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

Ladies and gentlemen, good day, and welcome to the AGI Greenpac Limited Q4 and FY '25 Earnings Call hosted by Arihant Capital Markets Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Ostwal from Arihant Capital Markets Limited. Thank you, and over to you, sir.

Thank you. Hello and good evening to everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining into the Quarter 4 for FY '25 Earnings Conference Call of AGI Greenpac Limited. Today from the management, we have Mr. Rajesh Khosla, the President and CEO of the business; Mr. Om Prakash Pandey sir, CFO of the business; and Mr. Sandeep Sikka sir, Group CFO. So without any further delay, I will hand over the call to the management. Over to you, sir.

Good evening, everyone, and welcome to AGI Greenpac Q4 FY '25 Earnings Call. We have already circulated our early presentation, which is available on our website and on the stock exchange website. Kindly note that some remarks or observations made during today's call might be forward-looking. These may include, but are not limited to, financial projections or statements regarding the company's plan, objectives, expectations or intentions. The company does not have any obligation to revise these forward-looking statements to reflect any future events or developments. For a comprehension disclaimer, please refer to Slide #2 of the earnings presentation. In the fourth quarter of FY '25, the company continued its growth trajectory, achieving total income of INR 742 crores, registering a substantial growth of 17% compared to INR 633 crores in Q4 FY '24. The company's EBITDA for the quarter stood at INR 191 crores, up 23% from INR 156 crores from the same period last year, resulting in an EBITDA margin of 25.8%. Profit after tax reached INR 97 crores, a significant 50% rise from INR 65 crores recorded in Q4 FY '24. AGI Greenpac reported strong financial results for the year ended March 31, 2025, achieving total income of INR 2,604 crores, registering a year-on-year growth of 6.5% compared to INR 2,445 crores in FY '24. The company delivered EBITDA of INR 689 crores, an increase of 17% over INR 588 crores in the previous year, resulting in an EBITDA margin of 26.5%. Profit after tax for the year stood at INR 322 crores, up by 28% compared to INR 251 crores in FY '24. The company continued to see strong momentum, solidifying its position as India's most profitable glass packaging leader. I'm happy to announce the Board has approved a dividend of INR 7 per equity share. 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 the year 2025, AGI Greenpac achieved a significant milestone, demonstrating our commitment to excellence across various fronts. Our glass container capacity utilization consistently exceeded 95%, showcasing our dedication to operational excellence and efficient production optimization. We successfully executed debottlenecking initiative across our existing plants. And now with 2,000 tonne per day capacity we are well positioned to cater to the growing customer demand. We further solidified our foray into high-margin categories such as Cosmetics, perfumery, Alcohol and Security Caps and Closures. In a significant step towards the future growth, the Board has approved the setting up of state of the art 500 tonne plant daily capacity plant manufacturing in Madhya Pradesh, which will help us cater to the Northern and Central India market quite closely. This strategic move expected to increase our production capacity by approximately 25% underscores our commitment to capturing emerging market opportunities and driving sustainable shareholder value. We are well positioned for continued growth and success in meeting the evolving demands of our industry. Now we would like to open the call for any question you may have. Thank you very much.

[Operator Instructions] The first question is from the line of Pranay Roop Chatterjee from Burman Capital Management.

Yes. My question is with respect to the other income. There is a INR 21 crore Telangana state subsidy that was recognized in Q4. Could you throw some more color on this? Is this onetime? Or would you be getting it yearly for a few years? Any other subsidy we should know about which you will recognize in the near future?

Mr. Pandey? So I'll answer this question. So when we make investment into the state, let's say, in the state of Telangana, there are various incentives of state government, which are there -- some of them are linked to sales tax, GST refunds. Some of them are electricity. Many of these -- for this, we regularly apply to them. Our accounting is based on reasonable certainty when the money comes in, then only we grow it. Technically, these are all incomes which are related to business. And if you track our record for 3, 4 years, you will see at many times, we get this. So I cannot confirm that this will be a regular stream of income as such. But these are all incomes, which are related to the businesses, which we do and the investments which we have made in the state of Telangana. So these are technically one-off but relating to businesses.

Got it. My next question is on your margins. If I look at it quarter-on-quarter and Y-o-Y, your GMs have taken quite a hit and which has slowed down into EBITDA margin as well, obviously, ex other income. Any sense you can give? What drove this low margin of about 21% after multiple quarters of 25-plus and what bearing would that have on incremental quarters?

Shall I answer this?

Yes, Rajesh. You can go ahead.

Okay. See, on a margin side, there are -- on a very elementary side, there are 2 aspects. One aspect is on the price part and second aspect is on the cost part. So what happens is the stability of the market always happen on the price part, but there is one area, which is beyond the control of an organization that is basically on the cost side and that, too, particularly on those commodities, which are well controlled by the government. So the quarter what you're referring to, they had some -- a little bit of disadvantage. On the fuel side, where the cost of fuel has gone up and it was high in those quarters in that particular quarter as compared to the other quarter. So what we normally do is we normally do not see from the perspective of one particular quarter where those elements which are beyond the control of anyone, they play the big role of fluctuating any margins. It is more important when we say the stability of the business only on quarter-on-quarter basis and all. So normally, we always merge the whole year profit margins and the whole year EBITDA margins, which are quite indicative of the future and all. And your second part was, is it -- how it is going to be in the future. Yes, future is same as we have been committing in the earlier times that the market for us, particularly for us is stable, and we are going to supply the material as per our earlier supplies. Small fluctuations has happened and small fluctuations can happen both on positive or negative side at any point of time for timing and for a temporary basis.

But if you see year-on-year, we have been able to expand our EBITDA per tonne by a range of around 6.5% to 7%. So it's more the directionality rather going on the quarter-on-quarter numbers.

Sir, a follow-up to that. I'm not entirely sure about the fuel part. Don't you guys report fuel separately, like power and fuel? And I don't see any increase on that front. So any specific component in COGS that has increased?

So here, what we are referring to is the comparison of Q3 versus Q4, which reference you are taking?

I'm also referring to Q3 versus Q4. And if I look at power and fuel cost as a percentage of revenue, it's flat quarter-on-quarter, 19%...

Your question is on the?

Gross margin. Gross margin.

Okay. The fuel part has already gone up, and they have been the reason of a small fluctuation on the EBITDA.

Okay. Sir, I'll take that offline. That's fine. So my -- that's fine. So I'm not sure you want to answer this or not, but I was tracking the review petition and today it says dismissed in case status. So any color you want to throw on what the update is there? Or would you be disclosing it officially on the stock exchange.

So we are still waiting for the final Supreme Court order to be uploaded. So it's very difficult for -- to comment anything. So as it comes, we will make a necessary disclosure as applicable.

Got it. For the full year FY '26, any number on EBITDA margin? I understand that quarter-on-quarter, there is volatility, but like the margin, that print that has come in Q4 is 21% and previously it was 25%. So the range is quite wide. Any sense you want to give, which one is the more representative of next year? Is it more like 20% or 25%?

So you have to take it as a range bound. As such, if you see in the past also, our actual measurement is not on the percentage, it is actually the absolute EBITDA per tonne because it has a numerator and a denominator effect because when the raw material prices increase so with some lag, we are able to pass on the price increases to many of our contracts and similarly gets adjusted. So what we measure internally from our perspective is EBITDA per tonne number, but I know we don't give the tonnages as such to the market. But from your perspective, you have to work somewhere in a range of somewhere around 22% to 24%, 25% only in the guidance.

And I think so, if you talk of the EBITDA margins on the annual scale, even if you ignore the other income part, they are always in the range of around 24% -- 23%, 24%, something like that. And it has been in the year '24, '25 also, it has been in the year '23. '24 also.

[Operator Instructions] We take the next question from the line of Rohan Baranwal from Singhania Capital.

Yes. Okay. So sir, I wanted to ask some questions regarding margins. So can you please explain the reason behind the decline in the margins?

I think it has just been answered now. The previous question is on the same lines.

Really sorry, sir. I think I was inactive at that time. So if we can repeat, that would be much better.

I think we have already explained to the previous question that there has been some fluctuation on the fuel side. The fuel prices have gone up in the last quarter and they have basically contributed in the fluctuation of small margin. But normally, we see the directionality of the business, which is quite positive, healthy and moving positive towards that. There has been a little small fluctuation, which always can happen in any quarter, it can happen because of any reason. So we hope that the fuel prices are already stable and they will stabilize further and the margins practically whatever is a small fluctuation which has happened, it will get settled down.

So my next question is regarding the innovation in your field mix, which you've talked in the last call. So can you quantify the cost benefit realized for this? And what's the target going forward?

What do you mean, like a total value addition and innovation quantification? How much innovation is contributing in our margins? This is what you want to know?

Yes, sir.

I regret to say that looking to the confidentialities. And even our competitive edge over our other players, we are not supposed to disclose that how much our innovation is adding to the contribution in our margins because these are all confidential and secured type of things. Otherwise, it will get opened up and then we may not have any edge as against our competitors.

Okay, sir.

But it is open to the analysts like you to work it out that how much this innovation and other practices and good practices might have been contributing in our business.

Okay, sir. So if time persist, can I go for the next question?

Yes.

Officially. Yes. Okay. So sir, I just wanted the -- like can you please explain how have the soda ash prices move like Q-on-Q? And what is it currently? And what about your glass realizations as well for a quarter-on-quarter basis?

I don't think so. We are not indicating the glass realization or glass quantities in our disclosures. That is one part. And as far as the soda ash is concerned, now soda ash for last 2, 3 quarters is quite stable. They are still fluctuating, but to the some extent. And the price of soda ash depends upon many, many factors. It depends upon demand supply. It also depends upon Red Sea issue. It may also depend upon India's relationship with Turkey. So it all depends upon so many factors, and the contribution of the USA supply systems. So it depends on so many factors. But for last 2, 3 quarters, it has been quite stable with the fluctuation of hardly 2%, 3% here and there.

Okay, sir. And sir, if it's not possible to provide the amount wise details, can you please quantify it in -- if it's up or down for the glass realization quarter-on-quarter?

I think -- okay, see, once the prices -- because we have been indicating in our -- this call so many times that our prices have been linked with the formula-based pricing on the raw material and other things, but there is always a time lag and there is a time lag. So if the prices in the last few months, they have adjusted on a lower side or a high side, our prices have also gone accordingly with that. So there can be a little bit of time line -- time lags. And there is also sometimes, there is a very temporary fluctuation which may hamper or -- and I can say we can get a tailwind for one quarter or so, but it is -- but more or less, overall, it is in the same range as our business used to be.

Next question is from the line of Vijay Shah from Insightful Investment Managers.

Congratulations on a great year FY '25. So as I understand, our greenfield CapEx will come up by closer to end of FY '27?

No, no, no. '26. Sorry for that.

Yes, yes. So end of financial year FY '27?

Yes. Yes.

So just 2 questions. One is, in the meanwhile, do we have any plans of looking at any inorganic growth? That is first question.

Okay. And what is your next one?

Sir, next one is that given that we have capacity constraint right now and value-added products are up to 23%, over the next couple of years, if you could have any guidance in terms of where do you expect value-added products to go to?

Okay. Yes, you are right. We expect that the greenfield project is going to be commissioned by the end of '26, '27 financial year. And till that time, no capacity can be added up. But yes, there is a -- so we are hunting on debottlenecking our capacities, debottlenecking either on capacities, capacities are not going to be debottlenecked right now. But yes, with some practices and with some technological, we may upgrade our outcome of our furnace, I can say, performances. So all the efforts of our technical team and other teams are always there to put up the efforts to do that. So this is on the output side or technical side. On the commercial side, yes, there is a continuous and ever to go for more and more value-added and we are doing it. Yes, we have been doing close to 20% to 23%, rightfully, you are saying. And we hope so we can add more percentage of products in the times to come. We are working on that, and the success is we have to see in the next 2 quarters how much quantity we are able to push on the value-added. But yes, there is a consistent efforts to make more and more value-added products in this industry.

Sure. Sir, if I may, just one follow-up. The debottlenecking could lead to what kind of capacity growth approximately, in a ballpark?

It's too vague today. That's what I'm saying, it's a continuous effort. And we are not sure. For example, like when we were building our furnaces, we were reasonably pretty sure that we will be able to add 80 tonnes or 100 tonnes of the capacity at that time because those were all quantified in that. But now the furnaces have already been built. Now whatever is the debottlenecking or capacity upgradation is concerned, it is more on the practices side. And in the practices side, we are also taking a lot of help from the global technical teams, and they are doing it. So we are never sure that how much quality can come, but it's a continuous exercise which we are going to do, but we are hopeful something is certainly going to be hitting us in the near future.

Sure. And just one more thing, if I could add. Sir, if you could just give a little color in terms of the demand scenario and pricing? Like are we facing any pricing pressure? Or how is the demand scenario from our customers?

Demand is okay. Demand, I'm not saying demand has any big change. But it's a continuous thing. India has a very small glass demand, it is just less than 2 kg per capita consumption. It is just 1.8 kg per capita, which is far, far lower than the other countries. The China has more than 12 kg. And even in the U.S., it is more than 36 kg. In Europe, in some of the countries, it is more than 60 kg or 70 kg per capita consumption. So if we go that way so it is certainly very, very less. And we hope that this demand is going to continuously increase in the near future. I think India is -- as India GDP growth is there. So obviously, new avenues on the consumption side, on the demand side is opening up. And hopefully, with the new FTAs they are having with the U.K., U.S.A., which they are going to have. So there may be more export opportunity and the demand of the glass will also grow up because the end product may require to pack in the glass side. So we hope that there is going to be a good demand in the future.

Sir, pricing environment continues to remain stable?

Pricing is sometimes the adjustments, that's what I'm saying sometimes kind of the raw material prices goes up and down, the prices get adjusted with that. And there is a time lag. So with the time lag, there is small up and small down adjustment is always there. But more focus, I think we are also doing and probably the analysts is also must be watching more is on the margin side on a stable continuous margin side.

Sure, sir. And lastly, sir, any comment on the inorganic opportunity? Are we pursuing something? Or are we likely to see something over there?

Again, being in business, it's a continuous exercise. We certainly are looking at the opportunities. But unless until they are matured, approved by the Board, it is very difficult to say anything on that. But they are all immature or in a WIP stage, I can say like that. So if anything is there we will certainly...

Sir, I just want to understand, are we looking at it or not. Okay.

[Operator Instructions] Next question is from the line of Pranay Roop Chatterjee from Burman Capital Management.

Sir, would you be able to highlight what the legal costs were associated with some of these cases in FY '24 and FY '25?

Very difficult to respond to this because it's not that price-sensitive stuff, but it's not that we give an individual line items as a part of the things. But when you have the annual report copy, you can see from there what part can be there.

Got it. In terms of revenue guidance, in the past, you used to give after the annual results. Anything you would like to comment on FY '26 or we have to wait and watch?