Emmbi Industries Ltd

NSE:EMMBI

Earnings Call Transcript 2022-Q4

[Parvati Rai, analyst]

Good evening, everyone. On behalf of K.R.Choksey Research, I welcome you all for the Q4 FY '22 Earnings Conference Call of Emmbi Industries Limited. From the management side, we have Mr. Makrand Appalwar, Chairman and Managing Director; Mrs. Rinku Appalwar, Executive Director and CFO; Ms. Maithili Appalwar, CEO of Avana; and Mr. Yash Punjabi, COO of Avana. We will begin the call with a brief overview by the management followed by the Q&A session. I now hand over the conference to Mr. Makrand Appalwar for his opening remarks. Thank you, and over to you, sir.

[Makrand Appalwar, executive]

Thanks, Parvati, for a kind introduction, and hello and good day to all the participants on the call. So it's a very interesting year. It's a very interesting milestone, which I would like to talk to you today about. So, there are 2 impressive things which happened in our life here. One is, company has completed its 25 years of operation. And second, company has also crossed INR 500 crore mark in its turnover this year. So both the things are very interesting for us, both the things really got us many things like knowledge, passion, relationships, I would say the love and affection of our investors, our employees, and stakeholders in this company. So this year, especially this conference call is very dear to my heart. And I think I would be probably more talking from the heart side than the mind side during this time. So of course, all the data and numbers has been circulated to you. So I hope you had a chance to run through it, if you didn't, because today the time was very short between the presentation was posted and the time of the call. So we are open to your questions even at the later stage. So this year was very interesting. We had a very good growth. Growth was to the tune of around 60% in the revenue, which came from various sector and the best part is growth was not dominated by any one particular, I would say, segment of the company's operation. It was overall, every segment has performed very well. So that was one of the best thing to happen. Many a times we have seen that or you must have seen that when the top lines grow or companies are in the growth mode, at times bottom lines get challenged or if they get compromised, but here the story is little different. We could almost toward the 2.5x improvement in our PAT level also and with that ROC has -- with that ROC has started moving up towards the 13%, 14% mark from a previous year's 8% and that is I think one very good sign and symbol that whatever money we are putting it to, sweat hard. And we'll ensure that in the future also the same hard work is taken from not only the members of the company, but also the investment, what is being made in the company. Regarding the cash conversion cycle, is Emmbi has initially in the growing stage or in the growth times, we have faced a slightly extended cash conversion cycle, where last year, our cash conversion cycle was to the tune of 149 day precisely. And we are -- last time I gave a comment that we would be targeting it somewhere between 90 to 100 days. And we've made it this time we are in the 96 day cash conversion cycle, I think that is one of the best in the industry nowadays what is happening and that too with the growth of exports. Export has grown phenomenally this year close to 70-odd percent, plus with that we are maintaining this kind of turnaround with the money is one of the very impressive things I would say. Regarding the overall operation and the thought about the company, I can tell you that right from the day we have been listed and we have been talking to all our investors, I have been always telling that the best part of Emmbi will be consistent growth during all the situation, all the odd. So we again want to marry ourselves to that statement. We'd like to grow in the coming -- we'd like to double the company in next 5 to 6 years' time. And if you see why it is very important and close to this, around 10 years back when there was an IPO, this company was INR 39 crore company. So in 10 years with your financial backup and your support and the capital market, we raised the money. We brought it from INR 39 crore to INR 500-plus crores. And from here, there is no looking back. We are -- within the next 5 to 6-year, we are sure that we will double the company in all the means. While doing that doubling activities, you must be curious that what are the things which would probably we taking larger share of that growth factors what we are looking at. So we are believing that exports from India would remain very lucrative. FIBC as a sector has a global contribution of 42% by the India and it's still growing. So we are very hopeful that the growth what is going to come, exports is going to be one of the large contributor. And, of course, the retail division, which is very close to our heart again from the Avana side is growing leaps and bounds. And we would be able to generate a very strong brand driven sales from the Avana side. So when it's Avana, it's not only going to be the sale for Emmbi, but it is just like lending a brand support to my so many other MSME kind of companies who are always struggling to kind of create that phase in the local market. So through Avana, we would be able to extend that brand support, create the wonderful level playing all -- I would say positive field for those guys. And in turn also Emmbi and Avana will get benefited. Export this year had a wonderful growth of 73% and contribution of around 63% in the total sales and the domestic sale was to the tune of 37%. So you should see that exports was growing. And I had been historically always talking about the fungibility of Emmbi's product lines. So whenever there are difficult times, whenever there is difficulties in one particular market, we have this ability to swing our production in whichever way we want. So when there was a COVID major issues, 2 years back, we had ability to dispose or create some material within the domestic market and exports maybe came down. Again when there was -- we see that export is a better growing as well as better paying market and we have ability to move in there. So we quickly shifted our manufacturing set up so that we can move largely into the export market and got the export share to the 63% in the total turnover. I think this is one of the highest export share also we have enjoyed in the past and we intend to maintain similar levels of 60-40 in the coming years. So that is one of the interesting thing to happen in the coming time. Apart from this, we are completely focused on getting the best results out of a single every penny we are investing, trying to reduce the possible investment outlets, reduce and keep the outlets to the minimum. Till the time government new scheme in response to the MEIS is not announced -- rather the scheme is announced, but it's not implemented, we would like to at least on as more money and create a better EBITDA level margins, we are already in the range of around 11.5-odd percent from where give and take some percentage. So that is the level we would like to maintain without the scheme and every year, we would at least struggle to get 50 basis points up on the EBITDA level margin. So that in the coming year when you see that in the 5 years, when we double the company, our EBITDA level margins should be around 14% without any external or governmental support. So we are hoping that multiple things are going to happen. We are also very confident about the Pond Lining business. Recently our Honorable Prime Minister in Germany has announced a new pond lining or a pond scheme which I'm sure you all must have been excited. So are we. So we are just waiting for that scheme to come in an elaborate way. It's still not -- we are not yet got the details of the scheme. So soon -- as soon as we get the 50,000 ponds, which Honorable Prime Minister has announced, we will definitely create some better market for Emmbi and we would be able to capitalize some part of that, that's what my hope is. I can't say anything more on that at this juncture because this scheme is yet not available for the viewing. So this is the general commentary about this year. And now I will open the floor for questions and answers. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Keshav Garg from CCIPL.

[Keshav Garg, analyst]

Sir, many congratulations for good numbers. And sir, I'm assuming that our raw material prices since they are petrochem derivative, they must have gone drastically during this past year. So if you could just give us some idea about what kind of volume growth was there and what kind of realization growth was there?

[Makrand Appalwar, executive]

Volume growth was to the tune of around 30% and realization growth was the balance around, so it's not only about the raw material, which has gone up or has got even. So total growth is close to 58.99%, out of which 29.54% came from the volume growth and the balance came from either value of the raw material going up or value of the product going up because of the kind of a need in the global market or improved product contribution either of it, it's a both way, because the contribution of raw material in the product is less than half of it.

[Keshav Garg, analyst]

Sure. And sir also like you just mentioned in your initial comments that we will strive to increase our operating margins by 0.5% per annum, sir but we are like -- for FY '22 we are at 11% and in FY '18 and '19, we had already done 14%. So -- and I'm assuming that our product must have improved favorably during these few years. So in that case, sir after this COVID disruption is over, now we should start from 14%, but here you are guiding that from 11% we will increase by 0.5 or 50 bps.

[Makrand Appalwar, executive]

[Foreign Language] which has been withdrawn by government. So that money has gone. So still -- so that's what I actually clarified in my this, that without MEIS support, we will be back to 14% and in case the MEIS, or RoDTEP or RoSCTL whichever is the government scheme is, comes in and gets us, that would be up and above that number.

[Keshav Garg, analyst]

Okay, sir. So basically, right now we are getting no export incentive whatsoever?

[Makrand Appalwar, executive]

No, no.

[Keshav Garg, analyst]

Zero. So that is really strange that, I mean this is probably only export that there is no export incentive what so however smaller so anyway that is...

[Makrand Appalwar, executive]

Technically I can say that this is the interest of internal exporter, which is common to 100% every single exporter in the country, but sector specific yet to be announced, they have announced it yet, but the formal notification has to come. So we are hoping that it will come so soon, that it is in the range of around I don't know everything is talked anything from 2% to 6% people are talking about it. But in the time I don't see the notification in my hand and we don't get the money actually in the bank account. I don't want to comment anything here.

[Keshav Garg, analyst]

So we will get this I mean whenever this is notified, so we'll get it retrospectively for whatever exports we are doing in these past few quarters.

[Makrand Appalwar, executive]

Not really, I don't think so, because most of the time government is not giving anything retrospectively. It would be from that particular day on the day of announcement or something like that or maybe maximum a month to the adjustment or something like that.

[Keshav Garg, analyst]

Okay. Okay. And sir, also wanted to understand that I was just comparing our company's financials with one other listed companies Shri Jagdamba Polymers, it's Gujarat based and our product profile is quite similar. But if you see their operating margins, they are operating at anywhere from 20% to 23% and even their cash conversion cycle is like was 50 days in last financial year. So I mean being of roughly the same product profile, sir how come there is too much of divergence in working capital intensive activity as well as operating margin?

[Makrand Appalwar, executive]

No, I can't comment like because I have not studied Jagdamba Polymers' balance sheet so comparing how our balance sheet is different from them, it's difficult, but I will tell our finance department, they will work it out. If you can call us a little later, we'll be able to maybe give you some clarification, or I would say guidance on that.

[Keshav Garg, analyst]

Sure. Sure. And sir lastly, sir any rough idea, you want to give us about the kind of CapEx that company is likely to or planning to incur over the next 2 years?

[Makrand Appalwar, executive]

Yes, I think we are not going to be very, very capital intensive. We would be investing anything close to INR 12 crores to INR 15 crores on the annual basis to either debottleneck or add some base equipment so that we can go from or move from this. So that is definitely going to be there certain CapEx, but not very heavy CapEx is expected in the, I would say, short term.

[Keshav Garg, analyst]

So basically this INR 12 crore to INR 15 crore CapEx per annum will suffice for us to double our revenue in the next 5 to 6 years?

[Makrand Appalwar, executive]

Yes.

[Keshav Garg, analyst]

Okay. And sir, any plans to delever the company?

[Makrand Appalwar, executive]

Any plans to?

[Keshav Garg, analyst]

Deleverage our balance sheet?

[Makrand Appalwar, executive]

No, I couldn't understand your question, what do you exactly mean by deleverage?

[Keshav Garg, analyst]

Sir I'm trying to understand that, sir, do we have any plan to [indiscernible]

[Makrand Appalwar, executive]

Paying the debts off?

[Keshav Garg, analyst]

Yes. I mean, do we have any plans to getting debts free?

[Makrand Appalwar, executive]

So I really don't see it is going to be interesting only to pay off the debts because. see, deleveraging is basically can be done by even adding more value added, I would say investment than just simply repaying. Because today the money, what we already borrowed is not very expensive money, [Foreign Language] money was already available. So, instead of paying back at 7%, 8% and saving that money, I would like to probably invest in the new activities, either in the front-end or in whichever backend and earn better margin instead of just cutting the debt because we have enough debt coverage. There is a steady, I would say ability of our company to repay the debt. So from the banking side, from the financial institute side, we are very stable company. So just repaying debt would be very conservative way of using the cash. I would probably like to use the cash in more creative way.

[Keshav Garg, analyst]

Sure sir. And sir our market leader in this whole industry is Garware Technical Fibres. Sir, they are into fishing net and Sports nets, et cetera. So -- and that company has tremendous margins and return on capital. So do you foresee that in the next 5 to 10 years we might be able to transform ourselves to somewhat similar profile in terms of return on capital and margins? Is it possible or do you have any plans?

[Makrand Appalwar, executive]

Even I would not like to comment that we will be like Garware or not, but I can tell you that companies do mature with the time, every company takes its -- we are a first generation company, when you start the company, your responsibilities and your liabilities are different and assets are different. And when the companies start growing with the age, not only with the size, so entire probably financial profile keep on improving and keep on becoming more sounder, so definitely Garware is basically fifth generation of their manufacturing. So I can say that we already beaten many other Indian companies within the first generation itself. So yes, we would be going towards betterment now whether we'll catch hold of Garware in the next 5 years or no, only time can tell. But I can tell you that we have a thirst or we have a reason to grow because we have the right kind of product, we have right kind of mindset, we don't unnecessarily take any risk because our money and our investors' money is precious to us. But at the same time, we have delivered on a consistent basis. You must have heard in my initial comments that a company, which was INR 39 crores, within 10 years we brought it to INR 510 crores. So it's almost 9, 8, -- 8x, 9x times, 900% growth. So we could deliver that type kind of a growth in a consistent way and we will continue to deliver that. So automatically without doing anything very rash or very aggressively, we can still double your wealth in a short span of time.

[Keshav Garg, analyst]

Sure sir, very encouraging. And sir, just one last thing sir. Is there any possibility of reducing our working capital intensity especially our inventory days?

[Makrand Appalwar, executive]

I think we have reached a very good level. We are right now, the inventory days are down to 82. So we have to keep so, because you know it's a petrochemical derivative and lot of things are very sensitive to the market. So whatever is our order book position, we have to keep that much of a stock in any particular level. So again, being a very non-speculative and straightforward operating company, we'd like to keep or maintain our inventories to the tune of our order book, so that we're never exposed to undue market risks. So we would probably might get it down by another 5, 7 days here and there. But I think anything from 60 to 75 days would not be -- it will be a risky to get it below that. So that is what we are seeing.

[Operator]

[Operator Instructions] The next question is from the line of [ Saravanan Balakrishnan ], an individual investor.

[Unknown Attendee]

So very good results, Makrand. So my question is generally on product being in extension of what the previous person has asked. So like normally if I see like last 10 years growth rate, so like what I understood is like so we constantly require [ net 4 ] scaling up the operations center like where I feel like the debt has come 2.5 to 3x?

[Makrand Appalwar, executive]

Saravanan, can you be a bit slower because your voice is very breaking, so I'm not able to catch you in totality, if you just go slowly so that I can hear you clearly.

[Unknown Attendee]

Got it. So what I understand is, like if we go back to 2013 like the debt was around INR 59 crores odd. And today if we fast forward to 2022 like we have almost like INR 144 crores of borrowings in our balance sheet. So like the revenue growth in this period and the debt growth is almost like more or less similar. So is there anywhere like where again like where this portion of like relying on borrowings might again come down like where again so that is again increase in the enterprise value is concerned, that is one. And the second part, primarily, again, is on the like the margin pressure, like we are again in the -- like lastly it's a fragmented industry, right, like where again, with limited working capital and low-entry barrier. So like usually again like that is again a pricing pressure impact like which restrict the ramping up of operations. So like where again like do we have any roadmap in terms of like where we will slightly move on to like high margin products, so that like the cash flows is also goes up like where again which significantly deleverages the balance sheet?

[Makrand Appalwar, executive]

Okay, I understood few of your opinions. And I think I would consider this as an opinion, not the facts connected to the industry, because I think that things are little different than what you see. If you see, it's not like a industry per se, automobile, either if large industry but certain automobile companies makes more money than the other automobile companies are. Certain cars or products made better margins than others. The same thing within the FIBC field, there are certain products, which are more premium than other run-of-a-mill products. So obviously with the time the company is maturing, slowly move towards those more matured manufacturing of FIBC. So that happens with the company's agents and automatically the companies which get the price pressure on the companies which are creating more commoditized or run-of-a-mill products. So that is not happening or if that would have been happening with the growth, we would not have improved our profit margin, which we delivered this year itself. Your first question was connected to the borrowing as well as growth. So if you are looking that entire borrowing remains connected to the money which you have to get from the market amidst stock you are holding. So you have to see that the borrowing is not supporting any other activities just in order to make the company more stable as I explained to you that we are in the petrochemical market where we'll add volatility is one of the challenges, which all of us has to face. So either companies can take a route where they take the volatility or factoring the volatility and say that we would either have some meaningful profits or losses or there are some kind of companies like our company where we believe that there is no need to have any volatility impact on our operations, let's earn the money out of the merit. And that is why whenever there is a higher order book, higher, it has to be backed by higher inventory and where you are backing it by higher inventory, higher capital gets employed. So there is a relationship between the topline and the borrowing, which is going to happen. Of course the relationships is getting skewed day by day. Simply the last year's cash conversion cycle, which was 149 days, which came down to 96 days, that automatically changes the cash employed. So I think you need to do your math correctly there. So things are changing, things are little bit different here. So I would say that this is, I've been, I guess, we've been chatting in the past also on this particular topic. So you must have seen gross or some stark improvement in all operating parameters. With this we are 1.49 as a current ratio our DSCR is like beyond anything. Our debt-equity ratio is phenomenally good. So all the ratios are falling in place only with volumes increasing and profit margins getting maintained. So, when and also -- there is also a substantial R&D spend in the part. Last one year we've reduced our R&D spend, but the year before that or rather, I would say in last 10 years if you see, we must have spent more than INR 25 crores at the various R&D spend in machinery, raw material, various things which has created a fantastic product lines for this company. And on that basis, I am so confident that in next 5 years again from here we will be able to double the company. And when doubling the company, it's at least 1.2x like 22x growth in your net worth, right. 2.2%.

[Unknown Attendee]

So at the moment, like what's the cost of capital?

[Makrand Appalwar, executive]

Cost of capital is exact numbers, I would not be able to reveal on call. But if you write us, we will send you an email on it.

[Unknown Attendee]

Got it. So now let's assume that right now since the cost of capital also is going up so, like here again if that's the case so like it would make more sense to like sort of again let's bring the gearing slightly to a lower level right especially higher cost like can I also assume that we can pass on the raw material cost to a drastic extent when the raw material...

[Makrand Appalwar, executive]

No, I think, if the cost of capital is going up, it is always better to reduce the inventories because what we are seeing is as the cost of our capital is going on, but the crude oil and the crude derivatives are going down. So it might not really impact because in last 20 days if you see crude has actually reduced or even the petrochemical has reduced by more than [ 90% ]. So, it generally balances out plus the dollar impact what you're seeing like if you see a generally delta of inflation between India and United States, which is roughly, if you see the 10 years data, annually it is close to 4.2%, 4.3%. So entries I mean currency depreciation to that level should not be ruled out. And that also directly, because 63% of my revenue comes from I would say foreign currencies. So that net benefit would be there. So I think the cost of funds is getting increased, it might get affected by these various other smaller impacts, which will be in our favor.

[Unknown Attendee]

Got it. So you're talking from a foreign exchange standpoint right like we are again we are hedging basically.

[Makrand Appalwar, executive]

Yes.

[Unknown Attendee]

And like what's the hedging policy, we have like, is it 3 months or like 6 months?

[Makrand Appalwar, executive]

I think this hedging policy is a stage of -- it's more of a business secret so I can't publicly tell you what is our hedging policy.

[Unknown Attendee]

Got it. Got it. And like you mentioned about doubling the business right. So like in this part like, like what's the type of capital that we'll again would require like from a greenfield and brownfield standpoint? I think last [ time ] you mentioned the capacity utilization will come like 90% or above in next 1 or 2 years. So like I asked from that standpoint, things where demand is looking strong.

[Makrand Appalwar, executive]

No, I think I will not be able to spell you the entire capital outlay of next 5 years because frankly, it's a very dynamic thing. So whether we are going to do it using the external outsourcing mechanism which our last couple of years we have been very bullish, and it has been very successful or in case we find some product which has to be very technically secretive and we are going to do it more in the house. So that might change a little bit here and there. But I guess what we expect is company has a sound balance sheet in case even we need to borrow more, we would be able to borrow more. At immediate level, we have no plans to liquidate or liquidity equity or anything like that. So, in the present case either from the internal accruals or from the borrowings, the growth would be done.

[Operator]

[Operator Instructions] The next question is from the line of Deepan Shankar from Trustline PMS.

[Deepan Shankar, analyst]

Congrats for good set of numbers. So firstly, sir wanted to understand in Q4 we have built $1 million kind of export in this UK business in that Reclaim. So what kind of growth we are expecting from this business over next 2 to 3 years?

[Makrand Appalwar, executive]

I think Maithili has been very active in handling the Reclaim thing, so I'll let her answer this question.

[Maithili Appalwar, executive]

Sure. So with regard to Reclaim, we were just starting the product out -- okay yes, we were just starting the product out this year. So we did about [ 1 million ] in sales in the last quarter. We are expecting that to ramp up actually, we don't know how much growth will come from that just about yet in the UK market because we are expecting that a lot of the general FIDC orders that we get that are typically in normal bags will then start shifting into the Reclaim 30 orders. But we are also expecting that because we kind of have a monopoly on this right now from the Indian manufacturers, the ability to create bags like this then we will see at least the 30% to 40% growth from the UK market. In addition, we are also looking at similar loss coming into Italy and Spain. So if legislation changes there as well, we do expect to see significant growth from those markets as well.

[Deepan Shankar, analyst]

Okay. So what we mean to say is our regular exports to UK so that will slowly convert more towards Reclaim kind of product.

[Maithili Appalwar, executive]

Yes. Sir, that's actually what we are trying to do because Reclaim is a better margin product and also like I said, we have a monopoly on Reclaim. So we're able to command an extra margin out of that as well. So we are trying to convert even our normal orders into Reclaim 30 orders. Also, it's better for the environment because there is 30% of recycled polymers used in it. So overall, we think it's a better product, better margins and that's why we're trying to move more into that in the UK market.

[Deepan Shankar, analyst]

So can we assume this could be at 3% to 4% higher margins than our normal products?

[Maithili Appalwar, executive]

Yes, we can assume that.

[Deepan Shankar, analyst]

Okay. And Makrand Ji, this INR 12 crore to INR 15 crore kind of CapEx every year so you mentioned so that will add what kind of capacity additions every year?

[Makrand Appalwar, executive]

Deepan, that is, I mean it's like, I wouldn't -- we're not yet actually blueprint is not yet created. I have given a ballpark figure because when we have to -- it's not necessary that because now we are coming up with so many new different ways to produce the product. So it will not be only in terms of tonnage, which will get added but there is also going to be a technology where that would earn us more money than just probably adding more tonnage. So we might also see that we create a pilot order technology plants right in MB and then get that replicated from some others where the capacity -- that's why if you can see, present gross block is close to the INR 200 crore. And in the next 5 years, we are talking about, let's say, even at the peak of 15 x 5, INR 75 crore, we are talking of doubling the capacity. That is going to be that skewed. The utilization of the cash is going to be so highly efficient. So let us see, means, I will not like to reveal the entire plan here because that plan itself is, I would say, the secret sauce, which is going to improve the company's operations in the coming time.

[Deepan Shankar, analyst]

Okay. So that means these basic forms of production might -- we will be looking to outsource and the technicality of the products we'll be retaining within in-house?

[Makrand Appalwar, executive]

Right, as we very rightly pointed out.

[Deepan Shankar, analyst]

Okay. And sir, lastly, so if we see the product mix, so earlier, we had these standard products and then advanced products and then now we are doing even Reclaim. So this standard product, which had a lower margin. So that contribution keeps coming down. So that's how the product mix is improving?

[Makrand Appalwar, executive]

Yes. That contribution keeps on coming down or the manufacturing of that product within the company definitely goes down. So if those products are getting manufactured outside. So outside products are most of the time cheaper than what we are able to house because we are especially selecting the companies which are not doing the greatest of the, I would say, things and we can get a similar kind of return from even those run-off-the-mill products, I would say.

[Deepan Shankar, analyst]

Okay. And lastly, so what kind of run rate we are doing on Pond Liners per day now?

[Makrand Appalwar, executive]

So Pond Liner is still within the range of around 15 to 16 ponds a day because it keeps on changing depending on the types and the states in which we are operating. So it's a stable business. It's growing stably. So that is a very -- I would say, it is contributing to the society. At the same time, it is contributing to company, and it is very nicely and stably placed.

[Deepan Shankar, analyst]

Okay. So there, we are expecting that to move over the next 2, 3 years because we have expanded to newer regions also, right? So what kind of run rate we are expecting?

[Makrand Appalwar, executive]

Frankly, because the type of the ponds made in the northern region, that is Haryana or Punjab or Uttar Pradesh, the sizes are so large that now the number of ponds will not only remain the count so we'll probably start giving you account in per square meter because the ponds what we made in Uttar Pradesh are almost 10 to 12x larger than the ponds what we made in Maharashtra. So that run rate numbers probably might not really now remain very relevant in the coming years. So we'll have to readdress it in some other numbers. So we might start giving you either by square meters or a number of area or hectares covered or something like that.

[Operator]

[Operator Instructions] The next question is from the line of Keshav Garg from CCIPL.

[Keshav Garg, analyst]

Sir, I wanted to understand, sir, that who would be your major competitors in our various product lines?

[Makrand Appalwar, executive]

Probably in agricultural-related products, there are companies like Garware, somebody pointed out or in the packaging, there are multiple companies starting from ITW, [ CB Node ] or Amcor or Greif or [ Flexible ] or Kanpur Plastipack. There are multiple companies which we can see either within the country or globally. And regarding the waste recycling, it's all the Reclaim side, it's completely new vertical. So probably this is developing the whole new set of business in the coming years. So right now, I can't address any other but might be companies like Ganesha Ecosphere who's doing very well in the recycled material can be of similar peer. I don't say they have similar products. But operation-wise, we are doing something similar what they do for PAT, we'll distribute 2 for polypropylene.

[Keshav Garg, analyst]

Sure. And sir, also, sir, if you could give us some more information about the efforts you are making to differentiate our product portfolio and how we can increase our realization of our products and how we can de-commodify our product portfolio?

[Makrand Appalwar, executive]

Multiple things. So primarily, we all have to believe that in today's time, everything is commodity. Even the airplanes, like there are -- I don't know whether you're aware, but there are 117 different airplane manufacturers in the world, starting from Boeing, Airbus and going through the smallest of the ones. So the aircraft, which is one of the most technically sophisticated product is also manufactured by more than 100 companies all over the world. So point remains, it's not about whether it is commodity or not commodity. It remains how sustainably the product is going to be there and how interestingly the need is getting addressed. So what we have to see is what needs Emmbi is aggressive. So one primary business of bulk packaging, we are addressing the need of a global movement of material, which is unparalleled, whether today or some 50 years from tomorrow, bulk packaging or the global movement of material or things is always going to happen and we are going -- we are a part of that. Now if somebody might use a polymer-based bulk packaging or somebody might use a paper or a glass or say gold. So we are married to that need of bulk packaging. So we are going to take care of that. Another product, what we are doing is water. So we all are aware that I don't have to explain you how important it is, what a water is, and how important the storage is. So by creating that Pond Lining, what we have created is the lowest cost water reservoirs. It is 1 paisa per year per liter, is the cost of water reservoir we have created. And the storage of water because of very heretic weather patterns, rainfall, another, how important it is, I think, again, I don't have to spell it to anyone. A couple of needs are so necessary and that is one of the reasons why I told you that Emmbi has been consistently growing, and we are married to that growth. We'll ensure that everything grows within that stipulated period, double-digit sell and double the wealth of all of us. And so I don't want to just say that by doing this one special thing, there will be for 3 years, nobody will be able to manufacture. But okay, what happens on the fourth year. Everybody will produce it and the prices will rise. So that should not happen. You should choose the right need and you can keep on addressing that. And that is what is our belief at Emmbi. Choose the right need and address it to the level where nobody in the world would be able to create alternatives for that. So that is the mantra, what we are using. And that would we'll keep on using. So we are not married to that particular product that we produce. They're married to the need, which we are addressing in today.

[Keshav Garg, analyst]

Sir, got that. And sir, product is one part of differentiation, sir, we can also have a competitive advantage if our distribution network is superior than the competition, something like what Pidilite has been able to do with carpenters or some pipe companies have been able to do by developing deep relationships with plumbers. So is there any possibility for us like in agri side can we make that kind of distribution so as to achieve an advantage over competition?

[Makrand Appalwar, executive]

Certainly, we can. And Maithili is taking care of the distribution side especially in the Avana, I will let her address this question.

[Maithili Appalwar, executive]

Yes Keshav, I fully agree with you. I think that Pidilite and companies like Astral and [ Flames ] have set up really good models for this, that can certainly be unrelated. What we are currently what we've noticed is that farmers really have herd mentality when it comes to trust, but that's very limited to their local environment. So if I tell a farmer that okay, you know, I've done something for a farmer in let's say 80 kilometers away from you, he is not likely to believe it, no matter how good the results are. But if you're able to show [Foreign Language] this is how well it's worked out, then that is something that really helps them understand things quickly, they really trust it and based at additional kind of bond and loyalty that they create with the product. So we've been running this initiative for little bit now, which is called Balwaan Kissan where we are creating demo farmers within villages that we are presenting. So any new products that we launch, typically we sell it at cost to these demo farmers, we create a plot of land. And this is something that a lot of seed and pesticide companies have also like majors like Syngenta et cetera have done in the past. So we'll give it to them to pilot the product in their land and then once that's done, we hold a lot of farmer meetings, we bring people from other fields et cetera to show that. And that kind of both -- it creates this loyalty in the mind of the farmer where if they're asking, let's say for milestone they don't just go-to-the-counter or the retail counter and say [Foreign Language] because they've seen the product, they've seen that it does well. And in terms of the distribution network like you mentioned, it also creates that demand, which is coming from the ground. So the distributor or the retailer is likely to buy more and buy at a better price, because we are not pushing the product to him, there is a pull for the product, which is coming from the market. So I think there is definitely going to -- it's going to take some time to create the kind of brand that Pidilite has created. But I think that it is in this path like you said that it's a promising one for sure.

[Keshav Garg, analyst]

Sure ma'am. And then lastly, just one thing that are we -- do have any plans of maybe exiting some of the product lines to reduce our inventory and to focus more on the highly profitable segment?

[Maithili Appalwar, executive]

I think, right now we aren't looking at our plan to exit some of the like I think what you're seeing is essentially high inventory days or low-margin products, do we have a plan to exit those products. Currently, we are not looking to exit any of the product streams that we are in because we do believe that in plastic volume also presents a really important metric to bring the overall margin up. And currently as we're growing and as we've seen that as capacity utilization has gone up to 90 we are seeing the improvements in margins coming from those things as well. So I think immediately there is no plan, like that. However, like I was saying earlier, I think the question we were talking about like Reclaim 30, et cetera. So with things like that where there is a market which is demanding more for example a recycle product or products into of barrier properties and we're seeing that without sacrificing any sale we're able to switch into a higher margin product, then we certainly want to do that.

[Keshav Garg, analyst]

Sure, ma'am. And lastly, one more thing like it was mentioned that our capacities are fungible between domestic and export. So does that also mean that our agri capacities can be used for bulk packaging and vice versa?

[Maithili Appalwar, executive]

Yes. It's completely fungible. All of our capacities can be used across the board. We are also now starting to develop a Pond Lining distribution in the US. So that's something that we're focusing on in the next 2 year plan or so is trying to sell up on Pond Lining outside of India as well. So that machinery even for selling Pond Lining will become viable but even currently like if you just understand the process then Pond Liner is basically a fabric right, it's basically large fabric and then when you have these FIBC bags, which is what we export, we take that fabric and we make bags out of it. So if we want to change that Avana demand into let's say export -- the Avana machinery into export machinery basically we're taking that fabric and you're adding some bag making to it and then you can explore that. So, the capacity is fungible to answer your question.

[Operator]

As there are no further questions, on behalf of Emmbi Industries Limited and K.R.Choksey Research, we conclude this conference call.