Ladies and gentlemen, good day and welcome to the Mold-Tek Packaging Limited Q1 FY24 earnings conference call hosted by Nirmal Bang Equities Private Limited. As a reminder, all participant lines will be in 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 press star then zero on a touchtone 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.
Yeah. Thanks, Ziko. Hello, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to Mold-Tek Packaging Limited Q1 FY24 earnings conference call. We have with us Mr. J. Lakshmana Rao, the Chairman and Managing Director of the company, along with the finance team. Without further ado, I would request J. Lakshmana Rao to start with his opening comments, post which we can open the floor for question and answers. Thank you, and over to you, sir.
Good afternoon, everybody. Thank you very much for the introduction and initiative from Nirmal Bang. Thank you all participants showing interest in our Q1 results. I am pleased to inform you that we have a sluggish quarter, this quarter Q1, with a margin growth of 1.8% in volume terms, and a dip in EBITDA by about 4%. There are a couple of reasons. One of the reasons is the lower-than-expected growth in our Food & FMCG products. That is the ice creams and dairies, which contribute mainly to the Food & FMCG . There is a major dip in the consumption of these two products due to intermittent rains across the country in the summer, leading to a drop in more than 20% volume sales in ice cream and dairies.
Which has resulted in a moderate growth of 13% for us in that segment, which used to be around 36% to 37% in the previous Q1. That is one of the reasons. The second major reason is our Satara plant, is operating at around 46% of the capacity during the Q1. That is much lower than its normal. Of course, from July, we are noticing that it is now back to around 65% to 70% capacity utilization. That is mainly due to one of our major clients there taking up maintenance and expansion for its in that particular plant.
These two are the major reasons, and the dip in profits by about 13% is majorly due to increased depreciation for assets which have been added during the last few months, which are yet to be really productive, about Sultanpur and several other locations where we are starting our operations. That is the major reason for this sluggish performance. However, the future looks very bright because our pharma packaging, which we are entering with our four products, might give us the entry into the huge pharma packaging arena. These products will be out from October onwards. By December, all the four products we wish to put them in the market, and the impact of this could be fairly felt from the beginning of the next financial year or maybe the fourth quarter of this year.
Having said that, the month of July has started on a positive note, much better than the Q1, and hopefully we'll see growth catch up with the double-digit growth for the overall year. Having said this, I would like participants to go into the Q&A so that more information can be discussed or more information can be given to you. Thank you, and back to the operator.
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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Karan Khanna from Ambit Capital. Please go ahead with your question, sir.
Thanks for the opportunity. My first question is on the paint segment, where we've seen consistently poor volume growth over the last four quarters. Besides volumes, we see paint share also back. If you can help me understand, are we losing market share here? If not, what kind of growth expectations do you have next fiscal year in your paint segment for this year?
Yeah. Main drop is in the paint segment, I agree. It is 8.7% drop as against 3.7% growth we saw last year. This is mainly due to one of our plants at Satara that is Khandala , is been running under 50% capacity utilization for the last six months. Mainly due to the modernization and the expansion happening at our main plant in Satara. So that has now started back onto operations, and from the month of July, we are witnessing normal capacity utilization close to 70%. Hopefully this should bounce back our numbers in the paint segment, at least to a positive number from - 8% this quarter.
Sure. On pharma packaging, we have seen slight delays in terms of timelines for commercial production. What challenges are you facing there, and where are you in terms of approvals for regulated pharma products? Do you expect commercial production to start from your end, and have you signed any anchor clients there as well?
Not really. No client will sign unless they see the DMF facility and audit the facility. The facility will be open for audits from October, we hope. There was some delay because of the heavy rains. The construction activity has taken a backseat, and now it is in full swing and internal paneling and everything is starting this month. That is a two-month activity, so by beginning of October, we should be ready to install the machines. Probably end of October, we will be starting our trial production and start bringing in clients to start the auditing. That is why I said this financial year, maybe there will be little contribution from pharma packaging. At least till December, the whole process of certifications and couple of clients placing orders would start. One of the segments, that OTC segment of Iodex, will definitely go into production by October.
Hopefully, those numbers will be added in this third or fourth quarter of this financial year. Other products here we are planning to launch in November, December, would take some time to pick up, and mostly the impact will be felt in the next financial year in a costume manner.
As a follow-up on the OTC pharma side, what is your revenue expectation from the Iodex product in FY 2024 and 2025, and have you got any new orders apart from Iodex?
No. On both these fronts, that is the only order, but for the other products, we are in touch with some major pharma companies who are interested to make use of our products. I can't give more details at this stage because those products are company to information sensitive. We wish to share with you probably in the next quarterly meeting. Those products we expect a faster penetration. They're not OTC, they're under DMF. But they're not like the tablet containers, which are traditionally manufactured by C&G Containers and others. These two products are a little, not exotic or anything about, but they're having the ability to penetrate faster and not many manufacturers in this field. Those products will be out in by November. The numbers will gradually pick up from the Q4 of this year and will be considerably contributing from next financial year.
Sure. My last question, how has been the progress on QR coded [audio distortion] lubricant clients , Shell and Castrol?
Shell has already adopted. There were some hiccups in the QR code reading at several locations, which are now sorted out. Again, actually, a new batch of QR coded containers are going out this month to Shell. Shell has found it very effective. But as I said, there was a hiccup in QR code readers resulting in some errors. As we expected, whenever you are launching something new, there'll be some hiccups in the hardware or software. Those have been now corrective steps have been taken, and further launch of Shell products are again going on in this month.
Sure. Thank you, and all the best.
Thank you.
Thank you. Our next question is from the line of Piyush Jain from NX Wealth Management. Please go ahead with your question.
Mr. Piyush Jain, your line has been unmuted. We request you to use your hands to ask your question.
Yeah. Thank you. I just want to know, what is the growth been in the FMCG segment?
Yeah. F&B segment in the Food & FMCG , it is 13.66%, as against 35% last year. This big dip is mainly due to the drop in ice cream and dairy products consumption that has come down in this quarter due to heavy rains during the summer.
Can you share what is the EBITDA per kg for this quarter? Because I couldn't find it on the press release.
EBITDA per kg is now at INR 38.8, compared to INR 40.1 of Q4.
In previous calls, sir, we had the target of keeping the EBITDA at around INR 42 to INR 43 or something. This missing the Q1, will this have an impact of the overall EBITDA for FY 2024? Do you feel in the next few quarters we will be able to attain the EBITDA per kg on the higher side?
Probably achieving what we were targeting was INR 40 to INR 42, which I still hope we can achieve because a couple of things are happening in that direction. One is from Q3, we will be having our integrated printing facility at Sultanpur. It is now currently spread over three locations, and all machines will be now brought down to in one complex we are building in Sultanpur. From October, hopefully, we will have all those activities under one roof. Even today we are purchasing HDPE worth around INR 7 to INR 8 crore annum worth of sheet canister daily from outside. This will be completely manufactured in-house from October, November, which can result in a sizable reduction in cost in the consumables segment. That is where we see improvement in the EBITDA coming in.
As I said, Food & FMCG and other products of high value add like pharma, both OTC and pharma products might start from November, December onwards. They also will be contributing more handsomely to the overall EBITDA. I am still positive we may be ending up between INR 40 to INR 41 EBITDA margin for the current year, which can go up further next year as more and value-added products will be contributing to the EBITDA in the year 2024, 2025.
Sir, there is one thing. Last time also, previous time also we have discussed. I think this Food & FMCG has some, I think, quite a decent share in the overall revenue, maybe around one-third or something. You have given some breakup numbers to EBITDA contribution of [inaudible] food around somewhere INR 80 per kg, and pharma will be somewhere around, you will be making INR 150 per kg. When the share of this FMCG is increasing, even though our EBITDA may be constant to a great extent, but it will still remain around INR 38, INR 39, to INR 42 when the proportion of higher per kg EBITDA component is increasing. That number is not stacking up the way the share of [inaudible] increased in last two, three years and the number you mentioned about INR 80 per kg EBITDA. Can you just clear this?
Yeah. Because there is a Paints & Lubes also were growing. Last year, we had Lubes gone up by 27%. Even in the paint segment, there is a growth of 3.8% last year. These are also handsomely grown. Lubes, in fact, contribute moderate EBITDA, less than our average. Even paints in that manner, they contribute less. When the Food & FMCG grown at 31% last year, we could easily sustain the INR 40 plus EBITDA. Now, the growth in FMCG is only 13%. The Q-Pack has grown sharply at 89%, but Q-Pack EBITDA is less than our Food & FMCG. Overall put together, these two, Food & FMCG together are around 24%. But in that, only FMCG, 14%, which has grown at 13.6%, which is our major contributor towards EBITDA.
Had it grown at 36% like last year, we would have seen the number beyond 40.
Are we saying our EBITDA from Paints & Lubes are way lower than and substantial difference with unattended business, maybe around INR 20 per kg something, even because of just the food and-
It is INR 25 to INR 30 per kg.
Okay, the number is correct. From pharma business, you will have around INR 150 per kg EBITDA. Is this number correct?
That is correct.
Is this regulatory or some company, or is this the normal OTC packaging also?
No. Out of the four products, OTC is only one product. Other three products come under regulatory or DMF. In both these categories, we are aiming at INR 150 EBITDA.
Do we have
It will be somewhere around INR 80 to INR 100.
Do we have LOI and contract or something in hand where we can see from November onwards, this will be like commitment and the process will start or something?
No, no. In case of the OTC product, the delay is because the changes in their assembly line that are happening at their filling places. They said sometime in September they will be completing those changes. Already our samples have been waiting for the testing. Once they complete that in September, October, or November, certainly they will be launched. The LOI is based actually by June itself. The Letter of Intent or the PO was given with an idea that the manufacturing should start from May, June. Due to the delay in the assembly line corrections at their seller's end, there is a delay in the launch.
How much pharma business can do next year? Let's hope this year even if we start, we will do a little bit of something four, five months. How much of pharma business can do the next one, next year?
Next year, we have a target between INR 30 to INR 40 crores. It could be reaching INR 40, if things go as per our plan. Otherwise, it may hang around INR 25 to INR 30 crores because it is time-taking for some of the statutory clearances. Out of four products, three products can easily go in because they do not need very long waiting for the regulatory product range. That regulatory product range where we are anticipating about INR 15 to INR 20m crores for next financial year. That might take a little longer than our anticipation if things take too slow down. Otherwise, we should be aiming at least INR 40 crores turnover from that.
Okay, last thing on that Aditya Birla Group business, just want to know two more quick things. What will the volume be achieved in a full year, next year or something? Whether these will be a QR code business right now or it is without QR code page?
Definitely they are not QR coded. Definitely they are not screen printed. They have indicated to us that they want to eliminate screen printing. They will be mainly IML and HTL, I hope. There is another concept called OPP Printing, which is similar to screen printing. On that, we have no clarity. Definitely their IML and HTL will be better than other paint majors, we hope. That will have much better margins compared to our current average print revolution.
How much volume in net external whatever we can achieve in, let's say, next full year? .
Actually, these two plants, Panipat and Cheyyar , to be ready by end of this calendar year. These two plants, their indication was somewhere around 2,000 tons each. Mahad plant, they are indicating to start from April next year. There also, their indication is about 1,500 tons. Out of these 5,000 tons, what they are planning, in the year one, how much they assume are able to achieve, I can't comment. From our side, we are ready with that 5,000 tons per annum capacity by-
How much would contributes in INR revenue , 5,000 tons?
This 5,000 tons-
In revenue
Contribute about INR 100 crore to INR 120 crore.
Okay. We see this next year 5,000 tons in year one or year two cumulatively or branching out?
Sorry?
In a year one or two, we see this 5,000 tons entire will be getting utilized or no?
Yeah.
This is dedicated for Grasim only, no?
Majority of it is for Grasim. At Panipat, we are parallelly setting up our Food & FMCG products also, of about 1,000 tons capacity. By March 2024, we are planning to start that. That may also contribute to the numbers, maybe in a smaller way in the year one. The northern area, we are covering all the way from Hyderabad, freight and drain dispatches is causing some disappointments. By setting up a plant in Panipat itself for Food & FMCG, we hope to cover that market and service the market better.
Okay, thank you.
All three plants with the F&B, pharma, and the new Panipat Food & FMCG unit, they three in general contribute, on paper, looks like 6,000 to 7,000 tons, which from 38,000 to 40,000 tons for this year, is a big jump, considering other areas are yet to be counted. For the next year, we are all fetched a major jump, if plants go as per their predictions.
Thank you, sir. Thank you so much.
Thank you.
Thank you. Our 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. Maybe I might have logged in slightly late. So what is the total volume during the quarter and what is the breakup between the three segments?
Yeah, 9,200 tons is our overall volume, out of which 48% is paints, 28% is Lube, Food, and Q-Pack together is close to 24.2%.
Okay. It means that there has been sharp reduction in your Foods share during the quarter.
Yeah. In the last year, it was somewhere around 18.2%. It is now 24%. There's no reduction actually. There's an overall increment, but the increment has come more in the Q-Pack. That is our Square Packs for edible oil, cashews and other segment. But in the Food & FMCG, the growth is nominal, at 13%, which used to be around 30% to 35% in the previous quarters.
Okay. And sir, you have also said that the Paint segment has also been under some sort of a pressure. Whereas if you look at the paint companies, they have even reported 8% to 10% kind of a volume growth. Do you think that this year off-take was there was some one-off factor and off-take will improve in the coming quarters?
Yes. That is what I explained in my previous questions. One of our units, Khandala, is performing below 50%. They had 46% capacity utilization in the Q1. The previous Q4 also, it was down because of the maintenance and expansion work taken up there by our major client. That it is improved in July. We are back to almost 70% capacity utilization in the month of July, because their production has restarted and expansion also is in place. We are hoping that during the remaining nine months of the year, we may recover from the deficit and at least come into positive growth numbers in the Paint segment also.
Okay. Sir, you also stated that you could be supplying approximately 5,000 tons of packaging to Grasim in the first full year.
That is a target they set for us.
Okay. How much that could be as a part of total supply to the paint industry?
Total supply to paint industry is about 18,000 tons per annum.
Okay.
Last year was 18,150 tons. Maybe this year it may be 19,000 tons. Assuming some 4% to 5% growth at the end of the year, we may end up around 19,000 tons.
Okay. This 5,000 ton number is for FY 2025 because the plants will-
Our three plants put together, the capacity we are creating is 5,000 tons.
Okay. Understood. All our plants are in terms of timeline, they are on track?
Yes. Hopefully, Panipat should go into production by December, maximum January. Cheyyar by January, and Mahad by April, May.
Okay.
No question in that.
Okay. Sir, finally, in terms of our EBITDA per kg, because on a quarter-on-quarter basis, it has come down to now INR 38 per kg. Do you see the uptick happening in the immediate quarter, or it will take some time for the things to improve?
It should be back, at least to INR 40 soon, because a couple of matters have created this. One is the correction in the contract labor cost and power cost, which happened last year. We could not carry forward to the clients till now. But in the month of April, May, we have started negotiating, and most of the clients have accepted increase in the conversion cost. This labor and contract labor and power costs have gone up in Telangana and Andhra, where we have our major operations. The major clients have agreed for the acceptance of the increase. Other admin costs have gone up due to some legal patent work we have taken over against couple of competitors in our Square Pack, where we have won one of the case also. That is what was the minor reason for the drop in the EBITDA below INR 40.
Otherwise, it should have been close to INR 40 this quarter itself. Going forward, recovery in our plant at Khandala itself, and some additions of pharma from third quarter onwards can take this above INR 40, is our hope.
For full year FY 2024, we should be looking at a number around INR 40 per kg.
Yeah, INR 40 to INR 41 is our target.
Okay. For next year, if you have any numbers, that is FY 2025.
Next year will be much better because there will be a reasonable contribution from pharma at a much higher valuation. I hope next year summer will be a good summer for us, at least for ice creams and dairy sweet or other contributors in Food & FMCG industry. We are setting up a plant in Panipat for Food & FMCG by mid-March next year, along with the Paint plant for ABG. That will enable us to capture some part of the northern markets. Overall, next year will be much brighter, with EBITDA at least conservatively INR 42 plus is our target.
Okay. Sir, finally, what is the plant CapEx for FY 2024 and 2025, if you can share?
FY 2024, we already had a plan that looks like it will be similar to INR 130 crores to INR 135 crores, what we spent last financial year. Because these three plants are up and running, and our integrated printing facility at Sultanpur is also getting ready. Our pharma investments are partially made. Only advances are paid, and the rest of the costs are to be borne in this year. So the investment overall will be in the region of same level of INR 130 crores and INR 140 crores last year.
Okay. Thanks a lot, sir.
It was spent in the Q1.
Okay. Thanks a lot, sir.
Thank you. Our next question is from the line of Chandrika from Rika Enterprises. Please go ahead.
Hi. I have three questions to go. My first question is, you have already invested a lot in setting up the Grasim paint business. Now, we do not know whether Grasim will be successful in the paint business or not. It is a very difficult business to enter. Suppose Grasim is not successful in paint business, and they are not able to generate enough volume for us. What happens to the investment we have made in setting up capacity for them?
Okay. Grasim as a group, as you know, has an excellent distributor network in building materials, including their white cements, and they have their own plans of marketing. As you correctly said, as a standby option, at Panipat, we are starting our Food & FMCG products also, which will be giving us an entry into the northern market where our presence is almost nil. So in South itself, we are able to do INR 120 crores, INR 140 crores last year in Food & FMCG and INR 50 crores in Q-Pack, that is above almost INR 200 crores in South and West. So there is no reason to feel that North market will not accept our products. So our standby backup option is to have the range of Food & FMCG products in the North, in case ABG takes time longer than what they envisage to stabilize in their volumes.
As you all know that injection molding machines are tangible. If not fully, at least 40% to 50% of the machine capacity can be used for different purposes. So that way, our Panipat plant is well preserved with our plans to introduce the Food & FMCG. Coming to Cheyyar, we have several clients in Chennai, mainly which are close to Cheyyar, who are our clients, and some of them are heavy sector whom we are not servicing because of costs and transportation delays that are generally included. Once we are in Cheyyar, some of these clients can be reachable from Cheyyar to Chennai, and we will be able to grab some of the paint companies which we are not really following up, like Nippon Paint and other companies in the South. Even access to Kerala is extended.
We can also produce some of the Q-Packs there, if not the Thin-wall Food & FMCG. Q-Packs, like 5 L, 10 L, 17 L, 20 L. They are going up very rapidly. In fact, in this quarter, from a small beginning, our rise is 89% increase in the Square Packs from a small INR 4.8 crores. The sales are INR 49 crores. So there is a jump of almost 90% in our Q-Pack sales, which are mainly for cashews, edible oil, nutraceuticals, fish food, all other products, which can be sold to our clients in Kerala and Tamil Nadu in a better way if we start our operations in Chennai. So that is our backup plan for Cheyyar. Coming to Mahad, the Mahad unit itself is small unit. It will be having four machines, hardly able to handle the ABG plans.
We also have a commitment with them that the Mahad plant capacity will be created using even the molds that are made for other locations. That way, we are safeguarding our investments. We are confident that ABG with their major game plan in paint segment, will able to attract reasonable market share over a period of time. With these backup plans, we hope our investments will be safe.
Is Grasim going to be IML or non-IML?
Sorry.
Okay. My last question is, we are entering the Injection Blow Molding business, the IBM business, which is a commodity business unlike the IML business. We should have competitive advantage in the IBM business. The pharma company already have IBM suppliers who are supplying to them. Instead of buying from you, they could just use you to get better rates from their existing IBM suppliers and buy from them instead. No one buys from you. Why do you want to enter this competitive IBM business? Why not focus on IML business where we have a competitive advantage?
Yes, I remember you asked this question last quarter also. IBM, I do not know where you have learnt, is no more a commoditized business. IBM in various applications are still considered as good as injection molding. As I explained in my previous quarter answer, we are also planning IML in IBM. In IBM, there are products which are highly valued in the regulatory market, like tablet packs, for example, and they attract more than at least INR 150 conversion on the raw material, which you cannot get in EBM or other packaging processes. IBM per se is no more not a low entry technology. It also has molds, both injection and blowing. There is a lot of usual inspection and other controls that are required in pharma, which make many people cannot enter in that segment.
If you note even on hand, you hardly have five or six players of notable presence in regulatory pharma. Sri G, Pravesha, Gopal Das, Dairy Shammers, Doctor Pack. Like that, there are the only five, six players who are above INR 100 crore or INR 80 crores turnover top line. Only few companies, none of them are listed, and their technology in terms of molding and mold manufacturing is definitely we can surpass within a year or two because of our understanding of mold manufacturing, understanding of processing, much better than any of these leading players. Pharma in DMF is a different animal altogether. If pharma products are made for Indian companies or Indian products, let's say the conversion cost is INR 60 to INR 60. But if you are going for pharma for regulatory market, the pricing is nowhere less than INR 150 to INR 200 per kg.
This is the difference I request you to study. Last time also you asked me the same question. I want you to update wherever that information is available.
Okay. Thank you very much. I wish you the best for the future. Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Jenish Karia from Antique Stock Broking. Please go ahead.
Yeah, thank you for the opportunity. The first question is with regards to the PP. If you can just help us [audio distortion]
Yeah, is this better?
Yes. Please go ahead.
Yeah. If you can just help us with the volume contribution across the value contribution across the three segments. You have given the volume numbers. Values, you can just help us with?
Yeah. The percentage of paint is 43.3% in value, 25.6% in Lubricants, and 31% in Food and Q-Pack.
Okay. Sir, how much would the Khandala plant be contributing toward paint segment?
You mean Khandala?
Yes.
Yeah. Khandala, Mysore and Vizag are the three dedicated plants for Asian Paints. A small quantity goes from Hyderabad, but these three contribute to almost 90% of our Asian Paints supplies. That plant is almost one-third capacity or say 25% capacity what we have created for Asian Paints. That was running under the 45%, at around 45% capacity utilization.
Understood. Is it fair to assume? Is it fair to assume that we would have lost volumes of approximately 400 or 500 tons because of the underutilization of the plant during the quarter?
Yeah, you can hear me.
Yes. If I just add that 400, 500 tons to the paint volumes of approximately 4,400 tons that we have done, still the paint growth seems very muted at around 2% to 3% compared to the paint industry growth of much higher. How do we plan to ramp it up? Or am I missing in this 2% to 3% existing growth number?
One or two reasons is that we are not chasing the other paint companies for business. Actually, we are letting go some of the small and medium-sized companies where we used to chase till last year. From last year, we've taken a conscious decision to stick with the top players, four or five top players, and grow with them because the realizations and the efforts what we put in are not worth the kind of realizations we get in that industry. We are not chasing those small players anymore. That is one of the reasons for muted growth in the paint industry. The drop in these last two quarters is mainly due to the Khandala plant under utilization.
Okay, understood. Sir, going forward, any guidance you would like to give for the paint segment growth? I understand you maintain an overall double-digit growth guidance, but anything specific for the paint segment?
Overall, I'm still confident we may able to reach double-digit growth, but the paint industry might become a single-digit growth only this year also. Because I hope, I wish Grasim will go as per schedule in December, January. If there are a couple of months delay, we may slip into next financial year. If Grasim won't contribute in this year, probably we'll end up with a single-digit growth in the paint industry for this year.
Okay. Next year, we will definitely see a double-digit growth for paint as well.
Yeah. Definitely next year will be much better because they were talking about 5,000 tons. Even if they achieve 70%, 80% of that prediction, that will be a massive number for us.
That is helpful, sir. Just one last question. If you could just help us with the volume and value mix for IML and non-IML for the quarter.
Value-wise, IML contributes 68%, up from 65.7% last year.
Okay.
Non-IML is 31%, down from 34%.
Volume-wise, sir?
Volume-wise, 61.8% has become 64.1%. 38% has become 36%.
That's helpful. Thank you for answering the questions and all the best. Thank you.
Thank you. Our next question is from the line of Harsh Shah from Marcellus. Please go ahead.
Yeah, hi, sir. Just one question. Since the volumes have grown at high double-digits during the quarter, I understand that Satara plants might be not utilized and being not being used to the capacity. However, then the Mysore and the Vizag plants would have run at higher utilization levels. Overall, our volume shouldn't have been impacted because it's a large expenditure. Am I missing out something here?
No, I explained to you the three plants are more or less equal capacity, and Khandala plant running at 45% or 46% is a big drawback in the overall number.
Are you saying I'm suggesting that essentially this volume growth is coming from other plants which are not running?
Of course. They have seven plants across India. We are only partners at three plants and a small capacity utilization at Hyderabad. Apart from Hyderabad, they have seven plants which are making a mixture.
Okay. Got it. Thank you. That's it.
Thank you. Our next question is from the line of Avadhoot Joshi from Bryanston Investments . Please go ahead.
Hi. Thank you for the opportunity. Sir, we normally guide for the volume growth of double with 15% average. Considering now the pharma going into the next financial year and if ABG volumes also grow further, do you maintain overall volume guidance to 15% average?
I think maybe 15% will not be possible this year being hit by the drop in stream and volume sales of paint in this first quarter. We are still confident that we can reach a double-digit volume growth this year, maybe around 10% to 11%.
Okay. Understood. Thank you. That's it from us.
Thank you. Our next question is from the line of Richa Agarwal from Equitymaster. Please go ahead.
Thank you for the opportunity. My question was related to pharma sector. Sir, for next two years, what kind of capacity or revenue potential do you have, two to three years, and how much percentage of what is the next revenue potential domestic and export roughly say, to the revenue?
Yeah. Currently, we are anticipating to start only for the domestic market, but the products which will be ultimately filled and sold should be for American and European markets through the pharma companies in India. That is called regulatory market. Overall, we are current capacity of our plants what we are setting up in Sultanpur in the phase one. We will be able to reach a turnover of up to INR 50 crores to INR 60 crores. At its peak, maybe INR 60 crores. After that, there is expansion possibility. We have space and immediate plans to expand as we progress. We are also in touch with some of the major pharma companies who have indicated interest in our range of products. The range of product is something different from any other packaging company as of today in country.
Not that they are unique, but we have a mix that none of the other pharma packaging companies are pursuing. We hope that this will give us a better edge in penetrating the pharma packaging faster than others could. Others might have taken three to four years to reach a reasonable level of INR 40 crores, INR 50 crores turnover. I think with our strategy, we will be in a position to do that in at least max two years. Once we establish the relations and regulatory market also we get the clearances, the growth can be substantially good in the going years. Minimum in two years, we hope to reach a turnover of around INR 50 crores and then we can comment what is our new plans.
Because in anticipation of good growth, we are even procuring further land in Sultanpur area, so that we have land and other facilities ready once the kickoff happens in the pharma packaging.
Okay. Sir, this guidance for EBITDA of 150 per kg kind of guidance. Th is to be in mind with position in the domestic market or export markets?
No. The domestic markets or export markets and domestic products, what we have in plan altogether. None of the products will be planning to export right in the beginning, but they have the potential. I am not counting those prices. I am considering what our ability to sell within India, either for export or for Indian market.
Okay. And sir, in your northern plant, in the north region, when you are setting up the Food & FMCG plant, what is the capacity that you are setting for?
Initially it will be with about 1,000 tons per annum.
4,000?
1,000. Only 1,000.
Okay. 1,000 tons per annum. Sir, what is the total utilization time? Let's say, once you set up this plant, to reach 80% kind of utilization, how much time does it take?
That plant, because it is going to have standard products which we are already marketing in our South and West, and there is some presence here and there in North. So once we have the product range ready, next year itself, achieving a 50%, 60% utilization is possible. In the year one itself.
Sir, you are also using some kind of recycled material. Can you share the contribution of that in the total volume? I also wanted to understand if, let's say, RCP planning would have attract more clients towards you. Can you talk about that, in terms of RCP and all those things?
Actually, there is an increased use of RCP, that is recycled polymer, in the entire country. Thanks to the new statutory measures on the end users, like our clients are under statutory compliance now. So they, in turn, put the pressure on us and we are able to find very good quality RCP suppliers in the country today, thanks to the new technology. There are cases where the utilization is as high as 15%, but in Food & FMCG we cannot use RCP. There are some clients who do not want RCP to be mixed used. So overall, our consumption of RCP will be now reaching around 5%, 6%. It may gradually go up, I hope, in the coming years.
Okay.
Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, that was the end of our question and answer session. I would now like to hand the conference over to the management for closing comments.
Hello. Hi, everybody. Thank you very much for your time and interest shown in our company's Q1 results. I wish you all a very happy evening and good luck. Thank you very much, and thanks Nirmal Bang Equities , Abhishek, for your cooperation.
Thank you. On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.