Control Print Limited (522295) Earnings Call Transcript & Summary

Ladies and gentlemen, Good day, and welcome to Control Print Limited Q3 FY '22 Earnings Conference Call, hosted by Asian Market Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand over this conference to Mr. Karan Bhatelia from Asian Market Securities. Thank you. And over to you, sir.

Thank you, Hemant. Ladies and gentlemen, good afternoon, and a warm welcome all to the Control Print Limited Third Quarter and 9 months FY '22 Earnings Conference Call, hosted by Asian Market Securities Limited. From the management side, we have with us Mr. Shiva Kabra, Joint Managing Director; and Mr. Rahul Khettry, CFO. I would like Rahul to take the call ahead with respect to the financials, and then we can open the floor for Q&A.

Thank you, Karan. Welcome, everyone, to the third quarter FY '22 earning conference call of Control Print. We appreciate your taking out time from your busy schedule to attend the 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 the website as well as the investor presentation notification on the exchanges for this call. For those who are probably reviewing Control Print for the first time, we are a 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 an advantage to sell our products locally and compete strongly with the other multinational players. We are the only integrated player with capability to manufacture both printers as well as consumables in India, giving us an advantage to share the benefit with our customers. This also gives confidence to 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 Guwahati plant. In addition to this, we have also started manufacturing some printers in that location. We have a strong sales and service team of 360-plus engineers across our 11-plus branches, which gives us the advantage to service our customers efficiently and timely. Since aftersales service is very critical to ensure that the production line of our customers continue to function continuously, thereby maintaining customer satisfaction. 11-plus branch offices across North, South, East, West and Central India gives us an advantage to be in direct contact with all our customers in a timely manner, since our products are critical to their production line. Post sale of printers, there is continuous demand for consumables over the life of the printer, which typically lasts for 5 to 7 years depending on the 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 giving our customers confidence. We have end-to-end SAP ERP system setup, which ensures maximum transparency in accounting, sales and aftersales service as well as total control from raw material planning and ordering to receivable collection, and is integrated with our CRM systems, which gives the confidence to the team, the customers, as well as our auditors and investors. We have 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 requirement of the industry. The details are elaborated in our company presentation. As of today, the company has an installed base of 14,000-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 product to meet the requirements of most of the substrates. It gives them additional advantage to the customer 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 Q3 FY '21, '22. Our Indian economy witnessed an increase in the manufacturing activities in Q3, which was encouraging, but the increase in Omicron cases in December was a damper and affected the consumption sentiment. Though there was no stoppage in work, but there was a slowdown on the demand side. The repeated occurrence of COVID wave every few months is demoralizing the industry as they have to work on both correction as well as ensure the health and safety of the employees. The gross margins -- the gross margins were dented across industries due to increase in material prices of components, especially electronics, chemicals, solvents, et cetera. With the increased vaccination, the third wave is very mild, and the government is not willing to do a lockdown, which means that the production momentum will continue and a quick bounce back is expected for higher margins -- for higher growth. These are extraordinary situations when the strength of the company is tested. And we assure you that Control Print is geared up for any challenge. We are financially stable and robust, and we'll continue to perform in spite of unforeseen challenges. This stability of Control Print has been reaffirmed by credit rating agency, CRISIL, with an A rating, after considering the short and medium-term impact of the COVID pandemic. Our investors retain their belief on the company's management for an optimistic future. This quarter's performance once again delivered all-round growth in revenue and margins and also had volume growth. Revenue for the quarter was above INR 60 crore at INR 62.72 crore, which is the highest revenue in Q3. The year-on-year growth in revenue was 12.7% and the 9-month growth is 25.3%. The reason for growth in revenue was due to good traction in consumables, the year-over-year growth of 16.4% in real value term as the industrial production increased. So we believe it is still not at the optimum level. The production of some of the industries was lower due to raw material shortages -- so there is still scope of growth in the overall production volume. Profit before exceptional items increased 19.4% year-on-year and increased 29.8% for 9 months. Profit before tax increased 19.5% year-on-year and 54.3% for 9 months. Profit before tax for 9 months is almost equivalent to previous year's PBT of 12 months. EBITDA increased 14% year-on-year and 23.4% for 9 months and continues to remain above 24%. Profit after tax increased 20% year-on-year and 51% for 9 months. Also to mention, profit after tax for 9 months is almost equivalent to previous year's profit after tax. Working capital days improved significantly by 32 days this financial year due to better inventory management and receivables recovery. The company maintained healthy margins with profit before exceptional item and tax at 17.9% and EBITDA at 24.5%, with scope of improvement due to better product mix and higher revenues, triggering economies of scale. We should continue to maintain EBITDA margins north of 24% on a long-term sustainable basis. Let me brief you on the performance of business divisions, products and business segments. Printers and consumables had a positive demand despite a challenging environment, and the increased installed base will drive the business in the coming quarters. The company strengthened its market share in the building materials segment. And the dairy and food sector, including FMCG, witnessed increasing customer penetration. The company received the U.S. FDA approval for surgical face masks and is only the fourth company in India to get this accreditation. The FTP division witnessed 9-month growth of 15% year-on-year as the production of customers were increasing. The growth was mainly due to improved production of some of the industries where we have a stronghold, like dairy, health care, food, cable and wire, agrochemicals, and was also encouraging to see growth in some of the upcoming sectors like pharma, paint, goods. Our CIJ, TTO and high-rise division continues to grow exponentially, with some good installation in the past few months. We have dedicated managers and teams like these verticals, with focus on dairy, beverages, bakery, frozen food, ready-to-eat, pharma, packaging, plywood, lubricants, carton coding. These new products continue to grow every quarter, which builds confidence on the potential of these products in the coming year. The laser business is growing steadily as product technology is being improved and the new team is driving the business. This has yielded good dividends with positive response from the customers and new opportunities expected in the coming quarters. Service revenue has shown good growth in value terms, which contributes towards profitability. Our strategy for separate vertical for key accounts and OEM business, our focused approach is showing encouraging results and should yield good quantum of business. LCP business reported an increase in previous 3 quarters with some revival in cement accounts and pan-India supplies in sugar industry. We are changing our focus to non-LCP business with some new application, and the team is confident of generating business in the coming quarters. With new government directives regarding marking and coding in agrochemicals, health care, plastic bag, we expect some good contribution to our business growth. Customers, especially large business organizations, are looking for coding and marking solution so as to avoid counterfeit of their products -- counterfeiting of their products. We are offering complete solution, including availability of our in-house software development team to prepare tailormade solutions or as per our customers' expectation. To intensify our reach to the customers, we are strengthening our inside sales team for telecalling the customers to generate good quality leads. This is helping the field sales staff -- this is helping the field sales force to improve their strike rate for order conversion. The company has strong cash flows, and the trend is expected to continue. As the pandemic retreats and with the increase in the vaccination population will result in robust growth of the economy, and we hope for similar trend of growth trajectory. Fundamentally and inherently, the company remains strong. And we are focused on our plan and strategy as we are confident of the growth potential to deliver positive results. The floor is now open for questions.

[Operator Instructions] The first question is from the line of Gaurav Shah with Ashok Gandhi Securities.

Congratulation for a stable set of numbers. I have a couple of questions. Firstly, what is the game plan to win market share from our competitors and take it from let's say 18.5% to say around 25% to 30% in longer term? And secondly, during this quarter we have the got U.S. FDA approval for our marks division? So what's the revenue position here?

Like we mentioned in the previous call, we now have the complete portfolio for the coding and marking industry. And since industries like Control Print was not able to penetrate, like we mentioned our new product range of CIJ, TTO and high rise printers, we're now able to generate good customer response there and these verticals are continuously increasing. So we will be able to add more customers with these news printers as well as the market share. Even our CIJ team is very strong. And like I mentioned, now we're doing -- increased our in site sales team for telecalling which is showing good results and we're able to reach more and more customers. So the conversion rate is definitely increasing. And being a Made in India manufacturer we're able to compete very strongly with our competitors. So the trends shows that we're moving forward on the market share.

Sir, have we got any market share from competitor during last quarter?

We project their numbers on a quarterly basis We don't get their numbers on a quarterly basis. So there are no industry reports. So we have to wait for the year-end to -- when they file the return probably towards the end of September, October of next year. Then only we will get to know the market share. But the ground field keeps telling us that we are gaining competitor accounts, which is a positive sign.

And the second thing on the U.S. FDA approval for mask division, what's the revenue condition there?

So it's a great thing. We are only the fourth company in India to have received this approval and that has opened up the market wherein we can export the surgical masks to the U.S. now also. Earlier, there were restrictions because if you don't have the FDA approval, you can't supply to the U.S. market. So that opens up an export opportunity for us, which the team will explore. As of now, you know that the third wave is anyway in progress, and that has seen an increase in demand for the face mask division. So yes, we are quite -- this quarter, we feel that the mask division will be strong. So we should be doing about INR 2 crores, INR 2.5 crores a month on the masks sale.

Okay. So do you think we have the opportunity to reach INR 10 crore or something in the longer term?

So it's difficult to predict, yes, because it's completely driven by on the wave and if things settle down, then the mask things goes down. So difficult to predict. But yes, as of now, it's on the up.

The next question comes from Devanshu Sampat with the Yes Securities.

A few questions from my side. So can you elaborate a bit on the opportunity that arises out of the Department of Health latest notification of having QR codes and batch codes and batch details for all the APIs being manufactured. So does this require an entirely new set of printers to be sold? Or are we going to sell more to the existing guys? Can you put a number on how this could possibly expand the INR 1,200 crore, INR 1,300 crore industry?

Yes. So specifically about the requirements to print QR codes on pharmaceutical products, right now, the latest notification that for printing on PPI, active pharmaceutical ingredients don't have that type of volume. And normally, they are packaged not directly on the production line. They're packaged offline. So what people tend to do is pack them in barrels or mobile packing. And what the tendency to print the label top line and then use a person to basically stick it. So there's a limited benefit we see from that. But as and when it starts going down to the primary products, the actual finished formulations, which are manufactured online, then definitely, we'll get a benefit in that regard. So the pharmaceutical industry is going to be focused for us in terms of improving our market share. And we do have fantastic set of products for this business. Our market share is quite low because it wasn't a focus for us in the past. But it's something we're taking up on. And definitely, we expect to gain in that business. Our existing printers are capable of building QR codes. Most of the existing printers which are installed as of right now are not people. So if the requirement comes on people's formulation line, we will require to upgrade their existing installations. So that depends on the government regulations and each company's decision on how they want to implement this.

Is there any time line on which -- when this has to be implemented? Any -- do you -- are you aware of that? Is this first, then next year onwards?

So regulation has come out once or twice before. But I mean the pharmaceutical industry has a pretty strong lobby. So it has come out and it has been withdrawn also. So I mean, I think in general, there's always resistance to enforced rules and regulations. And of course, there was some technical difficulties in actually implementing this as well, like few years ago. Now it's much easier. Not only us, the solution is available. So I think -- I don't know. I think this is like a very regulatory driven process, and it's going to come down to the government areas seeing this whole or -- or idea of this whole thing.

Okay. Okay. And second question, I had touched upon this in previously, a few calls earlier. But just wanted to get some sense from you on this. So the consumables for printer is a key number to track, right? Because assuming, say, the last 7 years as your printers that we've sold is what I have to term the installation base, right? So if I look at that average, the last 2 years have been below the average. We've been selling 1.08 lakh worth of consumables for printer in the last 2 years versus the average of about 1.2. And as I've said, I picked out the 1.3. Now I just wanted to ask, I guess, what I am saying, have the prices been held on? Or are we holding on the prices? Or is there a pressure on prices only, or this is entirely to do with the lower production sort of utilization levels?

It's more on the production side, like I mentioned also in my opening remarks, that we still believe that some of the industries are -- there is -- there has been a shortage of raw materials. So their productions are happening, but there's still a gap of about 10% to 15% where we feel that the production can be higher. So that's definitely one of the reasons why the -- for consumable -- for printer consumables seems low. Plus, there are different product mix right. Now we have different printers. It's not only the CIJ printers, so some printers have higher requirements, different industries we are supplying to now compared to earlier. So every industry doesn't need a 24/7 production. So various reasons, I am not sure, to be honest. It's not going to be at the same level it used to be a few years back because that was predominantly on the CIJ printers with many specific industries. Now the number of printers are different. The product mix is different. The industries are more varied. So yes, it might be slightly lower than the earlier figures, but current figures should improve is my take on it.

Sure, sure. And lastly, we sold about 2,950 printers in FY '21, which is a COVID year. And that essentially is great because if you compare it to the preceding 3 years, I think you were selling about 2,400 printers odd. Now given the talks about CapEx cycle recovery and all these things, would it be -- what kind of numbers are you working with? Are we looking at 3,000, 3,500 printers per annum? Or is that a bit conservative and can go much higher as per you?

I think we can reach close to 3,000. Even for this year, we are on target. So we've done about 2,100 printers in the first 3 quarters. So we can be close to 3,000 if Q4 is aggressive. Otherwise, we should somewhere be close to last year figure definitely.

What will be the installed capacity? Or what is the manufacturing capability and number of printers that we can do per annum on a full -- assuming full capacity utilization?

Again, it's a mix of different printers, but we are still at 75%, 80%. But since it's more of an assembly operation, that can be ramped up without much of expense. So we'll have to, of course, force path more aggressively, faster with a lower -- lesser lead time and increase some workforce in the factory. So I don't see that to be a bottleneck.

The next question is from Deepan Shankar with Trustline PMS.

So firstly, wanted to get the breakdown of revenue in terms of printers, consumables and the service division.

For this quarter, printers is about 18% to 19%, the consumables will be about 52%, 53%, printer service will be 23 -- 22%, 23%, and the rest on the mark.

Okay. So secondly, I also wanted to understand, so how is our market share dynamics in terms of our newly launched products? So it's been now 2 to 3 years in terms of TTO, Thermal Inkjet and even high rise. So are we able to successfully convert our existing customers to these new printers? And the new customers also, are we competitive enough in these new printers?

Yes. Definitely, we are competitive. That's why we have seen that every quarter, we are growing in these CIJ, TTO and high rise divisions. And these predominantly they were our competitors' customers because we didn't have these products in our portfolio. But over the last 2, 3 years, we've definitely benefited well, and that is giving us a good confidence. And we are competitive. That's why we are seeing these divisions grow through exponentially.

Okay. So in terms of market share, so are we on the -- these new products are in line with the company's overall market share? Or it is still way below that levels?

So you have to look at the market overall, of course, the CIJ is biggest part of the market and the non-CIJ products are growing faster. So it's difficult to look at an individual product. We look at more industry-wise. But what I'll say is that, of course, we had a lower market share in the packaging side of business. And it's increasing, so we're definitely still much less than our competitors, but we've not really lost our market share in the industrial side, but we're gaining a little bit of market share on the packaging side. And that's a bigger part of the business than the industrial side as of right now in India. So it's -- if you can gain a little bit more market share a little faster, then obviously, there is a potential for us to go fast. So I think -- and on the packaging side, there's a more diverse mix of printers. On the industrial side, it is more CIJ-focused still.

Okay. Okay. Okay. So from next year onwards, are we looking at -- in terms of revenue growth, are we able to cross 20% kind of revenue growth? Are we looking at it aggressively now?

To note that even in this year, we are quite in line for the 20%. The growth in Q4 is on track. So we feel that -- we believe that we can achieve at least 20% this year. And hopefully, next year will be COVID-free, so that will give us more scope for growth. So yes, as we always mentioned that as a team, we believe that 15% to 20% is definitely achievable for Control Print.

Okay. And in terms of margins, now we are around 24%. So what could be the drivers if we have to improve the margins from here on? So are we working on in that aspect as well?

I think that if our business scale increases, we'll just see an increase in margins anyways. So I -- we don't have to do anything extra aggressive on that. We have had some increases in this last year because of increased costs because of COVID all around. Including on the component side, we got some things from the spot market. So there has been pressures, cost pressures on us. So I think if things just go back to normal and we get more scale, we will see a big benefit in terms of SG&A improving as a percentage of overall sales and if -- as a percentage of the cost base. Then at the same time, you'll see an improvement in terms of the cost of materials, because right now, like I said, we have taken some cost pressures in the last couple of years, especially in the last few months as our old stocks have been replenished. And then that should help us.

Okay. Okay. Okay. And lastly, in terms of this surgical mask division, so are we looking at putting up newer or higher capacity? And so -- if so, then what kind of CapEx are we looking to invest in that division?

No, no. No CapEx, no investments.

Okay. So whatever current capacity, we will be probably selling to the U.S. market? So that's the plan currently.

That's the market we'll explore now. We just got the approval only a week ago. So it's yet to be explored. Right now, with the third wave, we're more focused on the Indian market.

Okay. Okay. So what is the current capacity we have in terms of masks?

We'll let you know that. There's more detailed because there are different varieties of masks, but more complicated than making printers.

The next question comes from Swechha Jain with ANS Wealth.

Sir, I have a few questions. So if you could help me understand the capacity utilization on the consumable side, sir?

All our consumers, as I mentioned, are manufactured in the Guwahati facility. And that was operational since 2016, '17. So as of now, that was made with the long-term vision, and we have about 50%, 55% capacity utilization.

Okay. Okay. And sir, like you said, given you guided for a 20% growth this year and maybe a little bit higher growth over the next few years, so I just wanted to understand, would the growth be primarily led by our consumables business? Or you think it's going to be primarily led by the printer segment, sir?

I think we see the same proportion as what we are now because, first we have to printers -- to sell inks.

The previous question was asked, that printers were sold very aggressively during COVID time, which is a good sign that -- I mean the industry still has a large demand and they are increasing capacity. Probably more products are coming into coding and marking industry. So that is giving us the sales on the printer side. And once the printers are installed, the consumables will automatically follow. So it will be a mix of both. But yes, I think, consumables did have little more scope considering that the last couple of years, what we've installed hasn't really seen the peak production of customers.

Okay. So basically, I wanted to understand, to get to 20% growth, would we need to do some CapEx on the printer side? Because we're already at a 75% to 80% kind of utilization. Are we [indiscernible] on the printer capacity?

I don't see any large CapEx. Mostly the maintenance or some debottleneck of -- at the factory level, but we don't think it will require any large CapEx to meet this 20% growth, at least for the next couple of years.

Okay. Okay. And sir, from the installed base of 14,000 printers that we currently have, could you help us understand what percentage of the printers are nearing the end of the product life cycle? Could you give me some sense around it.

We don't have the data, to be honest. But that doesn't really matter because we keep upgrading our customers' printers, even if they are not at the end of life. So it is -- we know when the customer will replace.

Okay. And sir, now what I understand is the printer gets upgraded, right, at the end of the life cycle. So with the newer technologies coming in, the consumables required for printer [indiscernible] -- how does that ratio change as the customers move to new technology and they upgrade their printers?

Normally, one printer is replaced by the same type of printers, normally. So a CIJ, a new version of CIJ, something is replaced, a of TTOs, older one is replace with a new TTO and so on. So there's not so much of a CIJ being replaced by TIJ release or that sort of thing. So it's not so much.

But no major consumables is what we can say.

Okay. Okay. Sir, just one last question, and then I will join the queue for the follow-up. So if you could give a revenue breakup industry-wise, this quarter versus last quarter and for the 9-month this year versus 9-month last year.

To be honest, we don't share this data on a public platform because it's not available for our competitors also, and we don't want that information to be available. So it is not available.

Okay. No problem, sir. Okay, okay. But do you see a shift in any particular industry? Like you mentioned packaging side and on the dairy side. Apart from that, do you see any shifts, significant shifts?

Like Mr. Shiva mentioned that, we are more focused on packaging now, maintaining our industrial market share, because the newer printers that we've launched over the last 3 years, they are more on the packaging side. So this was not our forte, but these are helping us gain competitor account. And yes, there will be some percentage which will increase on the packaging side for Control Print.

[Operator Instructions] The next question comes from Saket Kapoor with Kapoor Co.

Sir, Rahul ji said, as earlier in our last interaction also, you did spoke about business sentiment not rising to the -- your expected levels. So towards the exit of the December quarter, how is the current business environment shaping up in terms of the demand scenario, especially for the consumable sector? And also this being the last quarter year, ending quarter, there is always traction that we expect. So where -- what's the thought process? And how could the coming quarter shape up, sir, in terms of the business environment? And then my follow-up question.

As I mentioned in my opening remarks also that we believe and that the feedback that we get from our team in the field is that they still feel that production of the customer can be up by about 10% to 15% more. Not in all industries, but definitely in some of them where we have a good presence, especially like if I can just mention the pipe industry. There was a shortage of their raw material of granules. So many of them with the price increase and shortages had some extruders which have not been -- were not running as they were previously. So we feel that there is still a scope of improvements in certain industries, and that should help going forward. And Q4, we are getting good response from our customers as well as the team in the field, that there should be a strong quarter. Hopefully, the third wave is now subsiding, so that should not be a hindrance then, but the Q4 is strong, like I mentioned, we should be in line for the 20% revenue growth.

The loss in the margins which we have -- if I take the expense side item, sir, whether it is the cost of material consumed or even the employee cost, they have -- not commensurate with the increase in revenue, even sir, if you take the quarter-on-quarter revenue, sir, we have seen a dip from INR 62.80 crores, not meaningful, to INR 62.36 crores, whereas the cost of material has gone up from INR 18 crores to INR 20 crores. So what explains this 2 crore change in the raw material? And sir, going forward, are we in a position to regain the lost part? If you could explain, sir.

See last quarter, if you see the gross margin, I don't think there is a much difference of -- in terms of percentage, a few hundred points. It's not a very large change as you see in the sequential quarter. If you see the Q3 of previous years, in fact, we have gained some on the gross margins, which means that our raw materials, it's still under control, but we would like this to be lower because there are certain places where we had no choice but to give price increase to our suppliers during this COVID times, and even currently with the shortage of chips in the electronic market. So definitely, the challenge is much more than what you are seeing in the figures. Both Mr. Shiva and myself know how much we have to struggle to get the components from our suppliers. And it's like take it or leave it in terms of delivery. So yes, it is getting tough. We have been able to manage. And I think at least for the next few months, we are covered. So we are not worried on a short-term basis, and we're continuously in touch with our suppliers.

Sir, the point I'm trying to make is for the September quarter, sir, September '21, we posted revenue of INR 62.80 crore, with a bottom line of 11.73. And now for this December quarter, we did revenue of INR 62.36 crores and a bottom line of 10.78, wherein we find the line items of employee benefit and other expenses as well as the raw material not commensurating with what the September quarter numbers were. So that was my understanding. What factors have impacted the margins, sir? And overall, what steps are we taking so that we can regain the same going forward? Or is it permanent, sir?

So like I mentioned, definitely, and Mr. Shiva also explained that, that there are pressures on sourcing our components, which we are hoping that post COVID and once things normalize, we will be able to pull back a couple of percentages on the raw material side. I would be more optimistic in comparing Q3 with Q3 because that is the more safer comparison. So if I do that, then from INR 54 crores of sales, we've gone up to INR 61 crores and then up of 12.7%. And the profitability has gone from INR 9 crores to INR 11 crores, which again is an up 19.4%. So Q3, again, explaining that further is that it is traditionally a weak quarter for us. And I mentioned it in my opening call, that this INR 61.2 crores of revenue is the highest Q3 for Control Print in the past 6 years, or ever, if I can say. So let's look at it optimistically that Q3 has also been strong for us, and Q4, like I explained, will hopefully be in the same line, and we should deliver 20% growth. So I can say that things will definitely improve from here, both in terms of margin and revenue, as things are more in a steady state.

Correct, sir. Sir, even, sir when we look at the notes to accounts and also the auditor remarks for the company, wherein we have made a small investment, not small, but innovative code, their performance are also a drag on a competitor level. Sir, what steps are we taking there to improve the business? And where are we, sir, in terms of getting Innovative Codes, also upscaling them, sir? And other points are about, sir, any update on the Liberty Chemicals real estate part and Videojet case, sir, if you have anything to share on?

So Innovative Codes, as you know, we did our investment only in August '21. So it's still a baby right now. And that was their first year of operations. Coding and marking industry has no strategy -- has a gestation period, when in, first, we have to install printers and gain our customers. And that is the phase where you have to bear the expenses. And post the 1.5 to 2 years of this gestation period, when the consumables and all are being sold in the market, that's when the profit starts rolling in. So we did have a Board meeting of Innovative Codes, and we have reviewed the situation. And it seems to be in line with the coding and marking industry. We are hoping that post Q2, Q3 of next financial year, this thing will turn around, and it will be in their profit mode again. So considering 1.5 years gestation period for Innovative Codes, it's a good start. We have a strong team. We are still getting more people on board. So employees have to come in, their costs have to be borne for a couple of months before they start delivering. So we're not worried on Innovative Codes. Be a little patient. Control Print has enough of -- Control Print can carry it for a couple of years, and then it will start giving its own share in our revenue as well as our profits. So definitely, it will be profitable maybe in Q2, Q3 of '22, '23 if things are normal. Coming back to your other -- second part of question regarding Liberty, there is no change on the real estate side. And even on Videojet, most of the courts in Mumbai are still not fully operational. They did start post the second wave for a couple of months, but again, only taking the urgent cases. So I believe now with Q3, again, things are -- sorry, with the third wave, again, the things have slowdown. So as of now there is no development both in Liberty as well as Videojet case.

And as of now, sir, for the Videojet part, we have made the sufficient provisions as per the last order. That is to be...

We made a fixed deposit with the [indiscernible]

Okay, sir. What is the amount, sir.

We mentioned it is couple of times, it is INR 2.8 crores or INR 3 crores.

INR 3 crores. And lastly, sir, on the utilization levels at our Guwahati manufacturing unit. I think so some capital work in progress was also due -- some renovation parts was also required at Guwahati, if I'm not wrong. And the levels were also lower -- on the lower side, I think on the consumable. So how is the Guwahati plant operating currently? And at what utilization levels?

Mentioned in the previous question that Guwahati is at 50%, 55%. So there's definitely no bottleneck or capacity issue. I think you're mixing it up with the Nalagarh where we were doing some expansion of our stores and production facility. But that has been done and capitalized in Q3 about INR 4.5 crores to INR 5 crores, we have invested there, which is the major CapEx for this financial year. Guwahati is not, we are not doing anything large. It could be some -- it could be less than a INR 1 crore on some machines. I'm not sure. But no large CapEx in Guwahati that I recollect.

Okay. So on the Guwahati part, we are now happening on the increased level of performance from our user industry, then the utilization levels for the consumables will go up. That is what we have working out, sir.

For at least -- for the next couple of years, we are comfortable.

Yes, sir. And as per our understanding, now that as you have told, we are looking for a minimum growth of 20% on a -- on what we closed last year. That is what you are...

Hopefully, Q4, we will give you the good news.

The next question comes from Shalabh Agarwal with Snowball Capital.

And congratulations for the good set of numbers, sir. And my first question is, this is at an industry level, wanted to understand how easy it is -- is it to get accounts from competition, especially the 3 MNC players? Because they may be having global tie up with some of the bigger, say, FMCG players in India. And for these customers, given the cost of printing, there might not be much incentives to really change the vendor. So just wanted to check, how do we -- what are the possible levers available to us to make inroads in such accounts?

See, you're correct, that the customers in our industry are generally loyal to their vendor. So getting a competitor account is never easy. Nobody wants to reinvent the wheel and get a new vendor and things are running well for last 10 years. It's only when the vendor supplies, and there's always an unhappy customer, unsatisfied customer, that's when we get some way to enter. That was the traditional way of thinking. Now we have these new products. So we are able to exhibit the complete range to our customer, which we have been harping that gives us a good entry into competitor accounts where we have not been able to open the doors for maybe more than 5 years now in spite of giving them the best of offers and service commitment. But now with this new products, we have seen a complete, fair opportunity given by our -- given by new customer. And being competitive, made in India manufacturer has helped Control Print. We always -- we always proudly exhibit our service commitments to our customers. And so this is a very essential part of our coding and marking business, because post sales, the printers have to run efficiently. So though our competitors are multinational, they have strong players, we still are able to break some accounts. And over the last 2 years, definitely much more than we were doing previously. There is also income increase, in spite of doing everything right, you tend to lose customers. So we did have [indiscernible].

Sure, sure. sir, one of your customers had asked, I think, 2 years or 1.5 years back factory in India, and it's a big factory for them. So have products started rolling out? Has that changed certain dynamics in the market or your price advantage at least to that one competitor?

Basically, again, it's more of a screw drive technology like Mr. Shiva Ji is mentioning. It's not like they manufacture the printers, the way Control Print does, right from start to -- from the assembly level completely. They'll probably bring it down in knockdown condition and just putting 3, 4 parts together to call it an assembly. So we are not much -- we're not seeing any particular change in the industry during their supply.

Okay. Okay. Sir, any change or any difference that you can spell out in terms of the feet on street or the number of people or the accounts that you manage? Because as you said, it's a highly service-driven industry? So in terms of where Control Print is managed to score better than the other 3 MNCs.

There was some background noise at our end. Could you just shorten that question and ask? It wasn't clear.

So I was asking, is there any advantage that Control Print has in terms of people on the ground? Because as you said, it's a highly service-driven industry compared to the other 3 MNC competitors in India.

So I think we've got a very good service network and a faster response time than our competitors. But I wouldn't say necessarily we would have a big advantage in terms of number of people only. I mean, of course, we have more people because we have our factories here. And therefore, we have a good amount of people in manufacturing and so on. But I think in terms of our advantage, I think we've got a set of products and good team overall, and just about focusing on executing our strategy with a good set of products and strong service, and I think, we're a consistent over a period of time to get results.

Sure, sure. And sir, lastly, just quickly, how much long CIJ printers contributed for this quarter or for 9 months broadly?

We don't have that bridge between CIJ and non CIJ, but still we sold like I mentioned about 2,100 printers.

Sir, I am asking in terms of revenue, sir, broadly?

So revenue, yes. Their share is definitely increasing. So earlier it was about 13% to 15%. Now it has gone up to about 17%, 18%.

The next question comes from Swechha Jain with ANS Wealth.

Sir, I have a few follow-up questions. Sir, one, just wanted to clarify, you said the number of printers that we've sold for this 9 months is 2,100. Am I correct, sir?

You're right.

Okay. Okay. And sir, on -- like you just mentioned non-CIJ share from printers in revenue is increasing. It has increased from 15% to 18%. So I just wanted to understand, what is the advantage over selling non-CIJ printers more as compared to CIJ printers? Is it that the consumables that is used is higher in non-CIJ? I mean how does it benefit us?

No. So what happens is that there are different technologies, and each is best suited for certain applications. So continuous inject, CIJ is the most broad-based technology. Most of the other non-CIJ technologies, for example, cannot work across a wide range of applications. But for certain applications, they are superior to CIJ or specifically more than -- like you said, more than being anything is what I think is that they require less service. And customers don't like to rely upon engineers to come in. They don't want to rely on something like that. So I think that's a big part of the entire attraction of the non-CIJ products. So like I said, is they do work on certain applications. Consumer wise it depends on the applications. But in general, the consumption for printers if higher. The service is, of course, much lower in terms of the service costs. So yes, we are maybe saving more on these overall.

Okay. So for us from a strategy perspective, it makes more sense to increase our share in the non-CIJ kind of printers, right? Directionally, how does it work for us?

Focused on that, it depends on the application. I suppose all printing on the pharmaceutical industry, the thermal Inkjet is best suited for that. If I'm printing on biscuit line [indiscernible] transfer over printers are best suited for that. If I'm printing on sort of the automotive component, which I need to track even 5 years down the line, laser printer is best suited for that. And if I would have print on a wide range of products, the continuous Inkjet is best suited for that. More on cement bag, the drop on demand -- it just depends so much on the application. So what I'd say is that we were not covering all the applications very well even with the best of technology for that specific application. So it's like saying there's a pickup truck. So pickup truck has its own use, even if it's not the biggest part of the market, but it does something better than MUV, that does something better than a passenger car so that's what it is.

Okay. Okay. And sir, just wanted to clarify. I think you mentioned that we did a INR 4.5 crores to INR 5 crores of CapEx till now in this year, and that is on the printer side. I kind of missed that part actually.

It is in our Nalagarh factory, so you can say it's on the printer side.

Okay. Okay. And sir, in the last call, we had kind of gave a broad guidance that at some point in time, we can reach kind of INR 300 crore or INR 400 crore kind of revenue as the industry expands towards INR 2,000, INR 2,500 crores. So just wanted to understand, if you could just broadly give some guidance as to, do you think this INR 300 crores, INR 400 crores of revenue can be achieved by us, like say, after 5 years from now?

So I think we're definitely working towards that because we -- like this time if we get 20% increase, we'll be close to about INR 250 crores. And then post that, we will target INR 300 crores, INR 350 crores, INR 400 crores. So yes, again, the market has to support as well. So we are all geared up. We have the product range. We have the finances and the team on the ground. So things are positive. But of course, we need some external support to reach that level. It's possible.

The next question comes from Saket Kapoor with Kapoor Co.

Sir, firstly, sir, about the new launches and about our technology partner coming up with the Internet of Things, the Internet enabled printers. Where are we, sir, in -- on that front, sir?

So basically, yes, the new printer is ready. It's just that you have to arrange the parts and the board. Hopefully, in beginning of next financial year, we should launch our new printer. We are working on it as of now.

And sir, those will be specific to -- will be to a specific industry or the entire industry we are servicing, sir?

No. It will be basically -- the CIJ printer will be the new launch, a newer version of the CIJ printer. And wherever -- whichever industry it is going to be utilized, it will be available.

Okay. And what kind of price differences will it come up, sir, because of this new features?

We will work out the modalities when we launch it with our marketing team.

Okay, sir. Sir, and we also thank the Board, sir, for the interim dividend of INR 4. And sir, what is the current cash on the books, sir? And what is the current size of our investment portfolio?

So let's wait the balance sheet for March, Saket, once this is available to everybody.

Okay. So just a just to get a ballpark number, how much cash is there for so that you...

We are quite debt-free, not much on the cash side. But we will wait for March to declare all this.

Okay, sir. And sir, we had some issues with the cement players, sir. The red ink and the black part also on the bags. So what kind of revenues are we now catching from the cement players, sir? And any changes on that front?

Like I mentioned in the opening remarks, last 2, 3 quarters, we've seen a good momentum on the LCP business. Some of the cement customers which we had lost were also coming back with contracts for 3 years with us. So things are more on a positive note. The pricing is tight, but we are trying to revive the market on the revenue side. So we are gaining some lost customers. And definitely, it's on the up. Last 3 quarters we've gained business.

Okay, sir. And on the new customer additions, sir, any new industry or vertical that we have added? Or have we strengthened our presence more in the dairy segment? I think so earlier, we did put strong foot on -- I think, we get order from Gujarat government cooperatives for dairy business.

For us, as well as there is a good focus and traction from wood and foam industry. So these are also picking up very fast. So yes, certain sectors, we are seeing a good traction. Even on the FMCG side, some good -- customers they purchased from us, and that can go into multiple printers. So we've been able to see some breakthrough in a couple of factories. And if it performs well, we can probably expand to other factories. And these are our competitors accounts so they are quite bullish over the few quarters.

FMCG, you said, sir? Sir, I didn't -- I overheard you.

Yes. FMCG.

And lastly, sir, if the time is there, I just missed the depreciation part, sir. Out of the total depreciation of INR 11 crore for the 9 months, how much would be March segment, sir?

See, our mask, like we've taken an aggressive depreciation policy. So that investments are quickly recovered. So mask would be about 50% of that.

Okay. And we are done with it, sir? By this year, it will be totally depreciated? I mean, the maximum portion will come out of the INR 10 crore investment, I think the 5.5%, 6% this year?

Maximum has been done, but I think by about -- within this calendar year, we will be able to complete the mask depreciation.

By 2022 calendar year?

Yes.

The next question comes from the line of Karan Bhatelia from Asian Market Securities.

Sir, we've seen a strong improvement on the working capital side. So your comments would be very helpful.

So like we always -- there was a concern of the investors and the analysts on the working capital being on the higher side. And we always mention that we do need a minimum amount of -- especially on the inventory to service our printers which are in the market. About the -- some of the obsolete printers which we are not manufacturing, but they are present in the market, needs certain spare parts, which need to be available in our inventory. So that was the reason we would carry. And if you will notice that the inventory is not increasing in line with revenue, so we are getting that advantage. We always knew with higher revenues, we will be able to hold on to inventory. So that's one of the major gains that we are seeing. And hopefully, that can further improve by a good 10, 15 days for the improvement we can see. But now talking about the launch of a new version of printer, so again, maybe, there will -- we'll have to see how that plays out. New parts will have to be in the inventory if we don't see a full-fledged production of the new version of printer. And the old version is not completely -- the stock is produced and put out in the market. So transition period, maybe there will be some overlap of parts and there might be a few crores of increase in inventory, but we'll see as it comes. As of now, it feels that we can pull back some more 10, 15 days. And even on the receivables side, we have a good team now. We're controlling it centralized from Mumbai. Earlier, it was more at the branch level. And so maybe now that they'll be running a tighter ship, and we've been able to pull back some days on the receivables. But I will give more credit on the increase of revenue and us holding on to our inventory and receivables.

[Operator Instructions]

I don't think there are any follow-ups. Thank you, Rahul. Thank you, Shiva, for giving us the opportunity to host the conference. Any closing remarks you want to make?

I would say thanks everyone for participating. It's a very busy day today, and things worked out, we hoped this would be a little bit earlier in the week, but there were some delays and that we had this day, but definitely looking forward to all of you guys remaining safe and interacting with all of you again as soon as we got our next meeting and the next set of results. Thanks.

Thank you, everybody. And please be safe and healthy. Thank you so much.

With this, we end the conference call. Thank you participants.

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