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S H Kelkar and Company Ltd
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Ladies and gentlemen, good day, and welcome to the earnings conference call of S H Kelkar and Company Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on S H Kelkar and Company Limited Q4 and FY '22 Earnings Conference Call. We have with us Mr. Kedar Vaze, Whole-Time Director and Group CEO; and Mr. Rohit Saraogi, EVP and Group CFO of the company.
We will begin the call with opening remarks from the management, following which we'll have a forum open for a question-and-answer session.
Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier.
I would now like to invite Mr. Kedar Vaze to make his opening remarks.
Good afternoon, everyone, and thank you for joining us on our quarter 4 full year '22 earnings call to discuss the operating and financial performance for the quarter. I hope you had all the opportunity to go through our results presentation, which provides details of our operational and financial performance.
In the fiscal year 2022, we have delivered steady performance led with stable consumption and offtake across key geographies. Our European business delivered robust growth in the year, driven by improved client wins in the Italian and other European markets.
In India, while we saw improved wins from the large FMCG customers, the contribution from smaller customers remained subdued, thus moderating our overall domestic growth. One of the key focus areas for us has to be strengthening our larger customer base. In line with this approach, we recently participated in a global RFP with a large global MNC. This should strengthen our performance and growth market position in the global FMCG and further broaden our presence in this customer category. This is a new initiative with a large key growth driver for us in the near future.
On the consolidated basis, our revenue from operations grew by 18.3% in FY '22. On the segmental front, domestic core Fragrance revenues marked a growth of 7.3% year-on-year. Organic growth in the Flavour division was a healthy 15% year-on-year.
All our acquired businesses, including CFF in Italy, Nova, Holland Aromatics and NuTaste, have delivered strong performance during the year. On a full year basis, CFF core Fragrance business grew by 21% year-on-year in FY '22.
On the raw materials front, we continued to witness cost pressures on account of global inflation in raw materials and supply chain constraints. Furthermore, the ongoing geopolitical conflict has intensified supply chain bottlenecks.
Despite such macro inflationary environment, we managed to deliver 15% EBITDA margin and healthy free cash flow-to-sales of 11%. We have been undertaking price hike coordination with our customers, which has enabled us to limit the impact of margin performance to a certain extent.
Coming to profit. Our reported PAT in FY '22 stood at INR 148.5 crores and our cash profit stood at a steady INR 176.6 crores.
In our earnings presentation, we have highlighted the impact of higher amortization of intangible assets on our future profits. This is on account of these acquisitions and is a noncash item. So going forward, the cash flow from operations will be an important monitorable for us rather than PAT in the accounting basis.
From a consolidated balance sheet perspective, our net debt position stood at INR 509 crores as of March 31, 2022. The increase in debt was primarily due to conclusion of our latest 2 acquisitions, namely, Holland Aromatics and NuTaste. In addition, higher working capital in the current inflationary environment also impacted the debt levels.
We firmly believe that these are big debt levels for us, and our focus is on reducing these debt levels from hereon. Our business model has inherently been a low capital-intensive one. And going forward, it is our endeavor to improve our ROCs from these low levels.
On the cash flow front, while increased inventories to the tune of INR 118 crores enabled us to maintain gross margin and meet customer requirements in the challenging raw material environment, it resulted in lower cash flow from operating activities during the year. We remain committed towards reducing the current inventory levels and improving our working capital cycles to more normal levels going forward.
Cash flow from investing activities in FY '22 is largely towards acquisitions.
Talking about the business. On our business front, our participation in the global RFP is progressing well, and we remain optimistic about the multiyear business potential from this global tender. From a demand standpoint, we continue to witness steady offtake across emerging and European markets.
Inflationary pressures are impacting discretionary spending to some extent, though we are seeing healthy customer inquiries.
In the last few quarters, despite adverse market conditions, we have undertaken measures to enhance our global market presence, augment our niche offerings and expand our customer segments. As we look ahead, our growth initiatives will help support accelerated growth in the medium to longer term.
Before I conclude my remarks, I would also like to share that the Board of Directors has recommended a final dividend of INR 0.75 per share, in line with our profit distribution policy. This is in addition to the buyback of SHK's fully paid up equity shares through tender offer announced in October 2021.
On that note, I would now request the moderator to open the forum for any questions or suggestions that you may have.
[Operator Instructions] The first question is from the line of Bhavesh Chauhan from IDBI Capital.
Can you throw more light on the global tendering that you were saying in your opening comments. When are we likely to have some orders from that?
So the global tendering process, as we have alluded, is a 12-month process. The first, I would say, 10% of the process is concluded. We have filed our tenders. The next 40%, 50% tenders are being filed as we speak. And by end of this year, the entire tender process will get completed.
From the tenders and the projects that we are doing, we expect that the second half of this year is when the revenues should start to flow in. It's a 3 year-process, so all the revenues will start ramping project by project and it will take 3 years for a full ramp-up of this business.
Okay. And sir, any quantum of revenues that can come from this over a period of, let's say, next year onwards or something?
So we are looking at something like INR 50 crores to INR 60 crores of incremental business year-on-year as a potential. And so anywhere between INR 150 crores to INR 250 crores in a really -- overall potential is much higher, but I think we should be able to touch around INR 250 crores as a good guesstimate where we can address. And on a kind of a pessimistic view, we'll be around INR 120 crores. So anywhere between INR 120 crores to INR 300 crores is our expectation of this business.
And this will come in a staggered manner over a period of 3 years. So if we start winning the project, so it will be like INR 50, INR 100 crores, INR 150 crores. So at the end of the third year, we will get the full potential.
Yes. Okay. Got it, sir. And sir, on the margin front, given the significant rise in price of raw materials, are we taking price hikes or any other measures to restore our margins?
So we are continuing to look at the price hikes in discussion with our customers, and we have taken a couple of price hikes in the last quarter and starting April this year. We are -- I think we have already discussed earlier, but we are focusing on the gross margin absolute contribution. The nature of inflation and the rapid pace of inflation means we are not in a position to take full corrections on the cost so there will be some margin hit on a percentage basis.
But we look to keep our gross margins in terms of absolute terms steady and work with our customers. As things improve, both in terms of demand, and to some extent, also easing of supply chain, we will take up accordingly.
[Operator Instructions] The next question is from the line of Dhaval Shah from Svan Investment.
Sir, just a couple of questions from my side. Sir, firstly, could you tell us what sort of gross profit impact have you seen in this quarter and how much is left to be passed on? So what is the normalized level of gross profit once we take the price increase?
Secondly, our other expenses have also increased in this quarter. So FY '21, we had a very low number in terms of percentage to sale logically because of the lower overhead expenses like traveling and exhibition and all of that. But -- so is this -- are you back to the normal range? And what sort of higher freight expenses are also in this, which could also get normalized going forward?
Third question is that I understand we had a very -- our organic growth ex of this Holland and the [ Nova ] acquisition, which were not in last year's base is a single-digit growth, which I think is a very low number. So if you could tell us why the growth is slow at only single digits. Yes. So these are my first set of questions, then I will -- we can have a word around that, yes.
So let me answer that one by one. On the gross profit, I think the quarter 4 was subdued in 39% gross margin for this quarter. We have come down from starting of the year 43-odd percent. So this 10% decline in gross margin is what -- the net result of the inflation, which has kicked in, in second half of the year.
We are -- in the current situation with the price increase and the cost, we hope to maintain through the full year '22, '23 gross margin excess of 40%, around 41%. There are no further escalations of raw material or steep escalations of raw material throughout the year.
In terms of we alluded and talked about the inventory in September, October last year that we have taken conscious call to increase our inventory levels and offset the hyperinflation. I think we are now looking at a reduction of the inventory levels going forward, and we should start to see the effect of that post July.
You talked about -- the second question was around overheads. So I think we will maintain our overhead percentage.
Yes. So the overhead stands at 14.1% to sales and then if you -- but however, we are adding an increase in freight cost and power and fuel cost. But at the same time, the traveling has started if you compare with this year. But our -- we will to maintain at the same level.
Okay, okay. And the 14% you said would be for the -- are you -- because INR 89 crores on a revenue of INR 450 crores. So that will be around 20%.
INR 89 -- so I've taken other expenses. What are you adding?
No, sir. Just from the way it's being reported the other expenses, which is there.
Okay. So you are adding depreciation and...
No. No, sir. Fine, I will take it offline if that's all right.
Let me just put in that despite the cost increases on energy and freight, we are taking steps to reduce our operating cost to maintain the same level of overhead in the coming year. So whichever number you take denominator and divide it, the cost control we are already initiated to reduce the overall cost per kilo to the same level where the freight and additional energy costs are borne. But we don't have any inflation on account of that to our customers.
Okay, okay, sir. Yes, and sir, on the growth front of absolute growth ex of acquisition, that seems to be at a very single low digit number. So what could be -- what is the reason for that?
Yes. So we have been very conservative in terms of growth because of a lot of reasons. One is the demand is subdued. There has been pricing pressure. So we've been cautiously moving up the pricing to our clients. And due to the supply chain disturbance and uncertainty, we are not being very aggressive in marketing to new clients. So we are focusing on existing clients and products to a large extent. This has resulted in slower growth in the second half last year compared to the year before. But we are on track, the normal -- with those [indiscernible] disruptions, we are on track...
Sir, if I interrupt? Mr. Shah, may I request you to please mute your line, sir, because there is a lot of disturbance from your line.
Yes, yes, yes.
Sorry for that. Management, you may please go ahead.
So that's the part on the growth. As you see, the pandemic effect in Europe was preceding what was happening in India. The next last wave was only sort of prevalent in emerging markets. We saw that in Southeast Asia and India largely playing out. But in European continent, because of the vaccination, the effect was very minimal. And we've seen the rebound in the fast growth in our European operations. We expect the same thing to play out in the emerging markets as we go forward.
Okay. And sir, you mentioned about the slower growth. So could you quantify which segments are you seeing the slowdown, the product-wise, the market-wise?
So we are -- typically, part of our business, which goes to the kind of trade and shops. So indirectly, the consumption on the bazaar market and the festival market of Ramadan. So this year, we've seen, again, the first quarter effect of pandemic in the Indian subcontinent has meant that these small segment businesses have affected. Plus raw material inflation, new payment cycles, we've been very tight on our credit policies. So there is an element of supply chain destocking to the clients holding and through the supply chain as well.
So do you see any improvement in the current quarter?
I think current quarter is still muted in terms of growth, but we will start to see strong growth in the second quarter onwards. There are very good signs in term of inquiries and demand coming through.
Got it. And sir, lastly, on the tender side of the business. I think in the last or last one of the conversation, you mentioned about INR 400 crores as the opportunity of the tender. And now the number you shared is between INR 150 crores to INR 300 crores. So this reduction of INR 100 crore, are we -- I mean, have we reworked our plan or the bidding? And also this staggered manner is something, which is new to -- which you're not aware of.
So could you just explain us the entire tender thing again. How it is going to move forward? And how should we account -- when will you be making an official announcement for it? Because I also -- it was supposed to come out in April end. So has that got delayed or -- yes.
So this a global tender. And as a result of the Ukraine situation, it has been postponed by a few weeks. We kind of hear bits and pieces, and it's not going as per what the original time lines indicated to us. So we are waiting and watching when we get more conclusive numbers and time lines from the client.
But we are very much participating in the process and the process continues. I think the net result of this is probably a 6-month delay in the entire process as we reassess the briefs and the costs for each of the product will need to be reevaluated post the Ukraine situation. So many of the original file numbers have seen a change and that has delayed the process to some extent.
But we are very much bullish to start winning business end of this year and then next year to see a good ramp-up, in the third year additional ramp-up.
So now since it's a staggered ramp-up, have you -- the margins would be also -- how would the margins be on a INR 50 crore base, and say, a potential of INR 300 crores base. How would the margins be -- margins look like on operating level -- EBITDA level?
I think most of this business will come in existing manufacturing plants where we already have a base volume. So this will be all marginal, very accretive business. We expect that the gross margins will be on the lower side of our current plant. However, the volume basis, the net margin will be similar to what we are currently delivering.
Okay. So for normalizing current quarter's EBITDA of around 13%-odd, assuming -- so maybe 15%, 16% is the normalized margin in your business. Is my understanding correct?
Yes. So we have been guiding about 18% to 20% EBITDA levels. I think with the inflation, we are seeing a 10% compression of margin in the near term. And we would be guiding 15% to 16% EBITDA for the full year.
Okay. Okay. And also on the new business also, the tender also, as and how it comes in.
Yes. That is an additional growth lever for us. We are not speculating or putting any time -- specific time lines on that. We are ready from our supply chain side, and as I mentioned, as we pull out inventory, we will have also the working capital readiness for taking up additional business.
Correct. Correct. And sir, on the organic side, since now all the acquisitions are consolidated in the quarterly number, so what would you be guiding -- what will be the core organic growth we will be guiding for FY '23? So we are at INR 450 crores quarterly number now for the March quarter. So any guidance would you like to share?
Typically, the fourth quarter is the strongest quarter. We have seen this INR 450 crores number for this quarter. My guesstimate is that for the full year, if I look at the underlying business at 10% to 11% plus the additional acquired business, we would end up with somewhere around INR 1,800 crores as the revenue line for next year. This is not taking any large ticket -- none of the global MNC or these acquisition businesses also have some big growth potential projects. So we are not taking any of those into this underlying base number.
The addition would be the tender. So if at all, maybe you said H2 '23 will start coming. So around -- and INR 50 crores is the first year. So maybe around INR 20 crores, INR 30 crore revenue could come from there. Correct?
I think INR 1,800 crores is our sort of penciled number for the year. INR 450 quarter is the highest quarter normally, quarter 4 is the higher quarter in the year. So take the normal basis of INR 425-odd crores plus the 10% to 12% growth on that. That's kind of what we are penciling in. It's still very uncertain to aggressively to push, but the supply chain constraints are sort of forcing using us to be selective on where we want to grow.
Correct. Correct.
So we have [ to focus on ] margin growth and not so much top line growth at low margin. We'll focus on the kind of 41% gross margin average and continue to grow.
The next question is from the line of [ Aakash Javeri ] from Perpetual Investment Advisors.
My question is more of this in the sense that currently how is the demand scenario looking in the European market? And how is it looking prewar? And how is it looking currently?
So I think the European scenario, our demand is very robust. We've continued to grow 15% CAGR on our core business last 2 years. We see continued growth there, no market saturation. We are one of the strong players in the mid- and small sector in Southern Europe. And we continue to see very strong traction and growth.
Okay. And how was it looking at prewar? And has the war changed the demand scenario very drastically? Or would that be more or less similar?
So far, we haven't seen any effect of the war on the demand. We are in very stable kind of part of the business, functional and normal home use products. We haven't seen any impact in the Italian or Netherlands markets due to the war. There is obviously a higher inflation. There is energy cost, impact of energy costs and so on and so forth, which will flow in. We will wait and watch. But as of now, there is no impact of the war on a direct demand scenario.
The next question is from the line of Viraj from SiMPL.
First question is you said that incrementally, say, from July onwards, We're looking at reducing the inventory levels. And at the same time, what you're also seeing is and you continue to see supply chain constrained. So is it the demand outlook so weak that this was driving the lower inventory level? Or I mean how should one really understand that?
So we have had -- from September last year, I think the 6, 7 months where supply chain and inflation, both were very difficult. So we've built up inventory to offset part of that supply chain constraints and to also average out the price increase or cost increases on a longer-term basis, aggregate the price increases from our clients in some -- offsetting the cost increase. We have taken that call since last -- third quarter last year and continued in the first quarter of this year, and it will flow into the first quarter of this financial as well. Post which we will normalize the inventory.
So for 9 months, we have now picked up approximately INR 65 crores, INR 70 crores of extra inventory as a base level, which is adding almost 1 month of consumption. And we've now taken a call to reduce that starting July to more normal levels and pull out crores INR 60 crores to INR 70 crores of additional inventory that we have increased post September last year.
Okay. So the reason I asked this is because if you look at the small segments, I think our commentary there has been that we're not kind of participating aggressively. But in terms of inventory, we are still in a very healthy position. So just trying to understand how should one understand?
Aggressive participation question was in terms of the last quarter and last second half of last financial year. We see things -- conditions improving and we will start to be more aggressive in the market in this year, second half, starting second quarter financial.
Okay. Okay. Got it.
This is turning in a way the demand is starting to come back and supply chain normalizing as we speak. It is still uncertain. I don't want to say we have 100% view. This is the assumption. On that basis, we are pulling -- reducing our inventory levels and starting to go to the market in terms of more aggressive pricing and taking this as a cost base.
So the -- on the RM part, just to get the understanding right, there, we are already seeing some correction in key RM prices given our focus on growth and pricing there. And the margins, what you're seeing, gross of around 40%, 41%, is how you're running, right?
Yes. So we are basically -- this is a guesstimate at best. Nobody knows exactly how things will pan out in the next few months, still uncertain. But our base assumption is that the worst of inflation in terms of raw material is already what we have seen to date and things should stabilize from here and not create additional cost of -- additional inflation in terms of raw material for us. And on that basis, we are planning our rest of the year.
Okay. Second question is on the global RFP tender. Now given we have a wide presence in Europe, Asia and India, when you're kind of bidding for these projects, what are the kind of focus markets for us? Is it primary within these 3? Or are we kind of also looking at other markets?
So our strategy for the global RFP continues to be the 3I strategy that we have mentioned in Italy, India and Indonesia and we will focus on these regions as our supply and development targets. Even for the global business, these are the 3 regions where we will focus on our tender.
So even, say, for the European market, is there a flexibility to supply it from India because that's where the [ internalization ] is largely at. And if you look at the CFF, Holland Aromatics, the kind of capacity they have is quite -- would be quite smaller in relation to the requirement the customer would have and there is already a certain steady state of business we had to do from those plants. So when we kind of bid for these projects, is there a flexibility to actually supply from, say, India operations? Is that how you're kind of approaching this or...
One of the reasons to also acquire the Holland Aromatics to have some additional capacity. Between the 2 operators, we are looking at synergies in supply chain and enabling additional capacities to be freed. Part of Holland Aromatics exports can also be diverted to our India manufacturing. So we have now the capacities in play within the group to address the requirements of the large projects.
Okay. But you wouldn't need any further incremental major CapEx to fulfill the...
No. There will be small incremental CapEx, but no major investment for the RFP, which is anticipated.
The next question is from the line of Bharat Sheth from Quest Investment.
Kedar, just first 2 bookkeeping questions. One is on this when you say this EBITDA margin, that factoring, I mean, our contract manufacturing in the Italy business where the margin is very low or that is separately we would like to treat?
So that is a composite. The 15% is composite with the contract manufacturing.
Okay. Great. And second on the...
Longer term, our objective is to reduce the volume value of contract manufacturing and utilize that capacity for our own growth that, I mean, contract manufacturing is a low digit gross margin and our own products have around 45%, 50% gross margin in Europe. So we will not look at revenue line growth, but to look at the gross margin growth.
Okay. And second is on the R&D. I mean this amortization will remain at what level? And any further increase since last 2 years we reduced the R&D spend. So how do one view that?
So on the R&D aspect in the quarter 1, if you are referring to the INR 12.9 crores, which we have taken a onetime hit in our P&L, and we are not -- we are charging it off in our P&L. So that is not anywhere impacting us.
The point which we have mentioned here in our earnings presentation is with respect to amortization of intangibles on acquisitions, so -- which is on CFF, Holland Aromatics. So which is INR 20 crores in this year and that moves to INR 28 crores next year, which is part of depreciation line item.
Okay. Now how -- what -- I mean, when we are looking at much better business opportunity, so again, to -- I mean, apart from encasing our existing pipeline that we built up, so again, how we are adding new product pipeline?
So product pipeline R&D, we are continuing. There are good products, which we have been introducing and pipeline is strong. I think the demand environment needs to stabilize. The situation of continuing inflation is what is driving the growth to existing products and supply chain, focusing on delivering current business in hand. Once we see that the supply chain starts to ease out and we have a steady cost -- I know now the costs are much higher than where they used to be last year. But as long as they remain stable and uncertainty around the future reduces, the growth will come back.
And again, would you like to share something on the demand side on the Fragrance as well as on the Flavours side for each of the geography -- 3, 4 geography we are largely focusing on is Europe, India, Indonesia and Middle East.
So Europe has been continuous -- through the pandemic, we have continued to grow. We see robust demand. There is no change in the environment there.
Middle East, we see a revival as the oil prices have gone up. And post pandemic, there is some level of buzz. And I mean oil prices have a direct bearing on spending power within the Middle East region. So that is helped by the sentiment of current oil prices going up.
India, I think we have seen a mixed situation. There is demand -- there is pent-up demand in per capita demand. But inflation at the lower end, we are also seeing part of the discretionary income being taken up by the inflation of food and basic items. So the expectation is there will be price increase. There will be small volume growth. But if they stability on the costs are there, then second half we will see a very strong growth recovery in the Indian subcontinent.
On the Southeast Asia, we are seeing last 2 years we had a lot of concerns on supply chain due to the pandemic. We are looking at strengthening the business model there with local supply and warehousing and further maybe part manufacturing or repacking in the region to help us quickly respond to the market.
So there, again, the demand is back. We see the post-pandemic scenario playing out in Southeast Asia. Similar in India, which I think with a lag of a couple of quarters, we will see the growth coming back.
On the food side, we are seeing strong robust growth across the region of India, Middle East and all our exports plus domestic. We've seen a 15% growth year-on-year, and we continue to see strong growth. During the pandemic, a couple of years, we have missed out on the growth during the summer. So a lot of the beverage, ice cream segments, sales in these segments are seasonal, so we lost out. This year, we've continued to supply. So we are seeing continuous business on that.
Okay. And this year, you said that we are expecting around 12% kind of growth and plus whatever in this new global business can play out. So how do we see, I mean, say, medium term, your growth aspiration?
We are committed to the 12% growth trajectory we had set out. I think we were very much on track in the last year, first couple of quarters and then we've seen disturbances on pandemic, particularly in the Indian subcontinent. We continue to keep our 12% year-on-year growth target, CAGR growth, as our baseline case.
And are we looking for new geography?
At the moment, no. We are not looking at new geographies. We are committed to our 3I-3C strategy and will continue to invest in the 3 regions, South Europe, India and Indonesia. Having said that, with the part of the global RFP, we need to augment our offerings in China and America and we may set up small kind of not full-fledged things, but some tie-ups with local companies or small setups to prepare ourselves for the future. But investment CapEx point of view, we are not expecting new geography to be added.
[Operator Instructions] The next question is from the line of Dhaval Shah from Svan investment.
Sir, my question is on the long-term wealth creation for the equity shareholders. Like in 2012, Blackstone invested at INR 750 crore valuation, and currently, you are at INR 1,800 crore market cap. So even on our 10-year journey, we are at 10% CAGR in terms of the appreciation of our equity value.
Now with connection to this, on our balance sheet, now we are at the highest debt in the last 10, 12 years. So what is your plan, and we've done a series of acquisitions. So could you just give us a road map in terms of what sort of debt would we like to reduce going forward? What is our focus?
And also, the -- also if you could share a separate presentation on a revenue bridge with regards to what acquisitions have we done? When have we done? What sort of revenue have they added -- profitably have they added? This will help us in understand the company better. Because there are a lot of acquisitions, a lot of subsidiary. And in terms of valuing there are certain high-margin products, low-margin products. Like more information on this entire revenue bridge will also help.
So these are my 2 questions. I would just like to get -- understand management's thought process for equity value creation.
Sure. I think one of the parts, which we've seen throughout the post IPO, at one point we were 0 debt. And when you look at our return on equity, there is a good case for putting some leverage. We've seen very low interest rates, particularly in the European eurozone, which has prompted us to pick up some assets on our longer-term strategy.
As we speak, we're looking at an environment where interest rates are rising and expected to rise further. So we will pull down on our overall debt/equity ratio, and that way, ensure a better return on the equity. That's about debt-to-equity.
So we've had March '20 of 0.3 debt to equity. We've gone up as high as 0.5 for the debt-to-equity ratio in this year and we'll bring it down further as we go ahead as interest rates are tending to go upwards, and we will reduce our overall debt levels.
Could you break up the debt taken for Indian banks, taken from foreign currency, what are the interest rate?
80% of the debt is foreign, currently denominated either in U.S. dollar or euro. Only 20-odd percent of the debt within Indian [ rupee ].
Okay. So what is the repayment schedule?
So many of these are working capital lines. So we have sufficient debt lines to continue kind of evergreen on a yearly basis.
On the term loans, we have not bullet payments. We have a sort of staggered payments. Payments start -- repayment schedule starts this year. So we have a repayment schedule roughly 3 million to 4 million per year on an aggregate basis starting this year.
So assuming FY '23, INR 1,800 crores, 15%, 16% EBITDA margin; we are at INR 260 crores to INR 270 crores EBITDA. Out of this, how much do we plan to channel towards repayment?
So we will have about INR 150 crores of free cash after CapEx and other costs and part of it will go as dividend so approximately INR 30 crores or INR 40 crores as a dividend, an exact number depending on how the inflation scenario we can look at. And about INR 100 crores of debt reduction, whatever is the growth, there will be some INR 10 crores, INR 20 crores of working capital.
So about, I would say, INR 90 crores of debt reduction and INR 40 crores of dividend or distribution, that's sort of a ballpark number. We will have to really look at it as things pan out. Interest rates remaining very low, it may be interesting to keep the debt and pay out to shareholders. Or if interest rate starts going up, we will reduce the debt and we will see how things pan out.
But I think as of now, our assumption is quite optimistic that things will start to grow. We are not anticipating any big shock further to where we are today. And with that, we anticipate some interest rates to go up, we will reduce the debt and pay out the dividend as per our policy.
And given the rupee has been depreciating in the last couple of months, so this -- on this foreign currency loan, what sort of loss do you see due to -- yes, due to translation loss and hedging loss.
Most of this currency is euro-based debt.
We have local currency, yes.
We are not seeing any effect because we have our payment and revenue and profitability also in euros. So it's euro to euro scenario. We are not seeing any big change.
Yes. That is one. And another aspect is we completely hedge our exposure. And so we don't have any exposure positive when it comes to ForEx.
Okay. Okay. So your entire -- so all your principal and interest repayment are -- your European debt are serviced from earnings in euro?
Yes.
Plus there's local currency, yes.
Local currency. All right, sir.
Since we talk about currency, we really, from part of our business where we see options to China supply chain is one of the trends, which we are seeing in terms of our clients and global business. So we need to really look at rather than dollar-rupee or euro-rupee, also the parity and difference between rupee and Chinese yuan and how that currency move. So that's really the net effect of all the hedging. So if we are -- the export realization is better than -- in Chinese currency and as a rupee versus yuan, that is really the arbitrage or benefit for us.
So sir, could you tell us how many currencies are we exposed to in terms of our export revenue and -- yes. So any -- so which currency should we keep a tap on?
So actually, only 2 currencies, euro for the European business. So the debt and business -- entire business is in euro, including debt/equity, everything is in euro, which is about, I would say, 1/3 of our entire business and half of our debt. The balance business is operating either in INR for all the domestic or in U.S. dollars, which, again, from the perspective that we have, exports from India in U.S. dollars, we have imports in U.S. dollars and we are hedging the currency offset we really are neutral on the currency.
Okay, okay, okay. And sir, just one request, if you could share that revenue bridge with regards to how the company has added revenues from our various acquisitions, that will really help us.
Sure. We will circulate a detailed part of it. It will be part of our annual report as well.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you. I hope we have been able to answer your questions satisfactorily. Should you need any further clarification or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call.
Thank you. On behalf of S H Kelkar and Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.