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Time Technoplast Ltd
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Good afternoon, ladies and gentlemen, and welcome to the Time Technoplast Q1 FY '23 Earnings Conference Call hosted by PhillipCapital (India) Private Limited.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikram Suryavanshi, Vice President, PhillipCapital. Thank you, and over to you, sir.
Thank you, Michele. Good evening, and very warm welcome to everyone. Thank you for being on the call of Time Technoplast Limited. We are happy to have the management with us here today for question-and-answer session with the investment community. Management is represented by Mr. Sanjay Kulkarni, Chairman and Independent Director; Mr. Bharat Vageria, Managing Director; Mr. Raghupathy Thyagarajan, Whole Time Director; Mr. Sandip Modi, Senior Vice President, Accounts and Corporate Planning; and Mr. Hemant Soni, Head, Legal and Corporate Affairs.
Before we start with the question-and-answer session, we'll have opening comments from the management. Now I hand over the call to Mr. Bharat Vageria, for their opening comments. Over to you, sir.
Thank you, Vikram, and good afternoon to all of you. I have with me Mr. Raghupathy Thyagarajan, Interim Director; Mr. Sandip Modi, Senior Vice President, Account and Corporate Planning; Mr. Hemant Soni, Vice President, Business and Corporate Affairs. Due to heavy rains, our Chairman and Independent Director, Mr. Sanjaya Kulkarni, could not come physically, and he is not taking the call.
We are here to talk about our results for Q1 FY 2023 and outlook for the rest of the year. We are pleased to inform that company started fiscal 2023 on an incoming mark with a healthy performance, driven by good demand in industrial packaging, robust growth in composite cylinder business. Q1 revenue and PAT are up by 25% and 56% on year-on-year led by higher utilization of capacity. This is despite of global uncertainties and continued inflationary pressures in the key raw materials.
The company continued to receive overwhelming response for the Type IV composite cylinders [indiscernible]. In addition during the quarter, Ned Energy Limited, a subsidiary of Time Technoplast Limited, has signed a Memorandum of Understanding with Tesla Power USA Inc for orders worth INR 100 crores to supply VRLA batteries of the different sizes for applications across the power, solar and UPC, et cetera.
With the strong outlook on Indian pharmaceutical and chemical business, driven by migration of chemical companies out of China, coupled with a good demand for CNG Cascade, we expect to continue a great momentum for the rest of the year. The results are already announced, but I would just talk to some of the key financials and operational highlights.
During the Q1 FY '23 compared to Q1 FY '23, on a consolidated basis, net sale stood at INR 945 crores as against INR 755 crores. EBITDA, INR 124 crores as against INR 101 crores. But PAT is including [indiscernible], that is INR 44 crores as against INR 29 crores. Cash profit INR 86 crores is against INR 68 crores. In terms of the percentage compared to previous year, sales increased by 25%, which is in India 27%, overseas 23%. Margin increased 13%; India 14%, overseas 12%. EBITDA increased by 23% and PAT is increased by 56%.
EBITDA margin, yes, compared to 1 year activity down means we can say EBITDA margin is at 13.1% as against 13.4%. But as you all are aware, in the first Q1 of the FY '23, real inflation in the raw material prices were there, which we have also passed on to the customer, but there is a gap of around 25 to 30 days which effect EBITDA margin. The share of the business established product [indiscernible] products. [ Composite ] products grew by 36% in Q1 FY '23 as compared to Q1 FY '22. While established products grew by 23%, the share of the value added product has been 22% of the total sales in Q1 FY '23 as against 20%. It means it is clearly visible -- the sale of the value added products are increasing in terms of the percentage.
The share of the Indian and overseas business is [ 63% and 37% ], almost same as of the previous year, not much changed. EBITDA margin in India and overseas also in the range of around 13.3% and 12.9%, respectively. Debt, small reduction is there compared to March ending, maybe around INR 26 crores. CapEx plan, as we stated the last time also, the annual CapEx expenditure will normalize in this optimization, reengineering and related to the expansion in normal rate is INR 170 crores to INR 180 crores. But especially, we are watching and as looking at the demand of CNG. We will have more CapEx but time to time, we are going to capture the business in hand. And in the first quarter, CapEx range is INR 49 crores, which includes mainly for regulated products, INR 34 crores and maintenance capacity is INR 15 crores.
Now consolidating and restructuring in overseas businesses, which already we have updated and provided in the results also. The consolidation of our overseas business by the restructuring through the consolidation through the JV, but this investment the majority is still under process at 30 June also, and we'll come to know how the outcome of this in the period ahead.
We are sure as company has projected in the current financial year this entire things will be under consolidation. In addition with that, one also, I would like to tell you, subsequent to consolidation of [indiscernible] in India has also some consideration of the business to optimize the unique collectivity will be also in the agenda, and that also will begin immediately.
So now I would like to open the floor to answer questions. Thank you before hearing.
[Operator Instructions] The first question is from the line Pritesh Chheda from Lucky Investment Managers Limited.
Sir, just a simple calculation between June '19 and June '22, June '19 being a normal quarter and June '22 being a normal quarter. There is hardly any growth in the revenue of the company, despite the fact that you have written in a presentation somewhere that chemical and pharmaceutical sectors are doing well.
So just why is it so in this assessment? Let's say, for the last 5, 6 years, we have been in a static revenue zone. So what is the challenge? Or what is your assessment of this?
Pritesh, now you're talking about the company from June '19 to June '20, right?
June '19 to June '22. June '19 was INR 870 crores revenue and June '20 was INR 950 crores revenue. And if you take from '17, '18, '19,'20, our business has been INR 3,000, INR 3,500 crores only.
Yes. But I think we'll have to make a comparison with EBITDA part also. You see that there is revenue depending on the prices of the imports, okay. Now if as we have mentioned last time also, that now pre-COVID level business has started already. Apart from the last 2 years, our business is coming to pre-COVID level and has actually INR 945 crores compared to previous year, also then a volume growth of 13%.
And as we all know, chemical business has started picking up in India. And definitely, this year, we are also sure and as the business is coming up in each of the sectors. This year we are also expecting at last year pre-COVID level business was around INR 3,600 crores.
So definitely, now we are back to the pre-COVID level but, definitely this year, we'll achieve the revenue around 15% more than the previous year. So definitely, good demand is here. Each of the segments is picking up now. And we have shown this year we will cross more than INR 4,000 crores.
So my second question is the LPG composite cylinder and the composite, the CNG cylinder Cascade. So this business, what was the size of this business in the year gone by, which is FY '22? And what will be the size of the business this year based on whatever orders that you have got and execution of this in mind?
Now as far as LPG is concerned, in the beginning itself, we have told that we had a good order book, has received the order from -- with IOCL. Supply it is going in the first year and second year also will be continued.
And almost 60%, 70% of our CapEx is booked by IOCL. In Q1, yes, later supply was there considering the flood in many of the regions and that is affecting the delivery part also. But as we are also committed to supply almost around 7,000 lakh cylinders of the LPG to the IOCL. Plus, we are supplying to other many countries.
For LPG business, I can say the percentage utilization will also be more than 90% as far as LPG is concerned. CNG concerns -- we also had last year was very small and Q1 last year was hardly -- we did the revenue of INR 6 crores. But current year, this Q1 also will give revenue of around INR 50 crores. But as a component in the whole, if you will see the last year around INR 230 crores. But this year, we are sure it will cross more than INR 230 crores. So definitely, the growth in this composite cylinder will be more than 50%, and even more than 50% in CNG and LPG [indiscernible].
So INR 230 was CNG, for LPG put together, with very nice number from CNG last year and INR 350 this year of CNG and LPG put together, right?
Yes, more than that. If you see the conservative volumes, if you could share in that INR 250 crores, what was the volume of cylinders?
In INR 230 crores, volume of the cylinders last year at 2022, all of the year, it is around [indiscernible] was there and this year, we are projecting because you know that salable capacity in the manufacture intend that cylinder in the present capacity.
So definitely, we'll have more than 90% utilization. Hence, we are considering 90% capacity when we can do the revenue -- maximum revenue, we can do INR 250 crores from our existing investment. But then last time also, I told that whenever the new tenders will come because this business is committed for 2 years.
Now whenever the new tender will come out from the other gas distribution company like [ SPCL -- and the BPCL ], then definitely, we'll talk about detail expansion plans. But currently, yes, we are utilizing existing capacity, to where we can generate the maximum revenue of INR 230 crores to INR 240 crores. And out of that 90%, we are likely there. But especially, I would like to tell you about the CNG part. There, we had done initially slowly, slowly, we are investing. And further, in the last call, I mentioned that my technical director was out of India, and we wanted to do the CapEx one from the CNG cylinder which we're already talking on.
We have already -- expansion plan is finalized. But in any case, taking the delivery time is more continuing 8 to 10 months. So definitely, part expansion will go each year, but full utilization, and I will receive the capital requirement by beginning of the next year. So we'll get some benefit in Q4 of this year, but full value will be captured in 2023, '24 when the entire CapEx money will come.
Now other booking is concerned, we have a good order booking even I'm telling you. Today also, we have order booking of around INR 250 crores with the CNG order demand. And LPG order is also around INR 300 crores we have for 2-year supply. If I could work together, the INR 550 crores order book is there.
Even for CNG part, we have slowed down order booking because then I don't have a supply capacity, I don't want to increase unnecessarily the order book at the present because too much volatility in the prices, so we thought at the right time, we will then have a visibility of receiving of the plant, then we will do the booking of the CNG.
Sir, what is the total volume of LPG plus CNG this year? FY '23?
Yes. FY 2022, '23, we are estimating work together. As I mentioned to you, INR 350 crores of [indiscernible] products.
Volume, volume.
Volume. I'm considering [ 950,000 ] LPG cylinders and cascades. I'm considering around 225 cascades.
Okay. 225 cascades. So basically, 1 million LPG cylinder capacity will run at 90% capacity.
More than 90 capacity, yes.
And how much Cascade capacity do we have?
In fact that Cascade capacity has increased already in this quarter, has increased.
By what number,sir?
I have increased. It's a different lines are there last time, the other [ 4 ] lines. We have now installed pipeline, 6th line working. But 1 line, I can do around [ 5 to 6 ] cascades in a month. So 4 lines, I'm gaining around 20 cascades. So all utilizing full capacity running. Now 6th line will start at the end of this month. So I can say 6 months, I'll have the capacity and will be able to do around 25 cascades in a month.
The next question is from the line of [ Rishi Ranjan ], an Individual Investor. Mr. Ranjan, we cannot hear you.
As the participant has left the queue, we move on to the next question, which is from the line of [ Karan Gupta from CAVI ] Capital.
I appreciate the opportunity. Sir, you mentioned about year-to-year growth in revenues and EBITDA, but if I just look at the quarter-over-quarter number, so comparing quarter 4 of FY '22 to quarter 1 of FY '23, it looks like there's a slight growth. I understand there might be a little seasonality, but can you just talk about the numbers on a quarter-over-quarter basis, please?
What you want to understand about quarter 1 of the previous year or quarter 1 of this year, right?
No, comparing quarter 4 of the previous year to quarter 1 of this year.
Okay. No, quarter 1 of the previous year and quarter 1 of this year currently are right. If you see -- because you know that always, I just would like to expand our business trend in the last 15 or 20 years. In each of the years, you will find first quarter we do normal business of 22% or 22% of the overall revenue.
Then the second quarter, it is around 25% of the overall revenue. Third quarter, we get around 27% of the total revenue, and mostly 30% we get always in the Q4, because in India, our company has a financial year and everybody has a target, every company has a target, every contract has a target, government has a target.
So always you can see. So we see never miss Q4 is the highest, there we do 30% of the business. So Q4 to -- if you can see the Q1, definitely, they will be down by 20% business quarterly because in the Q4, we have a [ INR 1,040 crores ] business as even we achieved [ INR 950 crores ]. The EBITDA level is down compared to last -- same Q4 to Q1 of this year will be [ 11% ]. Property is down by 21% and net working capital, after everything is down by 20%.
But then this data, Q4 to Q1 is not comparable always. You'll be seeing that Q1 to Q1 of the previous year. Then we will go to the Q4, definitely, we will have a growth over this Q4 of FY '22 to FY '23, because there is a lot of potential and good opportunity for the CNG business, where the capacity already expanded now. And further companies are planned to be expansion mode CNG, LPG also full order book is there as far as [ LPG ] is concerned.
So I have given you a comparison of Q4 to last year Q4 to this Q1.
So next question I actually wanted you to discuss a little bit. I know you've made disclosures regarding the organization of the international business. So I just wanted to get an understanding of why the company is doing this at this point? Why the change in strategy that historically, you've expanded significantly overseas and put up a lot of CapEx?
So why this decision to consolidate those holdings and focus more on India at the present time?
It's a good question you asked. It's the same question we also discussed deliberately in our Board meeting also. In our business, which is almost 30% to 33% revenue from overseas but where our EBITDA margins are in the range of around 13%.
But the business we are talking now is the right time for consolidation, why? Because in India, there are too much [indiscernible] available from the composite products, which we have seen in the last 2 years' time. And in fact, this 2-years' time, we thought why not to increase the return of our investor, return the good benefit to the all value investors, including promoters also.
So far, it is to be because in value added products, these composite products comes under the value added products where the EBITDA margin went from 18% to 22%, average we can get 20%. So what we are doing is to increase the ROCE to have a good opportunity available in India and to capture the demand which is already there.
And there's a big investment is also required, investment I'm talking in LPG and CNG put together, that works out to more than INR 200 crores. So company is replacing the business from 13% EBITDA level to 18% EBITDA level. In addition to that, there will be a substitution benefit in reducing the working of the cycle time also. The regulated products were working at the cycle time between the range of I can say 65 to 70 days, but in the other product cycle there is more than 100 days. These are the main objectives, means we are very clear with current ROCE, which is in the range of 13%. In the next 3 years' time, it should reach to around 19%, above 19% or maybe around 20%.
Okay. Do you have any projections of what your CapEx...
That normally you have seen, I can say that in these deals, CapEx, normal CapEx is in the range of INR 150 crores to INR 180 crores which includes the normal maintenance, automation, reengineering of existing products to maintain the capacity, changing the moves, changes the machine, that's all out there.
But for the [indiscernible] product, where we would like, for example, I'm just giving you the composite product, which currently we are doing in the range of around INR 250 crores to INR 260 crores. We are targeting in the next 3 years' time this business to reach to the INR 1,000 crores business. And that is possible very quickly because order bookings, we have good demand is there.
We have required to do investments that are around INR 250 crores in composites. But that will be done on completion of the [ system ], yes, we are committed. We have already ordered the plant and equipment, project is already finalized. And we -- but we thought because this equipment is also good delivery time, they take around 8 to 10 months' time in delivery.
Sorry, sir. I understand where you're coming from. What I was trying to understand was or get a better sense of was if you're saying you're going to be spending INR 150 crores to INR 180 crores over the next 3 years in CapEx, that's about INR 450 crores to INR 500 crores. Now is that going to be funded through internal accruals? How much of that is going to come from the reorganization, where I'm assuming we'll be raising some capital by offloading stakes in your overseas subsidiaries and plants. So can you just tell us what the source of all this funding is going to be?
So in fact, you go through the regulation which is approved by the Board of Directors and Shareholders. This investment process, for example, received by [indiscernible], okay, because we [ size the valuations ] are going to be. That all will be decided by our advisers -- we have already given the name, JP Morgan India and [ Ernst & Young ] are adviser for this decision and process.
And there, we will also continue as a management. The majority stock will go to the strategic initial investor, but management team will continue. Management will also be continued and the same management will continue. But our objective, as I mentioned to you -- but whatever consideration we will receive, that will be used for the almost 50% to 60% we will use for the reduction of the debt. Then the expansion which I mentioned to you, around INR 250 crores, we are planning for expansion in the composite products.
And balance, definitely something balance definitely for the value of an investor, including the promoters all will get some kind of benefit, whatever JP Morgan approves, maybe that is special dividend, maybe buy back of the shares by company, that will be then decided on financials of this company's business. And once we have also clarified, this entire process will be completed in the current financial year only.
Right. No, I understand that those are disclosures that you've already made. The sense I was trying to get was like just around numbers, I understand you've given the mandate to JP Morgan and...
But the we don't know the numbers from kind of the...
No, but you must have some internal -- going into such a large reorganization, I'm sure you must have a sense of some of -- some expectation as to the kind of capital that you might be able to raise. For example, your debt was these unsecured loans, I'm looking at is about INR 250 crores as of March. So if you're assuming you'll pay those back, you'll be able to fund 50% to 60% of this INR 500 crores of CapEx. So along those lines, you must have some kind of internal working like you might be able to share with us?
No. But one thing I'm telling you, as we have said from time of the consolidation, [indiscernible] with the potential [indiscernible], so we can't give them. But you know very well in a direct way. While you know the current valuation of the company, what company values together. If you will get some time over and over premium and better objectives you see in the previous year, we are targeting to increase ROCE by 20%, and that is possible by expansion in the value added products.
And I'm also -- on another comment on your point only. If I will wait for 3 years -- and I can very well mind justify the [indiscernible] and everything. If we do not do the investment but then my expansion product will take some time. At that time, I can say we can meet out that bus. But we'd like to capture the growth of the CNG. There's a very, very huge potential in India, but not only CNG, again, on the [indiscernible]. We have equipment which we are talking for applications of CNG as well as we will do the cash up to the testing process for the hydrogen cylinder also, which have a very large potential. You can say after 3 years, India will have a very good market for hydrogen cylinder.
So equipment which we are collecting is a combination of mainly for CNG, but some kind of a testing system approving size. We are considering equipment for high-volume equipment also. So for that, we are in fact -- therefore, we are doing the disinvestment, consolidation of operation. Further, see my remarks.
In India, also we are consolidating some of the product line. You have seen in the last 2 years' time. We have consolidated [indiscernible], we have put item for held under sales almost INR 50 crores [indiscernible] we have mentioned that we can undersell, which have been identified. In addition to that consolidation of the operation because now we're able to optimize margin. Capacity utilization will help the consolidation process as it continues on. So we have first initiative that we have taken for conservation of the overseas business. Yes, in the previous 2 years [ ahead ], India also we will do some consolidations of product mix.
So that is very -- it is very encouraging because from an analyst perspective, what we've seen in the past, obviously, the company is very innovative. We have an excellent R&D team. You've come up with very innovative products.
It's just manufacturing and sale of these products entails a lot of CapEx in that and the capital kind of gets locked. So there has been no -- that's why over the years, at least my understanding is that's why the return on those capital -- on that capital has been relatively weak.
So it is very encouraging what you are saying, and we hope we're able to achieve everything that you set out for. So thank you. I really appreciate the opportunity again. But 1 quick data keeping point. On Page 8 of your presentation, where you've given the volume growth.
For value-added products, the subtotal is 22.9% year-over-year volume growth. I couldn't follow that calculation. So either now or off-line, if somebody could just help me out with how that number was derived at.
Yes. I mean provided I think what we can do if the figures are available with our material on May 15. And you can make a call after that, you can get to one of [indiscernible], no problem. We want you to understand the calculation.
The next question is from the line of [ Agash ] From HDFC Mutual Fund.
A couple of queries over here. See, I understand the potential for the CNG business is quite large. And the CNG capital business should do well because India is going back to the decentralized approach that either this [ contenders ] program, wherein instead of the pipeline, more of Cascade users will come in. Have you calculated the potential also -- what is the potential for the CNG Cascade business for you over 3, 4 years when they roll out these 5,000-odd pumps and the [indiscernible] -- and who are the competitors for you?
Well, we have made a very detailed assessment of the potential that exists for the CNG pipeline by itself. Going by the fact that when the CNG rollout was carried out by the government, the number of pumps, which are available across retail units that are barely about 1,500 only. And then the government has started engaging in terms of expansion.
The planning store on a couple of occasions have made a confirmation and a commitment that they would want the number of retail outlets on CNG to extend -- to expand from 1,500 to 10,000 retail outlets in another 4 to 8 years. That is the kind of time line that we talked about.
If you look at the fact that when we talk about these kind of expansion, this is the number of units that are linked to this CNG ecosystem is fairly large. And one of the best ways to move the CNG gases through the cylinder, et cetera. Traditionally, they've been using [indiscernible] or steel cylinders that has been in use. But with the new technological advancements that have come up, the [ composite ]cylinders have proven time and again that they are much more economical and safer as well to use them in the place of steel, et cetera.
And the last one year operation, we've been able to prove this point many times over. If you look at the projections that we are making in terms of the CNG Cascade by itself, in a span of about 8 years or so, even if I take a barrier conversion rate of about 50% or so, we are estimating that the yearly business will be somewhere in the range of INR 700 crores to INR 800 crores in CNG cascades.
And INR 700 crores to INR 800 crores for the entire industry.
In addition to this, there are lots of other applications for which these cylinders also goes for. For example, you would -- these can be used for modules, as we call it as mobile retailing unit. Not everybody would -- can have an access to go to the retail outlets because some of the rural areas, et cetera, wherever you would want the CNG to be dispensed, what the government is planning to do it, they will put CNG in a cascade.
And then it will be serving as a mobile retail unit so that you can drive out to that unit, to the cascade unit and then fill it up, and then after it gets into the vehicle will move away and come back with the resale, et cetera. So that kind of additional business will also be there, which has also been predicted to be anywhere between INR 150 crores to INR 200 crores. Government is also investing into biogas that is also a form of CNG. In fact, compared to biogas, wherein some of the leading companies have also made commitments for investing into this system.
And there, again, looking at the potential that we expect in business in the region of about INR 400 crores or so. So there are a couple of more -- I have not even touched upon the fact that the users of cylinders for automotive requirements because -- at the end of the day, each vehicle, whether it is a bus, car or a lorry, they will need to allow these cylinders be fitted to the vehicles, which I've not even touched upon to address is the comment that by itself, this is going to be fairly large.
But then as I was mentioning it, we are extremely buoyant looking at the potential and the support that we have received from the industry. With the current order booking, it's a very clear confirmation as to which way the industry is supporting.
In addition to this, the next question you asked was in regard to the competition. Going by the government policy to make in India, [indiscernible], we have been able to successfully develop the technology here and roll out the manufacturing process. There are about 3 or 4 people, companies who are engaged in the cascade business, of type 3 and 4, which are the [ light ] of adoption. But currently, they are all imported from different countries and assembled here in India fulfilling the requirement of local [indiscernible], we are in that -- the position, I would say, as being the only supplier for sure.
Okay. One more question, sir. If you see your [ insurance ] part, you are doing something in the energy storage devices business. And I think these are the storage facilities for the [ iron ] buckets for the [ ESS ] applications, right?
Yes.
Okay. Then why not expand the business to the automotive part because there will be requirement for battery covers or for holding these things because you already deal with several auto companies essentially. So is there a thought process to get into the -- actually the business also as it's the same. Essentially, it is a static way of storing these things.
We are working on the leading battery side of the potential as well. As you know that we have a fully owned subsidiary battery in the name of Ned Energy, who have been in the business for batteries, for lead-acid batteries, et cetera. There, we have rolled out the development of [ Liga and ] batteries, which will be used for EV, electric vehicle. And we've been focusing on the latest technology that is available in terms of the [ cell ] technology.
And we are with the programming that is possible to have a thermal control also on these batteries that will be assembled there. We are in discussions with a couple of 3-wheeler companies to carry out the initial trials that they are already in progress. So we are also addressing that opportunity for sure.
Your next question is from the line of [ Ganesh ], an Individual Investor.
Okay. So we have been talking about the EBITDA range for our value-added products in the range of 18% to 22%. So what is stopping us from realizing that?
What is stopping us from realizing in certain EBITDA range? Because I see the EBITDA for value-added products in the last year target for this is down. So it's been in the range of 17% to 18%, fine.
But our aspirational range seems to be 18% to 22%, right? So I just want to understand what is tapping us from realizing that aspirational range?
Yes, you know that you know regulated products are the items covered in the regulated products. That is all composite products, MOX Film, then IBC. The few products are covered under the [indiscernible].
[indiscernible] to say the value-added products were EBITDA margin in the range of 18% to 22%, the average is 20%. At certain times, there may be the temporary price inflationary was there -- so maybe 1% or 2% here or there. But certainly, when we do the price looking in order booking, we consider that the EBITDA margin should be in the range of 18% to 20%. So average margin, you have seen 14% EBITDA level, which we are also targeting, considering stable existing products, we have a margin in the range of 11.5% to 13%, which include all established products. There's the packaging and some automotive-related products but all covered under the established products. [indiscernible] in the period is going to be improved further as the value-added percentage business is going to be increased.
Got it. Got it. Just 1 more question -- so in an earlier call, we understood that our LPG cylinder underlying capacity is [ 1.2 million ] cylinders per year. But because the [indiscernible] cylinders are [indiscernible], the actual capacity is 1 million cylinders. With our current order book, the cylinder tenders must be [indiscernible], right? If I were [indiscernible]and us. So with the same or similar [indiscernible], will we be able to get the 1.4 million cylinders per year capacity because the [indiscernible]?
In fact, the current capacity that we have been invested almost about 5 years, 5 to 6 years ago. And then actually, that was the equipment that was running in Europe, which we acquired.
Now when we are looking at expansion, obviously, lots of technologies have also changed in the meantime. The productivity has also gone up. There are faster machines that are available. Obviously, the kind of investment we -- even if we maintain it, we will have definitely a better capacity for sure.
Okay. So will it be even more efficient when we consider the multiple cylinder prices? Or if you [indiscernible]
Yes, of course. there will be a certain amount of consolidation that will have taken place. In the last 4 or 5 years, we've been able to understand as to which sizes are running and the sizes have a lower volume, et cetera.
So we adapt the next line of expansion based upon the fact that we need to run more of this size and such and such a size and set the type of capacity. So obviously, we will be more -- we will be in a position to have better output for sure.
The next question is from the line of Mahendra Jain from Way2Wealth.
[indiscernible] opportunities. Can you [indiscernible] this new path, how we are going to achieve like the demerger of [indiscernible] would be just for something like that or what kind of this industry and like reading from your stories, is there any clarity about?
Since I -- no, we'll be able to give you more clarity, I can say, in the next con call, definitely more clarity will be there. Because if battery strategy or [indiscernible] made with the adviser part. And I will in a period, we will definitely market, will update about the disinvestment process. Still I can say only on one thing. [indiscernible] under discussion, and we'll update you as the data will be available with me.
What about the slate share, like [indiscernible].
Yes. I had mentioned that this will be released shortly. That matter is already doing its process by the potential buyers, which I said in my communication is going. But I think regarding that, we will know in the next short time, maybe 30 to 45 days, we will learn very slowly. My internal target is also between the [indiscernible] the internal target, I am keeping it.
Sir, second question is about the raw material prices situation. So how we are like looking at the future like volatility and other things. How much we are comfortable right now in that situation?
So on the [indiscernible], you're right. You know that because we are also aware in the market and you are also in the market that how the polymer prices or oil prices have maintained in the last 6 months, including the foreign exchange also. But as we have seen in the last cycle, 20 to 25 bps, prices are coming on a reasonable level, I can say, which was in October, November, December 2022, not '21. So price is coming normalizing because demand supply is also increasing.
Initially in the month of I can say November to March, there are too many plants around the major shutdown in India and overseas. So now I think polymer prices as you have many people, as many research teams are projecting, oil prices in the range of maybe around $90 to $100, not merely $120. Similarly, in volume or prices, we are also starting a range, I can say around $1,150 to $1,300, but not $1,600 or $1,500. A reasonable price in whatever previous year average was the price should come back in the next 3 months' time.
Thank you. The next question is from the line of [ Hiten Boricha [ from Joindre Capital.
I have only 1 question related to the CapEx. So you mentioned our current composite sale capacity is running at 90% capacity utilization, right? So just wanted to understand what will be a capacity post the expansion of the composite cylinder, it's currently 1 million cylinder, right?
Yes, I recall in my communication earlier which was sent to [ BSE ]and where I had mentioned that we do the expansion secondly for half a million cylinders where we will need around INR 80 crores to INR 85 crores, but certainly that visibility currently is not there. We will see after 3 months' time when the new business or new tenders will come out by the government for this company.
But currently, as you heard when the previous person was asked about the capacity, as we have a 1 million cylinder capacity but currently utilization, seldom will we get 1 million cylinders for the recent 5 years. Pricing, that clear visibility about the LPG expansion, we will know after the 3 to 4 months' time only. Otherwise, small modification, automation, maintenance, the CapEx will be done as which already covered under expansion CapEx plan of INR 130 crores.
Okay. So sir, I am referring to this PPT, Slide #10, where you mentioned the company tends to add 1 million cylinders in next 12 months. So This is additional from current 1 million, right?
Yes, yes, 18 months prior to 3 months, we had given that. In next 12 to 18 months' time, we'll have a CapEx program for LPG cylinder for addition of maybe up to 1 million cylinder. But that is not taken in the range. Expansion brand is there, subject to how the capitalization and how the demand is coming.
Okay. Okay. So this is not yet confirmed, right?
No, not confirmed only. As I mentioned previously also CNG expansion program, yes, because order booking, it can be INR 250 crores as on debt. The CNG expansion plan is already annualized, and that we are going ahead.
So what is the current capacity of CNG cylinder and...
Basically, as I mentioned to you, where we can do because of around the current capacity is what we have facilities in the manufacturing. We can mention -- we have mentioned the 250 cascades in a year we can do that. In terms of the value, as mentioned, around INR 150 crores, we can do. But then the order booking itself is INR 250 crores result date. And to take the fresh order, we have -- execution of fresh order, we have identified CapEx plan and -- but that -- in any, it is going to be arrived in the next 8 to 9 months' time.
So twin capacity utilization, and we are projecting I tell you, current business of 2022, we did business at around INR 250 crores, so this we did. But this year, definitely, we have projecting more than INR 350 crores for composite products including the CNG and LPG.
Okay, okay. So we are expanding in CNG cascade business.
Yes, CNG are funding because more order book is there and more demand is coming up.
Okay. And what are we spending on this?
In fact I can't identify a few months where we are going to do investment. But first of all, that investment committed and -- but that's the investment we are doing around INR 125 crores, we are doing it.
And this will be starting from next year?
INR 400 crores with investment.
Sorry, can you repeat it, sir?
Well, we are investing INR 125 crores for the CNG CapEx, and we will be able to generate revenue of around more than INR 400 crores.
Okay, okay. And this capacity will be coming next year in FY '22.
Yes, yes. Full utilization will come next year only. Second half, right? Next year, it will come through. I think we will be able to get it.
The next question is from the line of [ Shashi Ranjan ], an Individual Investor.
Good afternoon. Thank you for the opportunity. Congratulations for the good order book, sir, that you have at present. The question that I have is that what measures are we taking to control the rising raw material prices and passing it on to our customers?
That kind of the product, our products are mostly 92% B2B product and is [indiscernible] and everybody knows the volume and prices. And you can see the last, I can say, 10-, 15-year trend: whenever price increases here, we pass on to the customer; price decrease also be passed on the book the way the understanding is there.
And most of the customers, I can tell you, around 50% customer, we do the business of monthly pricing every month, we will pass on with them at the time, because -- but every month when the supplier changes prices all the time, but we change one time only.
So we pass on with the gap of 15 to 20 days. But some customers, we do business on quarterly business, almost 40% business we are doing with the quarterly business with customers. There also we do the pricing transfer.
So only 8% consumer product is there, where they can play with the scheme. If prices are down, we increase the schemes, free scheme, and when the prices are up, we bring down the scheme.
So therefore, you have seen our EBITDA, they will also accept in [indiscernible] figures where the EBITDA was [ 10% ]. Otherwise, our EBITDA range is in the range of 13% to 15.5%, is our margin range for EBITDA. So we're able to pass on. There is no doubt because price and another thing, we have seen the price increase in the last 12 months, average price increase has been given because almost 70% is the raw material costs -- so we can't sustain the rate if we don't pass on the increase to the customer.
Great -- just a clarification on that. Can you just divide the revenue on which we divide -- on which we hiked the prices on a quarterly basis versus monthly basis?
As I mentioned to you, almost my 50% customer we do business on monthly basis, 50% of the customer. And 40% customer maybe revenue-wise, will do the markup. But normally, such a way, I can say almost 70% because where we pass on benefit to immediately with the customer.
That answers my question. Now can I squeeze 1 more that's on competition part? How you're going to address the competition from companies like the supreme industries who managed to grab order book of almost double of what they can produce than a company like Indoruss Synergy, who has started supplying cascades to [ Adamigas Maneggas ] Limited Energy of -- from Gujarat. And if [indiscernible] developers, they have also managed to grab the market, I mean [ SLB ] product. So what -- how they're going to handle the competition there, is it sufficient to have a business where all the competitors we have right now?
Especially desirable that we have some competition. It allows us to get some benchmark, number one. Number two, as you would understand the profile of the buyers in the Composite segment are mostly in the government-based organization, who rarely would be in a position to qualify any tender if there are not more than 1 bidder.
So though we are the company who have manufacturing capabilities locally. But at the same time, it is necessary for other options who would be probably a part of the bidding process by itself. So if they are like we mentioned, are able to import the cylinders and assemble them, they would also be in a position to help the process of tendering, of course at gross advantages. And there are a couple of policies the government has rolled out, which makes the local bidder to be much, much more favorable as well.
Again, there are companies in the LPG segment we have, I would put it, it's more like a race where we are far, far ahead in terms of the competition, in terms of our reach, in terms of our segmentation, in terms of our product range. We are there, probably globally, we have the largest product range that we have in terms of the sizes also.
So any requirement that comes up even on the LPG segment, we are in a position that we are constantly innovating and improving our technology and the product scale, et cetera. So if there are competition, they are always welcome. There are nothing to really get worried. In fact, we welcome them so that we are able to allow the customer to have the confidence that here is a business where he doesn't have to really depend on one single source and that also sometimes can be a little hidden as well. But then we continue to delight the customers as we normally would like to put it very humbly, and the customers are taking very care of when problems come.
That is just to understand that competition part a bit better? For instance, I'll quote also Supreme Industries who won bidding from IOCL and the price they quoted was [ INR 2,312 rupees per NPD ] cylinder or more than 7.25 lakh [indiscernible] of [ 10-K ] category, although when they won this, their production capacity was only 5 lakh units.
And are we lagging somewhere? Because a company with a production capacity of 5 lakh has managed to grab a piece of orders, which is more than INR 7.25 lakh. And how did we fail against the team industry over there? As the price being quoted by Supreme Industries, which I calculated roughly was 2,312 so they participated in that IOCL tender and was Supreme Industries ahead of us when it comes to grabbing the order?
Well, it's -- the answer lies in the question that you asked. When you don't have the capacity and you bid for a higher capacity, obviously, you know as to what the result will be, right? And I don't want to say more than that.
But with us, we are very realistic in terms of how we are able to create our order booking. We already have a good percentage of our business being catered to my customers who are placed overseas. And giving preference to the local requirement that comes up with the IOCL requirements that has also come up where we are now fully booked in capacity where I would put a 90% share of the business is there.
So I would not say if party B was not there, whether I would have gotten those additional orders. When I don't have the capacity, that's the situation. So if more and more customers do get to competitors this year, then the next year, we'll probably have multiple number of customers adding, doubling that. So it always helps in the growth of the market. It is never desirable to have just one player operating in this segment. Or for the matter, any segment.
How the investment holding [ PTE ] is going to help us? Can you shed some light on this, the recently footed subsidiary?
Yes. Yes. I mean you are talking about the subsidiary company was formed in the [indiscernible]. There's [indiscernible] Thailand, Malaysia, [indiscernible] because companies under that one group. So then we are doing the recent business, some kind of the area was [indiscernible].
Therefore, this company has been found, so that [indiscernible] investors whenever will come and put the money in that company, then we start for some [indiscernible] also own some partial [indiscernible]. So there is one kind of the [indiscernible] towards the, I can say, consolidation of the overseas operation, which we are already talking, right? Hello?
We'll move on to the next question, which is from the line of [ Harsh Bedia ] , an Individual Investor.
Okay, perfect. I have a question about your CNG cascade business. What is -- you had mentioned that you are putting up a new line, which will come on stream in 6 to 8 months. What is the cost to put up a new line in this division?
Yes, [indiscernible]. I have mentioned that we are going to invest around INR 130 crores for the line, this is a fully automated line. And their book around INR 200 crores, right?
Perfect. Yes, that helps. Sorry, I missed it out. My -- another question was on your business development plan for CNG on both vehicles. Is there any update in terms of OEM authorization regarding this?
Right now, with the capacity being utilized for the specific type of demand that has been already generated, we have been working with -- for the development of the auto cylinders as well. That's also a very large segment of demand. The new expansion that is being planned takes care of some of those requirements where a little different manufacturing capabilities are also required.
So all of these things are being lined up. So when we roll out the next phase of expansion in the coming year or so, we will be in a position to have that trust as well.
Okay. And do we have a priority like are we -- will we target more towards commercial vehicle OEMs or passenger car OEMs? Or are we trying to do business development across the sector?
Of course, not to forget the fact that the passenger vehicle would be the cream of the lot, there will be a large demand and they will have the better paying capability as well. So that is also the range of focus.
Commercial vehicle will also be there to take care of the fact that they will take advantage of the lower cost of fuel [ extenders ] when it comes to CNG. The normal is putting a lot of trust in terms of being able to get to use cleaner fuel as well. There are many such obligations where it will come in through.
And we are very, very confident going by the fact that -- some of these acquisitions have already found acceptance in overseas. We are also able to confidently foresee that we will have a similar and better experience with them.
That provides a lot of context, thanks for clarifying that. My last question was, is it possible for you guys to share like the gross margin breakup for CNG cascades and LPG cylinders, like what are the gross margins which you are making on these products?
Well, I wouldn't want to give you a breakup on that because they are pretty confidential in nature as people in the earlier calls have also confirmed. There are enough here available to take care of some of these additional information. But then when we meet one-on-one, we'll be in a position to share the top line. That's not a problem.
This is the last question.
This is the last question, because we have another conference call.
Yes, I am announcing now. As that was the last question for today, I would now like to hand the conference over to the management for closing comments.
Yes. Thank you very much to all my audience. And we definitely had a good period to guide. And whatever time we have taken and definitely the right time will come now as the [indiscernible]. And definitely, as we have promised, we have given the guidance of more than 15% growth in the previous guide, and the same team will be improving the performance and the [ net order ] margins also. Thank you very much to all [indiscernible].
Thank you. On behalf of PhillipCapital (India) Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.