Time Technoplast Ltd

NSE:TIMETECHNO

Earnings Call Analysis

Strong growth and outlook for Time Technoplast in FY '25

In Q2 FY '25, Time Technoplast reported a 15% revenue increase to INR 1,372 crores, alongside a significant 40% boost in profit after tax, reaching INR 98 crores. The company achieved 16% volume growth, driven by robust demand in Industrial Packaging and CNG composite products. For H1 FY '25, total revenue rose to INR 2,602 crores, with EBITDA margin improvement to 41.3%. Looking ahead, management projects continued growth of around 15% for FY '25, targeting expansion of value-added products to 35% of sales in three years, supported by a capital expenditure of INR 200 crores.

Overview of Financial Performance

In the recently concluded quarter, Time Technoplast has reported strong financial results, showcasing a 15% increase in net sales which reached INR 1,372 crores compared to INR 1,195 crores in the same period last year. The profit after tax also demonstrated an impressive year-on-year growth of 40%, amounting to INR 98 crores. This uptick in profitability can be attributed to optimized capacity utilization and reduced costs in financing and depreciation.

Segment Performance and Growth Drivers

The company has experienced a notable 36% surge in their CNG composite cylinders segment, driven by robust demand. This is complemented by steady performance in their core industrial packaging business, signaling a well-rounded growth trajectory across their business segments. Volume growth of 16% in India and 18% overseas aligns well with the overall positive outlook for both domestic and international markets. The CEO emphasized confidence in achieving a 15% growth rate for the remainder of FY2025.

Focus on Value-Added Products

Time Technoplast is strategically enhancing its portfolio by increasing the share of value-added products, which grew by 21% in the first half of FY2025. The management has set a target to increase the share of revenue from these products to 35% within the next two to three years, which should enhance overall margins as these high-value items offer better profitability.

CapEx Plans and Future Investments

The company had a Capital Expenditure (CapEx) plan for FY2025 in the range of INR 175 crores to INR 200 crores, with about INR 95 crores already incurred in the first half. Plans include regular maintenance and expansion, particularly for value-added products. The management indicated that approximately 50% of this CapEx would be directed toward enhancing capacity for these products, which are anticipated to yield higher returns on investment.

Debt Management and Financial Health

The company is focusing on reducing its debt, having lowered it by INR 52 crores in the first half of FY2025. They aim to become debt-free by March 2026, which could lead to improved financial metrics and lower interest expenses. With net cash from operating activities rising and achieving INR 238 crores in the first half, the company is on a robust financial footing.

Market Position and Competitive Edge

Time Technoplast continues to maintain a resilient market position with a balanced localization strategy across different regions. They derive 65% of their revenue from the domestic market and 35% from overseas markets, such as the MENA region and the USA. The leadership expects sustained growth, particularly in the CNG domain, where the potential market size could reach INR 2,200 crores in the next three years. The company's strategy to not pursue the sale of its UAE operations is indicative of its commitment to long-term growth in this region.

Future Outlook and Guidance

Looking ahead, Time Technoplast is projecting 15% overall business growth for FY2025, bolstered by their CNG composite cylinders and value-added products. The management is confident that their focus on automation, cost reduction, and diversification into new product lines such as hydrogen cylinders and composite fire extinguishers will unlock further growth potential. The market dynamics, including increasing demand for eco-friendly gas distribution solutions, positions the company well for the future.

Earnings Call Transcript 2025-Q2

[Operator]

Good evening to one and all present here with us. We welcome you to the Time Technoplast Q2 and H1 FY '25 Earnings Conference Call hosted by Kaviraj Private Limited. This conference may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantee 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. Abhijeet Mukesh Purohit from Kaviraj Securities Private Limited. Thank you, and over to you, sir.

[Abhijeet Purohit, analyst]

Thank you. Good evening, ladies and gentlemen. Kaviraj Securities Private Limited, welcomes you all for Q2 and H1 FY '25 Earnings Conference Call of Time Technoplast Limited.

Today on the call, we have with us the management team, which is represented by Mr. Bharat Kumar Vageria, Managing Director; Mr. Raghupathy Thyagarajan, Whole-Time Director; Mr. Sandip Modi, Senior VP, Accounts and Corporate Planning; and Mr. Hemant Soni, VP, Legal and Corporate Affairs.

Now without any further delays, I hand over the call to Mr. Bharat Vageria for his opening remarks, post which we will open the floor for Q&A session. Thank you, and over to you, sir.

[Bharat Vageria, executive]

Yes. Good afternoon to all the participants and my colleagues, and thank you, Mr. Vijit for the introduction to management. It's our pleasure to convened today the present and discuss the results for Q2 and H1 FY 2025 as well as to provide our outlook for the remainder of the fiscal year FY '25.

We are pleased to report continued strengthened over Q2 FY '25 with a year-on-year growth of 17% in volume and corresponding 15% in the revenue. There is a difference of 2% because of the prices seen in the downward trend. And as the company policy to [indiscernible] the prices to the customer. This performance has been [indiscernible] underpinned by robust demand in our Industrial Packaging segment alongside an exceptional 36% serge in our CNG composite [indiscernible] business. Additionally, our profit after tax for the Q2 has demonstrated an impressive year-on-year increase of 40%. And I remember the similar looking one in the Q1 also, reflecting the benefit of optimized capacity utilizations as well as the reduction in the finance and the depreciation costs.

The demand for Type 4 composite cylinders for CNG cascade remained particularly strong with our current order book is standing at approximately INR 185 crores. This momentum is complemented by substantial growth in the sale of our value-added products, including composite cylinder for both LPG and CNG. While our core Industrial Packaging business continued to perform with stability. Given this [indiscernible] trends and the solid foundations we have established across our key businesses segments, we remain confident in our prospect for the remainder of the year. As in the beginning itself, we have stated, will grow around the 15%, and that's [indiscernible] will continue.

Despite of -- we all are aware that there was a challenges quarter this year, especially because when seasons were increased substantially. And last in the month of October also, rain was there. But looking to that, I think remaining 5 months looks very good as far as India part is concerned.

With that, I would like to turn over the attention to the detailed financial and operational highlights, which have been communicated before in our results. Let us take a moment to review the key take aways together.

During Q2 FY '25, I will provide you the Q2 FY '24 figure also on a consolidated basis. Net sales achieved INR 1,372 crores as against the previous year, same period was INR 1,195 crores. So there is a revenue growth of 15%. The EBITDA has increased INR 197 crores from INR 167 crores. Paid after tax has increased to INR 98 crores as against INR 70 crores. We are just 2 runs away from the century. So we hope should get it in the next quarter.

Compared with the corresponding quarter previous year, the net sales increased 15% and almost in India 14%, overseas a little more achievement is 16%. Volume increased 16% in India, overseas 18%. EBITDA increased overall 18%, [indiscernible] increased by 40%. So first half of the -- on consolidation basis, normally, I have clarified in a part this conference call also. Normally, in the first half, we achieved 45% of our revenue. The first quarter, 22% and second quarter, 24%. And balance 55% we achieved in the second and third quarter, which is 26% and around 28%.

So during the H1 FY '25, net sell stood INR 2,600 crores -- INR 2,602 crores exactly held against INR 2,225 crores, EBITDA, INR 372 crores as against INR [ 315 ] last year. Profit after tax, INR 178 million is against INR 127 million. So in terms of the percentage, sales increased by 14%, almost India and overseas are same. Volume is also India and overseas same, 16%. EBITDA increased by 18%, PAT increased by 40%. H1 '25 EBITDA margin is -- there is an increase in the EBITDA margins also by 40 basis points. [indiscernible] achieved 41.3% as against 13.9% for the previous years in half -- first half.

Our sale of the business, yes, when we have seen the EBITDA margin improvement is there in percentage of the established versus [indiscernible] products has increased. Values products grew by 21% in H1 FY '25 as compared to FY '24, while established product grew by 13%. The share of the [indiscernible] product is now 27%, total sale in FY '25 as against [indiscernible]. And again, when talking about the value-added products, company is also taking target of achieving 35% valuated product sale in the next 2 to 3 years' time. So we are on that direction only.

Our share of the India and overseas business remained constant and continue at 65% India, 35% overseas. And EBITDA margin at the both Indian overseas surpassed the 14% range. Net cash from operating activity is continuously increasing [indiscernible] in H1 [ FY '25 ] is INR 238 crores. Company focus on debt reduction is continued in the first half reduced by INR 52 crores. Total CapEx incurred during the H1, FY '25 was INR 94 crores, which is included INR 39 crores to the regular maintenance CapEx, capacity expansion meaning, automation, et cetera, and INR 55 crores towards the valuated products, mainly composite products and the other IBC.

Now certain measured events, which has occurred during this quarter, I can say, first half also would like to give you attention, even though I have given an earnings presentation clarification because some of the people in between have also asked, I thought it is better to give clarifications on the conference call. So most of the people who are present [indiscernible] can come to know about that. And these are all the things already informed with [indiscernible] as per the required guidelines. Especially as part of the QIP concern, -- as the company Board has approved QIP qualified issue placement of up to INR 1,000 crores. And this is enabling resolutions. Object is already mentioned and as this resolution is valid for 1 year time. Because I have received certain questions from my investor why it is required. I'm again clarifying all of you. It is enabling resolution for the next 1 year time.

Despite of company's own plan to become a debt-free by March '26, but it's thought if it is better tied to that, then we can become the faster debt company. And company has no -- the objective is also mentioned in the [indiscernible] major object, the debt repayment, expansion plan for brownfield and new products valuated products mainly, CNG, LPG and hydrogen. I have also clarified in the last -- my conference call further that certain Indian government gas distribution company need same size of the cylinder that is 14.5 kg cylinders, which company is under development. But it is going to take time. And further in the present scenario, all the distributor mix of the government companies are ongoing so that the company can also understand the market size and took the necessary actions to put the capacity in place. So this [indiscernible] we ourselves are keeping ready for that.

Another company is also focusing as we are all aware that day-by-day or month-on-month, the main power cost is [indiscernible] cost is increasing because government is also focusing on the labor cost, so the company is very focusing on the automation, reengineering modifications of the existing equipment, molds to maintain the productivity and increase the productivity and reduce the cost in terms of the [ KG ] for the main power. And further, even though it is mentioned that funding organic is okay, inorganic growth in the areas of operations, yes, I used to tell you, [indiscernible], I don't have any acquisition plan or at the company because the company has own plan organic growth, and the company has own plan, as mentioned recently.

The working capital requirement because company is growing 15%, as we have decided, the company should be debt free. So additional working requirement, even though company is focusing reducing the working capital cycle, days, which at one point of time was 120 days, which is now reduced to 100 days. So focus is on. And the first company's achieved target to achieve the working capital cycle days of 85 to 90 days in the next 2 years' time.

Then another thing, which is -- I have mentioned, regard the consolidation of the subsidiaries companies, power build batteries and the [indiscernible]. I'll just give you [indiscernible] company. Company has gone in these energy storage devices manufacturing long back in 2007. Presently, 2 companies same line of the products and manufacturing and 2 manufacturing places are there, but company thought it is better to use the resources available, wind power resources, marketing resources and to the common better efficiency. The factory utilizations and resources, company management [indiscernible] so that overall profitability can be improved. And the overall ROCE from this company -- the company has made the investment of approximately INR 69 crores invested by Time Technoplast [indiscernible] company in both the companies together. So that is the objective for the increased margins.

And another you have seen one of my subsidiary [indiscernible] with 75% subsidiary of Time Techno, which is engaged in manufacturing of packaging products only. [indiscernible]. But mainly, that also includes the valuated product IBC, which Time Techno is also manufacturing. But as -- this company is also their own expansion plan, Time Technoplast has no IBC manufacturing in the Maharashtra region and the good demand is coming, which is already mentioned a reason for demand in that [indiscernible] region. So this -- and it's a government long-term lease, [indiscernible] already been allotment that was received, so in the next 3, 4 months' time, the company will plant the project cost identified. And then we'll do this project is estimated to complete next year. And just when I'm talking on the subject, last year, the PPL Plastic subsidiary company has completed expansion project in [indiscernible], overwhelming response is there. Capacity utilization has already reached to the 70% in the next 6 months' time. Already, it is achieved in the last 6 months' time. So looking to that overwhelming response company cost, which is to logistic cost basis and other cost basis to put up the plant in the [indiscernible] region. So this can be the [indiscernible] more advantage.

On another things, everybody would like to hear because you know that last 8 to 10 months, somebody was asked -- all the people mostly asking me, what about the overseas sales. But as I mentioned, very clearly, company had agreed initially by the [indiscernible] letter was received, but that offer letter was received based on the 22% and 23% EBITDA margin. But now as a company has achieved a growth of more than 15% in Middle East, further, in the last 3, 4 months, company has -- management has decided to put their own plant in Sharjah, which will be around 100% by subsidiary of Time Technoplast Limited. So it is better now in uncertainty situation to call out that sale business because it is very clear when companies earning more than INR 350 crores to INR 400 crores in a year, and the company was estimating this realization of INR 150 crores net of the taxes for sale percent 50% stake. So I've been advised by my Board member, not to sell this business and grow company for overseas businesses, which is already evident and growth is there in the Middle East good growth considering the -- especially in Middle East, I can say the [indiscernible] upcoming chemical loan areas. And when Saudi government is welcoming to expatriate and they are giving good kind of benefits to the industry people, so we thought it is better to put our own unit there in Saudi.

Currently, we are submitting from our nearby countries [indiscernible] and small units available in Saudi also and this will be the 100% ownership. Another thing also I have clarified, I might not sell of the noncore assets, which is upwards is continuing. You remember that I have told in the last October, November, there's a targeted [indiscernible] be estimated was INR 125 crores. So we have fulfilled our promise and almost 50% already relied around INR 65 crores. And for the balance, INR 50 crores, efforts are on and estimating in the next 12 months' time. This fund also will be utilized for the CapEx plan.

So overall CapEx, if I tell you that we have a range of -- maximum range of INR 200 crores. And if out of that, we are raising INR 125 crores, so net CapEx will be very, very minimum.

Now, I've covered mostudy to the things, but if any other things I have left, I'm keeping open the floor for the cautions, if any, which I'm not covered. Thank you to all.

[Operator]

[Operator Instructions] The first question is from the line of Jatin Damania from Swan Investments.

[Unknown Analyst]

So just want to understand regarding our business. Now when we indicated that we are not going ahead with the sale of the UAE or the Middle East plant, how shall one look at the overall growth in the Middle East when we have decided in the past that we wanted to sell it. So when you compare with our past 6 numbers, how when you look at the fortune of the Middle East operation?

[Bharat Vageria, executive]

Jatin, this is the only question you have or any other questions.

[Unknown Analyst]

Sir, I have couple of more.

[Bharat Vageria, executive]

So I think you asked -- give me your question first. I will answer at the time of where all the questions. One regarding the UAE, right?

[Unknown Analyst]

And secondly, on the loan core assets [indiscernible] dispose around INR 90 crores. Now we have increased it to INR 125 crores, and as per our [indiscernible] have already achieved -- have already received it. But as far as cash flow, it indicates only INR 30 crores which are -- which have come to the business. So is it safe to assume that INR 90 crores, INR 95 crores will probably come in the second half?

[Bharat Vageria, executive]

I will clarify because there [indiscernible] I will clarify that.

[Unknown Analyst]

Yes. And how on the capacity utilized across the product mix, you can help us to understand the future of your driver? So these are the three questions.

[Bharat Vageria, executive]

Yes, we have 4 questions. First, you told me about the UAE business. You know that overseas, we do manufacturing the packaging product only, that is called [indiscernible] and drums. Now, I have clarified in the past also, overseas business, if I consider the 100% revenue, we normally get 30% revenue in the MENA region, which is inclusive of the 4 countries that is Sharjah, Bahrain, Saudi and Egypt. Egypt is around 75% of revenue. If I'm not wrong, I told Middle East revenue in terms of the rupees around INR 350 crores. And the INR 350 crores revenue, if I will sell out, there was out of the revenue figure was around INR 175 crores.

So we are able to sell by getting 50% or 100% valuation was [indiscernible] 50% addition was to $25 million, which if I will take my EBITDA of 22% and 23% average, we were selling at the time of the [indiscernible] 7.5% around, but as this current year is concerned, '24, we are already 1 month away from closing of this year. So we have told very clearly, we should get the EBITDA multiplier, not '22, it's a '23 and '24 average. Yes, and this was agreed in between us.

And further, looking to the present growth, we've asked very simple questions because it took 8 months' time in concluding this deal. But again, delay is -- we are holding our decision about the expansion plan of the Saudi and other expansion plant on the Middle East. So we thought and the company is growing, we should not agree because INR 150 crores, which company is getting. It is equivalent to, I can say, the 4 or 5 months profit of the company is the whole organization. That is the point we consider. And I've been clearly advised by my Board member, not to sell this business. You grow yourself.

When the international business, we have reviews for the next 2, 3 years' time, and be sustainable and if the good growth is coming around 15%. So there is no need for sale. That is the guidance given by my Board. Accordingly, we have conveyed these message to the -- and one thing, again, I'm clarifying you -- as a company side, we have not incurred any because it's a succession based, transaction was there. So as a company, we have not incurred any kind of expenses for sale of this investment. This was [indiscernible] agencies were there also was very clear. If conjection goes, then only you will get the [indiscernible]. Otherwise, everything [indiscernible] back to the home.

Second, you've asked noncore assets. I think you have heard about the March only. But in the month of last 23 of 24 in -- around November or December, I've said my noncore assets was INR 125 crores. By March, INR 30 crores was already [indiscernible] INR 90 crores shown in the balance sheet or the realizable value for the '24/'25. So out of that INR 90 crores again, we have realized around INR 30 crores, so it is around INR 60 crores is pending. And that's also we are -- I mentioned to you, we are focusing that [indiscernible] next 12 months' time.

Third, you have asked about the capacity. The capacity utilization as the 15% company is growing and company management decided to do the only brownfield expansion where required, looking to each of the product capacity. For example, you have seen we have a shortage on the capacity of CNG expansion. So definitely, the expansion is going on in some kind of IBC, lead base expansion is doing in India and overseas put together. But I'm glad to tell you the overall capacity utilization you asked me India and overseas put together is around 82%. And overseas utilization is more 87% and India utilization is around 80%. So contribution basis, it is 82%. And that is, as the company utilization is increasing and the valuated products [indiscernible], therefore, you have seen the EBITDA is increasing on quarter-on-quarter by 20 to 30 basis points, which is evident on the margins.

I think I've answered [indiscernible].

[Unknown Analyst]

Just a follow-up questions on your first answer. When we indicated that we are not going to the Middle East. So it is fair to assume that the growth -- the target growth for the entire overseas is 15%? Or it is only the Middle East?

[Bharat Vageria, executive]

No. No. I'm again -- because you are right. If I'm getting 100% revenue from overseas, we have a 3 continent, I can say. One is the Middle East, where we get 30% of revenue. Around 50% revenue we get from the Southeast Asia, which covers Thailand, Malaysia, Indonesia, Vietnam and Taiwan. And another 20% revenue we get from that USA part where we have a presence in 3 cities. But as company management decided to expand further in U.S., U.S. country is growing now. The last 2 years situation is improving. And further, it will be strengthened [indiscernible] Trump has recently taken as a President of the U.S.A. So, I think very aggressive.

So considering I'm very clear to my International Director, International President, to look after this business. He is targeting to grow 15% overseas across the countries everywhere, where he can give me consolidation growth. India is also -- we are quite confident for the 2 to 3 years' time because one another thing I think everybody dividend there. The oil prices have gone down in the range of $70 to $75, which at 1 point of time, it was $85 to $90. So it's good. When the polymer prices are down, company take the strength and the benefit [indiscernible] on to the customers. And it gave good conversion from metal to the polymer and composed product take place faster. That is the metal advantage better advantage of conversion and this thing.

So another thing, it is seen that in the last 1 year or next 1 year also -- 1 or 2 years, would new capacities of polymers are also coming. I'm glad to tell you, anybody in the process industry, next 3 is good for the polymer processing and component product company because the capacity and there is a demand gap between the demand and the supply. So it is the bias market, you can ask your discounts, whatever things you want and the faster conversion will be there, right?

[Operator]

The next question is from the line of Anish Kara from Trade Brains.

[Unknown Analyst]

Sir, I wanted to ask you about the value-added product. In the presentation I read that the company is focusing on increasing the share from its value-added product in terms of revenue and margin. So I just wanted to understand what are the plans for expansion in the pipeline?

And also, I also said that in the QIP that it is mentioned that the company is going to allocate some amount for this. So what percentage of the QIP can be expected to be ported in this segment?

[Bharat Vageria, executive]

In fact, if you go to the objective of the QIP, I will tell you the company is going to incur [ INR 100 ] on the expansion. I think you can consider almost 50% for value-added product because then only that percentage can be the higher end to the 35% of the total revenue. And as I mentioned previously also, companying the existing product will do the brownfield expansion. But the major expansion in India and overseas put together is the value-added product and value-added product, which covered you have seen in my earning presentation side, what are the products come under the value-product is clearly mentioned valued products are a composite LBT, oxygen, CNG and the [indiscernible]. One other product, we have not had here, but very huge patent, that is hydrogen cylinders and that is the future will be in the [indiscernible] cylinders after the CNG. The company is focusing [indiscernible] business also.

Company has already got the approval for hydrogen cylinders. And further, I'm great to tell you another application is also coming up, which government is also focusing on the application of cylinder in the drone. The government is focusing and is using more drone by the agriculture use also and for surveillance. So currently, what I understand, most of the drone company, I think 20, 25 companies [indiscernible] is engaged in manufacturing of the drone. And as I understand, drone value [indiscernible] ranging from INR 5 lakhs to INR 30 lakhs. And many agriculture is now started using [indiscernible] is the drone they are using. And currently, they use the batteries. So when they will use this cylinder, then can go to fly on the high. And further, they can fly more hours, 4x capacity more than the present batteries that they use it. So this new application is coming. And very soon, you will hear application for the drone application of our products. I will update as we get the final approval for this [indiscernible] huge opportunity in that line of the business.

Because internationally, I understand it's a $40 billion business as far as drones are concerned globally. But India has a good opportunity, we'll see how we'll grab that opportunity available.

So company, you are right, if I will incur INR 100, 50% will go for value-added product and 50% on the brownfield expansion of the existing, because value-added product, we are estimating growth of 13% year-on-year for at least next 3 years' time. And the existing products, the packaging, we are considering growth of 10% to 12%, so combined of both is averaging around 15% growth we are projecting.

[Unknown Analyst]

All right, sir. And sir, I also wanted to ask you 1 more thing, which is about your CapEx. So what is the CapEx plan for the H2 and FY '26. And also what kind of growth are you expecting in terms of volume and value in this period?

[Bharat Vageria, executive]

In fact, I can tell you the volume growth because when you -- you have seen recently, as I mentioned, the 16% volume growth and revenue growth is 14% because of the price differences, revenue. But when we estimate our business when I'm telling you the 15% growth, that is the volume growth. Revenue, maybe 20%, maybe 10%, but the volume growth is depending on the pricing of each of the product composite products and the polymer prices, which is linked with the demand supply.

Now you are asking me CapEx. You have seen in the last track record of the 5 year, 7 years, company was doing expenditure in the range of around INR 180 crores to INR 200 crores. This year, including the value-added product sale, we have projected around INR 180 crores to INR 200 crores. In the first half, around INR 99 crores is -- INR 95 crores incurred. And in the balance of overall estimation in the beginning of the year, we had given it will be around INR 175 crores to INR 180 crores. And if you ask me the net CapEx after the reduction of the noncore assets, it will be in the range of around INR 125 crores to INR 130 crores that already in the beginning of the year, I have given my projections.

So I think looking to the first half [indiscernible] years, maximum CapEx in the whole of the year will be in the range of INR 180 crores to INR 200 crores. And out of that, whatever costs will come from the sale of the noncore assets will be netted off from this.

[Operator]

[Operator Instructions] The next question is from the line of Dolly Choudhary from [indiscernible].

The next question is from the line of Khush Bafna from Bafna Brothers Finance and Property Agent.

[Unknown Analyst]

Many congratulations on your excellent performance and also continuous debt reduction. I just had a small question, sir, from my side about the trade receivables, which are being shown in the books. Any estimate as to when that comes little down or this is how the company maintains in general business conditions.

[Bharat Vageria, executive]

No, no, it's okay. I think it is going to be down. As you know that especially normally, I talked about the working capital base, I'm talking, which is 100 days. So what happened was working capital cycle time as we know the working is the inventory days than receivable days and the minus the creditors. So if I'm getting more credit, I will give more credits [indiscernible] but always 1 principle is very clear of our company. If anybody would like to have a more credit more than 30 days' time, have to simulate 1% cost of the credit to them. And that is the advantage to the company because if I'm passing on my cost of the funding is around 9%, so if I'm taking 12%, so it is benefit to the company. But at the same time, normally, average the receivables we have seen 73 days is the combination of the [indiscernible], with some products, we give the [indiscernible] 60 days, some product we give to 90 days. But maximum credit, we gave 90 days for some of the products with the industry itself is giving, I have also to follow the industrial norms.

For certain products, we give 45 days credit is the average working out around 73 days. But if maximum, whatever efforts we will do, we can go down to 70 days, not less than that, it's a combination of that. Because our nature of the product is such that, we supply the products, then our customers consider the credit period after receivable of material at their sight or acceptance by their site, because if you take the [indiscernible] product. We supply the material, customer received after 10 days, then it will receive from their site, then further from their site, they are received to their informed office. And then the head office will consider the days. If I am giving the credit of 40 days, the actual credit period will be 60 days. So I'm considering 15 days is acceptance and the [indiscernible] in receipt of the consignment.

So we do best efforts, it cannot go less than 70 days. I have to consider. But yes, what we can do as we are keeping our target of 90 days periods. What we can balance out, we can reduce the inventory level by 5 to 7 days further, and that efforts are continued because in the current scenario, our certain products, which we are depending on the imports -- but yes, we are developing. We have certain understand with the local manufacturer to develop this product in the next 2 years' time. I don't want to mention the name of the polymer manufacturer because they are the large company and the confidentiality agreement signed between us to develop the product based on the government also like Make in India. But I'm sure in the 2 years' time, this working of the cycle time 90 days based on the inventory level go down from 70 to 60, later from 73 to 70 and the creditors to increase to 50 days. That's where we were able to maintain 90 days' time. There is still availability of 10 days to improve volumes on cycle time.

[Unknown Analyst]

Wishing you all the best for the forthcoming QIP and also -- entering [indiscernible]. .

[Operator]

[Operator Instructions] The next question is from the line of Priyank Parekh from Abakkus Asset Managers LLP.

[Priyank Parekh, analyst]

Sir, my question is more of a clarifactory in nature. So we -- I think we have the CNG capacity of 480 caskets per annum. Is it right sir?

[Bharat Vageria, executive]

Yes, yes, you're right. [indiscernible].

[Priyank Parekh, analyst]

Yes. So currently, we are in this quarter, if I see we have manufactured 135 cascade in terms of volume, and I just to [indiscernible] it will give number of 540, so just want to understand when we have capacity [indiscernible] per annum, why this excess production? So what is [indiscernible] understand?

[Bharat Vageria, executive]

You see that in the first half, how much sale was there. In the first half, it was a 95 cascade [indiscernible]. So number of the cascade I tell you, the cascade the 2 types of the cascade because number of the cascade we mentioned is not relating to [indiscernible] because the cascade -- certain cascade size where we use 40 cylinder, certain cascade where we use the 60 cylinder depending the capacity of its cylinder.

Number of the cascade don't multiply directly. Numbers of cascade I will sell the mini cascade, you know that bus [indiscernible] is a difference. Just don't keep a number of the cascade. You see the revenue part.

[Priyank Parekh, analyst]

Okay. Understood, sir.

[Bharat Vageria, executive]

In terms of the revenue, you can work out very well. The maximum revenue for 460 cascade is there and 480 cascade if 90% utilization considering the holidays, the revenue can be of around INR 350 crores revenue can be generated from CNG business. whether I sell mini cascade or I sell the large -- big cascade. But yes, as the expansion, if you attended my last call [indiscernible] the capacity of 600 cylinder around 36,000 that is coming in the Q4, it is complete. So next year, definitely, the projections will be the higher.

[Priyank Parekh, analyst]

Okay. And [indiscernible] is coming on which end period you said?

[Bharat Vageria, executive]

I think Q4, it is coming already. [indiscernible].

[Priyank Parekh, analyst]

Okay. Okay. Understood.

[Bharat Vageria, executive]

It is delayed by 6 months. I mentioned in my last call also, it is delayed because of the elections, because of the Russia-Ukraine war, because of Red Sea problems, European problems, multiple problems were there. Otherwise by this time [indiscernible]

Otherwise, the project would -- streamlined by this time, but it is delayed by almost 4 to 5 months. .

[Operator]

[Operator Instructions] The next question is from the line of Dolly Choudhary from [indiscernible].

[Dolly Choudhary, analyst]

I had 2 questions. So first of all, in our presentation, we have mentioned that in CNG cylinders, our per year opportunity price is approximately INR 2200 crores. And I believe in this year, we can do around INR 350 crores to INR 400 crores. So I wanted to understand, as we are the only player how is the remaining demand is being fulfilled?

[Bharat Vageria, executive]

No, no, I'm telling you. One of our -- every customer give us some delivery scheduled timing impact. So you know that if you go through my projections, large business potentially is there as far as CNG cylinder is concerned, if you have gone through the policy of 2020 that as far as composite product CNG business potentially is INR 28,000 crores for the different applications with CNG cascades, mobile peopling unit, compressed biogas plant. You must have seen today Economic Times, which [indiscernible] declared INR 65,000 crore investment in compressed biogas plant in Andhra Pradesh, so that is also where the cylinder can be used. CNG for intra-city bus.

But what we are projecting, it's 8 years on 4 years policy. So we are projecting the composite business, cylinder business can be of INR 2200 crores yearly business, it is possible in the next 3 years' time, looking the policy of this government. So in that direction, only we are working. So we are also targeting in the next 5 years' time, this composite product, which is currently INR 350 crores can be reached to over INR 2,000 crores in the 5 years' time and around INR 1,500 crores in the next 3 years' time. We are also projecting in this business.

In this business, we have not used the -- all the existing cascade, which is metal cascade, because CNG cylinders are available for more than 30 years in India. This policy is for the new stations. You know that Indian Government has allocated in 29 district 8,000 stations -- new stations are under construction and allotment have been given to various gas distribution companies, which includes government and private [indiscernible] companies. Very good potential, CNG and later on, future also, it will go on by the hydrogen also.

[Dolly Choudhary, analyst]

Okay. Sir, that was helpful. And next question I had regarding the value-added products and the development that we have presented. So I wanted to understand what can be the -- where are we on this composite fire extinguisher and hydrogen cylinder, -- like what is the [indiscernible]? And what can be the opportunity size for it going forward?

[Bharat Vageria, executive]

In fact, in value terms, opportunities very huge. We have not yet summarized at all. You know that first thing is the composite fire extinguisher. Current fire extinguisher, you know that metal everybody has a compulsory every even now I've seen many societies are keeping many -- government authorities have to keep, every industry has to keep it, but it is just for [indiscernible] because everywhere, you will see the fire extinguisher is made from the metal, which is very, very heavy and it is not very usable friendly. Light fire extinguisher, I tell you the fire extinguisher, which we are developing the weight will be 20% of the existing weight of the cylinder.

Yes, the price would be higher. But you know that India, people are willing to price subject to the item can be used. You must have seen today nowadays, the buyers of the Apple phone are more than the other Samsung phone. Similarly see the prices are higher, but people more buyer. So these items which we are developing is the very high-value items. But yes, it's usable and it has advantage. Just my colleague Director, Mr. Raghupathy will explain more about the fire extinguisher.

[Raghupathy Thyagarajan, executive]

As Bharat was also explaining the typically, the first extinguisher made of metal, and they are normally installed at a place and very rarely in use. Those cylinders -- extinguisher are not used, they undergo a lot of corrosion and deterioration of the cylinder. And when the need comes in, you have to ensure that these cylinders are actually in working condition or many, many places that we observed the cylinders are nonfunctional, and they don't even work because of the fact they continue to corrode. .

The advantage of the composite cylinders would be that they will not rust or corrode and that's a big advantage that we'll have. In some of the new trains that have been rolled out by the Government of India, such as the Vande Bharat, et cetera. If you go through the documents there in the tender documents, they mandated the use of composite fire extinguishers in those new age trains. So it's a clear acknowledgment as well of the technology that is available, and we are moving in that direction.

The demand is enormous. There is no doubt about it. Likewise, hydrogen, I would put it, the story is very well validated, and most of the geographies, most of the countries in any geography, they are all proceeding on this. We are also in a position to see there are enough initiatives being taken both by the government as well as by the private sectors to venture into hydrogen. Multiple hydrogen generating plants have already put in place. So there is a lot of interest that is being generated in the high-pressure cylinders that are being manufactured by us. So we are very hopeful that all these new initiatives in these new technology items are going to be a good opportunity for the company to grow.

[Dolly Choudhary, analyst]

Just a follow-up question. So I wonder if there are other players also in India who are working on the composite fire extinguisher. If it's compulsory in Vande Bharat [indiscernible] maybe as the other players also who are working on this?

[Raghupathy Thyagarajan, executive]

Yes, there would be some initiatives that may have taken. I mean, since we have taken the lead, we are there much ahead of the others. So in any industry, you will have some people or other who will follow us, there's no doubt.

[Bharat Vageria, executive]

But one thing -- why we are going under this development because we are already working on the composite products since last 4 years. So one experience what we have. You know that in composite product, initially, we started from the LPG cylinder then we expanded to the CNG cylinder, then we have expanded to the oxygen. Now we expanded to hydrogen. So at least somebody has to pass on the basics, whichever [indiscernible] time in the 5 years. Always, you know the customer will advantage the experience and [indiscernible]. If anybody's trade will come is not very easy for everybody miss.

[Operator]

The next question is from the line of Heath Vora from Guardian Capital Partners.

[Unknown Analyst]

I had 1 question on the CNG cylinder, may be composite cylinder. So in the AR, we have written that we've already gotten an approval from Tata Motors, while I know that we are going to look at automated applications only once the new capacity comes in, but any sort of [indiscernible] that we've received from maybe Tata Motors for the CNG cylinder?

[Bharat Vageria, executive]

Okay. I'll just clarify you. Today, we have approval for automotive industry for the size of 60 liters. For the gas industry, 156 later. Now, as I have mentioned, I think if you attended my last call, we have capacity limitations because currently, whatever we are producing we are selling as a complete cascade where we use the CNG cylinder and selling as a cascade to the gas distribution company.

Now definitely, because you know the automotive industry already we have approval. And currently, automotive industry is using the cylinders, which is made from the metal only. So we have started working with them. We know that's 8 to 12 months project when working with the automotive line. So already, my team have started working with them, getting [indiscernible] because every vehicle capacity is different, then we need to do the development of the tool for each and every model and each and every manufacturers. So our team has started talking with them. And when expansion will come in the Q4 of this FY '25, thereafter, we will take with each of the OEM and supply them.

Approval, we have already. There is -- approval wise, there is no problem. We have a currently limitation and instead of selling the only cylinder to them, better to use the valuated product will sell as a cascade to the gas distribution company. There is a priority on that.

[Unknown Analyst]

Actually, my question was, I mean, have the plant [indiscernible] being done by these [indiscernible]?

[Bharat Vageria, executive]

Of course, OEM -- IMM, we are the category 1 supplier. We are having a green channel with all OEMs because certain OEM products we have done, for example, Tata, we are already working digital fuel tanks we have worked out, and we are supplying from [indiscernible] factory. You know that Tata Magic that vehicle, we are using that fuel tank of the gas of this -- digital fuel taxes, we are supplying. For composite product, air receivable tank, we have worked for [indiscernible] under development. Certain composite products, which are not on the commodity in nature, special -- we have a relationship with Tata, Ashok [indiscernible]. So we do some of the automotive components, which are not on the commodity specific customized products, we already deal with them. So in fact, people have started talking with them. We are in process of getting their design, buying approvals, then we will do the development, submit them, then the [indiscernible] will be required.

And when you go in automotive industry, then automotive research institute, which is in Pune, their approval, it also will be required. So we'll do the right time that all get the approvals, and we will introduce that in automotive industries also. But there are so many other things, many composite products by using the same line, we can bump out of the automotive industry.

[Operator]

The next question is from the line of Devam from Adrigo.

[Unknown Analyst]

Congratulations on a decent set of numbers. [indiscernible] Firstly, we have seen typically in the past that there is a propensity that we have higher revenues in H2. So can we expect that based on the way our current business, order books and everything is placed, that H2 should be higher revenue than H1 for us given the client mix and their programs and everything?

[Bharat Vageria, executive]

It is always [indiscernible]. As I mentioned you, in Q1, the gas business up 22%; Q2, 24% was put together 45%-46%. So in the first half, you will see 45% last 10 years progress, you can see that. And the second half always we get 55%. Then again, in Q3, 26%; and Q4, 28%. It's a trend of the industry. Last Q4 always [indiscernible]. You've seen over the last Q4 turnover, [indiscernible] easily comparable.

[Unknown Analyst]

Sure, sir. A couple of questions on the expansion. One is PPL last year, we have announced an expansion. So what kind of total CapEx and asset terms do we expect over there? And also at the overall -- that is a [indiscernible] how much do we expect for entire FY '25 and '26. And in general, what are the guiding rules that you would consider for an expansion in terms of asset turns and margins to consider it in a particular product [indiscernible]?

[Bharat Vageria, executive]

[indiscernible] I think your right question. As far as you asked me, the overall CapEx as a consolidation basis, India, overseas put together is in the range of INR 160 crores to INR 180 crores, so a maximum INR 200 crores. Now, out of the INR 200 crores also, you will see around INR 70 crores to INR 80 crores on account of the maintenance CapEx, automation, reengineering to maintain the capacity and to maintain the capacity and the tool development. Balance INR 120 crores expansion where we added the capacity in valuated products or the existing product capacity.

Now specifically another you have asked me -- and basically, this year, I mentioned out of INR 180 crores to INR 190 crores, we have already noncore asset sales business will be there, so net of that, CapEx would be hardly INR 140 crores to INR 150 crores. Then '25'26, we are the same in the range of INR 150 crores to INR 180 crores, considering the expansion line in India and overseas. And somebody has asked me just in this call itself how you distribute, I'm very clear. In our business, when you rate product, when we invest INR 1, we get more than 3x of revenue, but when we do the investment in the other existing product lines, [indiscernible] expansion. Normally, we see the 3x of the revenue we should get it in the [indiscernible] products and other products, we get in the range of 2 to 2.5x.

But we have seen whenever we do the automation, reengineering product, we consider payback period, so payback period should be less than 4 years to -- whether by a reduction in the power cost, reducing the labor cost et cetera. So many other areas also I'm working, I'm not advising every time I'm glad to tell you, we are working on the [indiscernible] cost reductions also. As you know that government is also focusing the use of the solar power. I'm just [indiscernible] figure, which I remember I am like to tell you, in a year in India, we use INR 15 crores units of the power. So now -- you know that certain government policy has come out in Karnataka, Tamil Nadu, Maharashtra, Gujarat to you can buy up to 75% to 80%, if we are power requirement from the solar manufacturing companies.

Already, we have already signed agreement, we have done the equity investment, and we are going to save almost INR 3 units. So if I just remember, around INR 4 crore units which we have a requirement in Gujarat, Maharashtra, Tamil Nadu and Karnataka, we have signed, the company will able to save next year at least INR 12 crores on account of the power, power cost itself. Because otherwise, my power cost itself is more than INR 110 crores or something we are paying annually.

Now the similar policy we are expecting in other states also, like in Telangana, in Uttarakhand, in Himachal everywhere we are extracting, else because 1 of our team is completely following with the government, Ministry Department and other local departments, wherever policy is coming, immediately, we are tying up and try to save these costs because it's a major cost as far as power is concerned.

Our in business, 2 are the major cost other than the raw material is the power and the manpower. So we work hard on that how we can [indiscernible] these costs by increasing the productivity and by increasing doing the automation. So we will be able to get the more productivity and increase the percentage and offer our products competitive pricing to the customer. That is the main objectives of the company.

[Unknown Analyst]

Sir, I had also asked regarding the [indiscernible] plastic expansion and what [indiscernible] ?

[Bharat Vageria, executive]

[indiscernible] Plastic it's just expansion in the [indiscernible] region because Time Technoplast do not manufacture [indiscernible] region. Currently, that customers are servicing from the Union Territory area, [indiscernible]. So too much logistic cost is involved. But especially in this [indiscernible] area, too much chemicals is coming up, [indiscernible] many new units are coming up that region. It's already mentioned [indiscernible] not you must have seen the solar TV chemicals, food juice industry, semiconductor many new units are coming and because of the near to the Nava Sheva port and the reason that chemical Johns is coming up.

So TPL plastic, -- and that investment we worked out, but roughly, I can say, it will be in the value of around INR 20 crores to INR 25 crores, improving the cost of the land and buildings and equipment, and so that if a company will do INR 25 crore investment, then definitely it can generate the revenue of around INR 75 crores to INR 80 crores.

[Unknown Analyst]

And this would be falling in the category of value-added products only, right?

[Bharat Vageria, executive]

Yes, value-added product, yes.

[Unknown Analyst]

And sir, a couple of bookkeeping questions. One is your depreciation is lower. Would this -- what would be the main reason? Would this be related to the noncore asset disposal? Or why would the depreciation year-on-year be lower from INR 46 crores to INR 42 crores?

[Bharat Vageria, executive]

No, no, no. Depreciation cost is in the range of INR 150 crores to INR 160 crores. And again, it is lower because a certain assets, which is already depreciated [indiscernible] 94 companies almost 30 years have gone, many assets already written off. No need to, again, write off that depreciation. That is there may be the difference.

[Unknown Analyst]

Okay. I mean because there was a sharp year-on-year drop of almost 10% .

[Bharat Vageria, executive]

Yes, because you know that 25 years company, some essence always, we consider the life of the building 25 years. Life of the plant and machinery is 20 years, life of the [indiscernible] machines, life of the [indiscernible]. So definitely, it is going to be reducing the system. .

[Unknown Analyst]

Fair enough. And finally, sir, what is the -- what will be the current borrowing rates for debt for us and incremental debt? How much would we be borrowing it?

[Bharat Vageria, executive]

[indiscernible] provide you the range because company is rated and AA rated company. And so with the rate of the interest is in the range of we are considering, if you ask me the range, 8.25% to 9% in the range we are keeping ourselves in India. And similarly, overseas in the range of 6% to 7%.

[Operator]

The last question is from the line of Ankur Sagaria, an individual investor.

[Unknown Analyst]

Congratulation on the fantastic set of numbers.

[Bharat Vageria, executive]

[Foreign Language]

[Unknown Shareholder]

[Foreign Language]

[Bharat Vageria, executive]

[Foreign Language] We are not working beyond the market. [Foreign Language].

[Unknown Shareholder]

[Foreign Language]

[Bharat Vageria, executive]

[Foreign Language]

[Unknown Shareholder]

[Foreign Language] we are trying to [indiscernible] MENA business, so now the company policy has changed and now we are not looking forward to selling any business overseas or we are still looking into it?

[Bharat Vageria, executive]

[Foreign Language].

[Unknown Shareholder]

So our revenue target for the next 2 years for financial year, '26 will be somewhere about INR 6,000 crores in that case?

[Bharat Vageria, executive]

[indiscernible] ?

[Unknown Shareholder]

The revenue target ?

[Bharat Vageria, executive]

[Foreign Language].

[Unknown Shareholder]

[indiscernible] LPG orders because last time, it was really enhanced for 1 month because of the elections. [Foreign Language] any enhancements news anything?

[Bharat Vageria, executive]

[Foreign Language] We are not depending on the election. [Foreign Language].

[Unknown Shareholder]

Last time, if I recollect correctly [Foreign Language]?

[Bharat Vageria, executive]

[Foreign Language].

[Unknown Shareholder]

Any update on orders [indiscernible] cylinder?

[Bharat Vageria, executive]

Oxygen cylinders are, yes, we have orders [Foreign Language], which is a very, very huge market [Foreign Language]. And we are going to supply [indiscernible] also. [Foreign Language] what we are looking, we are in composite product. Composite product, LPG, CNG, hydrogen, drone applications [indiscernible] automotive sector, fire extinguisher, we will use our knowledge of the composite product manufacturing and explore the possibility in the industries where these items can be used.

[Unknown Shareholder]

Absolutely. [Foreign Language].

[Bharat Vageria, executive]

[Foreign Language].

[Unknown Shareholder]

Congratulations [indiscernible].

[Operator]

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

[Bharat Vageria, executive]

Yes. Thank you very much my all valued existing and possibly investors to listen peacefully. And I tried my best to provide you clarification. If any person later on comes any query clarification, they ask, we have an investor leadership agency, that is [indiscernible] there. We have provided a number of the company, Investor Relations Manager, Mr. Himanshu number is also mentioned. In addition to that, you can ask Mr. Purohit that [indiscernible] Securities, they are also aware about the updating time to time who are arranging this conference call.

So thank you once again to all the participants. Thank you.

[Operator]

Thank you. On behalf of Kaviraj Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.