EPL Ltd
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Earnings Call Analysis

Q1-2025 Analysis
EPL Ltd

Steady Growth with Strong Margins

EPL Limited reported a robust quarter with a 10.7% rise in revenue, 20.8% EBITDA growth, and a 35.4% increase in PAT, excluding one-offs. The EBITDA margin improved by 160 basis points to 19.1%. Regionally, AMESA grew by 9.5%, EAP by 13.9%, Europe by 9%, and the Americas saw an 18.9% increase. The company remains confident in achieving sustained double-digit revenue growth and a 20% EBITDA margin, benefiting from strong demand and strategic initiatives. Continued emphasis on sustainability led to 29% of its volume being sustainable tubes.

Strong Growth Across Key Metrics

In the first quarter of FY '25, EPL Limited demonstrated robust growth, achieving a revenue increase of 10.7% and a notable EBITDA growth of 20.8%. The Profit After Tax (PAT) saw a remarkable rise of 35.4% when excluding one-off items, showcasing the company's strong performance trajectory. The EBITDA margin improved to 19.1%, reflecting an increase of 160 basis points year-on-year, moving the company closer to its goal of a sustainable 20% margin.

Regional Performance Insights

EPL's revenue growth was broad-based across geographical regions. The AMESA (Africa, Middle East, and South Asia) region saw a 9.5% rise in revenues, with India alone growing at 8.6%. The Asia-Pacific region experienced even stronger growth at 13.9%, while Europe reported a solid 9% increase. Particularly impressive was the Americas region which achieved high double-digit growth at 18.9%, contributing significantly to the overall performance.

Enhanced Operational Efficiency and Innovations

The company attributed its growth to heightened demand and successful strategic initiatives. Notably, improved operational strategies led to a sustainable EBITDA margin, now consistently above 19%. This efficiency is supported by their transition to sustainable tube packaging, which is now 29% of total volume, up from 21% the previous year. Additionally, EPL has maintained an 'A' rating from CDP for three consecutive years, validating its commitment to sustainability.

Future Projections and Strategic Initiatives

Looking ahead, EPL's strategies are anchored on four priorities. Firstly, the Brazilian market expansion has been promising, with a reported capacity utilization currently at 65-70%. Secondly, EPL aims to grow its personal care segment, leveraging new product developments in oral care. Thirdly, ongoing margin expansion efforts in Europe and the Americas are showing promising results. Finally, the commitment to sustainability positions EPL to gain further market share as customer preferences shift towards eco-friendly solutions.

Challenges and Opportunities

Despite the positive outlook, there are challenges. In India, margins declined by 170 basis points, attributed to increased investment in capabilities and a performance-driven incentive system that has impacted short-term profitability. However, management emphasized that these investments are strategic for future growth, aiming to lift margins back up. The overall goal remains sustained double-digit revenue growth in all regions, though external factors like domestic demand fluctuations in regions like China may pose risks.

Guidance and Financial Metrics

EPL maintains its commitment to double-digit growth across its portfolio globally, with a particular focus on achieving a 20% EBITDA margin as soon as possible. The company's robust performance in PAT and growing ROCE, with the latter reaching 15.9%, reinforces its effective operational strategies. The anticipated steady-state tax rate is projected to fluctuate between 21% to 24%, depending on geographical profit mixes.

Concluding Remarks

In summary, EPL Limited's strong financial performance for Q1 FY '25 underscores its operational efficiency and strategic focus. With solid growth initiatives in play, particularly in new markets and sustainable products, the company is well-positioned to continue its positive trajectory. However, investors should remain aware of potential external risks and dynamic market conditions that might affect future performance.

Earnings Call Transcript

Earnings Call Transcript
2025-Q1

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Operator

Ladies and gentlemen, good day, and welcome to the EPL Limited Q1 FY '25 Earnings Call hosted by Systematix Institutional Equities. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Pratik Tholiya from Systematix Institutional Equities. Thank you, and over to you, sir.

P
Pratik Tholiya
analyst

Yes. Thanks Siddharth. Good evening, everyone. On behalf of Systematix Institutional Equities. I would like to welcome all the participants who've logged in for this conference call of EPL to discuss the Q1 FY '25 results. From the management team, we have Mr. Anand Kripalu, MD and Global CEO; Mr. M. R. Ramasamy, COO; Mr. Deepak Goyal, CFO; Shrihari K. Rao, President, AMESA Region; and Mr. Onkar Ghangurde, Head, Legal, CS and Compliance Officer.

As the outset, I'd like to thank the management for giving us the opportunity to host this call.

I would now like to welcome Mr. Anand Kripalu to start the proceedings by giving his opening remarks. Thank you, and over to you, sir.

A
Anand Kripalu
executive

Thank you very much, Pratik, and hello, everyone, and thank you very much for joining us for this Q1 FY '25 earnings call. We had a strong quarter with significant growth across all our key metrics. I am pleased to report double-digit revenue growth of 10.7%, with EBITDA growth of 20.8% and PAT growth of 35.4%, excluding one-off. Our EBITDA margin has expanded to 19.1% marking an improvement of 160 basis points year-on-year, with revenue and EBITDA margin moving in the right direction, we are firmly on track, to deliver on our commitment of sustained double-digit revenue growth with 20% plus EBITDA margin.

Our revenue growth is driven by robust demand in all our major markets, and the successful execution of our strategic initiatives. In the AMESA region, revenues grew by 9.5%, with India stand-alone growing at 8.6%. The EAP region delivered a strong growth of 13.9%, while Europe grew by 9%.

In the Americas, we achieved a high double-digit growth of 18.9%. On EBITDA, our 19%-plus margin demonstrates the efficacy of our strategy. We are confident that our margin improvement plan will successfully deliver a 20% margin as we continue to focus on enhancing efficiency and optimizing our operations. There was enhanced oral care demand this quarter, driven by strong organic momentum but also importantly, wallet share gain with a few customers as we transition to sustainable tubes. With solid performance across our diversified portfolio, we remain confident of continued strong delivery going ahead. Reported PAT for the quarter grew by 18.2% and adjusted PAT, excluding one-offs, grew by a solid 35.4%. The one-off includes INR 69 million of tax refund, which we received in the previous year that is Q1 FY '24. ROCE stood at 15.9% an increase of 1.9 percentage points, excluding one-off.

Moving on to sustainability and innovation and so on, innovation continues to be the cornerstone of our strategy. This quarter, we continued our work on developing innovative products and packaging solutions in close collaboration with our customers. Our ongoing efforts were recognized as the recent SIES SP Awards, where our tubes was celebrated for their innovative design. We're also seeing encouraging progress and momentum in our sustainability efforts. Our sustainable tube offering now represents 29% of our total volume and we anticipate this proportion to grow further as customer commitments align with our sustainable solutions. We have proudly maintained our A rating from CDP for 3 consecutive years.

Additionally, we secured approval for our emission targets from the science-based target initiative, or SBTi, becoming the first Indian MNC in the packaging sector to achieve this milestone. With these accomplishments, we are well on our way to achieving EcoVadis Platinum next year. Looking ahead, the strong performance in the current quarter reinforces our confidence in our strategic direction. Our initiatives are clearly gaining momentum and the positive results are becoming increasingly evident.

We have 4 key priorities as we look ahead. First, Brazil, our expansion efforts in Brazil are progressing well. We have started supplying to new customers in Q1 FY '25, including 2 multinational clients and the local partner alongside our anchor customer. The customer base expansion within just 1 year of plant commercialization reflects the huge potential in this market for EPL. Moreover, we have significant headroom for growth at our plant, both with existing capacity as well as the modular nature of the plant design itself.

Second, Personal Care and beyond. We continue to drive personal care and beyond as a category. We are making good progress with our Neo-seam tubes, securing commercial orders across 3 regions. We have seen strong growth in Personal Care in EAP and the Americas even as we continue to build capability in AMESA and Europe across both the back end and the front end.

Third, margin expansion. Our margin expansion efforts are advancing as planned with notable improvements observed in Europe and the Americas. In Europe, margins have increased by 230 basis points over the past year reaching the mid-teen level. Similarly, in the Americas, margins have risen from single digits to high teens underscoring the effectiveness of our efforts. And fourth, sustainability led competitive advantage. We are seeing continued pull on sustainable tube conversion. We witnessed wallet share gain in the oral category in Q1 FY '25. With a few key customers aided by our sustainable solutions which has all led to a strong oral growth. Our sustainable tube mix reached 29% in Q1 FY '25, versus 21% in FY '24. We believe EPL is well positioned to take the benefit from this trend with our leading the pack capability.

In conclusion, we are encouraged by our progress and optimistic about the future. We remain on track to deliver on our target of sustained double-digit revenue growth coupled with 20% plus margin. Thank you. We will now open this up for questions.

Operator

[Operator Instructions] The first question is from the line of Mihir P. Shah from Nomura.

M
Mihir Shah
analyst

Congrats on a good set of numbers. Firstly, I wanted to check if this quarter had any element of price cuts in the sales. And subpart to it was can one expect the high teens growth that we've seen in Americas to sustain on the back of new client sign-ups? And any geography that you think that can derail double-digit revenue growth going forward? So that's my first question.

A
Anand Kripalu
executive

Okay. You have another question?

M
Mihir Shah
analyst

I have a bunch of them, sir. I'll just rattle all of them. Second...

A
Anand Kripalu
executive

You may only just give me a couple now and then do it later. Otherwise, your colleagues will complain that we give you too much time and didn't spare time for the rest.

M
Mihir Shah
analyst

No problem, sir. secondly, I wanted to know on gross margins. We are seeing raw material prices are etching up for you. Does this warrant any price hikes -- or can gross margins be sustained at 1Q levels? That was on the margins front. Subpart to the margins is Europe margin is a very good improvement. Is it sustainable? Or do you think -- this is just a nature. And any reason for India margins to go down. I have a few other questions. I will come back in the queue.

A
Anand Kripalu
executive

Okay. Let me try and deal with this, and I'll request my colleagues as needed. So let me start. Has there been price cut. Now has there been some price correction in a few places with a few customers based on cost or based on commodity softening of the past that is now accruing. Yes, there has been, having said that, I would think that price corrections have largely bottomed out as we speak now and there are major price corrections that are spending anymore. When we sustain Americas high teens growth, we've given you a guidance on our global growth ambition. I would not like to get into a region by region growth ambition because every company and we included run a portfolio, but our ambition is to continue to drive growth in all regions but deliver double-digit growth globally right, and that's our commitment.

And we will play that portfolio to the best of our ability. If some regions grow faster and we grow faster overall, we will not be disappointed. But our commitment is double-digit growth. Are there any geographies that could derail our double-digit growth story. In this world, as we've seen, there is always something happening. Okay? A lot of people are talking about domestic demand in China not being great. But our EAP growth actually remains solid. There is a lot of talk of uncertainty and some softening that could happen in the U.S. particularly, okay? So I'm just saying these are par for the course. So anything can happen in any geography. We will do our [indiscernible] to make sure that collectively and globally, we still get to double-digit growth.

Are our gross margins sustainable? Yes. I think they're sustainable, and I'm not telling you something one quarter to the other may go up or down 50 basis points. But broadly, I think we are in the zone, which is sustainable. As far as Europe is concerned, it is absolutely sustainable. But I just want to say that we have not finished our mid-teens margin commitment journey, and we are still working to improve Europe margins further.

So we're not stopping here. Could India margins were down. If anything, we are doing what it takes to see how we can push India margins up from where they are right now. So we will not allow it to go down easily, okay? So of course, life is dynamic and many levers will play out. But our effort is to make sure that India margins improve from where we are today. So I think those are responses Mihir what you've asked. And maybe we could go to somebody else and come back later, if there are more.

M
Mihir Shah
analyst

Perfect, sir. Actually, I wanted to know the reasons for Indian margins going down by 170 basis points.

A
Anand Kripalu
executive

Well, see, first of all, I just want to say a few things, which is -- as far as India is concerned, there are a couple of things that have happened, okay? Now you might calculate the [ DC ], our DC is actually more or less in the zone where we want to be as far as India is concerned. But the India stand-alone results, right, have been impacted by investments that we are making to drive improved performance and growth. Okay. So I want to make this very clear. Investments we are making to drive improved performance and growth. So what are we doing here? We are investing in capability so we have increased our capability on the ground in terms of hunting and so on that we've spoken about earlier to accelerate some of our B&C efforts. But we've also invested in some corporate capability building that will benefit the globe but sits in the India stand-alone P&L.

Now combined with investments in capability building and part of that is flowing through to the P&L. We also have an alliance performance-driven incentive that we are running for people in FY '25. Okay? Now this will be paid out only if we deliver our enhanced performance ambition, which is more than our internal budget, right, during the course of the year. But -- by way of prudent accounting, it has been accrued for right now. So what I want to say is whatever you are seeing here, right, a good part of it is because of constant decisions we are taking to improve future performance. And I'm hoping it will be like that.

Operator

Next question is from the line of Sameer Gupta from India Infoline.

S
Sameer Gupta
analyst

Congratulations on a good set of numbers. Firstly, sir, and this is taking from the previous participant. There have been price corrections, but just wanted to understand, is there an element of negative pricing, which might be carrying forward from previous quarter, which is there in this quarter as well? And if so, if you could just give a ballpark approximation as to how much it is. And just a sub question to this, can you also make us understand by when do you expect this number or this phenomena to anniversarize in which quarter is it expected to anniversarize? That's my question, sir.

A
Anand Kripalu
executive

Okay. So as far as negative pricing is concerned, I mean, I'll tell you price mix, okay? Because just pure pricing is very difficult to isolate. But I'll tell you price mix. And it's a mixed portfolio, right? Globally, there is no material negative pricing. Some regions have more of that negative price mix, okay? But overall, looking ahead, I would say we have more or less anniversarized to use your word, right? As far as the pricing is concerned. So I think we're going to see more stability. Hopefully, no negative prices, maybe no major positive prices either because that's how commodities are moving. And therefore, you're going to see a more pure-play performance coming through. But clearly, there are still opportunities, some small percentage of price increase will come and mix more importantly, will come, okay? And those are the things that will help us in our quest for sustaining double-digit revenue growth.

S
Sameer Gupta
analyst

Great, sir. If I just add another question, while Personal Care on an annual basis has seen quite a good increase in say, this quarter, particularly, there is a large divergence. So just wanted to understand, is it only because of Brazil and some of the good performance in oral care players in India? Or is there anything else? There's a 15% growth in Oral Care versus 6% in Personal Care. Just wanted to get a sense of those numbers as well?

A
Anand Kripalu
executive

No, I think it's a very pertinent question. And I just want to make sure I'm able to communicate this answer with clarity to everybody. So first of all, I have to say that we are very pleased with the overall performance, okay? We saw, like I said earlier, very strong organic demand right? And something we've been speaking about that we are taking the lead on sustainability, and this has helped us to get wallet share gain with a few key customers okay? And this is something that will sustain, right? Particularly, the wallet share gain part will sustain. So first of all, on oral I think we are very pleased with the overall oral performance this quarter.

Now coming on to Personal Care & Beyond. We are seeing strong momentum for Personal Care and Beyond in EAP and the Americas. Okay. What I do want to admit here today is that B&C and AMESA, particularly in India could have been better, maybe should have been better, okay. However, we faced some supply chain issues in India specifically, but these have now been sorted out. So looking ahead, we should absolutely see improved performance on B&C and Personal Care and beyond, right, up.

Operator

The next question is from the line of Sanjesh Jain from ICICI Securities.

S
Sanjesh Jain
analyst

First, again, on the Oral Care side, you mentioned that the sustainability tube is driving a wallet share gain for us. Which geography, particularly are we speaking about? Is it India, America, Europe or it is across the region, we have seen increase in the wallet share. And how much percentage point do you think once this entire transition of sustainable tube happens in next 2, 3 years, we should be able to improve market share, which used to be at 35% for many years. Where do you think it would settle for EPL?

A
Anand Kripalu
executive

So I'll let reflect my, my colleague, Ram to lead the question and then if there's anything else, I'll follow up with that.

M
M. Ramasamy
executive

Sustainable tube as you know, many companies have given their targets days, right? Now it is getting accelerated in India for some customers is getting highly accelerated. So we are gaining that. We are gaining in Europe. We are also gaining in Americas. So in terms of wallet share of 35% over a period of time we believe that it will continue to grow exactly predicting how much it will be at this point of time may be slightly difficult, but we will grow.

S
Sanjesh Jain
analyst

But Ram, sir, now when we say that we have improved, how much percentage point in those particular customer has the market share gone for us?

M
M. Ramasamy
executive

As you know, oral care is a very concentrated marketplace, correct. There are only 4 players in the world. By saying anything specific probably is not appropriate. But when you have seen a 16% growth in this, it's one quarter, we need to see in the next 3 or 4 quarters at what we will be able to sustain and grow. But all indications are that we are able to sustain and grow further.

S
Sanjesh Jain
analyst

One follow-up question on that. In Europe, we have always been personal care heavy, and we said that oral care will drive growth there. And you specifically mentioned Europe, where we have won some market share in oral care. So that mix change what we were trying to do are driving more oral care sales in Europe and hence, driving the volumes in Europe that's happening? And is that what is driving a margin improvement partially as well?

M
M. Ramasamy
executive

Yes, as it told you every region is doing well. Europe is also doing well. Just to be very specific to you. We have gained wallet with 2 more customers in Europe, which we never used to do earlier. So those are all accumulating to ensure the 16% growth comes in. But any oral care commitment as you know, are long-term commitments. Most of the orals are sustainable and it will only grow. So given the market grows at a certain percentage, these are on wallet share gains, it will remain with us.

S
Sanjesh Jain
analyst

That's fair enough. My second question is on the gross profit margin translating into EBITDA margin. We have improved gross profit margin by 200 basis points. But when I look at EBITDA margin, the translation looks far lower sequentially. It's actually flattish quarter-on-quarter. Any reason why we are not able to translate the gross profit margin into EBITDA margin? Or we are investing cautiously to grow the revenue and maintain the margin, as you have earlier indicated that we will keep it at 20% and try to reinvest for the growth. Is that what's happening into the business?

A
Anand Kripalu
executive

Deepak will respond to this question.

D
Deepak Ganjoo
executive

If I look at the overall shape of the P&L, I think we are happy with the matrix that we are seeing our revenue has grown 10.7%, our EBITDA margin has grown 20.8%. Our margin has expanded by 160 basis points. Our PAT reported has grown 18% like-to-like because there was a tax refund in India. In same quarter last year, if I take that out, it has grown 35%. So our 10.5% revenue 20-plus EBITDA on 35% PAT growth is a good clearer metrics in our view. Now there is obviously some investment that we are making in the people cost that Anand just spoke about, et cetera. But those are I'm saying is the overall expense management that we keep doing that.

S
Sanjesh Jain
analyst

Correct. Correct. So how do we -- now look at this margin trajectory, we keep telling that we will be doing 20% kind of a margin. And we are already at 19%. So in another -- this year, we should exit with the 20% margin ambition we always targeted for ourself?

D
Deepak Ganjoo
executive

See, I don't want to give a time limit, but I can tell you that could be margin progression has been encouraging, right and will the initiatives be in place, we should get there, let's say sooner rather than later. I don't want to commit to a time limit, but we are well on track to kind of get there.

Operator

[Operator Instructions] Next question is from the line of Akshat Bairathi from RSPN Ventures.

A
Akshat Bairathi
analyst

So sir, I have some questions on Brazil. What is the current capacity utilization of Brazil? And what is our dependency on our anchor customer?

A
Anand Kripalu
executive

So your question is, what is our current capacity utilization? And how much capacity is available -- our anchor customer service, right?

A
Akshat Bairathi
analyst

Yes.

A
Anand Kripalu
executive

Okay, I'll request Ram to answer that.

M
M. Ramasamy
executive

See, as we told you in the previous calls, this plant is a modular plant. We have created capacity needed for 100 customer as per the contractual commitment plus we have provided some capacity for other customers to grow. Now what we are seeing is 100 customers are doing well as well that we are able to quickly accelerate other customers also faster than what we talked about. Currently, probably that will be somewhere around 65% to 70% of the utilization levels. But we still have head space but plant is built modular.

As we start getting more traction on the market demand, we will just plug and play kind of a situation that we can add any time capacity.

I just wanted to say, come back to our own anticipation of a ramp-up period that we are really doing well. Market is also responding really well, and we have added many more customers in the last one quarter.

A
Akshat Bairathi
analyst

Okay, sir. Got it. And sir, next is a bookkeeping question. So our tax rate for the quarter was just 17%. So for the whole year, any tax guidance, what will be the tax rate?

D
Deepak Ganjoo
executive

Yes. So tax rate, generally is a mix of multiple countries, and that is why kind of it varies up and down. I think in the long-term, we have said that our effective tax rate will be, let's say, anywhere between 21% to 23%, 24%. I think it's likely to be there quarter-on-quarter, it can go up and down depending upon the profit mix across various countries.

A
Akshat Bairathi
analyst

So sir, this year, we can expect around 21% to 23%?

D
Deepak Ganjoo
executive

I think that is the likely steady state tax rate where we would follow.

Operator

The next question is from the line of [ Mike Shah ] from Prospero Tree Financial Services.

U
Unknown Analyst

Thank you for the opportunity. I just have a simple question regarding the Americas region. Last year, Brazil was not contributing to the revenue. So I would like to look at this region just this region on a Q-o-Q basis. So there has been a slight degrowth in the revenue from Americas from Q4 to Q1?

And so has the margin decreased as well. So what would be the reason for this?

A
Anand Kripalu
executive

Yes. So first and foremost, while you could look at quarter-on-quarter. We don't look at the business that way because there is significant seasonality in the business cyclicality in that business, okay? So that's the first point, right? So I think the comparison of sequential can be year-on-year in this business. I think the second thing is to say that listen, we believe that we have delivered solid growth. And of course, the Brazil contributed to that. But even despite that its very solid growth. And the margin is in the range where we want to be with some headroom for further improvement. Okay?

And I think that's the way to just think about it, right? And above all, the quarter, particularly if you look at the margin and the absolute EBITDA and so on versus the same quarter of the previous year, is a radical shift in terms of the overall shape of the P&L of that region? So I think when you look at the right parameters, it should indicate you that the business in the region is solidly moving in the right direction.

Operator

The next question is a follow question from the line of Sameer Gupta from India Infoline.

S
Sameer Gupta
analyst

Just wanted some clarity on the interest cost part, I believe there is a higher interest rate due to Brazil debt. Any idea when we expect to pay this off completely and bring the interest cost down pertaining to this aspect?

D
Deepak Ganjoo
executive

So Sameer, I have been kind of maintaining that generally, we leverage our accruals to drive growth CapEx pay dividend, we are a high dividend paying company and invest in working capital to make sure that the growth doesn't get interrupt, right? And after that, whatever is left, we pay to -- say to, let's say, pay off our debt. However, we do not pay off debt or to compromise or we do not compromise our growth for paying off debt. And that is our strategy. We believe that in this market, we have great opportunity to gain market share and drive growth for many quarters to come. And in the foreseeable future, that is how we plan to work.

On the interest rate, I agree this quarter kind of looks higher because this is the first quarter when Brazil interest is coming in, right? However, if you look at the ROCE, our ROCE is improving. We are at 15.9% versus 14% last year same quarter. And as we keep delivering incremental profits without increasing our net assets because our CapEx investments are equal to our amortization. Our overall ROCE will keep improving and that is what we are working towards.

S
Sameer Gupta
analyst

Just a follow-up, Deepak. So let's say, you have INR 100 of debt in Brazilian currency, which is incurring a higher interest rate. Would it not make more sense to just replace it with and INR currency or currency which you are more comfortable with -- given that it's a greenfield CapEx and does not require any recurring servicing?

D
Deepak Ganjoo
executive

Yes. So that is, say, first of all, debt cost optimization is part of our core strategy. Now Brazil as a country -- and I'm going to the specific point that you're making Brazil as a country has a volatile currency. And hence, the moment you add -- if you take, let's say, for example, INR loan or USD loan or Yen loan or we have looked at various currencies, the moment you add the forward covers through that the lended cost in that country comes to be the same. And when you net of the tax benefits that you're getting in the country, et cetera, it could be marginally negative, right? And hence, the local debt at this point in time, is making most sense compared to funding it from anywhere else in the world.

However, having said that, our treasury team and we are kind of constantly looking at various options how to optimize that, but that's part of the regular business that we are doing.

Operator

Next question is from the line of Pramod Parasmal Dangi from Unifi Investment Management LLP. Please go ahead.

P
Pramod Dangi
analyst

Congratulations for a good set of numbers. Two questions. One is on the India, you said that there was some supply chain issue, which has now been sorted out? Can you just throw some light what -- was it -- does some vendor supply issue or some machinery things. If you can throw some light on that? And is it going to have some impact this quarter also or now is sorted out for good -- for the time to come.

A
Anand Kripalu
executive

It has been sorted out. And really, one of the [indiscernible] was we were -- we had plan to augment our specialized printing facility capability or capacity. And that installation was delayed, right, due to various supply chain reasons, right? And that is now fully installed. Okay? We have also done other augmentation and so on and so forth, right, to ensure there is no supply chain barriers to our servicing part. And sitting where we are sitting today, I feel much better that we are in a good place.

P
Pramod Dangi
analyst

Okay. Great. Great. And second, in America, as you just spoke in the last participant asked. See, the 19% growth in America, obviously, a part of that is driven by Brazil. If you can throw some light on like-to-like growth or the ex gradual growth of the rest of America, how did it mid-teens lower single digit, lower or higher single digit. Any rough number that will help.

A
Anand Kripalu
executive

So honestly, M&A, greenfield set up and so on is part of our strategy to drive the growth ambition that we have. Okay. So Brazil is an integral part of that and now an integral part of America. Now obviously, there is a kicker because the base was very small for Brazil and the numbers including now. However, all I will tell you is that the growth momentum from Brazil is going to continue. It is not there, the moment we lack the base for Brazil that the growth coming from Brazil will disappear completely. Okay? And every effort through what Ram just shared about new customers, augmenting capacity if needed, our modular plant and all that is aiming to sustain high levels of growth from Brazil for the foreseeable future.

So while it will temper a little bit the contribution from Brazil our ambition is to make sure that the overall growth rate for America stays reasonably strong. It may not stay at the current level of 19%, 18% or 19%, but will stay strong. So I think that's the best kind of flavor I can give you. about what's happening there.

Operator

Next question is from the line of Sumant Kumar from Motilal Oswal.

S
Sumant Kumar
analyst

Can you talk about how is the capacity utilization of Brazil plant? And how is the growth in Brazil? And any client addition we have in this quarter?

A
Anand Kripalu
executive

Ram sir...

M
M. Ramasamy
executive

If I took 70% as the current utilization. As I told you that it's a modular plant that as we reach a 75%, 75%, 80%, then we will add capacity which is easy to add. It's a plug and play kind of a model. So there are lots of traction. This is we expected after an year that we will start counting around the additional customers but we now are able to get additional customers quicker than what we thought. It's a good market. It's a good acceleration and also I think you will see going forward a good result from that.

S
Sumant Kumar
analyst

Okay. So do we add 75%, do we require a CapEx for the Brazil, sir.

M
M. Ramasamy
executive

No, not -- see, there is a lead time for any capacity accommodation. So we need to plan that once we have commitments from the customers, we will act. So all I'm saying is it's not going to be as long as our capacities when there's a demand. So capacity demand will keep continue to march quarter-on-quarter. The moment we see an accelerated demand we will accept.

A
Anand Kripalu
executive

But the current growth ambition, we have capacity for that business okay? Just to be clear. As we get new orders or new commitments from customers, as they start coming in, then we will augment that with a fresh line, but anything else in the plant is ready the utilities and everything, which is about the line inside. That is how it has been designed.

Operator

The next question is from the line of Miguel from Simple.

U
Unknown Analyst

Congratulations on good set of numbers. I hope I'm audible.

A
Anand Kripalu
executive

Yes, of course.

U
Unknown Analyst

I just have 2 questions. One is on the India part. You mentioned that we've taken a provision for the employee cost because of the higher growth, if I adjust for the India performance and last full year, we had seen Egypt was actually driving down the performance. But how is the performance at India, are the things looking better for you? And can you quantify what is the amount of provisions we have taken in the employee cost?

A
Anand Kripalu
executive

So I'm not going to tell you how much is provision for employee cost, but suffice to say -- that is the provision if we deliver the higher performance that we see, then we will pay that out. But unfortunately, if we don't, then this will flow back into the P&L. Okay? So either which way for you, it should be a win-win situation. If the higher performance comes then this has to be paid out, you're still going to see the [indiscernible], which is great. If not, this will flow back into the P&L, right? So I don't think it should be any concern other than the fact that there is some accrual right now that has happened, right, in our P&L, right. I see this as you should see this probably as a positive here's the incentive that people will get if they deliver a higher growth or a higher performance target, okay? So that's as far as the people's got [indiscernible]. What was the other...

U
Unknown Analyst

Ex of India, how is the performance?

A
Anand Kripalu
executive

Ex of India, meaning?

U
Unknown Analyst

Sir, in AMESA, if I consider we remove India last year, because of Egypt and some of those countries, the performance was always under pressure. So -- are you seeing any changes in the underlying economies or you believe the performance is not changing significantly?

A
Anand Kripalu
executive

Well then India, there is only Egypt really. And I think Egypt have largely sorted itself out now. And performance in Egypt now is largely coming back on track, both performance and the P&L itself, we took the hit, as you know, as an exceptional item last time for the currency loss. And now Egypt is largely back on track. So Egypt should not be a drag on our MSR numbers or on the India numbers we are asking.

U
Unknown Analyst

Okay. Second question, see, if I compare EAP versus Europe, the EAP growth has been better than Europe. But still, there is a margin compression why this difference of profitability when growth has been much higher, but still margins are coming under pressure in EAP is it some one-off there?

M
M. Ramasamy
executive

Look, so -- see if you look at, 14% revenue growth and at 22%, close to 22% EBITDA margin and 16% EBIT margin, I think is the kind of P&L that we believe is a very strong P&L. Now 22% EBITDA margin is in the target zone for EAP. The team is working very hard to ensure that we keep growing -- or keep delivering the robust growth our B&C performance there is very, very strong. The margin is in the range. It's a combination of product mix, some pricing discussions, commodity mix, et cetera. But I think it's in the zone. So I don't see a challenge in EBITDA margins there.

U
Unknown Analyst

Okay. And just last question. It's very interesting that you said in India, you are pushing for growth and you have created higher growth aspirations and creating an incentive system. But if you look at of all the 4 geographies, India is where the growth should be coming naturally because the GDP growth and everything, all the tailwinds are much stronger, is this competitive intensity has increased that's why we've pushed a team for higher growth and created a separate incentive system? Or is this incentive system across all the geographies similar?

M
M. Ramasamy
executive

It's an incentive system across all geographies. And the incentive system just so that is clear is about global EPL showing accelerated performance and not only India or one region showing accelerated performance. Now the reason why I called out for India is that the corporate overheads and therefore, the provision for the corporate [ people ] sits in the India standalone P&L. Their comps sit in the India stand-alone P&L and hence, that explanation.

Operator

The next question is all from the line of Mihir Shah from Nomura.

M
Mihir Shah
analyst

Sir, most of my questions are answered. Just one bookkeeping question on TSA if you can just jog my memory, when does this end? I thought it was spending in August '24. And does this quarter also have some TSA element and the margin of 20%-plus you are talking about includes or excludes the TSA part as well?

D
Deepak Ganjoo
executive

So August '24, you -- Mihir, Deepak here, you are right that the amortization of the cost ends in August 2024 and hence Q2 FY '25 will be the last quarter to have this the 20%-plus margin that we speak about is all inclusive, right? So -- but the cost about INR 60 crores a year, which is what we discussed. So the benefit is kind of included in the 20%-plus margin. But obviously, we are saying that it will be on margin, but it's included.

M
Mihir Shah
analyst

Okay. And for this quarter, it will be like INR 13 million and next quarter, it would be like INR 15 million sorry -- how much it will be, say, INR 20 million or something is that correct?

D
Deepak Ganjoo
executive

So the total cost which is, yes total cost is about INR 40 million per quarter.

M
Mihir Shah
analyst

INR 40 million per quarter.

D
Deepak Ganjoo
executive

Next quarter, it will come only for 2 months. And after that, it will not come.

Operator

As there are no further questions from the participants, I now hand the conference over to Mr. Pratik Tholiya, for closing comments.

P
Pratik Tholiya
analyst

Thank all the participants for being on this call. And special thanks to the management for giving us the opportunity to host this call. Anand, sir, would you like to make any closing comments?

A
Anand Kripalu
executive

No, I just want to thank everybody for joining in and really asking some incisive questions, and I look forward to your continued support.

Operator

Thank you.

P
Pratik Tholiya
analyst

Thank you so much, sir.

Operator

On behalf of Systematix Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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