CCL Products India Ltd
NSE:CCL
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
553.85
832
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
CCL Products India Ltd
Earnings Call Analysis
Q2-2024 Analysis
CCL Products India Ltd
The company has set ambitious growth targets, aiming for an 18% to 20% increase in both volume growth and EBITDA. These figures reflect the projected growth for the next quarter and the entire year, reaffirming the company's previously announced guidance despite past quarterly losses.
The domestic market business, primarily from branded sales, is expected to reach approximately INR 200 crores this year, with the total coffee business around INR 325 crores. Margin improvements are being pursued through an increased push for smaller pack sales and specialty coffee, balancing against the lower margins from spray-dried coffee growth. Future guidance maintains an 18% to 20% growth in both volume and EBITDA without expecting any significant change in overall margin profiles.
With a focus on international expansion, particularly in markets with a significant Indian diaspora, the company plans to leverage the brand equity of its coffee brands. Acquisitions like Percol and Rocket Fuel in the U.K. market are steps towards this initiative, aiming for INR 50 crores to INR 100 crores of sales across 3 to 4 global markets within the next few years.
The company's capital expenditures are carefully planned, with around INR 650 crores to be invested at the group level, including the projects in India and Vietnam. With a peak debt expected to be around INR 1,800 crores by the fiscal year '24-'25, the company anticipates reducing the debt from '25-'26 onwards as repayments commence.
For its Continental Coffee brand, the company forecasts aggressive growth at a rate of 30% to 35% over the next three years, which could potentially lead to approximately INR 200 crores in brand sales. The company intends to reinvest profits back into brand building steadily, expecting a substantial contribution to EBITDA from the third year onwards.
The company is well-positioned in the specialty coffee segment with volumes currently less than 2%. With considerable efforts underway to establish relationships with a range of clients, there is confidence that specialty coffee volumes could grow to constitute 4% to 5% of total volumes, capitalizing on the higher profitability of this segment despite its smaller volume.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to CCL Products India Limited Q2 FY '24 Earnings Conference Call hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking Limited. Thank you, and over to you, sir.
Thank you, Yusuf. On behalf of Antique Stockbroking, I welcome all the participants to the 2Q FY '24 Earnings Call of CCL Products. From the management, we have Mr. Challa Srishant, Managing Director; Mr. B. Mohan Krishna, Executive Director; Mr. Praveen Jaipuriar, CEO; Mr. V. Lakshmi Narayana, CFO; and Ms. Sridevi Dasari, Company Secretary on the call. Without any delay, I would like to hand over the call to Mr. Jaipuriar for opening remarks, post which we will open the floor for Q&A. Thank you, and over to you Mr. Jaipuriar.
Yes. Thank you, Manish, for the introduction. And I welcome you all to this call. I'll just go through the brief summary of the operational performance for the last quarter and the half year, and then you can ask your questions.
So as far as quarter 2 performance is concerned, the group has achieved a turnover of INR 607.56 crores for the second quarter as compared to INR 506.56 crores for the corresponding quarter of the previous year, which is almost a 20% growth. And the net profit stands at INR 60.86 crores as against INR 57.79 crores for the corresponding quarter of the previous year, which is approximately 5% growth over the corresponding quarter. The EBITDA is at INR 110.64 crores, which is a 13% increase over corresponding quarter. And profit before tax is INR 69.7 crores, which is a 5% decline with respect to the corresponding quarter.
As against the half year -- as far as the half yearly figures are concerned, the group has achieved a turnover of INR 1,262.50 crores for the second half -- sorry, for the first half of -- and as far as the growth are concerned, it is 24.3% growth. And as far as net profit is concerned, it stands at INR 121.57 crores as against INR 110.53 crores for the corresponding half of the previous year.
The EBITDA is at INR 217.32 crores and profit before taxes, INR 113.13 crores (sic) [ INR 139.13 crores ] As far as EBITDA is concerned for the first half, which is 15% growth over corresponding half for the last year. And yes, so -- and as I told, the profit before tax for the half year is at INR 139.13 crores. So that is a brief summary. I open the floor for questions.
[Operator Instructions] Our first question is from the line of Rakesh Wadhwani from Monarch AIF.
Just there was a few days the -- months back, there was an update regarding the breakage of equipment in the Vietnam subsidiary. Can you please talk about the loss -- the business loss due to -- because of the breakage of the equipment.
So yes, there was a breakage in the equipment in the last quarter for which we had given an integration. As far as the update is concerned, the equipment and the plant is back in running and everything is fine now. Now as far as losses are concerned, exact losses, we will not be able to comment exactly what is the loss right now because the losses are being assessed and because we are speaking to the insurance companies. So all that survey and everything is taking place. So once that is done, then we'll be able to intimate about the exact losses for that breakdown.
But, yes for 1 month our -- the production losses we experienced. So for the expanded capacity, almost half of the total capacity, we were not able to operate for 1 full month. So that is the kind of production loss we had, which led to top line as well as bottom line loss, but the exact number, we'll be able to share with you once we have assessed that amount of losses.
Okay. Okay. And sir, can you talk about the coffee prices for the quarter, like average coffee prices for the quarter?
Average coffee prices for the quarter is a very difficult thing to say because we -- as you know, our business model is such that we keep buying for our contracts. So there are a lot of these coffee prices that we may have which had already been bought quite some time ago. For some spot contracts, we would be buying coffee on the spot. So that's not a very -- probably the right measure for one to see.
But as far as the coffee prices globally are concerned, we all know that coffee prices are still at very high level. We're expecting that once the Vietnam crop comes in, which is approximately the same time next month, we will be able to get an idea that how the world coffee prices are or which direction they are moving in. And that will give us some sense that how the coffee prices are going to pan out for the next 1 year.
Okay. Sir, one last question from my side. Sir, there were articles couple of weeks back that there's a crop loss, coffee crop loss in the Brazil market. So I just wanted your thoughts on that. Are we witnessing any clients shifting from Brazil to us or we are getting new queries because of that?
So I think the news that you are referring to was probably 1 year old news. That's the time when Brazil crops were affected and Brazil coffee prices had gone up. But this year, the Brazil crop has been good. And in fact, there the prices have softened a bit. So it's not -- so the phenomenon of people out -- moving out from Brazil is not there. And we will -- as I view, a lot will depend on how things move, once the Vietnam prices come out in the open, which will happen after their crop comes in next month.
[Operator Instructions] The next question is from the line of Venkat from 3Sigma Financial.
Sir, last -- in the last quarter, you mentioned that the green coffee price actually determines the liability or the borrowings rather, the working capital. So can you give a breakup of the working capital versus the long-term borrowing?
Long-term borrowings -- this is Lakshmi. Long-term borrowings remain intact because we are availing the borrowings for new projects only at Vietnam and in India. As far as the working capital borrowings are concerned, as I stated in previous call, the limits or efforts are based on the peak level of the GC prices that remains intact. And in a moment a change that can be witnessed, once the Vietnam crop is coming in, that is likely to come from December.
Sir, there is a INR 400 crores increase in the borrowing. So is this due to the price? Or is there anything else that has contributed to this increase in borrowing?
Increase in borrowing, if you look at it as we had said, the new project is coming up, that is 16,000 tonnes capacity in the facility. [ Able ], we are taking around INR 320 crores is the term loan. And some of the balancing regarding the GC prices impact, there is another INR 80 crores to INR 100 crores. That's what it is reflecting as INR 400 crores.
Sir, there was a -- we had a shutdown, right, in Vietnam. So what is the capacity utilization in light of this, the total capacity utilization?
As far as the Vietnam capacity was concerned, we were looking to utilize 50% of the enhanced capacity and almost 100% of the previous capacity. But considering the breakdown and the situation that arose in Vietnam, probably that number would be lower for the last quarter. But on an annualized basis, we will try and maintain that kind of guidance of utilizing 50% capacity for the new line for the full year.
So at the company level, what is the capacity utilization, sir?
As I told you, the capacity utilization per se, if I were to take the India capacity utilization to the 100%, Vietnam, the previous line, let's say, the old line for capacity utilization is also almost 100%. Quarter 1 in Vietnam, we had utilized the new facility also 50%. But quarter 2, as I was telling you, we are still assessing the losses, the exact production loss that we had. But if I were to take an informed guess, it won't be 50% of the new capacity, but probably we'll be at around 25%, 30% of the new capacity.
But that will -- actually, we'll be able to give a clearer picture once we have done our surveys and assessments and the insurance companies also done the surveys and assessment. And -- but going forward, as I told you, at an aggregate level for the full year, we will -- we are trying our best to make sure that for the full year for the enhanced capacity we will be able to achieve 50% because we are looking to secure more contracts in quarter 3 and quarter 4 so that we can make up for the loss that we had incurred.
Sir, how do you see the next quarter and the entire year?
So the next, as I told you, [Foreign Language] exactly the same way as we were mentioning, the next quarter and the entire year, we already had the order books pulled as far as the guidance was concerned, which was about 18%, 20% growth on top line and EBITDA that will remain for big thing.
The only thing is that for the losses that we incurred last quarter, we probably have to book a little more orders so that we make up for that top line and bottom line losses. So the entire year, the guidance still remains the same. We will probably end up at 18% to 20% volume growth and the similar levels of operational profit growth, which is EBITDA.
[Operator Instructions] Next question is from the line of Richa Agarwal from Equitymaster.
My question was if you could share an update on the domestic incentive business performance for the first half. And second question is on margin trajectory, I know that you don't share the absolute margins, but do you see any kind of improvement or inching up? I think you had guided for that over 2 to 3 years, you would be looking forward to INR 135 to INR 140 per kg kind of margins? Are we on track to achieve that?
Okay. First of all, the first question that you asked was about domestic market performance. So if I were to see total number, we probably were around INR 135 crores, INR 140 crores of total domestic market business, out of which approximately 85%, 90% was -- sorry, INR 85 crores, INR 90 crores was pure, pure brand. So we are on track for the brand to close at almost INR 200 crores this year. And the total coffee business would be around INR 325 crores, round about that number for the entire year.
So we are growing at quite a healthy pace. But, yes, going forward, we want to kind of drive some more growth drivers in the business. And we're making plans for getting into more aggressive growth in the next, not only just the second half but also subsequent couple of years. That is a little brief on the domestic and branded business.
Now the second question that you asked is about margin improvement. We have given a guidance and we have been dedicated for last many quarters, that there are many things that lead to or that will determine our margins. For example, we are pushing hard for more smaller packs that will help us improve our margins. We'll drive more specialty coffee sales. So that will help us drive margins.
But there are also other factors, which probably at an aggregate level, also pulls it down. For example, let's say the new capacity that we are putting, the first capacity that we put in Vietnam was the spray-dried. Spray-dried we all know that the market profile is lower then the spray-dried capacity. So our mix will change...
Sorry to interrupt, sir, your voice is breaking.
Hello?
Yes. Your voice sound is a little now.
Is it better now?
Yes, this is better.
So yes, just -- I'll just repeat a little bit of things what I said because the voice was breaking. So I was on the margin question that was asked that will the margin profiles improve? So what I was telling you is that, yes, there are certain segments where it will improve. For example, we are driving more small packs that will help improve the margins. We're trying to sell more specialty coffee that will help improve the margins. But having said so, we'll also see some mix change because we have put the Vietnam capacity, the 16,000 metric tonnes is spray-dried capacity where we earn lesser margins.
So what will happen is that, this year, suppose if you were to utilize 50% of my capacity where the growth will come from will largely come from spray-dried. So that growth will be driven at lower margins because spray-dried will have lower margins. So there will be factors which will be pulling up the margin. There are factors which will pull down the margin. So when we had commented that some of the margins will improve, probably it was for some of the sectional business and not really at an overall group level.
Overall, group level, we have maintained the guidance for last few quarters, we have been always saying that. For the next couple of years, we don't see any improvement or any deterioration in margin, we will maintain the 18%, 20% volume growth and 18% to 20% EBITDA growth as of now.
Okay. And sir, my second question is that now that you're putting up India capacity and Vietnam capacities are also planned. So how much time do you expect for these capacities to be utilized at an optimum level of -- full utilization level, how much time does that take?
So as a thumb rule, if you have tracked our capacity enhancement and tracked our empirical data in history, you will see that. Generally, what we do -- what we have been able to do is in the first year, we tend to utilize 30%, 35% of the capacity. Second year is 50%, 60%. And third year, we get to 80%, 85%, which is very close to the maximum capacity because we actually don't get the maximum rated capacity because of the different blends and things that you make in the coffee plant. So therefore, that is the broad guidance we maintained. But if you were to see the Vietnam business, Vietnam capacity expansion. So instead of 30%, 35% in the first year, in the first year itself, we are able to utilize 50%. So that we are kind of -- that we are performing much, much better.
But as far as now the next India capacity is concerned, that's a thumb rule, we will see how things will go forward. But we know that there is a lot of capacity, which we already know that we'll get -- will be utilized because, for example, the India capacity will be used a lot for domestic market. Domestic market itself is growing at, as of now, 20%, 25%, we are looking to even kind of push the peddle harder and grow at a higher rate.
So we know that, that capacity will be required. So there will be some capacity utilization. But as a thumb rule, as I told you, this is how we have kind of progressed in the past, and this is how we are looking forward to progress for all the new capacities that we are looking forward to install.
Sir, one last question, if I may, what will be the effective tax rate over the next few years? Are they likely to be in the same range or some kind of changes?
At the group level, it is likely to be around 12%.
Okay. That's for -- that's the guidance for next 3 years, like until FY '25, '26?
The next 3 years, it was good.
The next question is from the line of Senthil manikandan from ithoughtpms.
So first, in terms of the breakage of equipment at Vietnam. So is it -- if you can share some insights into it has already happened in the past, or is it because of a new supplier that has happened in the expanded capacity, some insights on what is that?
No, I don't think it is because of new supplier. It has happened once in the past. And these are things which are part and parcel of any manufacturing processes that there will be breakdowns. These are not new to us.
And yes, of course, it was unexpected, but not really new to us. Having said so, the reason that we had informed the market because as to comply to the regulations that have been put up by SEBI and other government authorities. If there is a material impact that the organization feels that will take place because of these breakdowns, one needs to inform. So we were overcautious and we want it to be very transparent, and that's the reason we inform the market, but it is neither new or it is neither because of any new supplier or anything.
Great. Second question is with respect to the domestic B2C segment. So in terms of branding, I think we are seeing brands in the local Chennai metros. So what's the broad strategy for the branding part of the B2C segment?
So basically, the strategy is twofold. What we are doing is we are trying to aggressively gain shares from the existing players and the existing categories where we are trying to grow big. We started our operations from South India, which is a big coffee market. And we are now expanding to other cities across the country. So in almost all 10 lakh plus population town, we now have our distribution setup. And we are slowly trying to capture the -- not capture, let's say, but at least gain some market share in those area as well. So that's one part of the strategy.
The other part is that how do we increase the coffee consumption for which we are trying to introduce newer formats like premix coffee, which is -- because India largely, you see, is a tea-drinking nation and slowly people are adopting coffee. So we wanted to make sure that we are able to offer the consumers a lot more choices and lot more ways to bring coffee. And that is why we are very gung-ho about this category of premixes because it helps drive that consumption that much more easily.
So that's one segment, which we are focusing a lot, which is a very new segment. And here, we are doing a lot of category driving exercises. Here, it's a new category. There aren't many players who are playing in the category. So here, we are promoting amongst the youth, the college going guys, the bachelors, who probably are looking to, and not only experiment with coffee, but also try various varieties of coffee, and that is what we are trying to offer to them.
Again, coffee, it's a food product and your food products really have to be driven very differently. You have to drive newer habit. So what we do is we engage in a lot of sampling exercise, interaction of the category with the consumer. So wherever we get a chance, we do a lot of product sampling so that people interact with the product, they get the taste of the product. So that's the second part of the strategy that we are taking forward. And yes -- so largely, these are the 2 buckets in which we are operating.
The next Question is from the line of Rohan Gupta from Nuvama.
Sir, a few questions from my side. First, if you can give some sense in the current quarter, the kind of volume growth and the pricing, either the growth or the increase on a Y-o-Y basis?
So current quarter, if you see the volume growth was around 10% to 12%, and we got a value growth of 20%. So current quarter within -- I'm talking about the quarter gone by, which is quarter 2. So on 10% to 12% volume growth, we got a value growth of 20%, which was largely because of the pricing advantage we got. Largely if I were to pinpoint one thing, it was because of small packs, it's the leverage we got from pricing.
Okay. And volume growth was slightly muted mainly because of the shutdown at Vietnam or breakdown in Vietnam?
Yes, yes, yes. Absolutely, absolutely, absolutely. Muted as far as guidance are concerned, guiding to 12% volume growth in this era itself is quite...
That is fair enough, but we have been guiding for a few [indiscernible].
Yes, against our guidance because of the breakdown at NCL plant. .
Do we see, sir, that -- I mean, with the excess capacities which we have right now, over the next 6 months, I mean, we will be able to still achieve 18% plus kind of volume growth guidance? Or it will be [indiscernible]?
So we are trying very hard that because of the excess capacity, we have a chance to make up. So we are aggressively pitching and making sure that we make up for the losses. So only time will tell whatever losses that is lost in the last quarter. [ Vietnam ] make up to additional volumes. But yes, that time will tell because right now, we are in the process of pitching and seeing what can we meet now.
And sir, how has been the green coffee prices right now? You said that they have started softening and in next couple of months, that Vietnam will be setting up the prices, right?
So when I said softing, it was mostly -- there was a question asked that if the Brazil price is still very high and are we getting newer customers from Brazil, to which I said Brazil crops prices have softened because they had a good crop this year. As far as Vietnam prices and Indian prices are concerned, we will get to know next month because that's when we crop for both these markets come and that's when you start seeing that what kind of trends will evolve after the new crop comes. So as of now, they tend to be on the higher side itself.
So you think that, I mean, India and Vietnam will see a price upward revision? I mean...
No, I didn't say upward revision. I said that we will see the trend once the new crop comes. So it could be upward, it could be downward. If the market believes that the supply of crops has been terribly low, there could be an upward trend. But if the other trend happens, then there could be downward trend as well. So...
But as of now, we have -- we don't have much clue about it, whether it could be...
No, we don't. Because all the clues anybody had in this world about coffee prices have got broken in the last 2 years. So all predictions have gone haywire, so really difficult to predict as of now what's happening. Because as you know, a lot of fine guys also are playing into it, farmers are holding stock. So there are a lot of things that get played into this whole commodity. So it's better to wait and watch and see the trends before rather commenting it speculatively.
Sir, another trend which you just mentioned that domestic market coffee consumption is increasing by roughly 20% to 22% and even upward. So there's a very, very, I mean, positive, I mean, numbers. I mean, if the industry is doing with that number, I mean, that's surprising to see because I don't see that the coffee retailers in India, they are growing with that pace. So from where we are getting this, I mean, confidence that the growth in the coffee industry is roughly 22% and how...
Okay. I correct a little bit of this thing. When I was talking about domestic market growth it was our growth of 20%, 25%. If you see the domestic market, there are 2 segments that operate like any other market. There is an in-home segment and there is an out-of-home segment. .
Now the in-home segment, which is a segment -- which is a retail segment that you buy coffee and take home and drink coffee, that isn't looking at a very high pace. That is still very low at around 10% or so. So that is not going very high.
The growth that is coming is in the out-of-home segment. So what is happening is that there is a lot of coffee consumption that is happening out of home. Whether it is the cafes or at places of work. Because what has also happened is now that after COVID, everybody is back to their places where a lot of out-of-home consumption happens. That's a segment that is growing very fast, yes.
So -- but if you see our play, either internationally or in domestic market as of now is largely in in-home segment. So the in-home segment category growth isn't very high. But what we believe is that for us because we are aggressively trying to gain market share, we will probably be able to grow at a much, much higher space than what the category of the market is growing.
Okay. So you were saying 20%, 22% in your context, not the industry?
In our context, yes, yes.
Okay. And sir, in retail brands, you're targeting roughly INR 200 crores kind of sales for the FY '24. Over next -- I mean, in a pure brand scene only. So what is this number you are looking over next 3 to 4 years? Also, you are proposing the restructuring with the merger of the retail business with that context. And I mean, if you can throw some more light that how do you see the retail business going forward in next 3 to 4 years?
And, sir, one more thing that last year -- that on last con call, you mentioned that you have global ambitions as well to grow your coffee retailing business globally. So any strategy formed up there that how much spending we are planning to, in terms of our retailing into the global market, how much spending we are planning to do over the next 2 to 3 years?
So okay. That's a long one. But I'll just try and keep it crisp and simple. In the domestic market in the next 3, 4 years, we are looking to drive aggressive growth anywhere between 25% to 35%, which means that probably in every 3 years, at least for the first 3 years, you would like to double it from here, where you are. So that's the kind of ambitions we have, and that is what we are aiming for and doing whatever it takes to get to that level.
So that is what is about the domestic market. As far as international, yes, we have ambition to launch our brands, especially considering that now that the brand has got some equity in India, we are already getting a lot of queries from markets where Indian diaspora is residing that can we have Continental Coffee here also.
In fact, even if we haven't started anything right now, we see lots of instances where our coffee has been imported by some local traders and have started -- they have started selling in the local market. So that phenomena has started. So we felt that it is better that we take it up in a more organized fashion. So that's one segment.
And of course, the other is a segment like U.K. market where we bought a brand from Löfbergs, which is Percol and Rocket Fuel. So we also want to take that forward and create these segments where you could start seeing INR 50 crores to INR 100 crores of sales in 3, 4 pockets across the globe.
Now as far as what is that we are going to spend, see, we like -- just like domestic market where we have built it step by step and stone by stone. That is how we going to do in other markets also. So our strategy won't be to kind of blast a lot of money in the market and create a lot of hype and then try to get sales. But it will be a step-by-step sales.
It means that probably in any market that we operate in the first couple of years or let's say, by the third year, we would like to break even. And even in the first couple of years, we would not like to lose more than a couple of crores in trying to build the brand. So that is our philosophy, and that is how we will take it forward in each of these markets.
The next question is from the line of Jenish Karia from Antique Stockbroking.
First question is with regards to the CapEx that we are doing. Any color on how do we spend on both India and Vietnam CapEx, how much of it is funded through debt?
India, Vietnam CapEx. As we stated earlier, Vietnam expansion is taking place at USD 50 million, out of that $15 million is our contribution package and [ remaining ] is the debt component.
And sir, India CapEx, 16,000 capacity?
Yes. India, it was a facility which we are taking out from the CCL food and beverage only 1 subsidiary for which [indiscernible] for INR 400 crores. Out of that, INR 320 crores is the debt component, INR 80 crores is our component. It means that there and clear, it is around INR 600 crores is the net company and the balance amount it is our internal contribution.
And how much cash outflow has been done till date?
We have spent almost around INR 200 crores.
Combined India and Vietnam, both?
Yes.
Okay. Great. Sir, secondly, if you can just throw some color on how the small pack mix has improved in this quarter compared to the previous few quarters, how has the trend been?
Actually, the trend is improving. And in fact, if you see the standalone numbers, you will see that the efficiencies have improved, and that is largely because of small pack deliveries. So it is in the positive direction. If I were to give you percentages in the export business almost in the India business, we were actually, if you remember, a couple of quarters ago, post-COVID, we had a small packs contribution has come down to 17%, 18%. It has now reached back to slightly above 20%.
And as we are going forward, we are kind of constantly pushing more and more small pack. And we are likely to get similar kind of trends going forward as well.
Okay. Great. And sir, on the geographical mix, so how much of our exposure would be to in Middle East market? And how has our U.S. geographical mix improved over a period of time?
So okay, let's say, U.S. currently is at around 12% to 14% of our Middle East is not very much. It will be less than 10%, Middle East and Africa, if I were to combine. So it's less than 10%, close to maybe 5% or so. So that is there. Europe is almost again 15%. Russia and CIS will be around 20%, 25%, and the balance is the Asian market, including the domestic market.
And just 1 last question on the debt that we were guiding last quarter, the peak debt of around INR 1,800 crores, INR 2,000 crores. So the coffee price is still remaining at an elevated level, although we are expecting Vietnam price announcement next month. So any change in outlook on that front?
So just a small correction. That INR 1,800 crores was not the utilization. It was only an approval that we have taken from the Board so that we keep our out of, [ let me say ], intact. Utilization, if you see for the full year, won't go -- will be close to around INR 1,300 crores, INR 1,400 crores.
And that should be the peak...
Coffee prices -- yes, once we get to know the coffee prices trend, it would change a little bit. Because the coffee prices go down, then I think we'll see a reduction in that as well.
Next question is from the line of Abhilasha Satale from Quantum AMC.
Sir, just the breakup of the CapEx, like how much exactly will be incurring in this year in '25 and '26, if you could just keep those numbers. And secondly, in terms of peak debt, because this year, we will be at INR 1,300 crores. But by the time we complete India capacity, how much will our peak debt stand at, like what is our target to reach that? And what is our deleveraging road map post that?
Indian operations, so the CapEx is somewhere around INR 400 crores to complete the project, which we are going to incur before March. Thereby, we are going to start operations as well. This is Indian operation. So getting into the Vietnam side, the project is going to be completed as we stated earlier in the mid of for next financial year. And -- against project layout of around $50 million. We are going to invest around $30 million during this year till March and balance $20 million, we are going to invest into the next financial year.
So it means, the total CapEx, it is somewhere around INR 650 crores, it is going to get at the group level around INR 600 crores, INR 700 crores, we are going to invest into the CapEx at the both facilities.
Okay, fine. And the peak debt level, like what would it be? Like by the time we complete our CapEx? Because this year will reach around INR 1,300 crores and in '25, '26?
So '24, '25, as we stated, it would be around INR 1,800 crores and the '25, '26 onwards, we keep reducing it further because the repayments are going to start and the -- from '25, '26 onwards, you can see the reduction in the overall debt. So by March '25, we are likely to be somewhere around INR 1,800 crores as we stated in our previous call as well.
Sure, sure. Okay. And sir, just last one on the Continental Coffee. Like how do we see this business as a percentage of revenue or in terms of absolute? Just how do we see this segment of ours over, say, next 3 years, 5 years, what is the outlook? How much we want to scale there? And how do we see the profitability for this business as we scale up?
So I just -- in one of the previous queries I answered, that this business, probably this year will end at around INR 200 crores, pure brand business. And we are looking to aggressively grow this over the next 3 years, which is almost at a rate of 30%, 35%. So that is what our aim and objective is.
And as far as margins are concerned, currently, we have given a guidance of whatever, 18%, 20% for the group at top line and bottom line. Keeping that guidance in mind, we are going to take decision that what is the kind of investments that we want to do. But broadly speaking, see the brand is still at a very nascent stage. We are building the brand, it has a long way to go, there are a lot of new geographies to be expanded in. So we will not shy away from kind of building it further because brand building is something which is a continuous effort. It's not that we do it for 4 years and then you stop it. So that is going to happen, especially in recent years probably one would want to put more resources now that the brand has got established you know that putting that resource will help us in the long run.
So in the next couple of years at an EBITDA level, we aren't looking at a lot of growth at EBITDA level, we are trying to address more and more of top line. So that would be broad guidance from our side.
My guess is that from the third year now on, we start seeing a lot of contribution at EBITDA level from the -- from this business. But as of now, we want to continue plowing back whatever the brand earns into building the brand itself.
Next question is from the line of Abhishek Navalgund from Nirmal Bang Equities.
So just one question that we have restated our numbers for FY '23 also. So particularly on the tax front in FY '23 there has been a downward revision in terms of effective tax rate. So the question is basically, even if we deliver on the EBITDA side in terms of 20% growth this year, because of the below EBITDA items like depreciation and interest, our earnings growth would be more or less muted this year. So just wanted some clarity on what we did in the FY '23 effective tax rate after the restate.
Well, restating the financial, the carryover losses of our [indiscernible] or FMCG division, which is amounting to almost around INR 45 crores. That has been set off against the parent company and so profitability. Thereby, what happens is that we are already under the MAT. And the due to restating of the financials, our MAT credit has gone up by almost around INR 17 crores. So resulting even '23, '24, as well as -- and '24, '25 also, we are likely to be under the MAT.
And you said the effective tax rate going forward will be somewhere close to 12% on blended basis, right, on consolidate level?
Yes, that's on consolidated basis, it remains at 12%.
Sure, sir. And my next question is on CapEx. So I think you have already mentioned this. So while you have spent only INR 2.6 billion so far in 1H we are on track to incur the remaining part, right, the INR 600 crores, INR 650 crores number which you mentioned. So we will see acceleration in the second half there, right? .
That's right. Because as far as Indian implementation of the project is concerned, we are receiving of all the equipment and likely to be completed by March '24. So, as far as both the projects are concerned, we are on track, and we are definitely [ on schedule ] to complete the projects. .
Sure, sure. And one last one from my side. I mean what sort of outsourcing that you did in this quarter, particularly since you have this equipment breakdown. So will we outsource any quantity in the second quarter?
No, no, Abhishek. Very little amount here or there just to listing -- just of some small listing, but not nothing substantial, nothing like what we did last year.
[Operator Instructions] Next question is from the line of Jenish Karia from Antique Stockbroking.
One clarification. When we announced the India CapEx in the first quarter Fy'23, we had guided for a total outlay -- outflow of INR 320 crores, which would be funded by around INR 200 crores of debt. Now we are saying that the CapEx is around INR 400 crores funded INR 320 crores by debt. So firstly, why the CapEx amount has gone and what has contributed to it? And why have we increased our debt term mix in the CapEx context? These would be the 2 questions. .
No. If you look at it, there's no increase in our original estimation. Initially, we stated it is around $50 million of the Indian operations and $50 million at Vietnam at operation. And the [indiscernible] implementation that we have planned for, Indian operations are to be completed by March '24. And Vietnam operations are to be completed by mid of next financial year. Those earlier submissions are well in order.
Okay. Because I was just going through the transcripts, so there would be INR 320 crores, but I'll take it offline incase there is some disconnect from my end.
Yes. .
Next question is from the line of Richard D’souza from SBI Mutual .
Just wanted to ask about China. Last time, we believe that you were thinking of setting some consignments or having a tie up with a local partner there. So any developments on that front?
Yes. So, we have had lots of development. None on the business as of now because it does take time to seed the market and get to the clients, there'll be the process of getting the samples right, matching the product expectations and then, of course, the pricing, et cetera.
So yes, a lot of inroads have been made. We have got connected with our local partner there, we have started work on their part. So a lot of work on the background is happening. But yes, it will take a little bit of time to -- for us to see the results.
Okay. So are we tieing up with a local partner who has a brand there or how is it? Or will be...
No, no, no. They are into -- the earlier were into coffee business, they're right now doing a lot of other things like oat meals and all that. But yes, we'll -- but we have a lot of connect in the coffee industry. So that's what they will be pushing for us.
Okay. Okay. The second part is that worldwide, there is a lot of demand for specialty coffee and I just wanted to understand how are we placed there and specialty coffee as a percentage of our total volumes, what would it be?
So we are placed very well. We -- last time when we spoke, we have spoken about the mini plant and the pilot plant, which is set up. But the whole purpose of developing specialty coffee is, we have connected to a lot of clients across the globe. A lot of them have liked our samples, and we are in the process. Very interestingly, in autumn, so I can't reveal the names right now. But even in India, we have got some -- we did some pitches for specialty coffee especially to the high end coffee shops and chains. So all that work is happening.
As far as the volumes are concerned, see, the volumes will be very low. As of now, it is less than maybe 1% or 2%, but yes, the good thing about this segment is that once we get the first mover advantage to be the preferred supplier of specialty coffee, it helps us in the long run and that has what has happened for us in all segments of coffee, be it freeze-dried coffee or a microground coffee or whatever or let's say, the cold brew. So all that who has been doing, we were the ones to start it and then over a period of time, if the market develops , you get the advantage.
So a lot of work is happening, a lot of clients are being contacted. A lot of positive feedbacks have happened. But yes, the volumes are still very low, but that's -- we are okay with that because it's more of a building sales, and we all know that even at smaller volumes, it will be very high profitably -- in terms of profit, it will be a high profitable business.
Okay. By when -- I mean do you have a game plan to take it to about 4% to 5% of your volume, sir?
Yes, yes, absolutely. We are kind of wanting to hit those numbers. And yes, over a period of time, we will see that we will get to that number because a lot of background we have contacted or not many people and they all have liked the product, and we're all excited about it.
And the good part is it's not just concentrated to 1 geography, but also is kind of spread out and we are getting inquiries from across. So we are very hopeful that this will do well for us.
Okay. Okay. Just a question on this. I mean, on the innovation front. The last time we heard was about cold brew. And after that, has there been any further innovation, which you could talk about then?
Yes. So specialty coffee, as we are talking about it. That's an innovation that is happening because to deliver that profile of specialty coffee in instant coffee itself was challenging because most of the specialty coffee was supposed to be coming from either R&G or hosted beans. But the fact that we have been able to create a product profile which gives -- it is very -- almost identical to a specialty brewed coffee and itself a pretty big innovation.
And that's the reason why clients across have been very excited about it. And the best part is the coffee chain clients being excited tells you that we have been able to come very close to what all of them wanted. So I think that's an innovation that we are looking -- very keenly looking forward to.
Okay. Okay. One more question from me. On the brands which we acquired in U.K., could you share any quarterly numbers for that? .
No. So I think you know what happened. We acquired it in the month of first quarter, actually, and since then last quarter was a lot about transitioning. You know how complicated things are when you are transitioning things from a company to other and especially the kind of complexity that it involved in the sense of supplier and then the -- or the change to be transitioned. So all -- a lot of ground work has happened. So not much to share when it comes to numbers. But at an annual level, we probably -- we'll reach around INR 12 crore to INR 15 crores of sales.
But that is okay. We were -- actually, we are looking to relaunch the product with new product formulations, with new packaging, with new positioning. So a lot of that work is happening. And probably this year is not the year when we will be talking a lot of numbers, but more on the new strategy and how do we want to take it forward. And it's only from the next year, we'll start to kind of drive this aggressively. Once our whole strategy is clear, our whole go-to-market components are in place, and that's when we will try and start driving.
Okay. Okay. Sorry, one last question. reverting back to the China angle. By when do you think you will have some good news to report there or you would have formalized your plan?
Yes, yes. We're also eagerly hoping to start listening to good news from that segment. But as and when we start getting some firm commitments from that side, we'll keep all of you informed.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
So thank you everyone for joining us. Wishing all of you very happy festivities. And we look forward to meet you again next quarter, and thank you Antique for arranging this call.
Thank you very much. On behalf of Antique Stockbrokings, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.