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Ladies and gentlemen, good day, and welcome to Mold-Tek Packaging Limited Q4 FY '22 Earnings Conference Call, hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Abhishek Navalgund from Nirmal Bang Equities. Thank you, and over to you, sir.
Thanks, Neerav. Hello, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to 4Q FY '22 earnings call of Mold-Tek Packaging Limited. We have with us Mr. Lakshmana Rao, the Chairman and Managing Director of the company, along with the entire finance team at Mold-Tek. Without further ado, I'd request Lakshman sir to start with the opening comments, post which we can open the floor for question and answers. Thank you, and over to you, sir.
Good afternoon, everybody. Thanks for your patience. I'm glad to inform you that in spite of a severe inflationary situation in raw material pricing, a company could maintain or rather improve the EBITDA margins during the current financial year, I mean ending March 22, just concluded year. And our overall revenue growth has been 31.85% over the last year, and PAT is up by 32.4%. But the exact volume growth is only 11%. So with 11% volume growth, we could maintain a PAT growth of 32.4%. The EBITDA per kg has also shot up from somewhere around INR 31.7 to INR 41.78 or something. So almost INR 5 increase in the EBITDA per kg was achieved during the year due to increased sale in our food and FMCG products.
And coming to the segment-wise growth, in the paint and lubricants, we have seen reasonable growth in the revenues. But in the volume terms, they are still 11% to 13% growth. In the food and FMCG, in the edible oil sector, where it was impacted in the first 2 quarters of the year, we had a degrowth of 25%. Though in the fourth quarter, there's a handsome growth of almost [ 50% ] overall year still registered a negative of 24% in Qpack, that is edible oil pack. Excluding that, in the thin wall section, that is food and FMCG, we have a handsome growth of 40%. This is the most positive aspect of the current year's performance apart from a good 13% growth in paint industry numbers, volumes, this is where EBITDA margins are much higher, and that is what resulted into a sizable increase in the EBITDA margins per kg.
It was -- raw material prices have shot up more than INR 30, it is 28% will be precise from INR 119 -- INR 111 for the full year, INR 93, sorry -- INR 93 for the full year to INR120. So it's almost like 30% increase in the raw material prices that we could pass on successfully to the consumers. Before you ask this question, I want to also convey to you in the current fourth quarter, consistently, the prices have raised in January, February, and again in March twice, taking up the price by almost INR 17 to INR 18 in the last quarter. And because we generally have the 1-month lag or sometimes 1 quarter lag in pricing, that means whatever is the pricing of January is applicable in February, February and March and similarly, March and April. So whatever the price hike in March, we could not pass on because till April, so to that effect, the profitability is reduced in the Q4. In spite of that, we ended up with a 4% to 5% growth in the top and bottom lines in terms of volumes.
In terms of revenues, it looks 11%, 12% or rather it is in the Q4 to Q4, 10.7%, but actually, volumes, if you consider, it is around 5%. Similarly, the bottom line growth is also about 5%. So the prices have started falling from April 1, reasonably, not a great extent, but up to around INR 8 to INR 10 per kg. They have come down. So those benefits of March pricing will be now applicable in April and similarly April and May. So when the downtrend, there will be a beneficial accrual to the company's P&L.
So having said this, and also I want to just give a hint at April. April, we have grown at around 20% on volumes, 18.9% to be precise. And in the food and FMCG also, we have noticed around 30% rise, and in prospects of ice cream, restaurant, fast food sections are beyond our expectations. So things started on a very bright note for the next financial year, that is the current financial year '22/'23.
So as I explained in the past, IBM Project is moving as per schedule. The pilot will be readied sometime in July at our Unit 1 and the Sultanpur unit will be starting sometime in October. The OTC products -- production will start in July, August. But pharma sample submission and stability test will take 6 months after the trial production. So pharma may not add any numbers in this current financial year, but OTC products will add.
And another good news is, we have now commitments from Levers and GSK to develop some products for their new packaging products. Already molds are underway for one of them and the other 2 molds are just initiated. These 3 products put together would be adding around INR 25 crores to INR 30 crores to the top line in the current financial year. And in a full year, it will be to the region of INR 35 crores to INR 40 crores per annum. So this is a sizable addition in our food and FMCG for the current financial year and going forward.
So with these trends that are positively happening for the company, I leave the floor open for questions and answers through which we can interact. Back to convener.
[Operator Instructions] The first question is from the line of Ravi Naredi from Naredi Investments.
Thank you very much for nice result. You have given overall growth in the year. I am looking at this company since last 6 to 7 years and find when we attended the AGM, you display so many products in the AGM. But along with the result, you never give investor presentation in which you may show what product -- new product we have introduced by the company whereas -- like our -- we investor, we may benefit a lot. So this is my request. If now onwards, if you can post it, it will be nicely help to us.
Secondly, data rises too much as on 31st March, '22. Any specific reason behind it?
Sorry, what is the second question?
Data rises too much.
Data?
Yes, yes, yes. Data increases too much. It was INR 90 crores in 31st March, '21, it is raised to INR 143 crores.
INR 19 crores till last year 31, has now become INR 143 crores?
Yes.
Yes. I think maybe there is some typographical error.
No, no, no. It is not error. INR 90 crores to INR 143 crores.
INR 90 crores has become INR 143 crores.
Yes, yes, yes.
Basically, the sales growth, if you look at, it's almost 34% or 35%. So obviously, when the sales grow more rapidly towards the end, actually, the billing value has increased by almost 35%, 36% compared to last February and March. So that's basically raw material prices have shot up. We are making the data look ballooned.
Okay. Okay.
So that's the major reason. And of course, there are a couple of reasons like Asian Paints and others have increased their credit period during the year, which was not there last year. That is another reason for increasing the data. I'm taking your advise of new products introduced in FY, I will ask my people to upgrade it in the website or send one separate presentation about it.
It will help definitely. Sir, second, my advice is there. You have given INR 8 dividend this year and raising equity also. So why not you pay lesser dividend and less equity you raise because on dividend, you have to pay 20% DDT tax also. So this is...
Now the dividend tax is in the hands of individuals, it's no more on the company. So whoever receives it, in fact, if you are receiving INR 8 this year, it is less than INR 7 that was given last year. because effectively, you will be -- I mean, many of the investors will be incurring 20% to 30% tax bracket. So they will end up receiving only maybe effectively INR 6 or so. Whereas last year, it was tax rate. And only the 10% TDS is deducted as per the norm.
The next question is from the line of Kaushal Shah from Dhanki Securities.
Sir, if you can share the fourth quarter volume numbers for the 3 segments, paints, lubes and F&F?
Yes. The volume numbers of paint is for the Q4 is 4,676 tons, lube is 2,140, food and FMCG around 1,580. Overall, it is around 8,400 tons. Paint is 55%, lubes is 25% and food and FMCG is 19% in the volume-wise. In the sale value-wise, paint is INR 52, lube is 24 and food and FMCG also is 24.
Right. Okay. And sir, you have stated about our likely 15% to 20% volume growth for the current year. So if you can throw some more light on that, which are the areas that you are expecting growth because for FY '22, in the past, we were hopeful of 32,000 volumes, but we have done a little less than 30,000. So in the current year, if you can share some more thoughts as to where you expect this growth to come from? And on the margins also, you mentioned that the February/March price increases will be passed in April. So the per KG margins, whether you will be able to maintain, whether you can increase this number from INR 42, so some thoughts on that, sir.
Definitely. See in the volume side, I'm confident because of 2 factors. Hopefully, one of the factors is hope that if there is no pandemic this year, assuming that the pandemic under control, at least like what it is today, then the basic consumption of frozen food and the ready-made foods and ice creams will continue to grow, which is very evident in the month of April and May so far.
And we have now 3 new products cleared by top MNCs for mold development, and one of them is getting ready in the month of June, maybe, let's say, towards end of June. Another 2 will be in the second quarter that is sometime in July, August. So these 3 projects and IBM OTC products, however, capacity -- I mean the ability to add about 5% to the top line, around INR 30 crores is what we are anticipating from these new products altogether.
And food and FMCG, which is now currently at around, in volume side at around 34%, 19% of volume would add at least 30% to 35% growth. So that means 67% growth will come from food and FMCG sector. And in paint and lubricants, lubricants I don't generally expect major growth, though this year, we got surprising 11% growth. Generally, will take 3%, 4% or 5% growth in lubricants. The paint industry, again, we have been given an indication by Asian Paints to ramp up our capacities at Mysore and Vizag and the indications are very strong.
So those 2 plants should increase if it happened, as they have promised from June and July. That will be adding to another 10% to 15% of the total or at least effectively adding another 5% extra growth. So these 3 put together itself, we're seeing around 14%, 15% growth. And the basic growth of economy should continue to be even at 3% to 4% will be in the bracket of 15% to 20%. So this is what gives us confidence of 15% to 20% volume growth this year.
And coming to the margins, because all these 3 products that we are introducing along with the OTC products are high-end margins in the tune of INR 80 to INR 120 per kg. So even they add 5% to 6%, they will be able to add considerably to the EBITDA per kg and with the increase in volumes, our overheads will tend to be reduced a little bit. So overall margins, I'm confident it will be definitely better than 32, but whether it can reach 34, 35 level is the internal target we set, [indiscernible] we need to see how the price trends go on.
If the raw material prices go up as they did last quarter, very rapidly they went up, actually, in the month of March alone, the loss to the company because of increase in market price, which has been not reflected in our pricing, it will reflect in April, comes to almost INR 3 crores to INR 4 crores. So though the raw material price is passed on, there is a lag in passing. So by the time we pass-on in April, raw material price in April has come down. So April, we'll see that gain. Now again, the prices have come down. So again, maybe we'll get the benefit of retail price reduction. But if the prices start going up again, let's say from June or July onwards, and that particular quarter might get affected like what the Q4 is affected now. In spite of that effect, we have sustained a 5% top line growth and a 5% bottom line growth. But if you look at the per kg, it has come down a little bit to 39 level from 41, 42 last quarter because of this particular reason of not able to pass on the price rise as rapidly as we wish to because there are agreements that we pass on next month.
Evenly when the price come down, also, we don't give them the price reduction in that month, we will look in the next month, till next quarter. So hopefully, the first quarter Q1 will gain if the price trend is what it is going to be. And if the price trend stabilizes, still 42, 43 is possible, if the price trend is increasing, there could be some challenge. But so I still think 43 to 45 is impossible range given the new orders in the food and FMCG sector.
And sir, last question from my side. If you can share some names on the F&F side, I think in the last quarter, you had also mentioned on the lube, we had received the BPCL tender. So maybe some names where which can add to our volumes in the current year?
Yes. Hindustan Levers and GSK we have already more or less confirmed with them. The mold development has also been cleared by them. But the molds will be tested and all that will take time. So first one will be in June, we are hoping, others will do sometime in July/August.
And sir, last quarter, you had also spoken about Amul. So are we...
Amul is already reflected in the -- from April onwards -- March onwards. [indiscernible] in March. But now full growth in Amul is being...
Sir, sorry to interrupt you. We're unable to hear you. We request you to speak a little louder please.
Yes. What I'm saying is the Amul increase has been already reflected from March onwards. And in April, we have seen considerable improvement in the sales to Amul, and even Hatsun, that is Arun Icecream.
[Operator Instructions] The next question is from the line of Bhargav Buddhadev from Kotak Mahindra Asset Management.
Congrats on good execution. Sir, we had added 1 customer in QR coded IML, any new sign-ups from there?
Yes, Gulf has almost cleared our QR code and another edible oil company, a government cooperative, they have placed an order with QR coded lids also. They want even lid to be having a QR code. So that machinery has just arrived last week for printing on dynamic QR code on the lid. So these 2 clients will be supplied in this quarter, Gulf and the edible oil company.
So what is the revenue run rate we are looking from this business in FY '23?
In QR-coded products?
Yes, yes, yes.
I'll be very happy even if we can reach at least 5% to 6% of the revenue is coming through this QR coded. That means about INR 30 crores, INR 35 crores. Gulf alone can contribute around INR 8 crores to INR 10 crores. They are currently shifting with one brand, and they have indicated once, see their concern is in the supply chain, all the dealers and distributors have to get into the mode of reading QR code and invoicing using a QR code, which is something new for the hardware shops in our country. So they want to first start with their premium product, or the products where they are generally sold across towns and cities. And then they want to go for other products, which go into villages, are down further down into towns. So this experiment we are starting in the month of June. And I'm sure by July, August, once they have confidence, they will be putting in across the country. And Castrol is also taking price once this cap molds -- cap printing is done. So -- but they have not indicated time lines. But Gulf has indicated they want to go from June.
And any traction with these paint companies because that can be a big revenue driver for us in QR coded IML?
Sorry, your question was not clear.
So I'm saying that any progress with signing of with any of these paint companies for QR coded IML?
No, no, no. QR coded IML, as it is IML is still not there in most of the paint companies. So for them to go for a QR coded IML, maybe a little far fetch thing. But the lubricant companies are very keen because they face a lot of these duplicate markets and challenges from that duplicated markets. So they are very keen to go for it once the cap and jar results aligned. So that machinery is something special. We have just imported a week ago for cap printing. Jar IML and IML reverse also is already established and supplied also.
On the cap, they want printing directly on the plastic success. So we need a special laser equipment with the dynamic QR code feasibility that's been just arrived. So we'll be submitting samples and probably Castrol also will initiate trial in the month of June.
And then IBM, you guided for about [ INR 30 odd crores ] of revenue in FY '23 primarily for the OTC products. But maybe in the next 2 to 3 years, can it be INR 200 crores to INR 300 crores kind of a revenue line for us, IBM?
Yes. Our internal target is to reach at least INR 200 crores increase starting from October this year because this October, even we submit the samples of both the CRC caps and bottles, they take about 5 to 6 months to give the clearance. So effective commercial supplies from pharma bottles will happen only in the next financial year or early calendar year of 23%, and that's the best we can expect.
So I won't be counting any numbers from IBM pharma this year. But in the IBM other areas, we have one major breakthrough, hopefully, we'll be getting that on hand by end of this month. And that will be the first product we'll be producing the orders worth around INR 8 crores to – INR 7 crores to INR 8 crores per annum.
And other products will be added once the products are established. So this year, our guidance for IBM would be in the region of INR 10 crores to INR 12 crores for year 1. But in year 2, it can shoot up, like, say, next year '23, '24, both pharma will be added, CRC caps will be added, and OTC products will be converted. So something like INR 60 crores to INR 75 crores, we can expect in the year 2, that is -- we can call it actually year 1 because this year is more of a trial production and sample submission for the pharma.
But 3 years down the line, that can reach a level of INR 180 crores to INR 250 crores. So you can take an average of INR 200 crores achievable 3 years down the line say, 25, 26.
And EBITDA per kg in these products would be upwards of [ INR 150 ] right?
Much higher than even our food and FMCG.
Okay.
So once they start contributing the numbers, overall numbers should improve.
And in terms of our press release, I read guidance which you are seeing good export orders. So how big can this segment be maybe in the next 2 to 3 years?
See, this year, probably, again, initiation and definitely, we found some good response from restaurants, confectioneries and Indian stores in U.S.A. We are also trying for American applications, American companies are -- American restaurants and the hoteliers who are now getting more and more into home deliveries. That's become either it is not an epidemic reason due to pandemic, but it's also become a habit.
So those hotels and confectionery suppliers, wherever they need attractive packing with IML, we are pitching in. And the initial success is coming through Indian stores and Indian restaurants. It's catching up 1 or 2, which we did last year, not only recurring, but are also new inquiries coming from other resents. One negative feature in the whole thing that's -- by -- otherwise, by now, it would have improved a lot, is a freight cost, which has shot up from $3,000, $4,000 to more than $10,000 per 40-feet container.
So that is a kind of a hindrance if they are always saying that this quarter, the prices are softening a bit. But the way they have gone up, is tremendous from $3,500, $4,000 range. They are currently still at around $9,000, $10,000 per 40 feet container. So once -- if the freight prices stabilize even at least around $5,000, $6,000, there will be much more savings for the people who are importing from us, and there could be a good jump. So that is the one deterrent, otherwise, we are confident about decent numbers.
So this will primarily be a export market for us, right?
Sorry.
This product will be primarily for exports, right? Or we are also looking at domestic plan solutions?
No, no, no. These are the products which are already there in India, we are selling to our Indian clients. The standard containers for ice creams, the containers for confectionery, sweets, all kind of including even the -- one of the inquiries you will be -- it is for the dough for idlis and dosas. In U.S., they sell it in containers with a sticker and all. Now we are giving it to IML. So we are able to -- they need about 1 million pieces a month. So that's the kind of applications that similar like what we are doing in India. And there's no need to invest on new set of molds, which to -- from the same molds and same robots, we can produce. So to cater to this increased demand in IML food containers, we are almost doubling our printing capacity. We have placed 2 other missions for 2 more flexo machines. They are having one in July/August, and one in December. So by next year, we want to almost finishing on, if not doubling 70% increase in our IML printing capacity we are creating. So that should not be a deterrent in meeting our customer schedules and exports.
Sir, lastly, sir, on the pump business is there any update you are looking at new sign-ups like Himalaya, Reckitt Benkiser, any updates?
Yes, with Himalaya we've progressed. Trial lot has been given, but commercial production, they are also very much stuck with drop in volumes. So we are now inching up at least INR 50 lakhs to INR 60 lakhs per month sales were achieved in this quarter. And hopefully, it will touch about INR 1 crore per month in the coming quarters. Wipro, who has supposed to start their Hyderabad unit in a full-fledged manner by now, again, they have postponed, as I told you last quarter to December '22. They have committed 2 million pieces. That's worth around [ INR 11.2 ] crores per month revenue. If that comes through only, I see a big jump in pumps. Otherwise, this year would be limiting our sales to a level of around INR 8 crores to INR 10 crores.
[Operator Instructions] The next question is from the line of Nirav Savai from Abakkus Investment Advisors.
I just wanted to understand your view on this EPR regulations, which are going to come FY '24 onwards. And how do we see demand side post the EPR norms?
Yes, we are getting ready for that. Actually, the recycling plants in India have now developed to an extent of almost equal to the international standards. Their products, some of them are climbing even food safe. And companies like Hindustan Levers have approved a couple of products in PET and they are also examining polypropylene for food applications. So if that reality -- if that really happens, we are in touch with them.
And we are also even experimentally buying some quantities of recycled polymers from 3 to 4 reputed companies who have come up in -- a couple of them in South, a couple of them in Haryana area, North area. We found that success in the initial trials, which are not affecting the quality nor the dimensional stability.
The problem in the previous uncleaned, or I'd say, unseparated recycled material was it's impacting the physical characters or mechanical characters of the containers, including the dimensions, which is now not the case. The cleaning is happening up to the polymer level. So it's not just grinding and washing and making a polymer out of it. I believe the new system is to go to the polymer level and then clean the whole mix or whatever added in the scrap and then create the pellets out of it.
So in this process, they are reaching almost 99%, 98% characters of the basic resin. So adding even 30%, 40% is what they say at least is possible without impacting the qualities, mechanical and dimensional qualities. So it is very encouraging. And with this new reprocessing techniques that have come in, adapting to those norms is not a big challenge for a containers manufacturing company like us.
The film and other packaging lines will continue to have challenges because in film collection and recycling is still a big challenge and contamination in film collection, our contamination in the garbage because the film is generally thrown and it's difficult to collect, it's going to be a challenge for the film companies, film packaging companies. But I think for containers company like us, with the advent of these new techniques of reprocessing, we are able to easily meet the norms.
Great. Beyond FMCG companies, you also see this going into lubricant companies and paint companies.
No, no, paint and lube has already started.
They have already stared.
Asian Paints have come out with a couple of brands where it is mandatory to mix 10% to 12% of RCP, recycled plastic and something to them and already been last 1 year, 1.5 years, we have been supplying. And now they increased from 7%, 8%, they have accepted to go for 10%, 12% increase in the recycling. And everybody is testing 1 or 2 brands they're saying, they want to check, is the mechanical properties are not really not affected. It's happening. And we have already collaborated with 3, 4 RCP companies, reprocessing companies, and given them a lot of guidance and over the 1.5 year, our relations with them also grown, and they have committed their capacities as per our requirement.
Also on the food grade side, you -- there are companies in India who have been doing it or at least...
They are claiming, but we have not yet tested, we have not used. We are using only our internal recycled plastics in them with their permission, because there, we have complete control on the contamination. For outside, unless the client clears them, we can't buy and use. To tell you very frankly, companies -- big companies like -- I don't know much about Mondelez, but GSK and HUL and their R&D team, I've met recently, they are working on PET to start with, and they found PET completely recycled PET can be mixed with food grade bottle manufacturing, which is a major breakthrough. And according to them, even on polypropylene copolymer, which is our major raw material, they are finding some companies progressing to give food grade RCP.
[Operator Instructions] The next question is from the line of [ Martin from EAM. ]
Congratulations to you and the team on some great numbers. I'm wondering if you could repeat the 15% to 20% volume growth that you're expecting for the upcoming year, where that's coming from? I believe you might have addressed it earlier, but I could not make out what's being said on the call.
Yes. See, Martin, we are assuming this numbers growth based on an assumption that there won't be a return of pandemic. As I mentioned earlier, maybe you missed it. We have 3, 4 new FMCG products of decent volume and numbers, which we have initiated mold development coming into production from June and August between June and August. These products put together along with the OTC product and IBM, we expect sales of about INR 30 crores, INR 30 crores for the current financial year. And that might go up to a total of INR 40 crores per annum in the next financial year because this year, I'm counting only on 8 to 9 months. So that's a sizable increase in our food and FMCG line.
And we also have been instructed by Asian Paints to ramp up capacities at Vizag and Mysore, which we are doing now. And our plant at Kanpur has reached 1,000 tons per annum kind of a production. That's about 80 tons, 85 tons we did in April. And going forward, Berger is asking us to start production and supplies from July, August of this year, and they are committing about 70 tons to 80 tons per month.
So our Kanpur plant, which was last year, hardly contributed around 200 tons, 300 tons, we'll be contributing about 1,000 -- 1,200 to 1,500 tons. So that's about another 4% to 5% growth. So we are seeing 8% growth coming from Kanpur plant and these new products in food and FMCG. And Asian Paints growth in Mysore and Vizag, we anticipate to bring in at least another 3% to 5%. So these 3 new initiatives would be bringing us something around 12% growth in the -- in relation to our regular growth of about 5% to 8%, which we expect in the economy because paint industry generally grows 10% to 12% every year in a normal year. And food and FMCG last year, we have seen 40% growth. And that itself another, let's say, even 30% growth we get this year on 18%, 19% is another 4%, 5%. So if things go well and economies at least stays where it is today, we should be able to reach our goal of 20%.
The next question is from the line of Miraj Shah from Dalal & Broacha Stock Broking.
I just had one question that realization per kilo for this quarter has dropped. So I wanted to know what was the reason for it? Because even our EBITDA per kg has come down. So what could be the reason for this drop?
Yes, Miraj. As I explained to you, maybe you missed it. Our pricing strategy is always passing on the previous month price to the next month billing. So whatever price rise in the month of March, we realized only in April. And in the case of Asian Paints, which is one of our largest customers, it is a quarterly basis. That means October, November, December average price will be applied for Jan, Feb, March.
So these 2 itself impacted more than INR 4 crores to the bottom line. That has effectively decreased our EBITDA by almost INR 3, INR 4. So otherwise, this would have been even INR 43, INR 44. It is now INR 39.11 as against last year number of INR 41.88. So this should have been INR 43 level, and we -- at least the March remained -- March raw material remained at February level, we could have saved this money.
So now, thankfully, the prices have come down in April and also May. So this quarter, we'll get the benefit of increased billing value because March pricing we built in April, April raw material price will be built in May, and similarly, Jan, Feb, March quarter average price will be built for Asian Paints and 1 or 2 other clients in this quarter of April, May, June, where the prices have come down.
So as I always say, in up trend, the last month will always get shipped in the profitability. In a down trend, whichever maybe INR 2 or INR 3 coming down, that will be gained during the quarter in a reasonable manner, if not a very big way. So that is a major reason why this drop in EBITDA to INR 39.11. But the overall year, we ended up with INR 41.78 against INR 36.72, that is about INR 5 increase in the EBITDA margin, which is very comfortable in this -- given the price scenario.
The next question is from the line of Pulkit Singhal with Dalmus Capital.
Can you just -- first question was on the total EPR loans. What is the percentage of recycled material that you need to use and by what day?
It was basically the responsibility lies with the users of containers that is Asian Paints or FMCG companies. But the processes, our sizable processes also have to fall in line and show proofs of utilization to the level of 20% to 25%. The industry is still trying to negotiate in the injection molding and blow molding. It may not be a big issue. But in the film industry, it will be very, very difficult for them to meet the norms. So currently, I think what it was set for '24, '25 is 20% reuse.
And this is by 1st April, 2024...
I'm not pretty sure about the date to review that. It has been gradually given in the next 2 years. And we are already using around 7%, 8%. And more and more companies are allowing us or -- in fact, requesting us also to start giving trials and trials lots so that they can mix the -- they can check the containers for their mechanical properties and damage tolerances. So there is a change in the way people are looking at RCP. And as I explained in the previous -- to the previous question, a lot of new RCP techniques have been adopted by some companies, and they're giving really good quality polymer after recylcing, which can be definitely used more than 20% in sales that is paint and lubricant containers, which consume which in our consumption contribute almost 75% to 80% in the week. So using 20% overall RCP would not be a challenge by the time these norms have to be adopted.
Right. But by then, if the industry has to move in this direction, do you think the cost of that recycled material can actually shoot up quite a bit because maybe the sourcing of that is yet not in place.
Actually, the RCP material is marginally cheaper than the virgin polymer.
That is a good point, sir. But at that point, it will be mandatory. So everyone has to use it [indiscernible].
I don't think so because they always benchmark the virgin material minus some ex percentage, not much as you are seeking more and more clarified material, the delta is hardly about 5%, 10%. Initially, it used to be 20%, 30% cheaper, but now it's come down to around 10% and it is staying there. And obviously, the mindset is that RCPs after all made out of scrap material, they collect and generate. And with the increased tenancy and collection of this material happening in an organized manner, availability of RCP will be there. And the mandate is not 100%, it's 20%. So I don't think there would be a big challenge on price increase of RCP.
Understood. Sir, from a long-term perspective, I'm presuming they may start with 20% and then go to 30% and 40%, et cetera. Do you think getting into sourcing of this makes sense or from a long-term perspective as a barrier to entry? Or would you rely on external kind of...
Expected to be careful, and we are establishing our relations with already 3 major vendors in the country. And we are being given the first allotment of materials. So as of now, there's now such a desperation even with more and more companies are adopting this recycling material. There's still a lot of excess capacity is available. And some huge plants are coming up is what I heard from Chinese technology or Japanese technology, that's what I heard. And those volumes will be definitely able to gather for the next 4, 5 years. But how it goes on beyond I don't see a big challenge. And nobody can enforce beyond 20%, 25%. I don't think 100% recyclability of care plastic would ever happen.
Okay. Understood. Sir, the next question is on exports. I mean, you mentioned about freight prices going up. But in the current scenario, I mean, given that China provides a large chunk of the raw material to the U.S. on this front. Their freight prices must have also shot up, right? And also they are going through a lockdown in Shanghai. So isn't that throwing in an opportunity for you? I mean a lockdown there plus their freight also going up.
No, not only lockdown in China, but also China Plus One strategy is now well admired in American minds, I could see in a couple of calls I had with a couple of agents who deal with imports from China and Asia. And their mindset is certainly affected by the recent developments. And reduce to belief one Chinese as a single source.
So definitely, even with the extra price from India, they would like to keep us their second source. And that tenancy and that kind of inquiries are increasing in number. Because even these exports, what they are doing to U.S. today, they are in place of their Chinese suppliers.
So going forward, I see that more and more trend of China Plus One concept in even plastic containers, IML containers, especially. Because in U.S.A., manufacturing costs are very high. And with IML, the cost shoot up beyond even the landed cost from India at this even at this price freight cost. But in the freight cost goes up too much, there's less incentive for the people to import from India or China.
So that's what I'm worried about. It's not China is competition. If the price is too much, they might as well progress in U.S. or buy it from your sources. But I think the flight cannot stay there forever. It was very unusual. They've gone almost 300% up. Not recently, it's gone up for last more than 1 year now. It is now trending down from 10,000, 11,000, now around 9,000. Hopefully, it will settle down at around 5,000, 6,000 by end of this year or beginning next year. Then exports become very, very viable.
Right. So how big could the segment be, sir, in 3 years?
If the freights are like this, this can be kind of let's say, I don't think it will be more than 10% of our sales. Even if you can reach 5% to 10% in 3 years, it will be a good achievement. One area where I can see that number can be beaten is our CRC caps, which we are starting in October, but they become really available for suppliers from next March. So that CRC caps is -- U.S. is a huge importer of CRC caps. And once that range of products are available in our product portfolio, we'll be able to get more and more -- I mean inquiries and orders, especially with a much higher value add.
Next question is from the line of Akhil from Centrum Broking Limited.
Congratulations on overall a good set of numbers.
Akhil, sorry to interrupt you. You're not audible. Can I request you to speak a little louder, please?
Sure. Is it better?
Yes.
Congratulations on a good set of numbers for FY '22. My first question is on the free cash flow generation, if I look at last 6, 7 years. So we have done tremendously good in terms of sales growth, in terms of capacity addition, even in terms of operating cash flow. But because of continuous need of the business to invest in CapEx, the FCF has continued to be extremely weak for last many years. At what capacity levels should we feel confident that the FCC integration will continue to be healthy for the business?
Which generation, sorry, your voice...
I'm saying at what capacity level, should we expect a healthy free cash flow generation.
See, free cash flow even today is healthy. And we have -- in spite of a heavy dividend payout, we still have cash generation, which is covering our capital needs till now. But as I discussed with you all in the last couple of meetings or phone calls, going forward, the investments in IBM and pharmaceutical and in new plants at Kanpur and probably one more in North, expanding Mysore and Vizag, and expanding our tool room and printing facilities would be requiring much higher cash flow, something like to the tune of INR 200 crores in the next 2, 2.5 years. So that is where we made the QIP recently.
And with that, we are completely cash flow, I mean, comfortable. There is no negativity in the cash flows anticipated. Actually, in the short-term debts and long-term debts now are just one of the very cheap foreign loans are what we are carrying. So the total debt has come down from INR 108 crores to INR 44 crores now. And that also, we wish to repay some of that, but these are coming at very low ForEx loan. So the closure costs are higher than carrying. So we are continuing that.
And going forward, the outflows to set up these projects are increasing. They are a little lagging because of the building construction is taking place at Sultanpur and orders have been placed for machines, but the Sultanpur building is coming out in a more than 130,000 square feet RCC area with good GMS facilities. Half of it is beyond GMV. It's actually that Drug Master File, DMF standard. And half of the area is for our food and FMCG comparing to FSCC standards. So this plant construction is somewhat time taking. We started 4 months ago, and I think it will take at least another 7, 8 months or maybe 6 months by October, November, we wish to start our FSA production there, and DMF production also will start soon after.
So going forward, the mission investments and the capital goods will be increasing. Hopefully, from INR 51 crores last year, that is '22, we may have to spend at least INR 80 crores is what we think in the current year budget. Based upon the new plant commitment from other paint companies other than Asian Paints, it can again be INR 80 crores to INR 100 crores in the next financial year, '23, '24. So what all the debts we have reduced during this QIP -- with the QIP funds will be reutilized during these 2 years to ramp up capacities.
Sure. And just a follow-up on that, what capacity we are at right now, 41,000, right, -- 41,000...
41,000 has gone up. I think it's -- we -- our current total capacity is somewhere around 44 now or 44,500.
Okay. And the utilization rate will get...
Utilization rate is close to 70% because some of the machines that are just installed won't be added -- would got have added much in the last quarter. Majority of the machines have arrived in the last quarter from Jan to March. And some of our machines are yet to come. It's an ongoing process because our growth is there in all sectors. Surprisingly, even in lubes, we have seen 11% growth. Maybe it's because of COVID numbers were more affected in the previous year compared to '21, '22. So that's why lubricant numbers also have grown by 11%, which is a very healthy growth.
And last question from my side. On the FMCG part, what percentage would be available? What percentage would be ice creams tops?
Not only ice cream, it's a mix of all food products. So out of INR 44 crores, INR 43 crores, we have clocked in the Q4, INR 30 crores is thin wall and INR 13 crores is edible oil tax. INR 30 is from thin wall. That is, we call it thin wall as food and FMCG, other than QPack, which is edible pack is also a thin wall pack, but it's meant for edible oil and other applications where the value add is much lower than the food and FMCG thin wall.
The next question is from the line of Karan Bhatelia from Asian Market Securities.
Can you share the contribution of IML and non-IML in terms of volumes and revenues for this quarter?
They are in line with the previous quarters because the IML usage as stagnating around 67% now from 65% previously. Previous year, it was 65.3%. It is now the current year, it is 67%.
In terms of the full year, in terms of revenues?
In terms of revenue, yes, in terms of tonnage, it is 61%, 63% is it, 63%, up from 61% last year. 63.2% to be precise.
And sir, how is the Mondelez portfolio shaping up now? Are we...
There is no great growth. I think 3%, 4% drop is there, but not a major drop. So it is stabilized now.
So approximately what percentage could be that in terms of FMCG?
This hardly value-wise around INR 5 crores out of INR 30 crores, what we did – INR 40 crores – INR 30 crores. It is around [ INR 40 crores ].
What was this number?
[indiscernible] hardly 5%.
Okay. And this was INR 5 crores on number?
Yes. It was a peak of almost INR 7 crores, INR 8 crores 3 years ago. It's 2.38 in the Q4. For the full year, it's much more. INR 13.8 crores, INR 13.8 crores, which touched a peak of INR 25 crores 3 years ago. It's now remained more or less the same level. Last year, it was 13.5%. Now it is 13.8%, it has improved by 2%.
Right, right. And probably if you can give some clarity on the INR 70 crores to INR 80 crores kind of CapEx budget we've set for next year?
Yes. We have a very clear investment in IBM and IBM pharma with the -- in the Sultanpur project itself, the investments will be in the tune of INR 20 crores and -- sorry, about INR 35 crores on the land and building. Land has been already acquired. Building costs will be to the tune of out of INR 35 crores, we already spent INR 5 crores, INR 6 crores. So another INR 30 crores of investment will go on building.
On machine, in the first phase, at least 20 – INR 20 crores to INR 25 crores will be added. So INR 55 crores directly goes out to Sultanpur. We have enhancement of Asian Paints capacities at Mysore and Vizag to be done immediately, which are already -- machines orders have been placed and they're underway. That will be to the tune of INR 8 crores to INR 10 crores. And we are doubling our printing of 70% growth in print capacity we are creating with investment about INR 12 crores. All these 3 are the major ones. And if Kanpur confection may start and some investments will be made in the Kanpur plant for Berger and Nerolac, but not much. This year, it may be INR 5 crores to INR 6 crores. But the major amount will be invested in '23, '24 Q1 or Q2 or maybe Q1 itself. So this is our budget.
We have about INR 50 crores for Sultanpur, about [ INR 13 crores to INR 15 crores ] at Asian Paints expansion, INR 12 crores to INR 15 crores for the printing and die-cutting expansion of IML manufacturing and a little bit in Kanpur.
Next question is from the line of Hitesh Taunk from ICICIdirect.
I need just a few clarification on some numbers. You said like for FMCG, there was a degrowth due to edible oil and edible oil is nearly 70% of our revenue in FMCG. Is this the right understanding, sir?
No. The total food and FMCG for this year, '21, '22 is INR 146 crores, out of which INR 38 crores is edible oil. So hardly 25% is edible oil and the remaining 75% that is INR 108 crores is from thin wall, food and FMCG. We differentiate Qpack and thin wall in our nomenclature, though they are completely IML. So the value add in thin wall, that is the regular food and FMCG is much higher than Qpack.
So thin wall and Qpack is largely for oil category only, right?
No, no, thin wall is for food and FMCG. Qpack is mainly oil category, but there are other applications also, detergent, nutrient powers and other products also cashew nuts that there are also been -- these applications are also there for the Qpack. But in terms of value add, the thin wall for food and FMCG is much higher, like said, something like almost double that of regular Qpack.
So for FY '23, when we see a kind of 20% to 25% of overall -- 20% of overall revenue growth, what kind of -- sorry, volume growth, what kind of volume growth do we see in this segment, sir, in FMCG category?
Yes. In FMCG food that is INR 108 crores, we are confident of hitting at least INR 150 crores or more because there are 3 major products like Mondelez, which is an item which is still giving us INR 13 crores, INR 14 crores. We have now grabbed 3 major products. One of the names I can tell you right now is the Kissan Jam and other 2 are also equally strong brands, which already orders have been received, but it's at a very initial stage to announce.
So those 3 brands put together have the -- their projections indicate they are already existing brands. It's not that they are a new brand, which needs to pick up like Mondelez. These are all existing brands converting from conventional packing to IML packing. So these 3 commitments themselves are worth about INR 40 crores per annum.
But this year, I'm counting on about INR 30 crores for the 8, 9 months of the remaining period of the year because the development will take next 3 months. So that is a major rise and at least another 25% to 30% growth would come from the other segments, which are like ice creams, restaurants, exports, export of thin wall. So from INR 108 crores, we are anticipating it to cross at least INR 150 crores in the next financial year with a good EBITDA margin. So -- that will be a major contributor again, apart from Asian Paints and Kanpur growth.
Okay. Sir, my other question is from IBM pharma product category. Sir, what kind of products are we targeting in this strategy, sir? Is it a kind of bottle or say tablet...
Yes, to start with, our idea is to go with the bottles and caps. The caps are simple caps and again CRC child resistant caps. So a set of 15 varieties of bottles we have selected and molds have been made. CRC caps 6 varieties, 3 and 3 CRC will be introduced in the initial phase. And that will be expanded. So all these will be going into production for trial production by October. Then there are stability tests to be conducted by different pharma companies, clearances from some pharma bodies that will take at least 6 months. So the initial marketing efforts will start sometime from September, October, the samples are received from our mold makers and machine makers.
And the marketing team is being created. Already 1 senior guy from Grishma is joining us in July. And we also picked up quality control persons with pharma background and also production persons in IBM background. They all joined -- a couple of them are joining in June, a couple of them joining in September or July. So by July, our team will be ready because some OTC products that name also, I will be able to share with you soon, will be joining from July. So those products production, they will supervise initially, and they will be ready to take off the pharma once those global visions are in -- start in October. So all the steps have been taken actively to meet our...
Okay. Sir, my last question is that what would be our expected capacity for FY '23, sir, overall capacity?
Overall capacity is currently 44,500, I think it will cross beyond 50,000 to 51,000, at least 20%, 25% rise in capacity we need to create. Though the pharma capacity, which may be in terms of numbers, maybe 1,000 tons only, 1,000 or 1,500 tons, but it may not be getting into use in this current financial year. So apart from the 1,500 tons of pharma bottles and caps, we'll be crossing at least 51,000 tons, 52,000 tons capacity will be created by end of '23.
The next question is from the line of Deven Kulkarni from Marcellus Investments.
Sir our operating cash flows have reduced from INR 75 odd crore or close to INR 20 crores in FY '22. So can you just explain the reason behind it?
Sorry, INR 75 to...
INR 20 crores.
Which one?
Operating cash flow has reduced from INR 75 crores to INR 20 crores.
Operating cash flow has reduced?
Yes.
Because of the CapEx, you mean to say?
No, no, no. Operating cash before CapEx.
Before CapEx is not reduced, how can it reduce? Or am I seeing the same numbers?
Yes. So sir cash generated from operations in FY '22 is INR 2,194 lakhs. Last year, this number was INR 7,553 lakhs.
Cash generated last year was you add back depreciation and...
Yes, yes.
So you can get the numbers from cash flow statement... Okay, you ask the next one. I think it's ready. Cash flow for, which is this current year... Net cash flow is INR 56.5 crores.
Sir, not the net cash flow, I mean before investments.
And it was minus 9.6 last year.
So I'm talking about operating cash flows the first sub-bullet, the cash flow number is INR 2,194.34.
219, can you go down? Okay, 2,194. Cash generated from operations, I think something wrong here, INR 21 crores from INR 75 crores. March debt have shot up because of the increased value of the revenues, the volume of data, if you notice, has gone up by about INR 21 crores from INR 32 crores to yes, increased in trade receivables versus debt. That is a major item. And followed by inventories. Anyway, I will ask Ram Babu to send you a detailed question. Can you lockdown your email ID?
Sir, I have your email and I'll reach out to you separately.
You have Ram Babu's email ID, you can send it to him. He will answer.
The next question is from the line of Pulkit Singhal from Dalmus Capital.
Yes, sir. Just a couple of follow-up questions. Well, our capacity utilization has always been in the 60% to 70% basis. So is that how it will always be going ahead?
Yes, Pulkit. Because in the case of initial marketing, I explained in the past, jars and caps when you utilize the capacities, while the machine capacity has been taken at an average short weight of machine, jars will be using almost 80% to 90% of the machine capacity, but caps will be using hardly 40% to 50% of the machine capacity. So that is why in injection modeling, anything around 70% to 75% is the best anybody can achieve unless you are selling only jars, the only products which are deep and using the entire machine's capacity. So we being a supplier of both jar and cap, you need to underutilize the cap machines. Though they have higher capacity, they are the same machines, similar machines, if not same, which will be underutilized. So overall, capacity would be 75% will be most ideal.
Sir, and one quick data point, if you could share the volumes of the thin wall for the year?
Yes. The thin wall volume comes -- food and FMCG tonnage is 1,575 in the Q4. And for the full year, it was 5,042. That is included of both edible oil, which has fallen by 24%, but thin wall food and FMCG has gone up by 40%.
Right. So the 5,042 crores, how much is thin wall, sir?
Thin wall contributes to in week terms 3,077 tons...
3,000, sorry.
The next question is from the line of Jenish Karia from Antique Stock Broking.
Am I audible?
Yes, yes.
Can you just help me get the segment-wise EBITDA margins indicative for the year?
See, no, we can't share such a fine detail, but definitely, the EBITDA margins in the Paint segment and even Qpack segment will be much lower than the food and FMCG. While in the paint segment, that is both for paint and lubricants, it will be in the region of INR 30 to INR 35 per kg -- maybe INR 30 per kg. And in the Qpack, it is around INR 35 to INR 40 per kg. And in the case of food and FMCG, it will be as high as INR 80 to INR 120 per case.
Ladies and gentlemen, we will take that as a last question. I now hand the conference over to the management for closing comments.
Thank you, Nirmal Bang, and thank all the analysts who have shown interest to know about our company. I think most probably, the pandemic is behind us or even if it comes back, probably it won't be as pungent as it was. And hopefully, we all have a good year ahead. And at Mold-Tek, we are confident that given there's so many new initiatives we've taken up and new products that are coming up with a higher value add, the future is looking brighter. And I thank Nirmal Bang once again and hand it over back to the convener for the closing of the meeting. Thank you all.
Thank you very much. On behalf of Nirmal Bang Institutional Equities Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.
Thanks.