim for H1 were about close to 1,400 to 1,500 tons. Is that correct?
Yes, H1.
Okay. For H1. Sir, I was just wondering that let's say, barring those 1,500 odd tons, let's say, then there is a degrowth in the segment. Apart from the ex of Grasim, there is a degrowth in the business. Are we losing volume share for any of our customers, especially someone like an Asian Paints?
Yes. In Asian Paints, there is a continuous pressure on pricing and some volume loss is there because of mainly the pricing reason. Also we have capacity constraints, as I told you in the beginning, in the printing side, especially on IML and HTL, which is causing us also to go slow in competing. Once the capacities are in place, we also can take the advantage of higher volumes and can be competitive in the pricing. Hopefully from Q4 onwards, we will be able to strategize that way.
Okay. And sir, what was the reason for the degrowth on the loose side? Is it due to the end customers growing slowly, or is it due to COVID?
Sorry?
Sir, I was just asking what was the reason for degrowth on the lubricant side of the business. We have degrowth-
Lubricant side is completely based on the sales of the industry, because there we are not losing any client. We are not losing any even market share. The markets in lubricant are always plus or minus 2% annually because lubes are now a more of a standardized product where more and more mileage they're offering and volume-wise growth is minimal. One quarter it may be 3%, 4% +, one quarter it may be 4%, 5% -, but overall it is stagnant. This time it is around 2% - for the half year.
Okay. And sir, we expect it to be in such a range, like let's say plus minus-
Yeah, it will be plus or minus 2%, 3%. Last year was an aberration. Last year we had a good growth.
Okay, sir. And sir, on the, let's say food delivery. What kind of an opportunity do we see with Swiggy and Zomato and some of the other quick commerce players? Do we see an opportunity?
Swiggy and Zomato we have tried several times, but they have lot of logistical issues and their restaurant packs, they have thousands of restaurants so it will be very difficult for them to control the packaging material with their name and also the name of the restaurant. That is where I think their logistics did not support and it is not moving much.
Okay. So we have some volumes, but it is not moving much, so it is not significant.
We did some small quantities long ago, more than a year ago, plain containers, but everybody wanted their brand. Then the restaurant people do not want only Zomato name or Swiggy name, they want their name also. Then the numbers break between several combinations and logistics to supply those will be a very big challenge. They did not attempt that later.
Okay. Yes, sir. And sir, apart from that, I just missed the revenue breakup between paints, lubes and F&F . Can you just repeat it once for me?
In terms of revenue, 47% is from paint, 20% lubes. Food and Qpack together is around 32.4%. 0.4% is pharma.
Okay. Yes, sure sir. I think that is it from my side. Thank you, sir.
Thank you.
Thank you. We have next question from the line of Richa from Equitymaster. You may proceed with your question.
Thank you for the opportunity. Sir, my question is for the pharma segment. I think our revenue potential from the existing capacities is INR 60 crores. Please correct me if I'm wrong. I also wanted to know that let's say, if we realize this by, let's say, over next two to three years, what is the opportunity size in pharma from the client response, what is the sense that you're getting, how much scale-up can happen in this segment over next five years?
With the current further investment we are making in the pharma during this financial year. The capacity at full range when we supply could reach even up to INR 80 crores-INR 100 crores during the next financial year. It all depends upon how we will be able to bring the products into commercial production. Fortunately for us, there are at least two products which are cleared by clients with a commitment to buyback the capacity, and those products will be starting production from January. It's not huge, but both of them together would be not less than INR 10 crores-INR 12 crores per annum. Those two products will be launching in January, with a commitment of volumes from two particular clients. Those two products will add to the numbers from Jan.
And similarly, we are working with other clients for our regular products also, like oral bottles and caps, which are picking up because most of them are cleared our stability test, online test, everything is cleared. MTER , ETVR tests are cleared. So now they will be in a position to start trying our commercial quantities. All these numbers look positive, but as I said right in the beginning, pharma industry takes longer time to approve a new vendor and do several tests, including stability, online testing, and they start with small batches, and once they are confident about the small batch going through well, then only they go for huge volumes.
Looking at the trend, I am confident next year we should be in a position to reach up to minimum could be INR 30 crores-INR 35 crores, and it can reach even up to INR 50 crores-INR 60 crores at the top line for the next financial year. As a opportunity, it is a huge opportunity, close to INR 5,000 crores opportunity, including both exports and Indian market. Even if we reach 1%-2% of the market share, it will be close to INR 100 crores. Our market penetration and ability to bring in new products is what matters as we go forward.
And sir, EBITDA per kg is ranging between INR 80-INR 100 like you had hinted in the past?
Yes, it will be in that range.
Okay. And sir, currently, in the past we have seen EBITDA margin per kg at INR 40, and earlier you had guided for INR 42. Currently it is down because of low capacity utilization, but how soon can we reach that INR 40 or INR 42 per kg kind of level?
I think we should be able to see that in the first quarter of next year itself. That is Q1 of next year. It may inch towards INR 40. Overall year next year, we are aiming definitely for INR 40 as a minimum number to achieve.
Okay. And sir, what type of expansions are we taking for Grasim from the existing capacities?
You are asking?
You said that you would be expanding capacity by January 2025, so what kind of expansion are we undertaking there?
See, currently our capacity is at three plants put together is around 5,000 tons per annum. Probably it will go to 7,500 to 8,000 tons by March. Progressively, machines are arriving from January. Machines, robots, and molds, they will be ready from January onwards, but the capacity will ultimately reach by March, will be close to 8,000 tons per annum.
Okay. And sir, my last question is, any guidance on the CapEx next year for FY 2026?
For 2026, I can't comment today, but because as it is our CapEx for this current year, which we thought we could control within INR 60 crores -INR 70 crores and plus additional printing and die-cutting machines we are adding. So hopefully it will be stopping somewhere around INR 85 crores - INR 90 crores for the current year. Based upon how numbers move in pharma and new product launches, there could be similar CapEx next year or could be less because there will be no greenfield projects to start. Next year, CapEx may be limited to INR 50 crores- INR 60 crores is my guess as of today, but we would only can comment as we go towards the end of this year.
Okay. Thank you, and all the best.
Thank you. We will take next question from the line of Sidhant Chhabra from Minerva Asset Advisors. Please go ahead.
Yeah. Sir, just wanted to follow up on my last question, only when you said that for the pharmaceutical companies, EV tubes are going to be the only use case, and then nutraceutical bottles as well. I did not get basically the kind of use case or the reasoning why for EV tubes and for nutraceutical bottles, why IML packaging would be necessary. If you could just throw some light on that.
No, it is basically the decoration. The people who buy these tubes are nutraceuticals are people who buy it from the off-the-shelf OTC counters. In OTC, people are more concerned about the looks and the feel of the product as much as, it is not like Food & FMCG. It is somewhat closer to that kind of purchase. The print feel and quality is much superior in IML compared to DOP or HCL. That is why in EV tubes and nutraceuticals, IML would be preferred over the other forms of packaging.
Okay. It could be only because, as we were discussing, traditional pharmaceutical packaging will not require this, only specifically for EV tubes and for nutraceutical companies in their bottles.
Yes.
My second question, I just want to get an idea, is that pharmaceutical companies take quite some time to onboard packaging folks, so around three to five years. Can you throw some light on the kind of existing commitments or at least the amount of companies who we would be in trial with or in discussions with? Because if it's a very-
No. Three to five years, I never said. It will take about a year for any company to test a packaging partner and start giving commercial orders. Maybe max is one year. It's not three to five years.
Okay.
There are several companies who have already audited us, and once the audit clearance comes, they will ask for line trials. After that, stability test. After that, economics. That is commercial quotes and all that. Then a small commercial lot, say 20,000 pieces, 50,000 pieces. Once those lines are also the field and supplied without any trouble, then they start giving 3 lakhs, 5 lakhs kind of volumes. So the whole process will take max 12 months, sometimes maybe 15, 16 months. Not three years.
Okay. Basically, the kind of timeline would be more like 12 - 18 months at max, not three years or four.
No.
Two to four years. Okay, not like that. We would be expecting. Can you give us an idea what kind of client additions we would be expecting in terms of number of client additions over, say, the next three to five years?
No, we are touching all pharmaceutical companies right from Sun Pharma, Glenmark, Intas, or even Alkem, Dr. Reddy's, MSN Labs.
I still-
All of them are in contact with us. Some of them have visited, cleared our premises. That list I already published in the press note, and several of them, our salespeople are in touch with them. The point Mold-Tek is trying to drive to pharma companies is our ability to develop new products faster than anybody else. Even the leaders in pharma packaging, we are in a position to meet or exceed them in terms of new product development. All the new product developments are always under five timelines. Everybody takes a long time to decide, but once they decide, they want within a month. Developing molds, developing product designs is not so easy. That is the strength of Mold-Tek, which we are going to use and get into bigger pharma companies.
Once they start using our new product development, they will be obliged to consider our existing standard bottles also. That is the way forward for our growth.
Okay. Thank you for that. That is all from my side.
Thank you. We have next question from the line of Pranav Doshi from Ardeko. Please go ahead.
Yes, sir. Thank you for the follow-up. Sir, just one question. On the business side, what kind of contracts do we have with our customers? Is it on order-to-order basis? Do we have to bid for it, or is it a contractual agreement, and we have kind of a visibility for our volumes for some time? How is it, sir?
Yeah, you are correct. All the kinds of contracts or agreements are possible in pharma also. Generally, now we are at a testing stage. Nobody will give us a long-term five-year contract. They generally test our products, take some one-month lot, test it in the market on their lines. How is it? How are our caps? Let's say somebody is buying only caps. How is our cap doing with the other bottlings? All those tests, they do it over a period of three to six months, and then they start building up the confidence and increase the volumes. So at least six to seven companies have tested our products or are testing our products. And three, four of them have started giving us repeat orders. Actually, touch wood, but this month we received one major order from Marksans.
Hopefully, another product which is under development will start from December, January. Like that, once our relations start with the new product. Actually, our relation with Marksans started with a new product development. Then obviously, when they see our ability to quickly give a new product, and our facilities are world-class, they also encourage us for their existing products. Similarly, we are trying with Laurus, we are trying with MSN, we are trying with Alkem, we are trying with Gravity, Pulse Pharma. So at least eight to 10 companies we are in. Amneal, Sandoz, Sun Pharma. So we are in touch with their packaging development teams, R&D teams, and we've started. And once we have three, four in the line, five, six becomes easier to add. So that is the confidence I have.
Again, it's coming back to our strengths in product design and mold design, and speed at which we can develop new products. That is the strength which we are focusing as a USP, even in the pharma segment.
Sure, sir. This is for the newer segment, and for the segments that we established, like, let's say, paints or F&F . There, do we have some
In the FMCG, most of the products are well-established, especially come to paint pails. Those paint pails standards have become normal. They are like commoditized. There are at least 20, 30, 40 suppliers or even 50 suppliers who are able to produce paint buckets to a reasonable quality and a reasonable consistency. Obviously, there is a severe price war and also supply options. When it comes to pharma, you can hardly count on fingers notable players like FIJI, Gopaldas, Doctor Pack , like that, maybe another three, four players. These are all catering to the current pharma companies. We too also enter into the fray with them, but our USP will be new product development and faster mold development. Because of our strengths in injection molding, our ability to produce at low cycle times will also make us, can be an economical player.
With all these strengths, we are trying to focus on pharma business.
Sir, just one final question. The competitive intensity, as you mentioned, we are seeing a lot of it in paints. Is it possible that, let's say, down the line, the same kind of competitive intensity or pressure we might see in the other segments as well? Apart from pharma, of course. Pharma, I understand it is a longer approval process, but let's say in the F&F or the loot segment, like possible that
Competition is always there in all segments. Even today, paint, we are now almost 35th or 36th year of production of paint pails. Even today, we have our own value, and even today, 47% of our sales come from paint segment. There is a growing demand for the pails and quality pails, especially with IML. Having IML advantage, which is not possible for all and sundry to start, we will certainly have our own niche market for our products going forward. However, there will be a small pressure, but capacity utilization, in-house manufacturing of labels and robots is what brings us economies of scale, even under price pressure. That's how we are able to stabilize our EBITDA.
The current EBITDA also would have been INR 40, but for increase in staff costs, because for all these several projects across the country, especially pharma, we have added a lot of staff who are yet to contribute because the capacity utilization of pharma is hardly 10%. Similarly, Panipat and Cheyyar are now picking up. Earlier, three, four months ago, hardly it was 20%, 25%. Now it's coming to 40%, 50%. Going forward, as the capacity utilization improves, EBITDA margins will improve.
Okay. Fine. Great, sir. Yeah, thank you. That's it.
Thank you so much. The next question is from the line of Ashutosh Khetan from Asian Market Securities. Please go ahead.
Yeah. Hi, sir. I just wanted to know the revenue mix from the Qpack in quarter two.
Yeah, Qpack contribute around 19%. Sorry.
Okay.
14.53% .
14%. Okay. Thank you, sir.
Thank you. Next question we have is from the line of [Vikram], who is an individual investor. Please go ahead.
Thank you. Mr. Rao, just a quick question on H2. Do you think H2 will be better than H1 in terms of top line and bottom line? Any early guidance for FY 2026? I do remember on a previous call you mentioned we should exceed INR 1,000 crores for FY 2027.
My expectation of H2 is definitely better than H1 because, as I said, all the plants are now up and running and pharma has started. It is not in a big way, in a reasonable way. The numbers will start adding in Q3 to some extent, maybe INR 3 crores, and Q4 maybe INR 4 crores-INR 6 crores, will be evaluation from pharma. With these numbers, and now the Mahad plant started picking up pace recently, so that numbers will start increasing from December. All this gives me optimism to have a better H2 than the previous year H2. I am not comparing with H1 of this year because our product sales are always seasonal. Previous H2 was better, this H2 should be better in terms of top line. Coming to the bottom line, the things can only improve as our capacity utilization improves.
It may be similar or it may be marginally better than previous year H2. Going forward to 2025, 2026, yes, I am positive about it because all these numbers and pharma also will contribute handsomely. Our printing concerns, what we are facing now in this year, will be completely eliminated because we are adding almost 60%-70% additional capacity in IML printing by January, February. Maybe last machine will come in April. By April next year, we will have our IML capacity up by around 60%. That should give us adequate capacity to cater to all the segments, including pharma tubes.
Got it. Super. Thank you very much.
Thank you very much. Ladies and gentlemen, as there are no further question, I now hand the conference over to management for closing comments.
I take this opportunity to thank all the participants for their interest in our Q2 results conference, and especially I thank Emkay Global, Nitin Gupta, for arranging this conference. Thank you very much. Have a good day.
On behalf of Emkay Global Financial Services, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.