AGI Greenpac Limited (AGI.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Q4 FY '24 Results Conference Call of AGI Greenpac Limited hosted by Emkay Global Financial Services. We have with us today Mr. Rajesh Khosla, President and Chief Executive Officer; Mr. Om Prakash Pandey, Chief Financial Officer; and Mr. Sandeep Sikka, Group Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Gupta from Emkay Global Financial Services. Thank you, and over to you, sir.

Thank you, Manija. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

Good evening, everyone, and welcome to AGI Greenpac Q4 FY '24 earning call. We have already circulated our earnings presentation. It is available on our website and on the stock exchange website. For the year ended March 2024, AGI Greenpac Limited registered total income of INR 2,445 crores, an increase of 6% over INR 2,307 crores recorded in FY '23. The EBITDA registered a growth of 21%, reaching INR 588 crores from INR 488 crores in FY '24, with margin at approximately 24% compared to around 21.1% in FY '23. The company PAT stood at INR 251 crores compared to INR 249 crores in FY '23. As investment made towards high-end specialty glass state of the art plant and subsequent commencement of the commercial production from January '23 led to increased interest and depreciation expense in FY '24. Our consistent success is attributed to several key factors. Firstly, we have adapted responded to the increasing demand for both alcoholic and nonalcoholic beverages. Secondly, substantial improvement in internal efficiencies have streamlined our operational effectiveness. Thirdly, our dedication to [indiscernible] customer loyalty has cemented our position in the market. In addition to it, our focus on high value-added products and premium mix has significantly bolstered our profitability. In FY -- in Q4 FY '24, the company reported total income of INR 633 crores, EBITDA of INR 156 crores and net profit at INR 65 crores. There is a decline in financial performance primally due to lower average sales realization year-on-year basis on account of decrease in raw material prices. Additionally, please note that in Q4 FY '23, we received other income of INR 15.65 crores on account of subsidy, which was reflected in total income, but this is not the case in Q4 FY '24. As of 31st March 2024, our net debt stands at INR 226 crores. Now I will hand over the call to Mr. Khosla to discuss some of the key business highlights. Over to Mr. Khosla.

Thank you, Mr. Pandey. Good evening, everyone, and thank you for joining us. In financial year '24, AGI Greenpac achieved many milestones demonstrating a relentless commitment to excellence across various fronts. Our glass container capacity utilization consistently exceeds 95%, showcasing a dedication to operational excellence and efficient production optimization. The planned shutdown of one of our furnace relining in H1 for which we lost some tonnage of production. Additionally, we executed debottlenecking initiatives on existing capacities elevating our daily output from 1,600 metric tonnes to 1,700 metric tonnes. Substantial investment in digitalization and automation further enhance the operational efficiency positioning us for continued growth and innovation. Additionally, we expanded our international presence significantly through participation in exhibition and trade fairs in key markets such as UAE, U.S.A., Europe, Wallstreet visibility and fostering valuable connection with the clients and partners. The accolade received underscores our unwavering pursuit of excellence with recognization including the Supplier of the Year Award from Diageo India for second consecutive year as well as the prestigious awards for workplace culture, CSR Impact, Energy Efficiency and cost management. These achievements upon AGI Greenpac position as a leader in the industry committed to delivery exceptional value to stakeholders while driving sustainable growth and impact. As we look ahead, our focus remains on innovation sustainability, strategic expansion. We are dedicated to prioritizing high-margin products category to consistently deliver value to our stakeholders. Our commitment to digitalization across all processes, including operations remain stedfast as we harness technology to enhance efficiency and productivity. We are well positioned for continued growth and success in meeting the evolving demand of our industry. Now we would like to open the call for any questions you may have. Thank you very much.

[Operator Instructions] The first question is from the line of Sanjay Shah from KSA Securities Private Limited.

Congratulation on good set of numbers in this volatile world. Sir, my question was, we need some understanding regarding our growth trajectory ahead. Since we have done some bottlenecking and increase our capacity, sir, what utilization right now we are in and what are you planning to grow from here on for next 2, 3 years, sir?

Okay. I think one of the reason of our growth trajectory in the last few years is a debottlenecking. So the economics of debottlenecking versus the economics of capacity addition is very, very different, and we fully understand and to deliver the best value to the stakeholder. So debottlenecking economics is very important, and that is what we have done so far. So now -- but there is a limit to which these things can be debottleneck. Otherwise, it becomes a counterproductive. So now I think with the additional formats, what we are now debottlenecking and adding some 80 tonne of the capacity now. I think more or less, now our focus will be to add up the capacities in the future organically and inorganically. And very soon, things will be opened up to the people to understand about that.

Fine, sir. Sir, are we -- since we are doing 77% business to this alcohol industry, so [indiscernible] focusing and penetrating on pharmaceutical side, food and beverage. So what is the view of your management? And how is the demand panning out from these verticals?

In fact, the good part is the India is growing at a very good pace and all these segments are increasing, the pharmaceutical, liquor, beer, food, every segment is doing at some pace or the other. Now what is to be seen, there is a natural tendency of any of the organizations to ride on the waves of some increase or some demand increase. So in this case, so it's a very -- it is to be seen from the angle, which demand we should be catering so that we can best utilize our resources and assets. So as on date, I think we have diversified fields. We are catering to the food segment, pharmaceutical, liquor, beer and all other segments we are catering to. Yes, the combination in which we are, that is possible to change, but it all depends upon how the market requirement comes up. Yes, we have a focus in pharmaceutical, and we are doing day/night a lot of debottleneckings and a lot of movements so that we can have the better share in the pharmaceutical segment.

Sir, my last question was regarding our HNG acquisition. I don't know how much you can share, but we are a bit in a dilemma because there are 2 things which we need to understand. One is the stage where we have reached? And when we think that we'll hear some good news or whatever may be? And number two, since such a delay has happened, is that acquisition viable to us because of that machinery gets depreciated and so many things can happen. So can you highlight, sir, upon that?

So HNG, Sanjayji, is very strategic and very important acquisition from our side. It's a bit unfortunate that the time taken is a bit higher and it's taking some time. But all along, I think we have put the best foot forward, both in terms of the offer which we made. There were some litigations, which have been done and in NCLAT, in NCLT, and most of them have been in our favor. Now the matter is subjudice before the Honorable Supreme Court. And I think courts are taking some time because there are other matters also in the queue. So we are hopeful that in next 2, 3 months, once this matter is cleared by the Supreme Court. The whole process should move very fast. But from the question in terms of viability, the whole project is still very viable. It has definitely taken some time longer than what we had initially estimated in our plans as such. But from the results, which you see from Hindusthan National Glass as publically available, I think asset is also doing good that risk, and it's making EBITDA. So from an overall perspective, we are definitely, it makes a lot of strategic sense for us, and we are fully dedicated and fully inclined to complete this acquisition. But we are bound by the court processes, which I hope each one of you will understand, is not entirely under our control and court takes time which they have to take.

The next question is from the line of Nikhil Gada from Abakkus AMC.

Sir, just wanted the overall sales volume for FY '24? And how were the realizations? As in, how was the fall in the realization in FY '24 vis-à-vis FY '23.

So when you see on a year-to-year basis on a full year basis for the glass, we have sold -- we have tonnes -- 524,000 tonnes of sales as compared to last year of 532,000 tonnes, which is down by around 1.4%. And this is essentially due to the fact that we had 1 plant shutdown during the quarter 1 first half of the financial year, wherein we lost around 20,000, 25,000 tonnes of materials. Just for the investors side, we have another round, I think we have made disclosures. Another furnace is up for relining we just slightly come early and as per the schedule. And we are also debottlenecking that capacity also. So to answer your question, volumes broadly very flat, but had it been a normal year, so we would have -- may have additional 20,000, 25,000 tonnes of more volume to sell. In terms of realizations, so when you see 12 months average realizations versus 12 months average realization of the financial year '23-'24. On the container glass it's almost flat. In fact, it is, again, although the volumes have come down by 1%, but here, it has grown by 1%. So almost INR 36,400 around the average realizations from the container glass business.

Sir, if I got to volume numbers correctly, it was 524,000 in FY '24.

Yes, broadly around that.

Understood. Got it. And sir, just the realization part, what was the realization in fourth quarter?

The realization in fourth quarter has been somewhere around INR 36,000 only.

Okay. So we have not seen any major correction despite the decline in the soda ash price?

Yes. So that's -- basically, if you see the overall dynamics, we have been explaining this, that part of our orders, they get adjusted to the input raw material pricing. So -- but there are orders around 40% of orders, which we do on a spot basis. And these are essentially small quantities, wherein we can command the price premium and also on the product mix and other sides. So it's a net impact of that. That as a result of which we are able to maintain the price.

Okay. Sir, secondly, just trying to delve deeper in this other volume data. Can you also share the specialty glass volumes that you were able to do in FY '24?

Specialty glass, we have done around 33,000 tonnes.

And what would have been the revenue for this?

Corresponding revenue numbers. Average realization on this is somewhere around INR 63,500, so you can multiply...

Sorry to interrupt, Nikhil, can you rejoin the queue for your follow-up questions?

Sure.

The next question is from the line of Miraj from Arihant Capital.

Just a couple of questions. Firstly, trying to understand that the current announcement that you made regarding one shutdown, one furnace being shut down for relining for maintenance. It's not the same one that we had earlier announced that you were going to do in Q3, right?

So in the furnace, which we have announced that it will under shut down, what do you say, please?

So in the previous call, we had mentioned that we are going to reline...

Yes, yes. It is the same furnace.

So we've preponed our relining. So it will add 80 tonnes in this quarter itself, right -- 80 tonnes per month -- per day.

Yes. Preponed because whenever we used to announce it is all tentative dates depending upon so many more factors. But the actual date of relining more shutdown depends upon the behavior of the furnace which is not predictable right now with the present technologies available across the world. So we have to work out the outcome of the furnace and then accordingly decide when the furnace shutdown has to be taken. So our technical experts have confirmed that we should take this shutdown immediately, immediately means in the month of -- end of April, and that is what we have taken.

Understood. And sir, secondly, I just wanted to understand in terms of input cost metrics to understand our cost composition, the soda ash considerance of how much or what percentage of total input cost?

That will be a little bit detailing of the breakup, but I can say because it depends upon so many more factors like what is the collect ratio and what are the other things, but if you're talking by volume or by value. Around 12% to 13%, you can say by value.

By value 12% to 13%?

By volume, we are saying by 12% to 13%.

Okay. So in volume terms would collect be the largest one?

Say it again?

In volume terms, if you're looking in volume terms, the largest would be collect?

Yes, we can say like that. Largest will be collect or largest will be sack.

Okay. Okay. Understood. And sir, so I just want to understand one thing that if the acquisition that we are planning if it doesn't go through, by any chances that doesn't take place, then what kind of changes do we see in our own strategy for growth? Because now we are only adding 80 tonnes. So as a backup plan, what would be our thought process? What kind of capacities are we planning to add? Because we are at our optimum utilization right now.

Acquisition not going through is beyond our imagination. So I don't think so, there is any amount of chance we are able to anticipate as of today, that acquisition may not be going through. It's a matter of time. And the court processes they take their own street time. So sometimes a little more, sometimes little less. But today, I don't think so we have any chance of even thinking that it is not going to be through. So it is well on track and everything will be there.

Understood. And did we get the listing date yet because the date keeps coming. So I think last time, Sandeep sir, had mentioned that once we get the listing date, post that it would be pretty fast moving the entire court process?

Matter getting list but it gets deferred. Our next date is on 13th May.

The next question is from the line of Zaki Nasser from Nasser Investments.

Sir, congratulations on a healthy set of numbers. Sir, as we have added 80 tonnes per annum, right now, what would be our capacity? I guess, it would be around 1,800 tonnes, 1,850 tonnes, would that be correct, sir?

Sir, 80 tonnes per day, sir. That is one. And since 100 tonne we increased earlier, so it will be a shade below 1,800 tonnes, sir, on the container commercial glass.

Yes, plus 154 tonne of...

Plus 156. Okay. Sir, and has this specialty glass plant of 156 tonnes fully operational, sir, now?

Yes, sir. It is fully operational. It is well on track as per anticipation and planning.

And sir, what would be the realization on this specialized...

Close to INR 65,000 a tonne, sir.

And sir, considering everything and with the shutdown of part capacity for part of the year. Do you think, again, March 25 on AGI not considering the acquisition, would the value growth would be on something like what came between '23 and '24, sir...

It's possible we committed earlier. Certainly, you're going to get those numbers, sir.

That would be, sir, I mean, broadly?

I think whatever numbers we are able to share...

We have projected somewhere around 10% growth, we should be able to continue on the existing businesses.

The next question is from the line of Pinaki Banerjee from AUM Capital Private Limited.

In FY '24, the main raw material that is soda ash was quite volatile. So what are your expectations in FY '25? Is it going to stabilize or will it be volatile as before?

Sir, soda ash is a commodity, it will be volatile. And looking to the geopolitical situations like Red Sea and earlier, it was the Russia-Ukraine war and now Israel-Iran conflict, which is fuming up. So there will be volatility. But rest assured that AGI Greenpac management is quite expert in riding these tough waves and volatility. And we have been able to get through earlier also in the tough times of COVID and other areas. And certainly, these areas will also be taken care as well and numbers will be taken care as we have anticipated and committed to everyone, sir.

Okay. Sir, correct me if I'm wrong. So basically, if the soda ash prices decreases, it is a fall in our realization price side and if vice-versa is the opposite?

Sir, in a commodity type of business. I think the best way of analysis is plus sub-charge model analysis, where the base prices remains more or less stable or an organization has to make it stable. The sub-charge is up and down of the volatility of the commodities are there. So obviously, when the commodity prices will fall, the realization of that surcharge mechanism will certainly fall. If it goes up, it will go up. So more important is how in these tough times, the realizations are up and down adjusted with the market and the profitability remains intact. So those are the things which we are taking -- trying to take care of as well.

Okay. Sir, how much CapEx have we planned for FY '25? And what will be the source of financing it?

The CapEx for the year will be approximately INR 250 crores that we have planned.

And so your funding will be through internal accruals only?

Mix of internal accruals and the debt.

Okay. Okay. Sir, what is your debt repayment obligation in FY '25?

Around INR 130 crores.

Okay. Okay. Fine. Sir. And last question is, what is the percentage share of export at present?

Close to 8%, sir.

The next question is from the line of Chandresh Malpani from Niveshaay Investment Advisors.

I would like to know more about the industry dynamics. Considering that 3, 4 players are not adding capacities. So I just want to know at what rate the industry is growing and what are the dynamics? Are we losing any market share on that side because we are not having additional capacities to cater to the incremental demand?

Sir, if you don't mind, can you repeat your question because somewhere the voice was cracking.