Ladies and gentlemen, good day and welcome to the earning conference call for Q1 FY 2025 results with the management of Mold-Tek Packaging Ltd conference call hosted by Nirmal Bang Equities Private Limited. As a reminder, all participants 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 any 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. Abhishek Navalgund from Nirmal Bang Equities. Thank you, and over to you, sir.
Thank you, [Shubhangi]. Hello, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to Mold-Tek Packaging Q1 FY 2025 earnings conference call. We have with us Mr. Lakshmana Rao, the Chairman and Managing Director of the company, along with the entire finance team. Without further ado, I request Lakshmana, sir, to start with his opening comments, after which we can open the floor for question and answers. Thank you, and over to you, sir.
Good afternoon, everybody. Thanks for your interest in joining in our conference call for Q1 FY 2025. I am glad to inform you that there is a decent growth in volumes compared to last year. In Q1, we grew by around 7.5% over the last Q1. Compared to the Q4, it is 9.07% growth in volumes. In terms of EBITDA, EBITDA grew by about 2.77% compared to Q1 of last year, and 2.5% compared to the Q4 of last year. However, the per kg EBITDA has come down. It is mainly due to the costs which were being capitalized during the project times, like the manpower and various other overheads are now being taken in the expenditure side because all these projects have commenced commercial production in the last few months.
Starting from our plant in Cheyyar and Panipat for ABG, and then the third plant is our pharma products at Sultanpur, Hyderabad. All these three plants are now fully productive, and of course, they have been only occupied partially. They are running around 15%- 25% capacity utilization. Going forward, the good news is that both the pharma and ABG plants are indicated to do better in the coming quarters and hopefully add better volumes from Q2 or Q3 onwards. Having said this, I think more details we can share on question and answers. I will now hand it back to the operator to start the question answer session.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch- tone telephone. If you wish to remove yourself from the question queue, you may press star and two . Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jaiveer Shekhawat from Ambit Capital. Please go ahead.
Sure. Thanks for taking my question. Mr. Rao, if you can call out what is the growth in the thin packs during this quarter? If I see the overall F&F growth, it is just a little above [20%]. Does that imply your thin packs grew at very possibly in single digits during this quarter?
Yeah. The Food & FMCG grew by about 4.5% compared to the previous Q1, but compared to Q4 is a healthy 24% growth. The Qpacks again grew robustly at around 45% compared to the Q1 last year. Together, overall total food and Qpack together, the growth is 21.2% compared to previous Q1 and 11.8% compared to Q4 last year.
Sir, this low growth in the thin packs, if you could just call out the reason for that, because we did see intense heatwaves. Even if you remember the commentary last quarter as well, I think you were expecting the F&F thin packs to grow upwards of [20%]. Why this mismatch in volume growth, what you have reported?
The volume growth in thin packs was 4.54%, but compared to Q4, it is a big jump of 24%. Compared to the Q1 previous year to this year, as I indicated in my last quarter's results also, there are several small players who are offering these ice cream packs, spouted in different parts of the country, which has indirectly impacted our ability to service all of them due to price or supply constraints. Other than our north plant, which will be starting in August, September. Probably September it will start some products and pick up by next season, will be the way to grow again into double digits. That's in Food & FMCG. Another reason is some of the products which we have developed the most, they have not yet taken off.
Only Kissan Jam has taken off last two, three months, and other products for HUL and others are still in different stages of adoption. Those numbers have not yet come to contribute.
Sir, just to understand this issue better, if we see the growth of ice cream players, versus the last year. Because last year, if you remember, summer was also impacted because of [un seasonal] rains. Almost all of them have reported growth of 20+%, and some players even reporting 30%, 40% growth YoY. Just trying to understand, are we losing market share with some of our key anchor clients in the ice cream business?
Yes. As I said, competition in some sectors of ice cream, especially in the interior sections of North and deep in the South, we are losing due to some competitors starting up with the standard ice cream packs. That is one major reason. Some of the products which were to be launched three, four months ago, they got delayed. They would have been good additions, but they got delayed. I can't list them out because it will be not good for some of the products what other clients are launching, which got delayed. But that is one of the other reasons why the growth is [tepid].
Sure. Sir, on your paints business, if you could just call out how has been the volume pick up, especially from Grasim business, what is your expectation for the entire year for both Grasim as well as [ex-Grasim] ?
I cannot able to give you that kind of a break- up because it will reveal information about our—
Sure.
—Overall growth in the paints is again now positive. We have [4.77%] growth in volumes, in this quarter compared to Q1 last year. Compared to Q4, it is up by 8%. These benefits are mainly accruing due to ABG, that is Grasim's orders. They are picking up faster now. The pace of their correction and the call-ups orders are increasing rapidly. We hope hereafter, we can even see around 8%- 10% growth coming in the paint sector.
Sure. Sir, will you maintain your overall guidance of say mid to high teens volume growth for this year and possibly next year as well?
Yes. We are very confident because the response to our pharma business is pretty good. Already four major clients have audited and cleared our premises and accepted us as vendors. Several products, I would say more than four to five products are under development. Most are at final stage now. Some samples are also being submitted. As I told, the stability testing, the approvals take a long time in pharma. Some of them are on the anvil, which could even get cleared in September, and some of them in October and November. As I said, from Q3, we will see decent numbers coming from pharma. In this Q1, it's hardly beginning with INR 80 lakhs worth of goods sold in pharma sector. This number can swell in the coming quarters.
Maybe second quarter it could be INR 2 crore- INR 2.5 crore, but in the third and fourth quarter, it can go up to INR 5 crore- INR 6 crore each. Overall guidance was for around INR 15 crore- INR 20 crore. We are still confident in pharma, which will be coming at a much higher EBITDA. Once those numbers come in from third quarter, we'll be seeing better growth in both in terms of volumes and even in EBITDA. Coming to ABG, their indications are pretty strong, and our third plant Mahad supplies will be starting from September in a trial basis. By October, November, it will pick up pace, and those numbers will be added to improve our volumes further.
Sure. Sir, thank you a lot, and wish you all the best.
Thank you.
Thank you. I request the management to speak a little louder.
Okay.
Thank you. The next question is from the line of Jenish Karia from Antique Stock Broking. Please go ahead, sir.
Yes, thank you for the opportunity. Firstly, just a clarification, in the opening remarks you mentioned the Cheyyar and Panipat plants are being operated 25% utilization. Is that correct?
Yes, it is improving month by month. It started around 10%-15% in March, April, but now it is around 40% June. We are seeing more than 50% utilization it will be coming in from July onwards.
Okay. Could you provide utilization levels for the pharma plant?
Pharma plant is hardly running at 10% capacity utilization. We are just doing a few EV tubes. Sales have picked up. Various clients have taken our trial supplies and [inaudible] line adoption and trial batches have been successfully completed. Now slowly we expect the bulk orders to start coming in.
Sure, sir. Next, if you could just provide the breakup in terms of volume and revenue for the three segments of Food & FMCG for the quarter.
Yes. Food & FMCG we have about 1,3 65 tons. Qpack is about 1,3 31 tons. Pharma is hardly 19 tons. [audio distortion] 9,894 tons total. These three contribute to somewhere around 27.5% of the overall sales. Paints contribute 46.5% and lubes contribute 26%.
Okay. In terms of revenue, sir?
In terms of revenue, paint is 42.5%, lubes is 23.8%, Food & FMCG is 21.17%, Qpack is 12.11%, pharma is 0.4%.
Sir, similar breakup for IML, Non-IML segment?
IML, Non-IML is more or less stagnating somewhere around 66% now, compared to 64% last year, fourth quarter, and 64.11% in the previous year.
This is in volume terms. Is this in terms of tonnage?
Yeah, tonnage.
Okay, great, sir. And sir, just lastly, you mentioned you are maintaining a mid-teen kind of a volume guidance for the year, so that gives an extremely high nine-month run rate to catch up. Apart from the Aditya Birla Group, which is expected to operate at 50% utilization for around 1,000 tons, are there any other green shoots you are seeing in the lubricants or the base paint customers that you're adding for such high nine-month run rate?
No. Actually, ABG, it will be more than 1,000 tons per month will be addition, because Mahad plant also will start from September, if not October. Next six months, Mahad also will be contributing for the last six months. Along with that and pharma, we are still hopeful that we'll be reaching close to 15% volume growth.
Okay. And sir, for—
Hello.
—EBITDA per kg guidance, would you like to mention?
Yeah. That is again, our target is INR 40. We are not close to that now. In the Q1 it is only INR 37.1. INR 40 is our internal target. I think we should reach there once our pharma start contributing.
Can we expect that by end of FY 2025 or it would be somewhere in FY 2026 you would be reaching that?
Our target is in FY 2025. Let's see how it frames out.
Great, sir. All the best. Thank you.
Thank you.
Thank you. The next question is from the line of Avadhoot Joshi from Bryanston Investments. Please go ahead.
Hi, thank you for the opportunity. Just one question. If we look at raw material cost per kg on per kg basis, it has jumped up quarter-on-quarter also. Just wanted to know what's the reason. If you look at polypropylene prices also, they have been range- bound. If you can elaborate on that. Thank you.
Yeah, raw material prices are little uptrend compared to last year, but by virtue of RCP being used, which is as per the direction of the clients and needs of statutory compliance. The purchase cost of raw material has come down from INR 98- INR 95. So there is a reduction in the overall pricing due to the use of RCP, that is recycled plastic. Imp act- wise it is not really there, about INR 1 is the only impact.
Okay. That's it from me. Thank you.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Yeah. Hi, good evening, Mr. Rao. Thanks for the opportunity. Two questions, sir. Would you have any directional lead what we gather is that Asian Paints is investing for the capacity expansion. Is there order in place? Is there any indication you have got? If that is true, by when do you think the additional volume can come? Will it come in 2025 or will it go in 2026?
It will be coming in 2025 itself.
That will be-
We are planning to bring the volumes ready by December this year.
Okay. And this is what kind of additional volume you are expecting in terms of tonnage, if you can help me to understand?
Maybe it is confidential information, but more or less we are doubling.
The second question is, in the North you said there is some FMCG clients you are expecting to add. So at what journey, at what stage we are thinking? Will it contribute in second half to our top line?
Yes. Already we have one client asking us to set up Q packs in North. Once the deal is struck, initial couple of months he agreed to take from Hyderabad, but later on, probably from October, we will start supplying from North. So Qpack will be our first food product to be sold from Panipat, followed by sweet boxes and maybe by season comes in ice cream boxes, ice cream [cups] and all that. As early as October, we hope Qpack sales will be starting from North.
Okay. Just last question. I think overall volume FMCG segments are looking up, given by the several monsoon recovery volumes. Do you get any such indication that you have been asked to increase capacity by any player or do you think that will happen maybe post [Diwali] you will get a clear indication?
Yeah. As of now, as I said, competition ramped up in items like ice cream boxes and small packs on various pockets of the country, which is certainly impacting part of our sales. But coming to the exclusive items, we still maintain to gather interest from several big players. A couple of those projects got delayed, it has impacted the growth this year. Once the clearance has come, they will improve. It can happen from Diwali or even before Diwali, but the numbers may not reach 20%-25% growth levels which we achieved in the last five, six years. Such growth we will only see in pharma going forward. But Food & FMCG will continue to play an important contribution to our growth. I will be happy even if we close only Food & FMCG with thin-wall at 10%, with Q-Pack around 40%-45%.
They both together will be contributing around 20% to the volume growth.
Okay. Just one follow-up here. Out of three segments, the prime segments what you are catering, which segment at the current situation, the demand looks very positive and there will not be any surprises in the rest of the year?
Qpack. That is our Qpack is where we are finding solid demand coming in, inquiries coming from major players for edible and ghee and even other sectors. I am very confident of what we repeat. Last year did almost 60%-70% growth in Qpack. Probably it is not that much, at least 40%-50% volume growth is possible in Qpack.
Great. All right. Thank you and all the best, sir. Thank you.
Thank you. The next question is from the line of Pankaj from Affluent Assets. Please go ahead.
Thanks for taking my question. As I understand, most of the headwinds are behind now and few tailwinds also playing out. So how long will it take you to reach, say, INR 1,000 crores of top line and INR 100 crores of bottom line from here on?
If things go well in pharma, what we anticipate will be more stable from next year, because this year will be our introductory and then approval status, approvals and statutory clearances and various things, which we have almost crossed. But client approvals and stability tests will take a little longer time. But I am very positive the way our plant is being approved by various major pharma players, and being given a clean chit to go ahead to their respective vendor development teams. So almost six or seven such players are already put us in the list, and some of the products have been already offered to us for development and sample submission. So this process takes maybe another three to six months to stabilize. From Q3 onwards, we will be seeing decent numbers coming in.
But the numbers which you ask me, in the year 2025, 2026, they will be decent. And if things go well as per plan, 2026, 2027 would be a major year where pharma will be contributing handsomely. And that can shoot up our numbers beyond INR 1,000 crores top line and even INR 100+ crores in the PAT. So I would look at 2025, 2026 or 2026, 2027.
2026, INR 1,000 crores top line by 2026, and beyond that, 2025, 2027, right?
Yeah. 2025, 2026 is where we will be aiming close to INR 1,000 crores top line. And obviously, if that comes through pharma as I anticipated, PAT can cross or come close to INR 100 crores.
Okay. Secondly, as you mentioned that you have capitalized some of the costs on account of new developments. Had we reduced this additional cost expenses, what would be the adjusted EBITDA margin for this quarter?
The direct staff cost itself gone up by INR 1.70, sir. That would have been not there if we capitalized it, but because plants have gone into commercial production, all those manpower costs are now added to the expenditure. I can see that that itself is contributing INR 1.7. Maybe other items which are relevant, like travel and other things also now come under full expenditure. Probably about INR 2 per kg would have been capitalized had we not started commercial production, because commercial production at very low levels will not yield towards fixed costs. They will be not fully absorbed. Almost INR 1.50- INR 2 per kg would have been impacted due to capitalization. Completely moved.
You mean to say out of INR [37] per ton-
Yeah, out of [INR 30]. It would have been [INR] 38.5 had there been capitalization.
Closer to INR 39? Okay, sir. Sure. Thank you, sir. Thanks a lot.
Thank you. The next question is from the line of Prakash Modi from KCT Financial Management. Please go ahead.
Yeah, good evening, sir.
Good evening.
Yeah. Sir, couple of questions from the taxation perspective, like any update on the EPR guidelines that has come up on the rigid plastic. Anything from that side? Second, on the GST, recently there were some changes in the packaging side. Any impact on our products?
No, there is no impact on our products for the changes in packaging. Even EPR guidelines will be applicable from next year. They are talking about 20%-25% recycled plastic utilization. We already reached about 20% now, though we are not under any statutory obligation. Due to clients and our own internal developments, we have reached that level now. Reaching 25% next year, which is going to, I mean, mentioned to be statutory from next year, shouldn't be a major challenge.
Okay. Thank you.
Thank you. The next question is from the line of Ashutosh Khetan from Asian Markets Securities. Please go ahead.
Yeah, hi. Just wanted to know the IML contribution in terms of value, sir. Volume is on 66%, right? So in terms of value, what is the contribution?
70.5%.
Oh, okay. Thank you, sir.
Thank you. The next question is from the line of Abhishek Navalgund from Nirmal Bang Equities. Please go ahead, sir.
Yeah. Hi, sir. My first question is on the thin- wall. You mentioned that there was some 20%-25% sequential improvement in terms of volumes. Despite that, actually, even if you see gross profit per kg on a sequential basis, there is a INR 3 drop. I understand that on an overall basis, while your new capacities are not fully utilized and hence the operating leverage impact is not visible, purely because of the improved mix wherein we have sold maybe more ice cream packs or maybe more dates packs in the form of thin- walls. Ideally, why are gross profits per kg declining? Have you taken any price cuts in anticipation of competition or any other reason?
No, the point what I mentioned is capitalization costs, which were taken till last quarter to the extent of INR [1.50], now taken in expenditure, INR 2 actually. Presumably, it could have been covered partially by the production now. It would have been INR 38.5 had we not gone ahead with the commercial production. Because the capitalization advantage is no more there, the number looks subdued by INR 1.5. Coming to your other question of Food & FMCG and thin- wall, though the growth is 21%, it is majorly driven by Qpack. In Qpack, our margins are not as good as thin- wall. That is why, though the 21% growth in the overall food and Qpack has come, it is not contributed handsomely to the bottom line improvement and EBITDA improvement.
Okay. My immediate question was, you also mentioned in your opening remarks or maybe to some of the previous participants' questions that in ice cream also, we are seeing competition wherein some of the smaller local players are also offering the similar kind of containers. Because of that, our pricing or the revenue per kg that we charge to the client is under pressure in select cases, or there is no impact at all? I'm purely talking about the thin- wall containers wherein we enjoy higher margins.
There is some pressure. Once there is competition increasing, you need to adjust your pricing to retain your major players.
Right.
We could successfully do, but there are pockets of small players, and their needs also arise only in the season, due to which we also let go, and they will be looking at even a 3%, 4% price advantage on their [audio distortion]. That way we have missed the growth [inaudible] in ice cream this season. Going forward also, that should be a reality because there will be players who will make standard products like ice cream cups and dairy cups also to some extent, and they will be able to garner local demand. Because bigger companies will look at not only just the pricing, but they also look at the volume or ability to have several molds and several robots, which will, in case of any breakdown, there won't be any disruptions. Bigger players won't leave us.
Like I was saying in the paint industry, earlier we used to supply to everybody, but today we are only restricted to top five, six companies.
Right.
Similar to ice cream industry also, we are with all the top companies, but let go some of the small companies who are far away and they are periodically buying, and they are very picky about pricing. Competition setting in in that area also, which I should admit. But going into other areas where we have better margins is the way forward. We are very excited about our entry into pharma because we notice in pharma also, a lot of players are not agile in terms of development of new products. They take a long time, and there is an ability to showcase to the pharma companies by providing samples or 3D designs or concepts. It seems to be, in our first few months of marketing, we notice that the pharma industry is really looking for such agile players.
Mold-Tek can be done because of our product design, mold design, and mold manufacturing facilities. So we are really hopeful that our entry into pharma will be very successful in the coming years.
Okay. That is helpful. Second question, sorry, I missed that part, but you mentioned about doubling of capacity for Asian Paints. Could you please elaborate more on that?
No, not Asian Paints. ABG plants.
ABG? Okay.
ABG plants, Cheyyar and Mahad, we are increasing, if not doubling. We will be adding at least 60%-75% capacity, which are currently set.
Okay. So with this, what could be the total CapEx number that you are looking at for FY 2025 ?
Yeah. The schedule is happening. The CapEx so far committed itself is around INR 55 crores - INR 58 crores for various expansions. If volumes need to be grown up in pharma, again, there could be a growth investment required during the second half of the year. Most probably we will end up somewhere around INR 75 crores- INR 80 crores CapEx for the current year compared to INR 140 crores last year.
Okay, sure. That is it from my side.
Thank you. Ladies and gentlemen, this is a gentle reminder. Anyone who wishes to ask a question may press star and one on their touchtone telephone. The next question is from the line of Hasti Savla from Prabhudas Lilladher. Please go ahead.
Hello, sir. I actually missed the figures. I want to see revenue contribution for paints, lubes, and food.
Our revenue contribution for paints is INR 83.5 crores. Lubes is INR 46.7 crores. Food is INR 41.6 crores. Qpack is INR 23.8 crores. Pharma is INR 0.8 crores. Total INR 196.5 crores.
Sir, could you also repeat the volume of?
Paints are 4,605 tons. Lubes, 2,574 tons. Food & FMCG, 1,365 tons. Qpack, 1,331 tons. Pharma is 19 tons.
Okay. Thank you, sir.
Thank you. Ladies and gentlemen, this is a gentle reminder. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. Mr. Lakshmana Rao, would you like to initiate the question and answer session while we wait for the participants to join the question queue?
It's all right. If there are no questions, we can conclude the meeting.
Sure.
Unless, if any of the participants want to clarify.
We have one participant. The next question is from the line of Akhil Parekh from B&K Securities. Please go ahead.
Hi. Thanks for the opportunity. Sir, I have some question in pharma. Last time you had said that we can achieve INR 50 crores-INR 60 crores of top line by FY 2026. Sir, what kind of EBITDA per kg will we reach out here? Do we maintain that INR 150- INR 160 per kg of EBITDA? What kind of EBITDA per kg we will achieve in pharma for this year?
This year also the EBITDA will be nice. It will be INR 100- INR 120.
Okay.
The number being smaller may not significantly alter the overall picture. Going forward next year, once we are in the INR 50 crore [audio distortion] level of turnover, it will be handsome because I anticipate INR 100- INR 120 EBITDA [audio distortion]. It depends upon the product mix again. If we end up with formal bottles and caps, it may be INR 100- INR 110. If there are items like canisters and other things like [inaudible] and all, if those sales pick up, we can even go up to INR 150. So the band could be INR 100- INR 150, depending upon the product mix. We are into all the products, so it is wise to take somewhere around INR 120 per kg as a contribution.
Okay. Sir, you mentioned that we have approval for the four clients now in pharma.
Yes, already four major players have approved. Audited and approved , and another three are on the pipeline. Some of them have audited, but they are still to give their final go-ahead to their development teams. For a company hardly three months old, getting seven audits done and three, four already approved is definitely a good milestone.
Sure. Would it be fair to assume that we are far more confident now in the pharma packaging than could have been, say, six months back?
Yeah. I'll be much more clearer in my thought in October, November, once we meet for the second quarter. We have some of the audits executed. Then the challenges are first time mass production would come out. We are having the necessary wherewithal and expertise to handle that. Already in EV tubes IML, we have achieved a breakthrough. Which many players could not do that. We also had our own experiences. Today, we are confident we would be able to handle that. Like that, in other products like your canisters and various types of caps and bottles, we have already submitted at least five, six products newly developed within these four months to various clients. That is the speed at which we are able to develop new products. I'm sure that is going to be our USP in winning the clients.
Sure, sir.
We will give you a better guidance.
Right. Last time the paint segment, would it be fair to assume like the worst is over now for paints?
The worst is not over for other products, but certainly the future is bright with ABG as a player giving us a good opportunity to supply them the paints at three locations out of five. We being also again same there, we are fast in developing the molds now. They indicated quicker volume ramp-up, so we are ready to go for it. Hopefully by November, December, max December, we will be ready with the improved capacities. So ABG will be certainly a torch bearer of growth for us for the next couple of years. By then, pharma should be able to give us the impetus.
For the Asian Paints, we have not lost any kind of a market share, right? For Asian Paints?
No. I don't think that is the case with Asian Paints . Probably they have call-ups towards it, one or two plants due to various reasons, but they are not impacted as of now, at least that I know.
There is no conflict of interest here that we are supplying to one of the largest competitors?
Conflict of interest. Actually, right from the beginning, we have been supplying to Nerolac, Berger, AkzoNobel, Nippon Paints, now to Pidilit e. Absolutely no conflicts of interest, and that is not going to affect our business.
Okay. This is [inaudible], best wishes for coming quarters.
Thank you.
Thank you. The next question is from the line of Deepak from Sundaram Mutual Fund. Please go ahead.
Yeah, thanks. Sir, I have only one question. In the starting of the year, you said you will achieve a volume growth of 15% over FY 2024. Now, if I look at the current growth of Q1, it is around 7.58%. Which implies that on nine months basis, you would have to clock in volume growth of 17%- 18%. Sir, how confident are you that you can do that in FY 2025 for you to clock an overall growth of 15% for FY 2025?
Yeah, as you correctly said, now the run rate has increased to 17% for the rest of the three quarters. And typically Q2, that is rain impacted, so season will be difficult to clock such a big number. But from Q3 onwards, we see the ramp of coming up in our capacities to ABG and also numbers from pharma. Yes, it is a challenge, but we still keep 15% as our guidance. We will try to achieve that. We will see [October] when we know better.
Okay, sir. And sir, let's say at peak utilization level in pharma, what kind of volume can we do?
At peak utilization in pharma, we can achieve a turnover of INR 60 crores in the current setup, maybe with a couple of small auxiliary machines being added, like assembling machines or something.
Okay.
Which won't need more than three, four months' time. But these volumes, by the trend, what is going on, might need to be enhanced in the next second half of the year. That we will be knowing by October, as I said.
Okay. I was asking in terms of volume.
In terms of volume, it will be something like 1,500 tons - 1,600 tons now, currently.
Okay.
That is our production volume.
Sir, is this 1,500 tons the nameplate capacity or is it the operating capacity?
No, 1,600 tons will be the possible capacity because it's very difficult to calculate capacity in injection molding [inaudible]. Coming to these pharma products, the mix defines the volume. For example, canisters will sell more. The weight of the product is less, and the realization could be as high as INR 500.
Okay.
But when it comes to bottles and caps, if we sell them more, the realization may be around INR 350, INR 300- INR 350, and the weights will be higher. So at this stage, without going through one year, I cannot comment upon the average realization and volume of sale versus sale value.
Okay.
Roughly, you can take INR 50 crores- INR 60 crores and for a sale of around 1,500 tons- 1,600 tons.
Okay. And sir, one last question. Your raw material cost was asked by an earlier participant as well. I did not understand why did your gross profit per kg decline by INR 3 despite a favorable mix from thin- walls. I mean to say, do we expect this INR 114 per kg to continue in the next three quarters, or will it come down?
Which one you are talking about, INR 114?
Raw material cost per kg.
Raw material cost per kg is INR 100.14, not INR 114. INR 100.14.
Okay.
Gone up from INR 98 last Q1.
Will this come down or will it stay at the current level?
It will be more or less. This month they announced a INR 2 reduction. Reliance has announced.
Okay.
It may come down, but more or less it will stay somewhere there. It won't come down drastically. It looks like more or less INR 1 INR up in a month and INR 1 down in the next month. Last six months, it's been hovering around INR 100-INR 105 or INR 104-INR 108.
Okay, sir. I was talking about our raw material cost per kg, not the polypropylene price.
Yeah. Our raw material cost includes RCP. That is recycled plastic. That's why the average has come down to INR 100. Actually, the RCP cost is around INR 80-INR 85 , INR 85-INR 86 . The overall average raw material cost is about INR 100 now.
Okay. Thank you, sir. That was it from my end. All the best.
Thanks.
Thank you. The next question is from the line of Ankit Kanodia from Smart Sync Services. Please go ahead.
Yeah, thank you for taking my question. I have just one question related to the Food & FMCG business. Do you have any direct [audio distortion] with Swiggy and Zomato or their partner hotels?
Swiggy and Zomato, we got approved are going ahead with us. We have been talking to them for quite some time. They are very price- conscious, and they also have their partners to approve the cost of the packaging. That is where the problem. Most of the partners are restaurants operating with a deep discount for Swiggy and Zomato. I think that is where the curve stuck. As of today, there is not much progress with that.
Don't you think in terms of volumes, if you can get more volumes, it can help us in lowering our cost and then go for them?
Yeah.
Do we find it unattractive at those levels?
Volumes will help us to reduce the cost. It is not a cost.
Okay.
It is standalone machines and standalone molds and robots. If you want more production, you have to need more machines, more robots. So your fixed overheads and even variable overheads also will go along with the machine utilization. Within a machine, within a mold and the robot, if the capacity utilization is better, there will be improvement in the pricing or the profits, which we can share in reducing the cost. But beyond that, again, we have to invest for the second machine. It's like in costing, they call it, what is it? Marginal.
Yeah, variable cost will go up.
Yeah.
Unit of each cost will, so got it. Logic.
Marginally it goes up, but again, your cost of investment also goes up in steps.
Right. Is it fair to assume that this is not our top priority at the moment, then? We'll be focusing more on growing at a pharma-
Because there will be times where the pricing is depressed. Actually, there was one proposal I do not want to name. Somebody wants us to set up plants near to them, but the price they were thinking is absolutely not possible in injection molding. Maybe blow molding people are offering containers at low price because the technology is low, the investments are low, manpower requirement, and mostly manual operation, paper stickers and all that. You cannot compare that with an injection- molded container of—
Right.
—IML quality.
Right.
Pricing cannot come down just because the volumes go up. Up to some extent you are correct. Beyond that, again, new investment and new costs come in, and that is when—
Got it.
—you go for such low pricing.
That should be the case in case of all the subcategories in Food & FMCG, I would say. Competition from the unorganized sector where people would be willing to supply these at much lower prices, right?
Yeah. See, the people who have set up and they need to run for whatever contribution margin that is coming in. And they are closer to the client sometimes, and they treat them very well or, I mean, not that you treat anybody as bad, but they do prioritize even small suppliers, so they get attention. So some small players move off for pricing benefit and also some better supply situation. Say, for example, obviously, when volumes of HUL or Milky Mist or something is running, we would definitely give them priority over some small orders that may come in. So they would prefer a small player nearby who would give them both in terms of pricing and supply, so they move off. So that kind of competition is set up in ice cream packs now.
Got it. And do we plan to move beyond ice cream packs in the-?
That is the idea. We keep moving on with new set of products for new applications. In that direction, Qpack are growing rapidly now because that is where we are finding new adoption happening in various new product segments. So focus point now. Even in North, we are starting our Qpack, at least two sizes, 10 L and 15 L will be starting in October, and necessary equipment is being installed now. Hopefully by October we will start there.
Okay, sir. Thank you. Thank you so much and all the best for the future.
Thank you.
Thank you. The next question is from the line of Harshil Shethia from Renaissance Invest. Please go ahead.
Sir, just one question. What is the current capacity that you have?
Current capacity of the total plants put together is somewhere around, how much is that? 53,000 tons. And with the pharma is around 1,600 tons in addition to that. So total 55,000 tons you can say.
Okay, thank you.
Thank you. The next question is from the line of Amnish Aggarwal from Prabhudas Lilladher Private Limited. Please go ahead.
Yeah. Hi, sir. I have a couple of questions. Selling to the ABG Group in paints, are these the exclusive suppliers of your paints to them?
No, no. There are three more competitors at all the three locations. They always go with two suppliers at each plant. We have been given supplier status for three plants where we have one competitor each.
Okay. We are at Ludhiana, Mahad, and Cheyyar.
We are at Panipat and Cheyyar and coming in Mahad soon. Ludhiana, we are supplying IML containers from Panipat.
Okay.
That is a [audio distortion] business we have there.
Okay. At these three locations, what is our current capacity?
Current capacity at these two locations which are operative now is about 4,000 tons, and Mahad will be another 1,500 tons. We are in the process of enhancing the capacities at Panipat and Cheyyar.
Okay. What is the likely expansion there?
Each plant will become 3,000 tons-3,500 tons. Mahad is yet to start, so I cannot comment on that. That may be around 1,400 tons-1,500 tons per annum.
Okay.
These two plants will now go up to 3,000 tons-3,500 tons per annum.
Okay. From Panipat, we are supplying to their Ludhiana plant, and from Mahad, we will be supplying to which of their facilities?
No, Mahad is for Mahad, Panipat is for Panipat, and Cheyyar is for Cheyyar. Some quantities to Ludhiana also we are supplying from Panipat, as of now.
Okay.
In the future it may not happen. Currently, because of various balancing acts, they are picking up some quantities from us in Panipat.
Okay. What sort of utilization level are we expecting in these?
The last two months it has been good. It improved to somewhere close to 40%, 40%-45%. The indications are going to be better now. In a year, I will be more than happy if we achieve at least 50%-60% of the capacity.
Okay. Out of the two suppliers which they have at these locations, are you the major supplier or your competitor is bigger?
No, there is nothing called major. They promised to keep the equal distribution of demand. One may be a little early, one may be a little late. So initial period, things may look a little favorable or otherwise. But more or less, we will maintain 50/50 in the long run.
Okay. Thanks a lot, sir.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
I wish to thank all the participants for their interest in our Q1 results and in our company. I also thank Nirmal Bang for arranging this conference. I say goodbye to all of you, and have a nice day.
On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.