Uflex Ltd
NSE:UFLEX
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
Abbvie Inc
NYSE:ABBV
|
Biotechnology
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Realty Income Corp
NYSE:O
|
Real Estate
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
403.3
843.6903
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
Abbvie Inc
NYSE:ABBV
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Realty Income Corp
NYSE:O
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Uflex Ltd
You don't have any saved screeners yet
Good evening, ladies and gentlemen. I'm Hanila, moderator for UFlex Limited Q4 FY '22 Post Results Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions]
Please note, this conference is recorded. I'd now like to hand over the floor to Mr. Nitin Agarwal from DAM Capital. Thank you, and over to you, sir.
Thanks. Hi, good afternoon, everyone, and a very warm welcome to UFlex Limited's Q4 FY '22 Post Earnings Call hosted by DAM Capital Advisors Limited.
On the call today, we have representing UFlex Limited management Mr. Rajesh Bhatia, Group CFO and President, Finance & Accounts; and Mr. Vinu Saini, our Vice President, Corporate Finance, M&A and Investor Relations.
To start the call, I'll hand over the call to Mr. Rajesh Bhatia for making the opening comments and then we'll open the floor for Q&A. Please go ahead, sir.
Thank you. Thanks, everybody on the call, for taking their time out for this earnings call. We had a stupendous quarter and a very good FY '22 as you would have seen in the numbers.
We almost clocked the INR 4,000 crores top line this quarter. And for the year as a whole, it was INR 13,225 crores of top line, which is up by close to about 49% over last year. And this 49% growth is backed by close to about 30% volume growth in both packaging as well as the packaging film business.
Our EBITDA for the year is INR 2,280 crores, which is the highest ever we've achieved. The quarterly EBITDA at INR 734 crores again is a quarterly highest number. And for the year as a whole, the EBITDA grew by about -- close to about 25%.
The EBITDA margin was 17.24% this year versus 20.5% last year. But I think if we take out the impact of the raw material price increases and the consequent price increase in our finished products, I think we are very close to about 20% EBITDA margin. So if anything, we bring it down to the same last year prices. I think...
[Technical Difficulty]
Ladies and gentlemen, please stay connected while I connect the management team back on the call. Welcome back, sir. Please go ahead.
Okay. Sorry, gentlemen, the call got disconnected. So I'll repeat again. I think we were -- I was telling you about the EBITDA margin this year is 17.24% versus 20.5% last year. But if we neutralize the impact of the rising raw material costs and consequent increase in the finished goods prices, I think we're pretty much around 20% EBITDA margin, what we had achieved last year. And the PAT at close to INR 1,098 crores is up 30% this year. The leverage ratio is pretty good at net debt to EBITDA is 1.74x.
During the year, we've commissioned our Hungary facility, which got commissioned at the beginning of the year. And then subsequently, during the year, we commissioned our Nigeria facility. We have also recently commissioned our aseptic packaging expansion as well. And that sets the pace for the FY '23 as we continue to do pretty well in terms of volumes from the aseptic packaging business. We've told you earlier also that all our plants, except Nigeria, were running at close to 100% or, in certain cases, even above the installed capacity number.
And Nigeria was compounded by various problems of the supply chain issues for the raw materials because all the raw material there has to be imported and all the finished goods have to be -- part of the finished goods have to be exported. So there are some supply chain bottlenecks in that infrastructure, which are which are being sorted. And hopefully, in the next 1 to 2 quarters, we see much better numbers from that particular business because all other businesses are at almost full capacity levels.
We also -- back this extremely strong growth this year, we also had our share of rating upgrades. So the recent, the last one, the latest in the list is CRISIL has upgraded our short-term as well as the long-term credit ratings. The short-term credit rating is the highest category now, A1+, and the long term is AA-, which speaks about the credit stand and strong financial performance and a very, very conservatively the leverage profile of the company.
In terms of our liquid packaging business, I'll just give you an insight that in this year, we achieved almost 86% capacity utilization while last year was about 50%, 55%, so -- and with the expanded facility also, which has come into play recently, is also ramping up pretty well. So we are -- we could see good numbers in that business in the current financial year. So I think there is a presentation which has already been shared with you. It's there on the website also. You can have a detailed insight into the performance area parameters.
Just sharing you our numbers. So the net debt is now a little under INR 4,000 crores, which includes both short term as well as the long term. The long-term debt stands at about INR 3,500-odd crores. And the rest of about INR 1,000 crores is the short term. And we have about INR 600 crores cash on the balance sheet. And the net debt on that basis is about INR 3,974 crores. It's up by close to about INR 600 crores as compared to March '21, which is largely invested into our Dharwad and Dubai facilities, which we had announced, I think, a couple of years earlier, which are now getting commissioned in FY '22 and will give us additional revenues as well as profitability.
So whether it is quarter or it is the year, I think this has been UFlex's best-ever performance on all parameters, whether it is a production number or a sales number, revenue, profitability, EBITDA as well as the PAT. We are -- at a PAT level, we are hit this year by devaluation of its currency by about 16% by Egypt, which happened on 21st of March, which has impacted our bottom line by about INR 38 crores and has been shown as an exceptional item because this one was an official devaluation of the Egyptian pound by the Egyptian authorities. So that has been reported as an exceptional item.
The rest, I think all the numbers are with you, there is no other abnormality in the financials. Dividend is slightly up this year to about 30%. We've also announced, along with the financials, our backward integration into making the polyester chips for our facilities in Noida as well as our upcoming facility at Dharwad. So this is to ensure -- protect our margins as you would have seen that the raw material prices have gone up quite substantially in FY '22. So that -- number one, that helps us to insulate in a certain way from our raw material -- for our raw material pricing.
But I think a bigger advantage is that, given that disruption, what we've seen after the pandemic, I think that insulates us from our -- from a perspective of our raw material security also as the -- with Dharwad. We are close to the Dharwad implementation, would mean almost 80% of our existing capacity in India is added. And that's one which was putting us on a substantial risk from a raw material perspective. So this investment is to protect our margins as well as to ensure raw material security for the PET resin business.
That's, in a nutshell, about the financials for Q4 as well as for FY '22. We are open to any questions that you may have. And if we have ready answers, it's always my pleasure to share that with you. But just in case there are certain numbers or figures which we don't ready have, we'll surely get back to you as we -- thank you.
[Operator Instructions] The first question comes from [ Yash Banthibhavya ] from [ Banthi Equity ].
I just have a couple of questions. And I just want to bring something to your notice since you said the dividend payout has actually gone up. Actually, what I would like to bring to your notice is UFlex's dividend payout percentage has actually declined every year since 2013, '14, '15, '16, '17, '18, '19, '20 and '22.
Your dividend payout, for example, was -- payout percentage I'm talking about, was 9% in '14. And in '17, it was 7%. And in 2020 to 4% and now in March 2022, it has come down to 2%. So my question is why has the dividend payout decreased substantially? And why is that decreasing continuously for the last decade? That's my first question.
See, broadly, if you see, we had a very broader CapEx program in the last few years, the results of which are evident from a financial performance for FY '21 going strongly into FY '22. And all these expansions were also funded largely by the debt numbers also. So in terms of making the resources, equity resources available from our side to invest in these as well as certain restrictions that come from the banks as to how much you should be distributing, I think -- so it's been a balance of the two.
Yes, I may agree that if you look at the payout ratio, it's lesser. But in terms of the fact that the money was required in terms of flowing it back into the business for the expansions that we've done in the previous year, the current ongoing Dharwad and Dubai expansion and now the expansion of doubling-up capacity of the aseptic packaging from 3.5 billion to 7 billion packs and now the backward integration into making the polyester chips.
So I think this is helping us to make our business stronger by being a substantial capacity player across the globe. And aseptic packaging, where the markets have responded very well to our products, and as I shared already with you that even the new capacity that we've added, we've seen a very good traction on the numbers there.
So it's basically what we have done is a large CapEx program in the last, say, 4 to 5 years, driven largely by the debt funding that we've raised. And yes, that has helped us to boost the revenues, boost the profitability and overall numbers look great. But still, in terms of the absolute amounts of the payout, they've gone up in the last 2 years. But on a payout ratio, I agree, and the reason which I just shared with you.
Hello? Am I audible?
Yes.
So the reason I brought this to your notice is that it is my humble opinion that a packaging giant like UFlex can definitely afford a dividend payout of, let's assume, 5% to 10% by sustaining of CapEx. And that is why I brought it to your notice. And coming to my next question, sir. My next question is regarding the demand.
Crude oil is at $120 per barrel as of today. What do you see the demand outlook from your -- since there are rumors of us heading towards a global recession possibly? And let's assume crude oil goes up by another 10 points to $130 or $140 per barrel. How will that impact our raw material? And how will it impact the demand that we are seeing?
Yes, I think our demand issues, you are right that the world is talking about the U.S. and the Europe going into the recession. That's a harsh reality which is facing us. And actually, if you see prior to pandemic also, there was a talk about U.S. going into the recession, but the pandemic changed that totally. And now that we're seeing the U.S. inflation at record-high. We're talking about interest rate incremental scenario, which will sort of impact the demand side.
That's mostly true for a lot of commodities, commodities as well as the other consumer purchasing habits. But when I look at what I do or UFlex does, so 95% of my business is packaging foods, which is the basic necessity for the life. So given that the food -- and we don't do any fancy food stuffs and all that. We just -- the primary packing of the food is our core business. So there, frankly, we don't see any impact of recession coming and affecting us.
On the crude oil prices, we've seen in the past that frequent changes in the crude prices or frequent changes in prices because of the supply chain disruptions affected our margins in Q2. And we were quickly to realize that. And we started changing our policy from a longer order book to just a 7-days order book. So that's what we will be doing currently as well. So the raw material price increase are passed on as soon as possible to the customers in the packaging films business.
In the packaging though, still there is a lag there for a month or going maximum up to 3 months' basis. So that lag is going to affect your margins as the raw material prices go up. There also, we're trying to -- if the adjustments are too large, we discuss with our buyers and sort of rediscover the prices with them and they also understand the dynamics.
But yes, there's definitely a lag there. And I can't -- I have no qualms about not admitting that. But in a larger business now, which is the packaging films business, which is about, I would say, about 60% to 65% of our top line, there, we are pretty safe, pretty agile in terms of the raw material price changes and the consequent selling price changes.
So from your answer, can I conclude that even with crude at $130 or $140, we won't see a very good impact on the demand?
I don't -- that's what I said that, given that there's the basic necessity of life that we do, I don't see our demand side [indiscernible] in our business.
Also, are we -- you made a recent disclosure about [ readiness state ] in global market. Can you put some light on it?
I think what we are trying to do is we're trying to lift our holding company at the Dubai level at either in U.S. or European or other relevant stock exchanges with capital there. That serves two purposes. One is you get your leverage improved substantially, which improves your rating. That gives you the capital for the further growth that you want to do in the business.
And on top of this, because the numbers that -- the guidance that we've been having from our bankers, our investment bankers, in U.S., the valuations are pretty much different there. So that would also -- listing Dubai will also help you to sort of revalue at UFlex India level as well. So that's the whole objective.
Also my last question -- I'm going to be finishing off here, sorry for taking so much time. Do you have any plans of listing aseptic packaging, the part -- the subsidiary that [indiscernible] on the exchange?
So aseptic packaging is a division of UFlex and not a subsidiary of UFlex. So it's already listed as part of the UFlex.
No, I meant a demerger. I meant a demerger of the aseptic packaging. Because obviously, it will demand a much, much, much higher valuation than what UFlex is. Because it uprates UFlex from being a commodity...
You're right. It's a great idea. I think we can -- we'll definitely discuss internally. And if there is a merit in this and there's a value to be taken, why not? You can do it now or you can -- I think if our current capacity, we can -- next couple of years, we can operate at the higher, increased capacity level consistently, obviously there'll be a time to further grow there.
Because that one segment is growing at close to about 18% to 20% annual growth rate. So that really sets up the pace for you to grow that business. Maybe as a separate subsidiary, I think that's a good suggestion to take it back to the management. And if there is a merit on this, we'll [indiscernible] and grow that business separately.
Precisely. Yes, because the business has grown 100% year-on-year at a very fast pace. And since that business is very hard to enter into and it has a lot of barriers to enter into. It will definitely have a very high valuation compared to what UFlex has today. And congratulations on your performance.
Thank you.
The next question comes from Kaushik Poddar from KB Capital Markets.
Yes. See, I just want to draw your attention to the comment made by your Chairman. Two things, he is talking about the Plastic Waste Management (Amendment) Rules Act, number one. And number two is the U-Shape paper straw. So if you can comment on both these things?
So India has now implemented a new set of EPR rules from 1st of April 2022. Now as compared to the earlier thing, there are two new things in this EPR policy. One is there is a step-up for obligation on the brands, like PepsiCo, Unilever and all that, to step up their recycling of the plastics that they buy every year, assuming that Unilever buys 200,000 tonnes of plastics. So each year, they will ultimately in the next 4 to 5 years, they'll be 100%, but it's a step-up requirement for them to ensure that whatever plastics they buy, that is recycled. So that's one. And if they don't want to recycle that or they want to sort of do -- the other option that they have is make the packaging biodegradable.
Now UFlex definitely has a unique advantage in both these because not only we have the recycling facilities at our major plants in Jammu as well as in India and the recycling capacities are also in a small showcase, they are being set up in Mexico and in Egypt. But we also have a biodegradable product range also. So I think that's what the Chairman said that as these rules become effective and as they are implemented strictly by the government, so there is a play for recycling as well as for the biodegradability -- biodegradable packaging terms. Second question about paper straws. From 1st of July, the government has banned the plastic straws in the country. And so you have no choice but to go in for paper straws. So we are creating the necessary infrastructure at our Sanand plant. Because in the aseptic packaging, you would have normally seen that there is a diagonal-shaped straw attached to the pack. So those straws now have to be the paper straws. So that necessary infrastructure, we have to do. We are also hearing that the government may -- given that there are situations where, given these tougher deadlines, some of the companies may not be in a position to convert immediately to the paper straws. So there, the deadline may be extended a bit, but let's see, there's still some time.
But what we are saying is we've prepared ourselves well in advance to ensure that we are market-ready, whether it is 1st of July or it is 1st of September or 1st of October or 1st of December, whatever the government decides, we should be ready to give our customers the product because otherwise, the other possibility during this period is for everybody to import these straws, where the costing is going to be very, very different as compared to sort of producing this in-house. And all manufacturers do manufacture this in-house normally.
And this paper straw, the thing you have already done it? I mean, 1st of July is not too far off. So you have already done this paper straw along with this Tetra Pak?
So we are in the process of doing this. So partially, we'll be able to achieve before 1st of July. And then in the next 6 months, again the more machines are being added to comply with that.
So these paper straws, you are manufacturing yourself or you are getting it from some of the paper manufacturer or whatever?
No. We are doing it ourselves. So even the plastics straws earlier, we were manufacturing ourselves at our Sanand facility...
No, plastic was up your street. The paper was not exactly -- was not [indiscernible].
Aseptic packaging business is more of a paper business rather than a plastic business. So that's where you're already buying a lot of paper for that. And so this comes as an additional small setup to convert from plastic to paper straws.
And this EPR thing is yet to translate into a good amount of revenue or profit up to last year. Do you see this EPR Act -- I mean, this new act, which is Plastic Waste Management Act, coming into force, your profitability and turnover looking up some way with all the likes of Pepsi or ITC or whatever taking your help?
So I think as of now, the management mindset is not to invest into recycling from a business perspective. The...
Management of the -- management of your -- say, management of Pepsi and all these people or management of paper players?
UFlex.
UFlex setup. Okay, okay, okay.
So UFlex has set up some of the recycling facilities. But there is more as those things have helped us to showcase to the government that the plastics is indispensable. And there needs to be a strong regulation to recycle that. And recycling is possible as could be seen at our multiple facilities in India or abroad, okay? So that's a method which has gone well with them. And that's what it is imbibed in the EPR.
But as a business focus, I don't think so that we're going to invest in setting up the recycling facilities for our brands. What we can help the brands with this is that if they need any technology to make this happen or some handholding to make this. Because ultimately, what they will -- is the responsibility which is casted upon them. Now whether they do it themselves or they do it through a third-party recycler, which come up at the various -- because recycling cannot be that you transport that waste to one large center.
So there has to be small, small recycling plants at all -- at multiple places, which will do the -- which will take the local garbage and sort it out and recycle that. So from any -- getting into that business and handling that waste and all that, it's not UFlex key business. But biodegradable plastics, where certain enzymes are added, then the plastics fillers or the packaging fillers are made and that becomes biodegradable, clearly we see as a huge potential for the business. Because if the brands do not want to go in -- can you hear me?
I can hear you. I can hear you, yes.
So if the brands think that rather than going through this cumbersome route of recycling, it is -- it makes much better sense for them to just produce the biodegradable film. And this will be -- they'll do their cost-benefit analysis, their efforts and all that. So that's where UFlex will definitely look at increasing its revenues from these enzymes and the flexible and the biodegradable packaging.
Have you found any user for your biodegradable products?
Yes, we have. See, the users are always there. But what it means is that there is an increased cost to this. And unless the regulation is there, I think nobody is -- everybody would make forward-looking statements. But at end of the day, to shell out that extra money as people look at each other and say that, "You do it first and you," but when there's a regulation in place, then everybody has to fall in line. So as of now, the government has given them two choices of recycling or biodegradable.
And this is a step-up thing, maybe 25% to begin with, then going in the fourth or fifth year to about 100% of what they buy. And I think this will evolve in the next 2 years or so as to which way the brands want to focus. Maybe they can do a hybrid model as then because they also do not have -- may have full clarity to begin with. So they may also go in for a hybrid structure that some recycling facilities they set up or somebody else sets up for them and as a job work for them and a mix of the biodegradable things.
And before I end, I just want to highlight whatever two other participants have highlighted: a, demerger of your aseptic packaging division; and b, if you can be more shareholder-friendly in the form of dividend. If you can do these things, I think that will do your stock a lot of wonders.
[Operator Instructions] The next question comes from Shivam Saxena from ICICI Bank.
Congratulations for good results. My question is, one, what is the path of debt reduction? When do you see the company as becoming net debt zero and then I think more cash would come to equity holders? So what is your path on -- and the interest rates are going up. So what is your path to that?
I think if I -- we don't want to become in that net debt zero company. I think that's the most inefficient way to grow your business. The debt, particularly the kind of debt, as I said, that are 60%, 65% of the business is now our international business. A very small portion, 1/3 of the business, is now India business, where the rupee that may be higher. But to borrow in euros or dollars at between 1% to 2% kind of spreads is -- and with your ROCE being 16% or so, I think it makes sense to leverage that.
But yet the leverage has to be very, very prudent. You just can't -- and at 1.74x of net debt to EBITDA with no major CapEx in sight, I think we will gradually reduce our debt amortizations volume. And next year, amortization is about close to about INR 500-odd crores.
Okay. And one more question on the rating upgrade, you got a rating upgrade from CRISIL. So what is that? Have you negotiated for lower interest rates from bankers on that, the rating of upgrade?
Yes. We've done that. Some of the banks have already reduced interest rates. And some of them are in the process of doing it. But surely, we'll get that mileage out there.
Okay. And on the last question on the industry side, do you think the industry shape is changing, it is growing more structural in nature with e-commerce coming in, in fact, you said it is a necessity? So do you think there is some more -- then it was a more cyclical industry, now it is more of a structural change in the industry as per se?
I think it's a good point, what you are saying. We are also believing so. But I think it needs to stand scoping of time before we can actually say that we are moving that way.
The next question comes from [ Manasha ], an individual investor.
Congratulation on your performance. Sir, my first question is on clientele addition side. From last 3 years, the clientele addition has gone down while -- of the main business and for aseptic business, it has gone up. And sir, the reason behind it, can you please explain it?
I think one of the reasons behind this was that the capacities were fully sold out. So there was not much sort of opportunity to add on more customers. Because normally, you would do that when your plants are idling and you would even take the smaller customers and all that. Aseptic packaging, as you said, yes, we've added many customers. And with our enhanced capacity now also coming into operations, we'll add more. In fact, the order book there is overwhelming currently.
And on a month-to-month basis, we are not able to keep pace with the requirements, at least in this busy summer season, which is the peak season from a beverage perspective. But I think it's a good position to be in when your existing capacities are fully sold out and you don't have to add-on customers by sacrificing your margins or giving them inaugural incentives to come and be part of your business.
But I think over the -- so with our reach now, almost everybody and everybody in the world who is into the flexible packaging business knows UFlex. And the advantage they also consider is that with the supply chain disruptions at least, be sure that we'll get material from the other parts of the world to continue and maintain their commitments.
We've done that successfully this year with even our European and our Nigerian facilities supplying to the deficient markets like U.S. So we keep on sort of doing that. But to your point that even the customer additions have been a little less in the last couple of years, it's only because you're fully sold out.
Okay. And sir, the next question would be on the side of debt. In last two or three con calls, you said that the debt would be slightly above INR 3,500 crores. And from there, it would be gradually coming down. So when do you see this debt going now?
So as I said that we are at about INR 4,000 crores this year, net debt basis. And next year, amortization is at about INR 500-odd crores. So I think we are more or less around that number. And the new CapEx that we've announced is about INR 580 crores, assuming the rate about INR 400 crores of debt for that over the next couple of years because that project takes about 2 years. And by the time, another INR 1,000 crores existing amortization would have brought your debt number to about INR 3,000-odd crores now.
Okay. And sir, my last question would be on the side of the total net worth. The results -- or I would say the revenue results are more than even the market capitalization of the company. So are you willing to capitalize those results up and to be committed to it? Because it would be great from the market sentiment perspective.
We've not considered this. But we'll take this back to the management to have -- to ponder it over.
Okay, sir. And sir, the last suggestion would also be from my side that in case the dividend payout is very low, so in the next coming years after the CapEx is slightly lower, then it would be great if the UFlex use dividend as high as around 10% to 20% of the EPS. That's all from my side.
We'll take that.
Next question comes from Chirag Singhal, First Water Fund.
Mr. Bhatia, Mr. Vinu and the entire team, congratulations for another stellar quarter. So just two, three questions. First, you mentioned -- so we have mentioned about the listing of Flex Middle East. So concerning all the compliance and the timelines for other procedures, what is the internal estimate? By when are we expecting to list your overseas subsidiary?
I think where we are currently, it should take -- we should be in the absolute readiness in the current quarter itself for filing and all that. And then it really depends on the regulators to approve. And then the market timing in terms of when to do this and all that, I think our bankers would advise -- we'll get that advice from our bankers. But from our side, readiness perspective, I think it should happen within this quarter.
Okay. All right. Now the next question is on the Asepto. You mentioned recently on an interview that we have reached 90% capacity transition on the overall capacity, which is 7 million packs. So the traction that we're getting in terms of the faster ramp-up, is this more domestic-driven or more export-driven?
Both. So it's both. So 70% domestic and 30% exports.
And what was it likely in FY '22, when we're running just one line?
I think we are running at that number only. We were running at those numbers only. I don't have those right now. But we can share that with you later. But I think that will be around that ratio.
Okay. So 30% only, full capacity, which is 7 million packs, roughly, yes, you are saying?
Yes.
Okay. And sir, coming to the EBITDA, so what kind of incremental EBITDA can we expect? As you already reached close to 100% for Asepto, what kind of incremental EBITDA can we expect for FY '23?
Chirag, we are not sharing the business-wise sort of EBITDA numbers for this. But generally, we've given guidance earlier that in this particular segment, the margins are between 18% to 22%.
Okay. No, I understand that.
The next question comes from Subham Agarwal, Aequitas.
Sir, most of my questions are already answered. Just I had one question. So we have one line in Russia and two more lines in Eastern Europe. So given the current geopolitical situation, how are business there doing? Or do we see any headwinds there?
So our Russia business is -- so the business in Eastern Europe is Europe-centric mainly. So that is -- there's no effect there. Russia business was again for the domestic Russian market and other CIS markets and very small percentage, it was Ukraine. But with Russia getting sanctions now, a lot of things, which were a lot of raw materials were -- which was available in Russia, which was being exported to Europe, now that is available locally.
So earlier, we were not 100% dependent on Russian raw material availability. And we had to source the raw materials from -- either from China or from other places. But now we are getting almost 100% raw material stability within Russia only. So that's the positive. The second positive is that a lot of imports happening into Russia for the flexible, like earlier, we were -- before we set up this plant, we were exporting into Russia from our Middle East facility. So a lot of exports, which were happening into Russia, they've stopped now.
So the local demand is sort of pretty robust. So there has been only a positive impact on the Russia business per se. That's what I can share currently. And Hungary and Poland operations are absolutely unaffected because of any of the U.S. [indiscernible]. Yes, there was some raw materials, which we were getting in Hungary from Russia, which we now have to reorient from some of the other destinations, which has already been done.
So will this impact margin in Eastern Europe because of that? Or will we be able to pass it on completely?
No, I think we are -- the markets are very robust and all the raw material margins are being passed on to the customers.
Okay. Sir, just one question. So because our presence in Russia, do you think this will have any implication in listing in Dubai or anything like that?
I think we are quite close to that situation. So if there is a requirement to reorient the business to disintegrate Russia from the overall mainstream, we can even think of doing that. But I think that will happen more closer to when you are more closer to the event rather than today and as to how the things pan out in terms of the war. And so we're quite agile to that situation. And if there is a requirement, we can disintegrate Russia from the Middle Eastern business.
Okay. Got it. Sir, and secondly, just more on the demand and supply situation, so as per industry sources, we believe that a lot of BOPET lines are expected to come up over the next 18 months. So what's your sense, how many lines are coming up? And how do you see the line getting itself in the market?
So I think the number of lines coming up in Europe, in the major markets in U.S. or Europe are quite manageable. So they will not affect our demand-supply equilibrium at all. In the markets we are, we don't see that there is any irrational capacity which is coming our way to disturb the equilibrium as of now. So we're pretty confident of not having any major issues in any of the markets where we are present.
The next question comes from [ Saurabh Sharma ], an individual investor.
Congratulations to the entire UFlex team for finally getting to the INR 1,000 crore PAT number, which was slightly in doubt, at least in my mind, at the middle of this year, so a job well done on that. My first question is about the rise in interest costs and depreciation quarter-on-quarter, which is March '22 over December '21, despite no significant CapEx being commissioned. So could you please comment on that?
Just 1 second. Can we get back to you offline on this?
No problems, sir. So should I e-mail someone? I'm sorry, sir? Okay. I don't have the e-mail address, sir. What e-mail address should I write to, sir?
Investor Relations [indiscernible].
Okay. All right. I'll do that. Second question is -- so the expansion of Asepto and this additional Dharwad expansion, Dharwad and UAE expansion, that is happening in percentage terms of the existing capacity is going to be relatively insignificant, right? Because Asepto as far as [indiscernible] is going to be around INR 600 crores top line. Other raw materials over here, but it will probably be a little higher. And again, the Dharwad expansion is some 60,000-odd. So that is 10% of revenue -- 10% of current capacity.
So what I wanted to understand is where is the next growth going to come from in terms of significant meaningful growth is going to come from? Because comparing ourselves, comparing UFlex to chief global competitors, let's say, Huhtamaki, they're into food service quite big time. And in India, we -- I do not know of any organized player in the foodservice market, especially because it is a sustainable, paper-based packaging also.
It is recyclable and it is paper-based. So I wanted to understand this, whether the company has any plans to get into this foodservice packaging because that's clearly up and coming. And Huhtamaki already has set an example in this globally at least. So where is the meaningful growth going to come from?
No, we don't have any plans currently to get into any of these. I think we will remain core to our business, which is aseptic packaging, flexible packaging and the packaging film. Aseptic packaging today provides the positive scenario insofar as the margins and the growth of the business is concerned. So it's not only the India market, but we are supplying globally for this. The packaging films market already, we know. The third market, which is the flexible packaging market, you've seen that we've not done any CapEx there in the last few years, given that market is still in a consolidation phase. But India and globally, that market is absolutely different.
And while the foreign -- the U.S. and the European markets and other mature markets during the pandemic period had a great show in terms of their performance in the flexible packaging, unfortunately, India remains a different story at this point in time in this market. So that is why you see that there are no new investments we've made and neither there are on any plan. So I think currently what we have on the table is aseptic packaging, what we have double, then the two CPP plants and one PET facility. And then your margins will improve with this raw material availability. But apart from that, we don't have any other any other visibility...
But this PET chips plan that the company has decided to put up, I'm sure you would have seen over the past year or so, these integrated companies have actually been making almost 0% margins on the PET chips. Because the PET chips prices, they haven't increased as much as the PTA and MEG prices. So what is the thinking here in getting into PET chips at this juncture when the PET chips are running 0? And this margin reasoning, I understand...
I think those signs are gone. Today, if I look at conservatively, also this project gives you close to about 19% IRR project.
19%?
It's not only IRR projects. And this not only gives you your margin protection, but it also gives you your security also for the raw materials.
I understand. So security is, of course, understood. My only contention was the margin accretion -- margin-accretive component. And even the latest quarter results, you would have seen that it's been earning 0. PET chips have been earning 0. And you are, of course, much more aware of the prices of PET chips in the markets versus PTA and MEG. The prices of PTA and MEG have actually gone up much more than PET chips.
I think that those markets have reversed. And there are much higher margins for the converters from PTA to the PET chips now. You can look at some of the top suppliers in the world, their results for that. That situation is quite different today.
All right. Okay. My second question...
Sorry to interrupt, Mr. [ Sharma ], can you please join the question for more questions, please?
No, my first question wasn't answered. I will have to get back on e-mail. So this is my second question. I waited quite a long time myself being in queue. So if I can ask one more question, please? Yes. So my second question is about the preference share interest that has been recognized all at once in the March quarter. This would be the UTech Developers, Montage Enterprises transaction, correct?
Yes, yes, yes.
Yes, sir. So what is the reason for all at once for recognizing this interest all at once instead of quarterly?
So we thought that let the physical payment be there and we will [indiscernible].
So Montage has also sold off its stake in UTech in the September quarter, Bhatiaji, as is clear in the shareholding -- [indiscernible] shareholding pattern. So what is the real nature of relationship between Montage and UFlex? Are they related parties? Of course, not legally because...
I have no knowledge of that. I have no knowledge of that because Montage sold off our business. Whatever the buyer does, it's their business. Montage is then -- it's just a trade relationship between the two organizations.
Right, sir. Right. And sir, one last request, if the AGM can be held physically and if Mr. Chaturvedi, the CMD, sir, if he can be present. I mean, it's just a request to the Board because it's already been 2 years that no physical AGM has been held. And it would be great to hear the Board's point of view as well as CMD's, sir...
I'll take it back without any commitments to you.
It hasn't been decided yet, whether it will be a physical or an online conference for AGM?
Depends on COVID, we'll make the call.
That will be the last question for today. I'd now like to hand over the floor to the management for the closing comments. Over to you, sir.
Thank you, gentlemen, for allowing us an opportunity to present ourselves. To the best of our abilities, we've tried to answer all your questions, I think just one question which needs to be answered, which we will revert to [ Mr. Sharma ], and for giving us guidance on certain issues as well, which I'll be happy to take it back to the management. And if there is obviously certain things makes sense, certain things the management perspective may be different, but I'm more than happy to take those ideas back to the management and discuss them, see that as to where we can have opportunities for increasing the shareholders as well.
We already planned a listing of our offshore subsidiary for which the work is on. And I'm sure that, that will create a big differentiation in the valuation metrics of UFlex as and when that happens. But you all know that all these things are depending on the market, depending on the other things and all that, they are all best effort basis. And the efforts are that if you can raise capital and you can create a different valuation metric than what we see today, I think this is in the interest of all shareholders. And I think the other idea which was also looking at separate listing for the aseptic packaging business, then this becomes [indiscernible] that can also be sort of put across to the management.
Thank you, gentlemen. Thanks for being part of this conversation and discussion. Thank you.
Ladies and gentlemen, this concludes your conference call for today. Thank you for your participation and for using Door Sabha's conference call service. You may all disconnect your lines now. Thank you, and have a good evening, everyone.