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Uflex Ltd
Earnings Call Analysis
Q3-2024 Analysis
Uflex Ltd
The company has experienced a significant growth of 60% year-over-year (YoY) in volumes in Nigeria with a current utilization rate of around 70%. Executives are cautiously optimistic, forecasting a utilization increase to around 75% to 80%, driven by potential opportunities in the American markets, which have shown strong demand. The ability to export from Nigeria to these markets could further increase volumes. However, this is contingent on demand patterns in the American market in the upcoming quarters. Import duties in Nigeria have been raised nearly 30%, which is expected to have a positive impact on volumes. Specific distribution insights within the Nigerian and ECOWAS markets were not disclosed, suggesting either competitive sensitivity or strategic non-disclosure.
The company is investing in Post-Consumer Recycled (PCR) lines, indicative of a shift towards more sustainable practices. In Egypt, $13 to 15 million have been allocated to a new PCR line, targeting a payback period of about 3 years. There was a mention of a previously established PCR line in Mexico, which was expected to have a similar payback period. However, the performance in Mexico has been underwhelming, with utilization levels currently at 35%. This might be attributed to a challenging market in the Americas that went into a 'tailspin'. The Egypt PCR line is expected to ramp up faster as it is considered a substitute for virgin raw materials, catering to local needs which could alleviate currency and material import pressures.
The company is looking to complete its aseptic expansion in India between the second and third quarters of FY '25. Additionally, a PET chips plant is set to be completed in the current quarter in India, with another one anticipated for completion in Egypt between Q2 and Q3 of FY '25. These expansions are part of the company's long-term strategy to increase production capacity and enhance its position in the market.
Mexico operations boast strong performance with doubled volumes YoY during the last quarter, despite a previous drop in the earlier part of the fiscal year. Utilization in Q3 reached 92%, a slight reduction from near full utilization in the preceding years. No specific reasoning for the decreased utilization was provided, but it is suggested that Q3 of the prior year experienced weak volumes, and there has been a volume drop in the last fiscal and the first half of the current year overall.
The packaging film business in India is facing difficult conditions, with companies operating at a loss for the last two quarters, hinting at a potentially challenging market environment or competitive pressures. The scenario was contrasted with more stable margins in overseas markets, though no specific figures were provided, making it challenging to gauge the exact profitability and spread differences between domestic and international operations.
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Ladies and gentlemen, good day, and welcome to the UFlex Limited Q3 FY '24 Results Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sachin Bobade from Dolat Capital. Thank you, and over to you, sir.
Thank you, Lizan, and good evening, everyone. On behalf of Dolat Capital, I welcome you all to the Q3 FY '24 Earnings Conference Call of UFlex Limited. I hope you all and your family members are staying safe and healthy. So on the management side, we have with us Mr. Rajesh Bhatia, Group President and Chief Financial Officer; and Mr. Surajit Pal, Vice President, Investor Relations. Now I hand the floor to the management for their opening remarks, and then we would have question-and-answer session. Over to you, sir.
Thank you, Sachin. This is Surajit. Good afternoon, ladies and gentlemen. Thank you for joining us today for the Q3 FY 2024 Earnings Conference Call of UFlex Limited. We will start with a brief statement from Mr. Rajesh Bhatia, Group President and CFO, following which, we will open the forum for the interactive question-and-answer session. Before we begin this call, I would like to quickly remind everybody that anything that we say during this call that refers to our outlook for the future is a forward-looking statement that must be taken in the context of the risk that we face. With this, I would now request Mr. Rajesh Bhatia, the CFO, to make his opening remarks. Over to you, sir.
Thank you, Surajit. Thanks for the nice introduction, and good afternoon, everyone. A very warm welcome to all of you to the UFlex Q3 fiscal '24 earnings conference call. I trust all of you had the opportunity to go through the earnings release and the results presentation already shared with you. I would initiate the call by briefly talking to you through the key highlights for the quarter. And then we can follow it up with any questions that you may have. I'll try to do that to the best of my knowledge and ability.
Broadly, I would say that this is a quarter which is in continuation of the last quarter. So reasonable, healthy performance, backed by improvement in the sales volume, both in the Packaging as well as in the Packaging Films. And we have consolidated EBITDA margins, operating EBITDA margins have been reasonable. Things could have been a bit better, but there is a price pressure due to certain over-supply situation in India. But despite that, overall consolidated sales volume, this quarter, we posted a growth of 5.8% Y-o-Y, of which 6.5% comes from the Films business and 3.6% comes from the Packaging business.
On a stand-alone basis, the overall sales volume increased 13.3% on a Y-o-Y basis. The stand-alone Packaging Films had 25-odd percent Y-o-Y volume growth after post-commissioning of our Dharwad facility. And as I said that the Packaging Film industry continues to be under the pricing pressure because of the oversupply situation currently. And that has impacted the margins in that particular business segment as such. But by other business segments, especially on the stand-alone, which is Flexible Packaging, which is Aseptic Packaging, Holographic Films, and other substrates like chemicals and adhesives have all done well. And that is where, despite the pricing and the margin pressure in the Packaging Films business in India, we have maintained our profitability.
And once the margins improve, I think we'll be looking at a much healthier profitability with further increase in the capacity of aseptic films later in FY 2025. The consolidated net revenue stood at INR 3,345 crores. There has been a Q-on-Q and Y-o-Y decrease, but that is more related to the raw material pricing. Overall, the EBITDA -- operational EBITDA, I would say, or the adjusted EBITDA at about INR 426 crores in the quarter, 12.7% EBITDA margin. There's a slight improvement both on Q-on-Q as well as on a Y-o-Y basis.
And this quarter, again, we've been hit by the currency devaluation in Nigeria. So as we've said, Nigeria had migrated to a market-driven exchange rates in June '23. And this quarter, again, they had a devaluation, which had impacted us by about INR 125 crores this quarter. And total impact of the devaluation and the derivative losses is about INR 158 crores in this quarter, which are one-off kind. I think Egypt, as we've said that last couple of years, Egypt and Nigeria continue to be the sensitive areas from an exchange perspective. And we've seen that every 3 to 6 months, there are devaluation carried out by the Central Bank. And as a result, when we reinstate our balance sheet in -- with the revised exchange rates, I think we are looking at those losses coming and hitting us. And this quarter, the impact of these losses is about INR 150-odd crores.
Overall, from an operational perspective, it's been a reasonably good quarter. And even Liquid Packaging, we had a volume growth of about 8.5% Y-o-Y, and revenue growth of about 12.7% as well. Notably, even Nigeria, the production volume is up 60% on a Y-o-Y basis. Mexico, again, this is one of the -- America was one of the region which was again impacted by the fiscal and the low demand emanating there from. This quarter, we've done much better. And the Mexico production is up about almost double of what we had in the same period of last year.
And similarly, even in some of the other locations also like Dubai, India, we've seen a volume growth. There has been a degrowth in Europe as it continues to be an area which is impacted by -- because of the consumer sentiment. And given the Russia-Ukraine war impact on the energy as well as the higher interest cost leading to the consumer demand getting impacted in Europe. So we've seen on a Y-o-Y basis a degrowth in our Packaging Films volume in that territory. But as I said, that more than that we made up for that in Nigeria, in Mexico, in India, Dubai and other territories are quite stable.
Having said that, we -- November end we had an incident of Red Sea and that there is, again, uncertainty hovering around the demand -- the supply chain disruptions are now quite evident. The freight prices have increased. The mandatory insurance has come into play. So there is an increase to cost as well as the increased time taken for exports into -- from -- to Europe, and -- which has again brought to forefront the need for more reliable local sourcing, which helps UFlex. On a separate note, the exports this quarter from India, from a stand-alone balance sheet are also up about 13% to about -- close to about INR 400-odd crores. And overall, I would say, a decent quarter. Margins have been maintained. The volumes have grown. And we consciously optimistic of a sharper recovery in the next few quarters.
We know for sure that the other businesses such as Aseptic Packaging once we complete that debottlenecking to take the capacity to 12 billion PETs will definitely contribute towards additional growth, but also, we are looking at completing our backward integration facility in the PET chips in Panipat in this quarter as well as in Egypt in the Q2 of next year -- between Q2 and Q3 of next year. So given that it will add more reliability to raw material availability. There will be a pricing benefit as well, which will ultimately culminate into better margins for the Packaging Films business overall.
And I think that will be -- from India, we've already started the trial runs for our PET chips plant, which makes the PET chips for the BOPET films. This plant also has the facility to make the PET chips for the bottle grade for which the activities are still being completed. Hopefully, within -- by the end of this fiscal, we'll be up and running -- the entire facility will be up and running. So that is in a nutshell the summary of the operations for the quarter.
The net debt for this quarter stands at about INR 5,200 crores. And this quarter, there has been an impact of INR 60 crores because of the exchange devaluation on the debt numbers vis-a-vis the last quarter. And the rest of the debt is added for the PET chips plant in India, Egypt as well as our debottlenecking of the Aseptic Packaging facility at Sanand.
Thank you. Thank you, gentlemen. And that's all from my side in terms of the performance and the highlights for the quarter. And with this, I open the forum for any questions that you may have, and we'll try to address your inquiries, your questions as much as possible. Thank you.
[Operator Instructions] The first question is from the line of Chirag Singhal from First Water Fund.
Am I audible?
Yes.
So my first question is on Nigeria. You mentioned that the volumes have grown 60% on a Y-o-Y basis. What was the utilization in Q3?
About 70%.
Okay. And -- so how much time do you feel it will take to ramp up to full capacity going forward? And I think last time, you mentioned that the import duties have been raised to close to 30% vis-a-vis what it used to be earlier. And -- so broadly, shouldn't that have a positive impact on the volumes. So like -- within how many quarters you feel we should be able to reach 100% in Nigeria?
I think we look at for the time being at about between 75% to 80%. And -- because there's an opportunity, because the American markets have come in a very strong way. And we will require -- so the combined capacity in Mexico as well as in U.S. is -- may not be sufficient. So there are opportunities to export from Nigeria. So it depends on that. If that happens, I think the volumes will increase. But given the size of the market in Nigeria as well as in the ECOWAS region I think the current level of utilization is what we have in mind. We'll see as to how America pans out in this quarter and the next quarter. As I said that Mexico has seen a 100% growth in the volumes in this quarter on a Y-o-Y basis. Hopefully, if there are opportunities to sell more in America, so then there is opportunity to sell more from Nigeria into that market.
Okay. The 75% to 80% is the current utilization? Or this is something that you are seeing in the near future?
No, because 70% is around what we are looking at on a conservative basis, but 80%, 85% is what we are looking at -- if there are opportunities in America to export from Nigeria.
Okay. So currently, what is the total demand of BOPET in Nigeria? And out of our 70% production, how much of it is sold in Nigeria? How much is sold in ECOWAS? And how much is exported to other countries and ECOWAS?
So I think we would -- we will be not comfortable to share so much insight into the business. And overall level is what we can indicate but within Nigeria or ECOWAS or other adjoining countries and all that, I think we would not like to share that business.
But can you give a broad breakup as to what is it that you are selling in Nigeria and how much is exported?
So I think you have to take it that the current utilization, whatever is there is entirely catering to that region only.
I think Nigeria.
Nigeria, ECOWAS, those areas.
Okay. Understood. My second question is on the payback time for this PCR line in Egypt. So what is the CapEx that we spent on this? And what is the payback period that you are looking for?
I think we spent about $13 million on this plant, $13 million or a $15 million built in that range. And we're looking at about a 3 years payback.
Okay. And I believe we also set up a PCR line in Mexico as well, right, in the past?
In Mexico we had set up in the past.
Right, right. So like what was the payback over there? Like what has been the outcome so far?
I think the same payback was there. But as we said that the America markets also went in for a tailspin. And so there, currently, the utilization levels are low for the -- for only the PCR markets. So PCR films is a value addition, but the other way to look at that also is given that we import all our raw materials, especially the PET resin. So we are now looking -- exploring at blending this with our existing to increase the utilization and also the fact that Nigeria -- sorry, Egypt is currency-sensitive area and the dollar availability and the exchange rate. So this helps as a local available raw material for which you incur the cost in the Egyptian pound only. So I think Egypt will be a faster traction. When we had planned Mexico, we had the America markets in mind for value-added PCR product, but there, the utilization levels are currently not so good.
Okay. So what are the utilization levels in Mexico for the PCR line?
35-odd percent or so.
Okay. Okay. But in Egypt, you are expecting a faster ramp up?
Because Egypt, we are not looking at -- we are looking at this as a substitute to the virgin raw material.
Okay. Okay. Got it. Sir, my next question is on the expansion. So are we on track with our aseptic debottlenecking and the PET chips expansion in India and then Egypt?
So aseptic expansion in India is -- we will complete, I think between Q2 and Q3 of FY '25.
Okay. And the PET chips plant?
The PET chips plant, we will complete in India in March and in Egypt between Q2 to Q3 FY '25.
March '24.
In India, current quarter, and Egypt Q2, Q3 of FY '25.
Okay. Okay. So you mentioned that in Mexico, we have doubled our volumes on a Y-o-Y basis during the last quarter. So -- but in Mexico, we were already running at almost 100%, right, for the last maybe 1 or 2 years. So has there been any -- was the last quarter weak or -- plus there was any debottlenecking. I think what is the utilization in Mexico for Q3?
So Mexico utilization in Q3 is 92%.
92%. So basically, the last quarter was very weak. I think Q3 FY '23 was very weak. But overall, we were doing close to 100% in Mexico, right? Was there anything exceptional during the last year Q3?
More than a year back, but -- because there has been a volume drop in the last fiscal and the first 6 months of the current year as well.
Okay. Okay. And broadly, what's your assessment on the spreads? So like in the current quarter and, let's say, going forward, how are you seeing spreads in India, especially? And the overseas regions where the spreads are weak relatively?
So overseas regions the spreads are before you in terms of consolidated minus India balance sheet. They vary from the market to market. So very difficult to give you one number. But overall, pattern can be seen from total consolidated minus India business, which gives you a flavor of the margins in the packaging film business in the offshore markets. In India, in the packaging films, currently, everybody is operating at a loss. And that has been the trend for the last 2 quarters. And maybe marginally at an EBITDA positive. But overall, the -- I don't think so there's anybody who is making any money at a PAT level in the packaging films.
So this is in context to BOPET, BOPP or both?
Both combined I'm saying. I'm not giving one particular segment. BOPET is slightly more distressed, and BOPP is slightly better.
Okay. And how many lines are you accepting, globally...
Sorry to interrupt Mr. Singhal. May we request that you return to the question queue. There are participants waiting for their turn.
We'll move to the next question. That is from the line of Nishant Shah from Emkay Global.
My question is, are there any plans to raise the funds via sale of an asset or the QIP because the EBITDA level is low and the debt is on the increasing mode?
No, there are no -- currently no plans to raise any equity through QIP or any other means.
So how you are planning to pay down the debt?
The debt -- whatever is the debt, we will be paid through the cash generation from the normal business operations. So we're generating enough cash to pay our -- whatever is the annual debt servicing. There is no issue on that.
Okay. And are there plans to make it to a debt-free company or something or it will on debt?
As I've been saying that there are amortizations which we keep on paying and then there are the new plans for the CapEx, which are made depending on the market. So -- whatever is the amortization annually, the debt will be paid to those levels only. And as and when there are new investment plans, we'll obviously sort of inform the market.
Okay. And is it possible to give some kind of color on the breakup of sales and the profitability on the packaging films whether if it is India or outside India?
I already said that outside India can be easily derived from a consolidated number. If you reduce the India numbers, that is packaging -- because overseas, it's only the packaging films business only. So if we have -- if we have an EBITDA of let's say INR 426 crores, out of which INR 171 crore is India. So overseas business is generating an EBITDA of INR 255 crores.
Got it. And how we are placed versus the rest of the players outside India?
How are we?
How are we placed versus the peers, basically?
I think all of them are having the same issue that given that there is an oversupply situation and then we had additional situation emanating from the Russia-Ukraine war, which led to consumer -- tepid consumer demand in Europe. U.S. as the Fiscal Act was increasing the interest rates and taking away the excess liquidity from the market. So the consumer demand got impacted since 1.5 years. And that -- when the capacities also came at around the same time. So that led to lower demand, higher supply, lower raw material prices. And that led to ultimately the fall in the margin -- realization and the margin. But as I said that the America demand is robust in this quarter. America plant has done -- achieved the capacity utilization of 100%. The Mexico plant has achieved capacity utilization of 92%. So America markets are back. Europe still continues to be underperforming. And from 1st of January in Europe as the energy prices have now been stuck. So we have to see the impact, how does that impact the consumer sentiment and the purchasing power comes back.
Right. So when you are expecting to get normalized if it gets normalized?
I think this question has to be addressed in two accounts. One is the demand side in Europe. I think let's look at the next 2 quarters before we sort of make more firm statements. And the other side is on the margin side is the oversupply situation. Now the oversupply situation is surely going to take some time to get addressed. And -- so overall, it would be -- even if the Europe gets corrected in terms of its demand, that will impact the prices and the margins a bit, but like if you see today now November onwards, now we have this Red Sea crisis whereby shipments from India, Southeast Asia to Europe are getting impacted by way of longer voyage, higher freight costs and all that. So that's bringing in the local sourcing back. So -- because the customer wants reliability of the supply chain. So I think the local plants like us with the Red Sea crisis will do better as we did better in the COVID times when we seen the supply chain disruptions.
So I think overall, let's wait for the next 2 quarters before we give more firm guidance as to the state of affairs in European market. America, we've already said that -- we already at about 100% capacity utilization at our 2 plants. And that's where we are looking at expanding that market in the current and the next quarter, and see possibilities of exports from Nigeria, where we have a capacity to serve those markets, additional volumes in those within America.
The next question is from the line of Kaushik Poddar from KB Capital Markets Private Limited.
Two things. One is the margin and the second is the debt. Do you think the margin can -- will remain around, say -- you have called out for 2 quarters being -- 2 quarters are required to see how things will work out. But still, we can maintain that 12% margin? And secondly, on the debt front, do you think that debt peaking out in the second quarter of next year?
So I think the margins -- clearly, we've seen first quarter, second quarter and third quarter are getting marginally better. Current quarter, I think we love to see improvement over the current quarter's margins also given that -- but it's still too early and Red Sea impact is to be assessed. But if there is a positive impact on our business because of the Red Sea crisis, we'll definitely see a better margin. The debt levels, yes, you are right that we'll see FY '25 may the debt will peak out because some of the projects are getting commissioned in Q3. So the debt will peak out in FY '25.
And the debt level peaking out will be around INR 5,500 crores or it can be more?
It is right now at about INR 5,250 crores debt.
That's net debt, right?
That is the net debt. I think we can look at about INR 500 crores more in that.
INR 5,700 crores, INR 5,800 crores.
Yes.
Okay. And about the -- I think you haven't spoken about...
There will be amortization of the debt also. So this is a new debt which will be added. But then there will be amortization of like thing that also. So probably the number wouldn't be beyond INR 5,500 crores. But let's see.
Okay. And this Tetra Pak expansion -- I mean, Tetra Pak, of course, is a brand name of -- that belongs to your competitor. But that will -- that expansion will come on stream in the second, third quarter of this next financial year, where does it come onstream?
We are expecting -- so the season starts in January, okay? So whether it happens in Q2 or it happens at the end of Q3, it does not make a difference. So -- but definitely before the next season, we will hit the market with...
And the capacity will go up from what quantum to what quantum?
About 12 billion packs.
Come again, please?
From 7 billion packs per annum to 12 billion packs per annum.
That's a substantial. That is substantial expansion.
The next question is from the line of Miraj from Arihant Capital.
Just wanted a couple of clarifications. First thing, so do we look at contribution margins over years because I think that is what is followed in the industry where we, from the revenues we subtract the cost of goods sold and the power and fuels. If we were to look at those figures, is there any improvement on the contribution margins that we're looking over here or are we still negative on the contribution margin territory?
No, contribution margins we're not negative.
Okay. So I believe that currently, the entire industry is operating at below historical lows. Is that the right understanding?
I cannot say historical lows. But yes...
I'm sorry, historical average. I'm sorry, historical average.
Historical average [Foreign Language], yes.
Okay. And to see the view over here, do we expect the recovery to happen in the next 4 to 6 months, above historical average? Or is it still far away because the...
Okay. We'll have to really see market by market and not necessarily for -- true for all the markets. I think India is an oversupply zone certainly. So this market will remain under pressure. But the global markets are not fully linked to what India is. So they'll behave on their own depending on their own demand, supply and costing dynamics.
Understood. Sir, what would be the contribution margin for India right now?
I think we are not sharing details at that particular level for a particular business segment. But overall, if you see, we have the COGS is about 53.3% of the revenue.
Okay. Okay. And so in terms of per tonne, we don't share the figure?
We don't share the figure.
Okay. Next thing, sir, on the India front, what kind of capacities are we seeing that are coming in, in the next, let's say, till FY '25? Is there a substantial capacity remaining or is it slowed down because already we are in an oversupply zone?
So I think in India, the BOPET capacities are almost all of them have now been completed. On the BOPP side, FY '25, '26, may be fresh capacity additions. But on the PET side, it is more or less done.
Understood. So the current -- I believe the current utilization in this industry only -- average industry is close to 65% to 70%. Please correct me if I'm wrong at this figure. Do we expect that given the industry demand by, let's say, FY '26 end the utilizations will be at an optimum level in the current capacity itself?
Good part is the India market the demand growth is at least 10% to 12%, which is very, very healthy. Now the overcapacity this time has been slightly [ bunching ] has happened. So that is why we are seeing this phenomenon. But overall, it should take a couple of years before the demand supply mismatch should get over.
Understood. And just one last thing. Sir, in Egypt, we started our post-consumer recycling facilities for the rPET flakes, that is to substitute the virgin raw material. So can you just highlight what is the pricing differential that we'll be benefit of?
I think about 5% -- 5% to 7%.
So 5% to 7% is the difference in -- so that will be the same figure that will be reflecting in our margin, right, EBITDA margin, if I were to look at it? So I'll have an improvement of 5% to 7% in my EBITDA margin as well because of this.
So it will not be fully because we are not going to be fully self-sufficient in our raw material requirements with this plant. This is only -- this makes only about 1,200 tonnes per month.
Okay. And what is the requirements, sir, for us over there?
Our requirements would be much larger, maybe 3 times of this.
Okay. Okay. Sir, any plans to bring this to India this facility for our India facility?
So India already has this facility in a much smaller way, which was more like a pilot plant here. But India, we are not looking at sort of expanding this facility. The opportunity with the vision with which this facilities were to be set up was to sell the recycled -- using the recycled raw material, the BOPET film. Now the market is going into the tailspin. So that market has also got infected, and that is where we said that -- either we were actually looking at selling -- using this film to make the BOPET film from the PCR chips.
Now that market is also likely to become much better as the companies are becoming more conscious about the recycle -- using the recycled content. And on that basis, there is a huge opportunity to make a much more higher return as compared to using the virgin raw material. But -- and with that intent only, we had set up this plant in Mexico to cater to the U.S. markets. There was a requirement for these recycled raw material films. But given that market overall took a tailspin. So Egypt, when we planned we -- because Egypt, there is no -- we have to import all the raw materials or pay the import parity price for our raw material. And with the exchange being the way it is, this you buy bottles locally, you process them to make the PET chips. So the raw material is available locally for this product, and that's where you will get a differential margin in this.
Just two clarification over here.
Sorry, Mr. Miraj, may we request that you return to the question queue. There are participants waiting for their turn.
[Operator Instructions] The next question is from the line of Harsh Shah from Dimensional Securities.
Am I audible?
Yes, sir. Please proceed.
Yes. Just one question on the spreads and realization. So if I look at our spreads have come down from around INR 1 lakh per tonne to INR 90,000, both in domestic as well as -- overseas business. I just wanted to get a sense that by when do we expect our spreads to be recover back to the normalized level, in absolute terms? I understand that you are talking about oversupply in India as well as overseas markets. So just wanted to get a sense of what is the kind of spread that we are looking to work with. Since the raw material prices have come down, do we expect to recover our spreads as well?
So given the oversupply situation, if the raw material prices are falling, the selling prices are also falling in the same manner. So -- which means that your spreads are getting -- are remaining the same. The raw material price benefit is not being retained by the industry, but it's being passed on to the customer. Having said that, normal levels would be that your EBITDA margin on an overall basis should be about 14.5% to 15% range, which currently is about 12.5% range or so. So this gap of 3% is what has to be -- has to get corrected. And it will get corrected with the improvement in the European sentiment. It will get corrected with the demand supply [ equilibrium ] becoming better in India. And for us, there may be -- there is another opportunity to make it better when we start using our own PET chips raw material in India and in Egypt.
So when our PET chips -- our backward integrated plant for PET chips gets commercialized, when do we expect the benefits to trickle down in the margins. I assume the first priority is to ensure the availability, right? Or will it start saving us cost from the day 1 itself?
The cost savings will also be from the -- if not from quarter 1, it will happen from quarter 2 as the cost stabilize. There may be some extra costs when you start the plant, which will -- which is a matter of 1 or 2 quarters at the best to make it normalize. So not much difference between the starting of the plant and reaping the benefit of the lower cost of the raw material for your plants.
The next question is from the line of Chirag Singhal from First Water Fund.
So what is the CapEx for FY '25 and current fiscal as well?
Current fiscal, I think what-- we're looking at about FY '25, including the PET chips resin and the normal CapEx as well as our residual to be done on -- should be about $100 million.
Okay. So this includes the INR 140 crores, INR 150-odd crores of maintenance CapEx that you incur every year, right?
No, that will be external. So we're talking about the residual to be done in India, PET chips in Egypt, debottlenecking in Aseptic Packaging as well as certain other sort of...
Sir, how much is the residual CapEx in both the PET chips plant, which will come in FY '25?
About INR 150 crores.
INR 50 crores, which is the total across the 2 plants, which is the residual CapEx?
Because the main thing is the plant and machinery, which hasn't come, so the main CapEx is -- will be there in FY '25 only.
Yes. But -- so my question is this INR 150 crores that you just said, this is the total across all the 2 plants, right, across the two...
Aseptic expansion, debottlenecking.
This is the debottlenecking. And what about the PET chips residual CapEx total for both the plants?
Chips in Egypt is $70-million-odd. This will come in FY '25. And the residual of -- the PET chips in India should be about $20-odd million, $20 million, $25 million.
Okay. Okay. Got it. So basically, $100 million, this is the growth CapEx? And then you're saying the maintenance CapEx will be over and above this.
Yes.
And what is the CapEx for FY '24 that we're envisaging?
Sorry to interrupt Mr. Chirag. May we request that you return to the question queue. There are participants...
This is a continued question, ma'am, if you can let me?
This is the CapEx for -- in FY '24.
Yes, yes. The current fiscal.
It is given in the presentation.
Yes, including the Q4 resin, what is your guidance for the full year?
INR 1,000 crores -- INR 1,004 crores.
We'll move on to the next question that is from the line of Miraj from Arihant Capital.
There's two things that I wanted to understand from the last question only that we spoke of, sir. You mentioned that the requirement for recycled PET chips is much higher in India. And because of that, you had put up a pilot facility. I believe, from my understanding about the market right now, there is still demand for the recycled PET chips and the difference is significant as well. So why are we not doing this in India?
See, I said that the basic need for the PET chips, setting up the PCR plant was to sell the PCR-grade PET films and -- which give you an accretive margin. So it was not intended to replace the virgin raw material with this because -- like you see, a couple of years ago when the PET chips prices were very high, the raw material prices were much higher than what they are today. The margins for buying -- margins for buying the old PET chips and converting that into the PET chips resin was much higher.
But today, when the raw material -- virgin raw material prices have also come down drastically, the margin has shrunk and margins depend on the region-to-region on the -- with respect to the availability of the PET bottles and the pricing of the PET bottles because that does not -- that also gets impacted by the virgin raw material prices, but up to a very limited extent only because these are ragpickers picking up the bottles and then through that process, you get the bottles for the processing at your plants. So there the margins, the opportunity to get a lower pricing is not much. So it depends from time to time. Today, when the raw material prices are down, this delta is not there in certain markets. Is there in certain markets. So I think it's an evolving situation. But as I said, the prime motive was not to replace it with the virgin raw material. The prime motive was to make a value-added film with this and sell that film at a premium to the virgin raw material film.
Okay. Okay. Understood.
That's over a time which will happen. Unfortunately, the markets went into a tailspin. And markets like Europe and America will be the leading -- will be the leaders in terms of the PCR film demand coming.
Right. Got it. So if I were to just understand it in a different manner, it is not economically feasible to put this facility or increase in India. Is that right?
So today, it may not be, but at some time, it may be. As I said that today, the raw material prices are also at the low end. So today, the virgin raw material may be cheaper than the PCR PET chips.
I understood. Right. Okay. Got that. And sir, the second thing, in the Egypt facility of PCR that we have, I just wanted to clarify this, the price differential between virgin and recycled is 5% or the margin difference is 5%?
The raw material cost differential may be 5%.
Raw material cost. Okay. Okay. So let's say, if my virgin is coming at INR 100 per kilo, this would be INR 95 per kilo.
Yes.
[Operator Instructions] As there are no further questions, I now hand the conference over to the management for the closing comments.
So thank you once again, ladies and gentlemen, for the engaging questions. We will soon have the transcript of this call on our website, www.uflexltd.com. We look forward to speak to you again in the coming quarters. Thank you, and have a great day. Moderator, you can go ahead and conclude the call.
Thank you. Ladies and gentlemen, we thank the management for this call on behalf of Dolat Capital. That concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.