Control Print Limited (522295) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Control Print Limited Earnings Conference Call hosted by Asian Markets Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia from Asian Markets Securities. Thank you, and over to you, sir.

Ladies and gentlemen, good afternoon, and welcome all to the Control Print Limited Q2 FY '21 Earnings Conference Call hosted by Asian Market Securities. From the management side, we have with us Mr. Shiva Kabra, Joint Managing Director; and Mr. Rahul Khettry, CFO. I now hand the conference to Mr. Rahul for opening -- for his opening remarks, and then we shall open the floor for the question and answer. Over to you, Rahul. Thank you.

Thank you, Karan. Welcome, everyone, to the second quarter FY '21 earnings conference call of Control Print. We appreciate you all taking out your good time from your busy schedule to attend this call. Hope you and your loved ones are safe and healthy. Mr. Shiva Kabra, Joint Managing Director, joins me on this call. Let us start with a brief on Control Print followed by specific analysis of the financials of the current quarter and end with the Q&A session. The detailed presentation has already been put up on our website as well as in the investor presentation notification on the exchange for this call. For those who are probably reviewing the company for the first time, Control Print is in the niche coding and marking segment, which is an oligopolistic market with 4 major players, 3 of whom are MNCs, and Control Print is the only Make in India manufacturer. This gives us the advantage to sell our products locally and compete strongly with the other multinational players. We are the only integrated player with capability to manufacture printers as well as consumables in India, giving us an advantage to share the benefit with our customers. This also gives confidence to our customers for long-term partnership with Control Print. We have our manufacturing facilities in Nalagarh in the state of Himachal Pradesh for the manufacturing of printers and in Guwahati in the state of Assam for the manufacturing of consumables. Both the manufacturing locations are state-of-the-art facilities to produce good quality products. All our consumables are manufactured in the Guwahati plant, and in addition, we have also started manufacturing some printers in that location. We have a strong sales and service team of 350-plus engineers across our 12 branches, which gives us the advantage to service our customers [Technical Difficulty] predominantly the after-sales service is very critical to maintain the customer satisfaction. The 12 branch offices across North, South, East, West and Central India gives us the advantage to be in direct contact with all our customers in a timely manner since our products are critical to their production process. Post sales of printers, there is a continuous demand for consumables over the life of the printer, which typically lasts for 5 to 7 years depending on operating conditions. We have our complete attention on our customers' requirements to ensure that production is never affected and service requests are attended immediately, thereby gaining our customers' confidence. We have an end-to-end ERP SAP system setup, which ensures maximum transparency in accounting, sales and after-sales service as well as total control from raw material planning to ordering to receivable collections and is integrated with our CRM system, which gives the confidence to the team, the customers as well as our auditors and investors. We have a widespread customer base catering to multiple industries like pipes and cables, metals, automotive, food and beverages, FMCG, pharma, et cetera. And we continuously endeavor to customize our products to reach out to other industries to increase our installed base. We have the entire range of products in our portfolio to meet the coding and marking requirements of the industry. The details are elaborated in our company presentation. As of today, the company has an installed base of 12,000-plus printers across industries, which enables the sale of consumables across the life cycle of the printer. We are very confident that we have the best-in-class products to meet the requirements of most of the substrates, which gives the additional advantage to customers to do business with Control Print. With a strong foundation and 5 pillars that is man, machine, material, technology and finance well established to augment our business plan, we are continuously striving for greater heights. Let me give a brief analysis of the financials of Q2 FY '21. The strains of COVID-19 continue to affect the economy and the business environment, although the unlock of the national lockdown in a phased manner has kick started the economy. The customers continue to ramp up the production volumes, though in a staggered manner. And most are yet to achieve the pre-COVID levels. These are extraordinary times when the strength of a company is tested, and we can assure you Control Print is geared up for any challenge. We are financially stable and robust and have exceeded our pre-COVID revenue levels with a year-on-year growth of 6%. This stability of Control Print has also been reaffirmed by credit rating agency, CRISIL, with an A+ rating -- with an A rating after considering the short and medium-term impact of COVID pandemic. Our investors can maintain calm and belief on the company's management for a quick recovery and an optimistic future. We had a strong comeback in this quarter with growth in revenue of 6% year-on-year in spite of challenging times. Profit before tax also exceeded the year-on-year figure, which is a positive sign. The reason for growth in revenue was due to good revenue growth in -- volume growth in printers and contribution of the mask division. The company continues to maintain healthy margins with EBITDA at 24.7%; and PAT, excluding exceptional items, at 17.1% for the half year, with scope of improvement due to better product mix and higher revenues triggering economies of scale and stringent cost reforms. We have continued to maintain EBITDA margins north of 22% on a long-term sustainable basis. I will now brief you on the performance of various divisions, products and business segments. Printers had a volume growth of 26% and positive demand in spite of the challenging environment, which is a strong signal for the increase in momentum of industrial production. The increased installed base will drive the business in the coming quarter. The Flagship division, CIJ, witnessed traction with the opening up of the customers and a slight growth in Q2. We are confident to continue our dominance in some of the industries where we have a stronghold like pipe, cable, steel, food, FMCG, beverage, et cetera. And it is encouraging to see growth in some of the upcoming sectors like dairy, pharma, paints, wood. Our product launches of TIJ printer, High-Resolution printer and TTO printer continue to have a strong traction due to acceptance of the printers by the market, and we are confident of their potential in the coming quarters and years. With dedicated national-level managers driving these verticals with focus on specific sectors, we hope to cement our leadership position in these applications. We have realigned our sales team to specialize in these segments, which will give these new products the desired impetus. These new printers have done some good installations in the past few months and coming quarters should witness growth. We have also assigned separate managers to focus on OEM sales and key account customer accounts, and the strategy is showing encouraging results and should yield good quantum of business. LCP business though reported a decline, but we are changing our focus to non-LCP business, and the team is confident of generating business in the coming quarters in sugar and metal. The High-Res business has shown good potential and will continue to grow in the coming quarters. Laser business is expected to climb back as product technology is being improved, and the team has been changed. This will yield good dividends with positive response from the customers and new opportunities expected in the coming quarters. The face mask production has started, and the company has declared commercial production with effect from 24th July 2020. This will contribute to the company's revenue and profitability in the coming quarters, but we are not making any early predictions due to the volatile market conditions. The company is [Technical Difficulty] expected to continue. While COVID-19 has impacted economy as a whole, we are well placed to capitalize on any revival in demand, led by a complete range of products, strong presence across industries and a well-established service network. It returned to normalcy. In Q3 and Q4, we hope for similar trends of growth trajectory. Fundamentally, the company remains strong, and we continue to focus on our plans and strategies as we are confident of the growth potential to deliver positive results. Thank you. The floor is now open for questions.

[Operator Instructions] The first question is from the line of [ Rohan Pinto ], an individual investor.

I had a question on the balance sheet front. So we've seen that our inventory has increased by around INR 7 crores and receivables are up by INR 3 crores. Overall, we've -- our working capital is up by INR 10 crores. And against that, we've had a short-term borrowing, I believe, of INR 6.5 crores. So if you can just help me comment on what's -- I mean, why have -- we've achieved revenue growth at the rate of balance sheet deterioration. So I'll appreciate your comments on that, please. That's it. That's my question.

So you know that these are special situations right now. So we had to build up on some inventory for critical parts so that we don't get affected due to other countries going into lockdown or other suppliers getting affected. We did see some disruption in the supply chain in the start of the coronavirus. And now with news coming of some countries going into second wave, especially in Europe and some other parts of Asia, it was decided by the management that we should put -- keep some inventory in hand so that, as you know, we don't get affected as far as our operations are concerned. So that's one of the reasons why inventory is looking slightly higher. And even the flow of AR, I wouldn't be very concerned, because it's increased by a few days, but that's because the receivables are more skewed towards the current quarter, and that would get recovered in the existing quarter. So I'm not so worried on the receivables front. One thing that you mentioned about the bank borrowing. That's...

If I just also interrupt you, Rahul, one thing I just want to mention about the inventories, I just think everyone should understand that, especially for our company, we normally tend to have just a single supplier for most of our materials because of quality, because our volumes are normally quite small in terms of what we're purchasing. And therefore, we tend to maintain a single supplier. And also, our own supply to our customers was affected during the lockdown period. So that -- maintaining that quality of supply was a very important thing. And that's also one reason we've rebounded in the second quarter because we've also faced these issues with our competitors. So it's something that everyone I just want to understand our contribution to the customer is very small in terms of his overall production, but it's also quite critical. So we can't, for whatever reason, not be able to supply to the customer. So it is true that we have been maybe a bit conservative, but we are quite sure that by the end of the year, we'll be absolutely back to where we were at the beginning of the year in terms of overall inventory like level or something. Rahul, just continue, sorry about that.

Yes. Thanks for that, Shiva. Also just to -- on the borrowing front, which you mentioned, it's basically because we can't get our operations affected because of some small amount of borrowing. Previously, a lot of dividend has been paid out in the previous financial year to the tune of, I think, about INR 23 crores, because of which our liquid funds were utilized. And as of now, we have refunds to be received from the Government of India to the tune of about INR 7 crores, which is pending for like 7 quarters now. And if we would have received that on time, then this bank borrowing was also not required. So it's something that is delayed from the government side, but we can't -- I don't think something that we should be much worried upon. I think as Mr. Shiva mentioned, by end of this financial year, we should be back to [indiscernible] hopefully.

[Operator Instructions] The next question is from the line of [ Agastya Dave from CAO Capital ].

Sir, one clarification. In your opening comments, did you say that the printers, the volume growth was 26%?

Yes, that's right.

2-6, 26%.

Yes.

Okay. Cool. So that's a very good number. Now based on that sooner or later, I think these new printers will contribute to consumable sales 5 to 6 months down the line or before that?

Yes. So generally, with -- in the current situation, tough to predict when people actually ramp up and put their capacities into utilization. But our past experience says it's generally 1 or 2 quarters down the line that the consumables taking. So it'll be in the fourth quarter or...

Right. So sir, I understand and appreciate the uncertainty in the business environment, but could you give some color on what your customers are telling you as of now on the consumable side and also on the printer side? What kind of conversations are you having with your big customers? Any sense on that would be very helpful.

So like we mentioned that the printer volumes has gone up to double digit, 26% that we mentioned, so that definitely means that people are not delaying their expansion plans. Companies -- certain sectors of the industry, I believe, are quite bullish and going ahead with their road map of expansion. And that is why the printers are selling well. And -- but on the production side, maybe the consumables volume hasn't been back to where it was pre-COVID. So that's one front, which we hope that in Q3 and Q4 should see a rise. But consumables isn't up the same way that printers are up. So probably in Q3 and Q4, the consumables should be back, and that's where our product mix changes and then our profitability also increases. So that's one of the reasons why you will see that though our revenues have increased, our profits are yet to see the positive sign.

Right. And sir, one final question. The impact of the lockdown and the production halt at our factories. So certain consignments must have been delayed and shifted to Q1 and Q2 from Q4 and Q1, right? So there would be some shift. So now all those delays and pending orders have been cleared. And going forward, we'll have a clean Q3, again, subject to the fact that there are no lockdowns and no disruption in sales?

Yes. From our side that our -- both our operations in Nalagarh as well as Guwahati have actually been operational since the month of May because those places had opened up, and we were able to meet our customer demand. So we -- apart from that complete country-wide lockdown in the month of April, we have been back in action right from the month of May, though our offices opened up in a staggered manner in the different cities, but the production facilities were operational, and we don't have any much backlog. So Q3, like you mentioned, will be a clean -- there's no pent-up or backlog that we will [indiscernible].

But if I may say something, Rahul, I just want to say that I think for that 45- to 50-day period from March 20 to about May 10 or something, most of our customers are not producing anything at all. So we are like a dependent industry. So except for a few guys in the soaps and dairy, certain food products, the rest of the industry was quite short, like the distilleries, the breweries, the steel companies, like [indiscernible] production, so that production is lost. So it's not like there was a pent-up demand because they were producing, but they were not printing because if they were producing, they're already using our printer. They can't produce it and then put it on the side and then print it later, if you understand what I'm trying to say. So there was just this production in that times. That was a lost demand. There's no pent-up. There was no...

No, Shiva what I meant was that maybe somebody placed an order on 20th of March and the consignment could not be delivered, it was stuck either in transit or at your end in your factory. It was not pent-up demand...

Yes, those things are irrelevant. There was some demand, but that's sort of irrelevant because that's always there at a certain point of time. But what happened is like -- what's more important was it not like a pent-up per se demand that the situation is more that basically we lost 50 days of the year or somewhere between 40 to 50 days depending on what view you take and everything. And that was the time there was no production. So it just -- and if the production itself wasn't there, then our printing would not be there. So especially, -- theoretically, we could have keep kept selling printers, but even that was not really happening at that point of time, but we also lost the consumables business at that point of time. And so what I feel is the Q2 numbers are not really much connected to what happened in Q4 or Q1. This was independent. But yes, you'll see like some industries are doing better than others, as Rahul mentioned. So that's what...

Great. This 26% printer growth is a positive thing. So I hope we can keep it up. All the best for the next quarter.

Thank you. Thank you.

[Operator Instructions] The next question is from the line of [ Falguni Dutt ] from Jetage Securities.

Hello? Sir, I just wanted to know, did we see a big jump in first-time printer users? Because now that many -- because of this COVID issue, I would presume that many people who are buying loose -- I mean many people would not want to buy loose, and hence, even smaller companies would want to sell their products packaged and printed.

So that shift definitely, Falguni, is happening, moving from the unorganized to the organized players. But -- and yes, we are getting new customers in our foray, and even my sales team tells us that there is some strain with our competitors, the MNC companies are having some challenges to meet the customer service requirements. So we are seeing some additional demand coming from replacement market where our competitors' printers could be replaced with our printers. Some of it has happened, but we are -- we assume that going forward, that could also be a good market for. So yes, new customer base is increasing for Control Print.

So this 26% volume growth that you saw in printers is only the cyclical replacement that happened once in 5 to 7 years, most of it?

No. This is not -- it's tough to categorize that. Some could be a buyback and upgrade of printers, but most of it is the new printers. It's a small amount which gets into buyback and upgrade. So this will definitely add to our installed base. So it's very -- on the conservative front, about 10% to 12%, we should knock off from this before adding to the installed base.

Okay. And sir, what would be the revenue breakup in terms of volume and price for the quarter?

Revenue in terms of volume and price?

Yes, I mean the revenue growth in terms of how much was it volume-driven and price-driven?

See, at this point of time, it's all volume-driven. It's mostly coming from printers. And our consumables was just about at the same level, so slightly lower. But that's because of better production. That will catch up.

And sir, if you can, last question, share the absolute volume of printer sales this quarter?

That was 700-plus printers that we sold in Q2.

The next question is from the line of Madhuchanda Dey from MC Research.

Am I audible? Hello?

Yes, ma'am.

Yes. My question is, there is a sequential jump in depreciation. If you could explain that, please?

So the main reason is that we started this mask project and the intention of the management was that we want to depreciate the machines on a volume basis and not on the useful life, it's according to the company that can be spread over 15 years. So we are trying to depreciate the machines while we are having this demand for face masks and that would help us clear out our machine base. So the increase that you're seeing in depreciation is particularly because of that project.

Can you come back with the name of the project, please? I...

The face mask, we started the face mask project. So about 1.5 -- yes. Yes. So INR 1.5 crores of depreciation is on account of face masks, which you're seeing as a sequential increase in the depreciation.

Okay. Okay. So this additional depreciation is because of the face mask project? And how much capital have you committed to that?

We are about, I think, close to INR 10 crores that we are on the face mask is pending, and that should get cleared out by in the first couple of years.

My question -- related question is, I mean, do you think, given the -- I mean, I understand there's a lot of demand, but it's like more of volume-driven, low end kind of a demand. So do you think, in terms of capital allocation, will it match up to the ROI of your coal business? Or what was the rationale of doing that in that case?

So I'd be honest with you that the intention of the face mask project was because it was the need of the country, and it was not for -- not opportunist for profiteering profit maximization. But we think that the revenue and the investments will be able to cover our investments done in that project. It will not be a very long project, but it will in a short span be able to recover that investment. And sometimes, you have to be working as good corporate...

[indiscernible] of our existing customers, as you know, we are serving a lot of customers. So there was a requirement for some of our existing customers also for the local and some of the international requirements. There was a screw up because the exports were banned, which is not something that was taken into account initially. But now that it's opened up, I think we should get that thing moving at a faster level, but domestically, it will be okay. So we have a lot of customers like Unilever, Ferrero Rocher and some other things. So we had actually started from the CSR basis and also supply it to some of these customers. And since they were satisfied, there was some more thing to supply them as well. But I'm quite sure, like Rahul said, we're also making an extremely high-quality product at a Control Print level.

So you are exporting the face mask as well? Is that a...

Now we are starting because it was banned till recently. There were some sort of a...

Okay. Because of the shortage in the country and now that has been eased off?

I don't know. Yes, some sort of like a legal thing, we couldn't send it, but now we can. So now we can...

And what was the exact quantum of -- if you could just give the customary breakup of printer, consumables, spares in the total revenue?

Yes. Rahul has all those details. I think...

Yes. For this quarter, we had about...

[indiscernible] presentation I saw that.

No, it's not there in the presentation.

Yes. No, so for this quarter, the printers was at about 21%, the consumables about 50%, and the spares and service about 24%, and the mask was close to 5%.

Okay. And a related question is, when you're saying, of course, you've seen a traction in printer, and you expect that with the ramp-up of production and some of the printer generating demand for consumables, consumables can go up. So what is the best case estimate of consumables in your total revenue breakup? I mean to what percentage can it go up in your total revenue?

So we have seen this go up to above 60% also. But anything about -- above 56%, 57% is a strong number for us.

So that can take your EBITDA margin beyond 25%, 26%. Is that the correct understanding, if should that happen?

Yes. Yes. Yes, I think that's what we would like to be. That's where we would like to be.

And your total borrowing is of the order of INR 6.2 crores something, if I'm not mistaken. Is that a correct figure?

Yes, ma'am.

And what is your take on this borrowing? Is it likely to continue...

I just mentioned to the previous participant that hopefully, by the end of the financial year, we should again become debt-free like we've been in the past. It's just that we have some refunds stuck up with the government for 7 quarters to the tune of INR 7 crores. So if that would have been in our kitty, again, the borrowing would have not been there. So...

And what is this money stack up with the government? What is this for?

So we had a GST refund for our Guwahati facility that, on a quarterly basis, we filed with the government, that is pending for 7 quarters. The central government is yet to disburse the fund. Our...

That is about INR 7 crore?

Close to INR 7 crores.

Okay. And my last question is, if you could update on the status of the litigation? And if you have created any contingency?

So now the courts are being shut since this locked down and they're only taking, I believe, the urgent cases, so although this was planned to come up at the end of March, but that hasn't happened. And since then, there's no further progress on the litigation. We have already, like we mentioned in 2 quarters back, we've already deposited some amount at the court, and that's the status as of now. No progress for the last...

Yes. But what is the kind of contingent liability that is like -- that could possibly happen?

So we've taken the opinion of our lawyers, and we believe that this -- there is no contingent requirement because we still feel the case is quite strong in our favor. And the -- previously also, the last hearing the court has taken a noting of our -- the case that we put up wherein they definitely reduced the amount significantly to about INR 2.5 crores, which they have -- which we have deposited in the court. To be honest, INR 2.3 crores is the exact figure. And we feel that there are certain points that we have raised in the court, which they have to yet assess which once it goes in our favor, the whole amount could get reversed in our...

And should the project go against you, is there an additional liability?

We don't know if some more interest might add up, but it won't be too much that, that should come. See, right now I...

I mean if you could quantify -- so you have already deposited INR 2.3 crore, as you mentioned, and in case it is a favorable verdict, there will be a write-back of this INR 2.3 crores, but in case of an unfavorable verdict, what would be the maximum liability is what I'm trying to understand?

Well, as we understand that may be some more interest in all might get added to this. But again, the major chunk is already taken care of.

So it will not be more than INR 1 crore or something, INR 1.5 crore?

I don't think more than that.

The next question is from the line of Devanshu Sampat from Yes Securities.

Sir, just one question. Sir, can you elaborate a bit on the challenges that your competition is facing? Or was that something in the past and have they resolved those issues? Or are they still sort of having a tough time, which we can sort of benefit from? And continuing with that, was the jump in our printer volumes due to higher sales coming in from the food and pharma space, which is basically has been a stronghold of your peers?

So I'll answer those questions. So a lot of the increased business is, you're right, from the food sector and the beverage sector, not pharmaceuticals so much, so not in these 6 months, at least. So it's been mainly food and beverage. Industrials has been a bit across the board like from -- you can't lump it all together as being different from each type of sector to another. But food and -- F&B is the one that has actually been the growth area for us in the last 6 months. I'd say like exclusively that's the main area that has contributed. Pharma also, but pharma is not to that same volume. And as far as our competitors goes, so they had some issues, we also had some issues. I think we rebounded a bit faster from that and servicing our customers better. But they have also picked up. So it's not a permanent thing. So now I think like things across the country seem to be more normalized. It seems to me at the present moment of time is what I would say. So I think everyone's back to at least a normal service level. So I think that's the situation. As far as any market share gains or other things, I think it's partly yes, because they had some issues, and we had some issues and relatively we had less issues. But I think that the other positive is, of course, and we -- actually the coronavirus happened in opportune time for us. It's basically because we were already gaining market share if you look at it previous year, gone past well INR 200 crores. It's the situation [indiscernible]. And we were gaining market share because of the introduction of our new products. And that's the reason we were actually picking up market share versus our competitors. So I think that the -- there was sort of like 3-, 4-month halt because of the coronavirus. And now we're getting some of those sales, which maybe we were working on previously, maybe especially in certain couple of sectors like F&B, mainly. But we are quite hopeful that like if things continue to remain normalized, then definitely, we should at least continue to pick up some share and like it would have been better, of course, if the market was still normal. I think things normalizing and looking as the things are getting back to normal, we should still continue to pick up some share. But it's as much -- I mean because of our product portfolio is, what I'd say, more than any other problems of competitors. It's probably more because of us.

Okay. So any new customers that we've been able to add because of this especially in the F&B space? And does this -- I mean, I would assume this to be a fairly sticky sort of a situation going ahead. So you think that can open up a lot more opportunity for us?

I mean so we've mainly increased our volume of customers we already had. So a lot of customers, like large customers, they normally keep not just sometimes one supply, sometimes even 2, 3 of us are here in a single customer. So I think that more than anything we've gained -- so suppose maybe someone had 100 printers, maybe a 30, 40 of us and say, 60, 70 or 1 or 2 competitors, maybe that position has changed. We have 60, 70 printers, maybe the [ person has changed ]. Or they will increase from 100 to 130 -- because some companies are expanding. They are doing well. And I think we've got a disproportionate amount of the replacement and the new business that's come. As far as being sticky, of course, like our printers tend to be used for, I mean, anywhere between 5 to 10, 12 years, depending on the model, depending on the customers' requirements. So I mean, I assume that with the printer, the customers who purchase, would continue using it for a few years to come, at least. So that's obviously a positive. Right now, like I said, I do think we've got better products. And this is a continuing story from the previous year. It's just that 5, 6 months has just been very weird in between.

Okay. And last question, if I may. Is your low base LCP cement, the old cement thing that we had, so is that sort of behind us now in terms of the base?

So I don't know, this should dropped further in the first 6 months. But I think this might not be because we lost customers because I don't remember us actually losing customers. I think this is more because the production might be much less, I think, but I'm not 100% sure on that. I can -- Rahul, you have a better idea on this. Do you just check with these exact numbers? But I think so far, we've not lost any -- again, like I said, most customers were on limbo. So I don't think everyone was moving that much. Again, like I said, when people are operating at normally 50% or something, they're not really looking at expanding and adding lines and so on.

But we are changing our strategy in LCP, like I mentioned, Devanshu. And it has already hit the rough quarter. So I don't think it will go further down. The dependency as of now is quite low, it's less than 7% of our revenues on the LCP segment. And that non-LCP business, now we're going into the sugar season, so my team tells me that we have got some good orders for the -- from November to March onwards. Dwarikesh, Balrampur Chini, Bajaj Sugar, Dhampur Sugar and Ayan Sugar. So quite a few sugar industries have come in our fold. And now in the last 4 months of the financial year, we should see this LCP again coming back with stronger numbers.

[Operator Instructions] The next question is from the line of Sunil Shah from Turtle Star Portfolio Managers.

Sir, my objective here is to understand the competitive landscape. You mentioned that there are a few international players. Sir, could I get the names of various players, the market share between each one of you if I could get at least that basic data, please?

So the MNCs, it's there in our presentation. If you would go through that, it will give you more information. But...

Market share?

Yes, that's, I think, also mentioned there, but it's like Domino, Videojet and Imaje, the 3 main global players who are present in India also. In India, Domino is the #1, Videojet #2 and Imaje is #3 and Control Print comes at #4. So that's the landscape in India.

Yes. Sir, on the ability of product launches, sir, I think in the course of the call, you mentioned that we could gain more market share because -- because we launched some products early on. So could you give me some more insights into this, the frequency of new product launches again, from the customers' acceptance point of view, if you could give us some more understanding on that side, please?

Sure. So we have a set of different products. So it's -- if you look at it -- I think what is like in the auto market, I mean it was sedans, okay? So the CIJ is like the sedan. It's the primary product. Maybe the LCP was like the truck. Now one printer can be like the 2-wheeler or -- so like -- and the SUV or something. So we're getting into different segments of the market are catered to by different printers. And as you can see, in certain markets, people have a different tendency/. Like so there is a market for scooters, and there is a market for performance bike. So the same thing is happening in our market also. As the market is maturing, some people are going for different types of products. And depending on the requirement, rather than always going for a standard 2-wheeler motorbike of 100 cc or 125 cc whatever the standard is. So the same thing is happening in our market. And what's happened is, we were frankly behind our competitors in certain of these other product categories outside the main product category. Our focus was less. So we were very much focused on the inkjet for the Continuous InkJet Printers of the CIJ and the Large Character Printers, the LCP. And now we have really beefed up our portfolio across the laser, the Thermal Inkjet Printer, the piezo drop-on-demand high-resolution inkjets and also, of course, the Thermal Transfer Printers. So -- and what's happened is because we maybe because obviously, we like to think this because our products are better [indiscernible] that we came in later. So we had a better product than our competitors. And so although we started later, we are right now better than them. And we're gaining market share as a result in some of these other product categories. And as Continuous InkJet is also still a high-quality product, we continue to gain some market share there. Again, everyone has to understand that in our business, it's a pretty sticky business. So unless there's some serious issues with you, people are not necessarily looking to change from one supplier to the other. So the offering has -- can't be like that 10%, 15%, 20% better. It has to be 20%-plus better for someone to consider changing a supply or something. I have to look like a much bigger value offering for me to change from one supplier to the other. And I think -- so because we've got the other products that are there and giving a better value to the customer for certain applications is, again, being able to capture something, at least to some extent.

Sure. Sir, just one last question. Sir, I was just looking to gather some data. Companies like HP, they are coming out with some inks which can really be consumed in such kind of printers. So consumables, it's 50% of our business. Can customer approach HP and take the consumable directly from them versus coming to us? Can that...

Essentially our own Thermal Inkjet uses an HP type of a -- so Thermal Inkjet is HP type of a technology. So our own Thermal Inkjet Printers, for example, they actually use HP type cartridges. There are some limitations. HP can say whatever they want, and we also say some stuff. But there are some limitations on these types of inks working on many types of products because of the adhesion level requirements and the customers' ink requirements. And also, there are some issues in terms of throw distance. Where it works, it works very well. It's relatively more trouble free, although it's more expensive. So we're also selling a lot of Thermal Inkjet printers based on the HP technology, and we're doing well. And we do -- I mean we do get actually the cartridges from HP, the blank cartridge, and then we fill them and we sell them with our own smart card. So first, nobody can sell the printer that we have because those printers are with our technology and our card all protected. And yes, we sort of HP is, what I would say, is not directly selling the supplying to people like us and other people and then people are using that technology to build their printers around that.

Sir, just one last quick point. So on the printers and the customers where we have sold the printers, HP or any other company cannot come and directly...

No, no. Like I said, our printers have our own card inside. And therefore, our printers only have -- require -- like RFID tag is there. So far RFID tag is not there, the printer will not accept anyone else's ink or cartridges.

So we are protected on that, sir. Fine.

Yes. So whatever we sold is ours. And of course, that is a preclude HP from partnering with other people. But [indiscernible] design a print around, high-quality printers, not that easy to do. But we don't use HP's own inks. We actually have our inks developed, which we use for ourselves.

The next question is from the line of Karan Bhatelia.

Sir, what is the current utilization level for our printers and consumables?

Karan, the volumes for printers have increased that our facility in Nalagarh is quite equipped. So printers, yes, has utilized at about 50-plus percent, but consumables remain still sub-50%. So around, say, 40%, 45% on the consumables side and 50% maybe close to that on the [ printer service ].

So we were talking often some CapEx on the earlier con call. Sir, can you throw some light on that?

So that was just to debottleneck our stores facility in Nalagarh. We are just building a couple of floors to our existing store facility. That is what we were mentioning. It is just to ease out the operations with volume increasing. And we can easily ramp up our production by increasing the number of ships because it's predominantly an assembly plant. So even at 50% on the filter plant, it's nothing to be really worried about. We will not need any major CapEx to it higher volumes.

Right. So correct to assume INR 7 crores, INR 10 crores kind of CapEx?

Yes, I think sufficient.

I think that we're investing about INR 5 crores to INR 6 crores maybe totally right now, out of which most of the investment is complete. I'm going to Nalagarh tomorrow. I was waiting for this call. And then I go. So it's just to put the finishing touches. I think good job because that's already done.

Yes, yes. Most of it is done.

Debottleneck, I don't have space. There was -- the problem is you don't want to have a warehouse outside [indiscernible] because of some issues happened in terms of the bottlenecks that occur. So we have sufficient space, and we have enough people in everything. We just needed a bit more space to -- for a better flow of goods.

All right. And sir, how are things shaping on the international side?

So yes, exports although they are as it was earlier, but other countries, us also, gone through their lockdown challenges. So I think now it's trickling back. But our focus, again, remains on the domestic market. So exports, our customers and the installed base there is intact.

Also the travel and other things are restricted. So it's a bit difficult, honestly, to start like new businesses and to do certain things right now because -- I mean, I'm not saying like it's me, but like someone goes, like right now, the travel rules are not very clear in the quarantine and all these other things have got stuck up. So you can -- frankly, we can say whatever we want, but you can't start a business or give a training or do many things on Zoom. It's somewhat affecting us. So what business do we have like in Sri Lanka and Bangladesh, they are continuing and they're doing okay. But to expand upon that is right now quite difficult because it's -- there's just practical issues. I mean right now, it's -- I think the travel rules need to be very clear, especially for international travel. Because some -- nobody else go somewhere and then they change the rule and you can't come back or you were stuck out there or I don't know what is going to happen. So that's a practicality reality.

A lot of countries are also going through their second wave. Sri Lanka has reached 0 cases in the past few months. But again, now I understand from my team that they are again going into some kind of partial lockdown and certain areas have become quarantine. And they are now again putting back in the place. So it's better to stay where you are rather than experiment and travel and get stuck.

The last question is from the line of Saket Kapoor from Kapoor & Company.

Sir, firstly, sir, if you could -- hello?

Yes. Yes.

Yes. We can hear you.

Yes, sir. Yes, sir. Sir, firstly, sir, if you could elaborate the -- in the face mask segment, the mask segment, sir, what kind of opportunity are you garnering? You said INR 10 crore investment in the segment. And you talk about international market being that it's the key clients. So what is the -- is it the N95 mask or something better...

Surgical mask to our existing customers. So we have a lot of customers. I mean I don't want to give names right here, but we have a lot of customers here who have basically international customers. I think there was a bid -- I mean so we're supplying them here. There was a little bit of a, you can say, maybe not -- they want to have an alternative source to China. That's the way I'll put it. And so there was an opportunity to sell to their factories elsewhere because the basic idea, if you look at most of the factories, is that you come in and you get a surgical mask every day. I mean some people also have N95s, but you sort of come in and every day you take a mask and you throw it away and you know like so every time you enter and you go -- just to protect the workers from contaminating each other, maybe contaminating the products that they are packing or producing. So that was the basic focus. But also we -- from big angle was also the CSR angle. So that is the thing. If there was an issue because, like I said, the exports are actually banned in between -- like banned till quite some time or now [indiscernible]

Yes. So this INR 10 crore investment will garner what kind of revenue in full capacity, sir? And the margins, if you could elaborate, sir?

No, so I don't think that, that was the focus right now. I think the focus will be started with a couple of crores, which was basically for our CSR, INR 2 crores, INR 3 crores, and there was an expansion. And of course, there's some part of it is working capital, some other things also involved. So the idea was not from that angle. The idea was to take care of this segment. So I don't think like, like I said, it was not a plan for a 10-year plan of course. Now there's a second wave. And I think at least for 1 year, I see these things there. But I mean, like right now, it's not like our main business, as you said. In a few months, we'll recover our investment. That is the target. And then we'll see what we want to do. And so that's -- our target is to do that by the end of the financial year. And I think we've depreciated a good chunk of this stuff already. So I think that's -- we're going to plan to be quite aggressive with that and just get that...

Okay. So this INR 10 crore figure is then a miss number, sir, I have got the figure wrong? You have made investment of INR 10 crore for the face mask...

Approx, approx, something around there. I can't give the exact -- I don't know the exact number, but around...

Okay. Okay. And INR 1.5 crore is the depreciation, which we have taken for this quarter?

Something like that, I believe, yes.

Yes.

Something like that. So going forward, it will be another INR 3 crore for this year? So INR 4.5 crore is what is being getting depreciated?

You can say that, yes.

See, it's volatile market right now, Saket. So let us take it one quarter at a time.

Yes, but that's a good approx.

The depreciation is the point I was trying to understand. Sir, one point is about this consumable part. Sir, we are lagging in this bracket of 40% to 50% for Nalagarh in consumables. So sir, what are the key constraints? What will take -- in Guwahati, sorry, sir. So sir, what are the key constraints, sir? And what will be the key -- as the economy recovers, how sooner are we expecting this to be in the 60%, 65%? Because our printer base is increasing, so -- and we are also seeing that the customers which we are catering to are also posting robust volume. So is it the customer having -- competition is fierce in those categories? That's the reason the consumables from our side is also lower? I just wanted to understand.

So this 6 months is a very tricky period to look at. Because definitely, some industries have been -- like I said, even most of our growth has been through the F&B segment this 6-month period. And so in fact, I will say like in March 20 onwards, there was some, this thing. So I think, obviously, we were negatively affected because we would have crossed INR 200 crores last year, for sure. And this year, we'll be looking at a strong growth on that. So it's been a bit of a tricky period. We are -- I'm 100% confident that -- not 100%, but we are targeting that we will at least hit last year's sales volumes and profitability overall at the end of the year, and we have to also understand that we were like about 40 days behind because in April our sales were like -- I don't know what it was, there must have been a couple of crores at most or something. So that was like a lost difficult period for us. And all the factories were shut. So I think that the revenue that growth that's there is there depending on -- I mean, at the end of the day, see, it's about other people manufacturing goods and then using our printers to build the valuable information on them. And that business is doing okay. But it is sort of segment driven. So many things like tires or this, like auto, they could have been down. But I think that overall, it seems to me the economy it seems to me is normalizing. And if the economy normalizes, then definitely, the printers we sell will be used more. So like instead of being used maybe some people have 10 printers, 10 lines, maybe they're only using 3, 4 lines at this current period. So as soon as they get to 6, 7 lines or they get from 1 shift to 2 shifts and so on, so automatically our ink business will increase as a result. And same thing for the printers we are selling. So I think that the -- lot of things are out of our hand. Our only thing is that we can try to service customers the best we can and continue to make these market share gains because whenever the printers start getting used, which is totally out of our hand, then obviously that will translate into consumables growth. And then that will translate into bottom line growth. So -- yes, this is like mix -- it's like this is a very strange times. So it's not easy to compare.

But sir, the mood point which you just spelled it out, was that the H2 would be much bigger than what we people are taking into account?

Yes. If this recovery holds...

If this recovery holds, then H2 would be a very bigger one, and it is our endeavor that we will at least be reaching the top line and the bottom line, which we posted for March '20. This should be the nose point you are trying to convey, sir.

Yes. Yes. So our target is that, for sure. And I think like -- it seems to us like -- I mean, luckily, we are in a very good industry where even though some sectors have been negatively affected, some sectors have been positive in that mean same time. I don't know why. It could be people are at home and maybe they're eating more food or, I don't know, dairy or God knows whatever. But -- so some sectors have -- although some sectors are a little bit down, some sectors have been quite positive. In certain sectors, like pipes and all have not been that bad, I think, because of agriculture and stuff. Certain sectors were affected. Construction have definitely been affected like cement and paints. So it's a bit mixed. But I think if there are no issues with the COVID situation and the economic -- economy is sort of normalized, then I'm quite sure we'll do well.

And sir, very small point I would like to make. Last year, sir, we went for the inventory write-off also with some absolute inventory INR 4 crore. So sir, what are the stress tests that we now are doing on a continuous basis, and this will not be a repetitive one going forward, sir?

Yes. Rahul will answer that question because I...

So like we had mentioned in the previous calls also, Saket, it was more of a inventory that gets obsolete as our printers keep evolving. So now we will try to keep it on a year-to-year basis and consume it of as and when it is happening. So the stress test is that we will evaluate it more frequently rather than piling it up to do a bulk write-offs.

So sir, this will -- this is now 6 months basis you are doing on a yearly basis? We will be hearing about this inventory...

No, you won't be hearing. It will get charged off as and when the project is over. So you won't see a -- you won't probably notice it the way you did now. It will be part of our business process.

Okay. So for 6 months, we have taken a writing off this time, sir?

So in the first quarter, we did the bulk one, so we don't need anything immediate right now. Maybe towards the end of the year, we'll evaluate once again. And if anything is there, we will consume it off rather than going for an exceptional item.

I didn't get you, sir. Come again, sir, last point.

So I'm saying that we will evaluate it closer to the end of the financial year. And if there is anything that we feel is going to get into obsolesce, we will consume it in the P&L rather than going for an exceptional item.

Correct, sir. And last point was on the market value of investments, sir. I think so the investment value has gone up from -- under the financial assets from INR 14 crore to INR 20,68,00,000. So I think with the OCI route, the profit is around INR 7 crore. So the market value goes up by that amount, sir?

So mark-to-market like we did mention, in the March quarter, it came down, and this time, it has gone up because the markets are [indiscernible]. But it's not that -- it's mostly because of mark-to-market. But net over this half year, we've been a seller of investments in spite of the [indiscernible].

So sir, even after the seller, we are having investment -- the investment has gone up from INR 14 crores to INR 21 crores. So sir, is it -- how will you explain? If you are selling, then how the value will go up?

So the mark-to-market has gained on that. And like we mentioned, Saket, every time, let's stick to the operational. We don't want to...

But it is a very substantial figure, sir, INR 20 crores for [indiscernible] company.

But it is reported, right? And that's the figure.

Yes, sir. I'm just deliberating on the same just to have an understanding. And we have been doing very good on our investments. So there is no -- it is all the positives only that is there in the system. So just wanted to understand how are the 2 jelling together. If we are booking profits and then also the value going up, I could not understand. And lastly, just, you have to say anything, sir, on this? Or anything else that's in investment part?

No, no. The markets have gone [ against ] for us. So I think we've done well on that front. And everybody is to gain because it adds to a network.

Correct, sir.

And like we had committed -- all I can say is that like we had committed that it will not be part of exceptional item. It would all be part of OCI. So it's definitely a good sign from what the company had come.

No. I got your point, sir. And sir, for the provision for warranty figures, sir, what would be that for this half?

There is an arithmetic formula that we have put with our auditors based on how many printers we sell, the warranty gets accounted for that, depending on the model of the printer. So that's just a figure that we need to put in actual. The more printers that we will sell, we have a 13-month warranty period. So automatically, that provision increases. And that's healthy for the company.

As the period nears and there's no claim that the same gets -- the provision gets reversed. That is what the...

It moves by delta. So if this year, we have sold more printers than previous year, the warranty will anyway go up.

It will go up.

The delta provision is increasing.

I would now like to hand the conference over to Mr. Karan Bhatelia for any closing remarks.

Thank you, Rahul. Thank you, Siva, for your time. With this, we conclude the call. Rahul, any closing comments you would like to make?

Well, thank you, everybody, for your time and stay happy, stay healthy and stay safe.

Absolutely. I think -- like I said, the times are quite uncertain. I just want to give that message, and we are -- luckily, I think the market now seems to be pushing back to normal, and that's a big positive for us. So -- and I just think that, yes, the important thing is everyone stay safe and try to get back to businesses normal. Hopefully, we all be very positive going ahead. Thanks for joining all of us here.

Thank you, everybody.

We conclude the call. Thank you.

Bye.

Bye.

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