Control Print Limited (CONTROLPR.BO) Earnings Call Transcript & Summary

Sir, I wanted to understand regarding the GST benefits. And sir, it seems that we were earlier a dominant player in the industrial segment. So can we expect to grow further just because the FMCG will -- just because the FMCG segment can provide us a good opportunity and we have less presence versus the industrial segment. So how should we expect about our growth going forward?

I'm a bit confused because there was something about GST in there.

Yes, he went actually the change in the GST rates, would that impact our sales? I mean would we going for another...

We're still 18% in both cases. So I don't think it makes an impact to us. What has happened is recently because of the cut of GST rates, a few of the segments where the -- there's been a price cut as a result because the GST has reduced from 12% to 5% or so on. I think that those sectors are a bit bullish is what we feel -- the customer a little bit bullish and we feel that there's a bit of a demand pickup. The second, how that translates into our sales, of course, is like a bit down the line. So if their product sales increases, then hopefully, the number of prints increases and that would result in some revenue growth for us. The second part is that, yes, the industrial sales segment is still definitely the bigger segment for us. And we're still working on the Packaging segment, and we're still growing our sales in the Packaging segment. So we're growing in both segments. And yes, we see growth in both segments. So like I said, if the market is growing at 10%, 11%, we're expecting to grow at 15% or so in the -- we would -- that's what our target is in the stand-alone business, 15% plus. And like 15% for the coding and marking and then something extra because of the track and trace and whatever it is. So yes, that's sort of where we hope to be.

Sir, so are we able to acquire more customers on the FMCG side where we were earlier -- that was a lower portion of our machine portfolio. So have we been able to acquire customers because growing at a faster rate than market would require us to at least gain market share in some segments. So I'm trying to understand on that front.

I think we're gaining customers. But yes, I mean, obviously, if we are growing faster than the market, then we're gaining customers. Some on the packaging side, I think in specific areas of the packaging side, definitely, we are gaining faster, not across the board, but it's very specific applications or some industries, yes.

So when we say packaging customers, we mean FMCG packaging customers for the Coding and Marking segment, right?

Packaging is defined as food which would include everything under food, dairy, biscuits, ready-to-eat, staples and so on and so forth. Then it would be beverages, which again would be aerated beverages, alcohol, beer and then so on and so forth. The third segment would be personal care and home care, which would be what the traditional FMCG companies are like Unilever and the like. And the fourth segment would be pharmaceutical. So for us, these are the 4 broad industries which comprise the packaging sector.

Got it. Sir, I wanted to understand...

Madhur, please rejoin the queue.

I'll do that. I'll do that.

Sir, we'll take a question from chat from Rahul Koti. He says I see that we have done a record EBITDA margin in stand-alone business. Is this due to increased share of consumables? And if so, does this indicate the new normal in terms for sales of consumables?

Actually...

Overall, like it's -- I don't think it's any specific thing, but it's maybe because of the operational leverage that we are getting in terms of the SG&A growing at a slower rate than the business. Jaideep, I think maybe you can explain this better.

So quite frankly, what happens is that the mix of the sales that actually is a determining factor for -- because the quality of the revenue improves, like consumables obviously give us like a continuous sales, but an increase in the printer business also leads to like a better product in printers. Like if we sell more of laser printers, obviously, the margins are going to be higher. But yes, we are definitely keeping a track on not just the procurement costs, but we're also keeping a track on the selling and general and administrative costs. So that's the reason why like we have an increase in the margin. But that said, we definitely want to outdo ourselves and do a better show and make sure that we are very lean in our operations going forward.

His second question is on CapEx. Do we have to incur any CapEx with respect to consumables or printers?

Yes. To answer your call, see, for the current existing coding and marking business, we are well within the capacity utilization. So another 1 or 2 years, we don't foresee any major capital expenditure plans for the coding and marking business.

Okay, sir. We'll take the next question from Anuj J.

[Technical Difficulty].

Anuj, your voice is not clear.

Is it better now?

Yes, yes.

So it seems that your market share and your competitive market share is constant from a long period of time. I've seen that usually [Technical Difficulty] each competitor has some kind of moat or monopoly or a niche. If that's the case, what's your niche that none of the competitors are able to make a major dent in each other's market share? [Technical Difficulty].

We're not hearing anything clearly.

Anuj, you're not clear. Anuj while you sort out your mic issues, let us first take a few questions from the chat. So first [ Neelu ] Singh would like to ask some questions. [ Neelu ], you can ask.

Am I audible?

Yes.

I had 2 questions. One, Shiva just informed that we are seeding the market by -- in small lots of INR 50,000 to INR 1 lakh for the VEMAX's pouches, right? So I just wanted to understand if -- is that a good revenue stream until we actually scale up the machinery business of VEMAX's. This was the first question.

Yes. So I think, of course, it's a big revenue stream potentially. The main issue we were reluctant to do it is just because mentally we were not geared towards servicing like a lot of small orders and taking the responsibility of all that stuff rather than the customer buying the machine, taking the responsibility. So yes, it is a good revenue stream, to be honest. It's not bad at all. There are customers who want to make even like lakhs a month and stuff like that. So it's not like a simple thing. It's just that for us taking the licenses, doing the other stuff, doing things -- first, we didn't want the distractions, but we have no choice. We have to do what we have to do.

And is that income being booked in the Indian entity or VEMAX Italy? How is that being accounted for?

So we're doing co-packaging here now. We've just started. And even in Italy, we have started. So before they didn't have the permission to do beyond sampling. Now we've -- obviously, we can only do it in India, we didn't have the licenses. We can also even right now only do specific products, which don't require a very high compliance in terms of the -- definitely in India, we've got taken something for the food, say we don't do pharmaceutical or nutraceutical type products out here or there. So yes, it would be booked inside the companies. But yes, I think that the major -- whatever we've done is now going to come more in the revenue and probably Q3, Q4 because something that we were not entertaining. Now we've gone back to customers and said that, okay, we can try to do it once for you.

And there's an amount of work in progress of INR 764 lakhs, what is this amount for in the stand-alone numbers, capital work in progress?

Can you hear me?

Yes. Can you hear me?

Yes, yes, I can hear you. That actually relates to like some of the software development things what we are doing in the company, some enhancements to the SAP and the BI/BO projects. It also includes some portions of money which we have paid like as lease -- advanced lease for some facility. So we are taking a close stock of that. And yes, by the next quarter, we'll update you on the developments.

We'll take the next question in the chat from Awanindra Singh. The first question is, what is the status of developing domestically manufactured consumables for V-Shapes machine?

Yes. That project is very much on. So like I said in the earlier meetings, one of the big issues for us, especially in the European sales has been the lack of recyclability of our current packaging materials. And we've been working on developing a recyclable material. We think we've got something that's working at a certain level. Like I said, it's, of course, it's all a pilot, so nobody can predict what's going to happen. I just want to be very clear about that. It looks promising. It's looking like initially that it's working, but till everything is not proven, nothing is proven. But yes, so we wanted to go in India straight for the manufacturing straight for the recyclable material rather than really invest in the current packaging material, which is not recyclable. And if our trials are successful over the next I don't know this quarter maybe, then if everything is through, then we'll be moving ahead on -- we lock into the current -- so we're doing a variety of structures around a base structure, which we think is working to fine-tune exactly the final -- the exact final formulation and product. Once we do that and we put that in, then we'll be starting to manufacture the same in India. And that should hopefully get the cost of the material down significantly.

His second question is where are we...

We are patenting the formulation that we are developing for our recyclable pack. So it will also be another lock on top of the systems for our existing patent, which is expiring in 2036 for the machine. But the material -- the recyclable material patent will also go from 2024 to 2044. So that will be another part...

His second question is, where are we with track and trace adoption since last time, you were talking about some pharma companies working on the implementation? And are we offering the service to other pharma companies as well?

No, we are offering it across the board, but we're doing 2 intense cases like with 2 of the largest 5 -- I think 2 of the top 5 pharmaceutical companies in India. So those are 2 high potential cases because they're not conventional implementations, but this is more of a system solution. So I think if it works, it will be not necessarily a game changer, but it will definitely be like something significant, which will give us traction across the pharmaceutical industry. So right now, all our resources are focused on ensuring that these pilot projects are implemented perfectly. And of course, we've been going back and forth with some technical ups and downs on that area. But I think hopefully, we should have the option. If everything goes well, again, there's always a risk. But everything goes well, hopefully, we should have adoption and that will be the best marketing tool for the rest of the industry and in fact, globally also.

Sure. We'll take the next question from Saket. Saket you're requested to keep your questions down to two in the first round.

Namaskar, sir, I joined at the fag-end only. Just to put a very small question or perspective, sir, with the type of investment that we have made and as Shiva sir has always communicated to us that we are in the midst of creating a very different organization from the traditional and the conventional coating business. So how satisfied firstly, you are with the progress that we have achieved? And how soon, sir, we will be reaching this critical mass, post which the aspect or the recognition will come into play. This is my question for Shiva, sir. And for Jaideep, sir...

Just one question. Let's just take one question that one question, then you can hold on to the next question. So as we discussed, we're an Indian-focused coding and marking business. And we were -- and obviously, there's a ceiling in terms of what we can do. So for example, our estimation of the market this year is about INR 2,200 crores or something. So if you're already doing a certain business last year, I think we did INR 375 crores to INR 385 crores or INR 300-something INR 370 crores, INR 375 crores of turnover is coding and marking on about INR 2,100 crores, INR 2,200 crore market. So there's a ceiling in terms of how big we can just grow because, a, the customers are sticky. We are gaining market share and we are growing faster than the market. But yes, I mean, there's a market size limitation and there's a stickiness limitation. So you cannot grow fast enough. And therefore, we entered more into the digital printing area for innovation and of course, also in terms of the track and trace and the packaging business. And also, we had a couple of foreign acquisitions and subsidiaries for the same. So what's happening is that in terms of coding and marking, we're quite happy. But we had a first -- the second half of the previous year and the first 2, 3 months of this year were a bit slow, but we've given everyone a kick up their a**, frankly speaking. And I think some of the bigger cases and the other things are now really coming through, and we're expecting hopefully an accelerated run rate in the second half. And as you can see from our stand-alone results, it's also showing in terms of the financials. So I think we should comfortably -- it seems that on a stand-alone basis, we should comfortably cross INR 100 crores plus this year. Of course, we -- it seems is my point. And we should continue that growth rate. And even looking at the pipeline, hopefully, that should continue over the next year or so. So that's a positive part. In terms of the track and trace, like I said, we've got 2 big things going on. They're very exciting. Now what's the final outcome, whether -- like I said, we've got some key patents out here, whether those customers are valuing those patents, obviously, they're doing this project at the very highest level. But till everything doesn't happen, nothing has happened. So again, like I'm saying it's -- we will see. I think maybe in 6 months, everyone will have a much better idea of what is happening out here. And -- but we're very positive about what we've done. And the third thing, which is in the packaging business, definitely, like I said, there's a lot of interest still, whether for different reasons in Europe, maybe some of the older V-Shapes machines, which were sold, they didn't get the service support, especially in the breakup. So people are not -- like when they went under liquidation, so people are not happy with them. But definitely, the lack of a recyclable option in a lot of cases in Asian countries and especially India, the cost per pack. So different issues that different people are facing and -- but there's interest. And like I said, a lot of customers just aren't that keen to go straight into the machine because they've got an existing investment, either thermoform or sachet machines rather than going for our monodose or something else. So we're trying to now we pivoted towards like, okay, we will do some co-packaging for those customers so we can get more visibility in the market, put the product in the market and then prove the concept, and that will be a sort of self-sufficing growth. And the customer, if he's getting a success in the market, he's getting a better traction with our monodose compared to whatever the conventional packaging is, then automatically, he would be more inclined to purchase machinery from us and do the packing in his own factory, which is the best thing for everybody. So yes, I think it's -- that's still a challenge. It's still got a bunch of work to do. But I think in terms of the fact that in -- in the fact that we've gone from a coding and marking company, which was licensing the technology mainly for their staff to the fact that we've got a whole bunch of developed technology we've developed or acquired or we own. And most of our stuff is what we're looking forward is patented and has significant IP barrier. I think in terms of that journey, I'm very happy. And yes, like personally, I'm very relaxed, like whether we get the rewards sooner or later, I know as a shareholder, it's a very different thing. But we definitely feel that if we have high-quality innovative solution combined with the reliability and the service that Control Print provides, we're going to be successful.

We'll take the next question from Hardick Bora.

Am I audible?

Yes, Hardick.

Congratulations on a good result. This is just a small clarification from a discussion we had last quarter on the GST benefit at the Guwahati facility. You mentioned there was some INR 10 crore per annum benefit, which has been -- has gotten over, and it's already reflecting in the current financials. I just wanted to confirm which line item in the P&L was that GST benefit coming?

Jaideep, did you get the question? This is relating to the Guwahati GST benefit.

I think Jaideep got disconnected.

Okay. Hardick, can you come back to that question later, please? Should we move on further. If anyone -- is he back by the way?

Not yet, but we'll answer the question once he's back.

No issues, Shiva. If he's on call, I'll take it from him. Otherwise, I'll take it offline.

Yes, no worries.

Saket Ji, you can ask your question.

It was also again to Jaideep sir only. So I will also wait till he comes up. So Shiva sir, just to conclude to what the very elaborate answer you gave that for our core business of coding domestically, we are now on a very, very strong footing with the type of sale of printers and now also the consumable sales and the gross margin inching up for the balance part of the year. And in terms of the other ventures, if I may use the "word" there also, we are on verge of getting -- gaining good business to reach the critical mass in times to come. So this is -- this should be the good understanding of what you narrated to us currently.

So I think that the -- like I said, the current coding and marking India business is doing well, and it is definitely generating certain amount of profitability, which is paying for everything else and still delivering shareholder results and the rest of it. But obviously, we've been investing that money and our time and bandwidth in the last 2 to 3 -- and in fact, in the last many years in R&D and other types of things. And that was to, like I said, to grow the other businesses. Now like my point, which I've made earlier is like when you're doing something that's different, so we expect that the India coding and marking/digital printing, which is almost like an add-on of our coding and marking business. So we know that well. That's not a problem. We have the technology for that. We've been developing it for years. We're happy with that part. Specifically regarding the track and trace business and the packaging business and then obviously, the international subsidiary, it's a longer-term play, and it's an innovation-based business. So we hope that we will -- it will be successful. But like I said, there's always a risk because in terms of execution, in terms of competition and stuff like that. But right now, it's looking positive, and I see nearer-term results in the QRiousCodes revision. And in the packaging business, of course, it's got even much bigger potential, but it may take a bit more time because we are going step by step, it's seeming that, yes, that's what it is. I think Jaideep is back on. And now everyone can put their questions to Jaideep.

Sir, for this quarter, we have done this reclassification for foreign income exchange fluctuation -- foreign exchange fluctuation. And then again, in the cash flow, there is one mention of about transfer from exchange fluctuation translation reserve. If you could explain these 2 line items and where will we see this reserve line item in the balance sheet, sir?

Correct. So the reason why we have done this is like to make or to ensure a better presentation of the foreign exchange fluctuations. Normally, it goes and sits as part of the other income. But what has happened is that the dollar has actually depreciated vis-a-vis the euro in the Q2 as a result of which like the fluctuations were very severe. And we did not want to you like club it either into the other income or the other expenses figure so as to distort that. So just for the sake of a better presentation, what we've done is that we have disclosed it as a separate line item in the figures which we have disclosed. Because what happens is that in the next quarter, the trend might get reversed. So we don't want our operating revenue or our operating expenses to get distorted by virtue of this particular fluctuations. And that's why we have instead a separate line item over here.

I'll take it offline, sir. This is a large difference, sir. Standalone and the...

Sure..

Hardick.

Jaideep, actually, the question was that there was some GST benefit on our Guwahati facility, I believe, for 5 years probably. And that got expired and it's not there anymore. Last quarter's call, you guys had mentioned it was about INR 10 crores per year. So my question was, which line item in the income statement was that benefit coming through? So we can understand when we do the Y-o-Y comparison that it's not there.

So I tell you, this benefit got over on the 26th of May 2025. And the yearly benefit was about INR 8.5 crores. And what we should do is that we used to include it as part of the sales. So you would find that in the revenue from operations.

Okay. So to that extent, the year-on-year comparisons would look a little weaker because there is no GST benefit in our revenue going forward? -- at least in the time that is in the base?

Yes. Actually, it would look better because like we would not have the GST benefit in this year. So that would be a fair comparison. So the performance in this year would be like better because last year's performance did include that GST benefit.

No, I understood. Got it. That was the tune of INR 8 crores to INR 8.5 crores.

Yes, INR 8.5 crores, yes.

And it is fair to say that would completely be flowing down to the profit level because there's no associated cost with it. So that's the -- you are right. We do not have any official costs. You're right.

We'll take the next question from Rahul Koti.

Congratulations on the good set of numbers. So I had earlier asked a question regarding the EBITDA margin. So the answer what I got was like it is due to maybe operating leverage and not one sector is -- segment is responsible for the record EBITDA. So this stand-alone, we have done like around 28% EBITDA. That's what I saw in the presentation. So going forward -- my question would be, if going forward, if our run rate is around similar to INR 200 crores, right? So would our EBITDA be on the similar level going forward?

Yes. Fundamentally, if the revenue levels are maintained, we should see a similar EBITDA. It's very difficult to completely predict. I don't think the EBITDA has risen as much as compared to last year. I think that it's just that some -- part of it is also the fact that we are funding losses for 1 or 2 other divisions like the QRiousCodes and the other stuff. And like I said, we don't give exact breakup division by division. So yes, it's -- if we -- unless other things fall back -- like we also invest in the Indian packaging business for the Indian part of the V-Shapes and so on. So those things don't aren't in a loss, then fundamentally, this is -- yes, the coding. Right now, they're not making money, I can tell you that, but they're not -- I don't think they're losing money. So I think fundamentally, this is -- yes, what we're seeing is the coding and marking business.

Yes. Because if you look at our like history, right, so on a stand-alone, we are always around like 23% to 25% EBITDA, right? So we always have like done around that. I don't think so we have crossed 25%, maybe we reached 27%, but 28%, I have never seen like -- I have been invested in your company from last like almost 8 years. So I have been like tracking your numbers from like long back. So I have never seen like 28.5% EBITDA. So that's why I was curious on knowing that. And in future, right, maybe in the next 12 months, we would be crossing beyond INR 100 crores on a stand-alone basis quarterly. So would that operating leverage kick in and EBITDA would be like even higher? Like any guidance, any ballpark what you guys are working with, like any number you guys are targeting going forward?

You said that -- so I think that our revenue would grow, like I said, in our coding and marking business. I don't know if you were there earlier in the call, but we said that we should continue growing at about 15-ish percent. In this year, at least, we don't know what's going to happen in the future and the market is growing at about 10% to 11%. So yes, we would hope that the operating leverage continues to improve. Like I said, part of it is an operating leverage effect and part of it is the fact that we were funding losses for the last couple of years. So maybe the operating -- the numbers were actually better last year and the year before that. But I don't know if I've -- I think I mentioned quite clearly in our investor con call that some of the divisions and some of the other things were at a loss and we were more investing in it. Now a couple of things have -- so even if the QRiousCodes business breakeven, and we don't have to funded like it's not negative, it would have shown up as negative. So I think it's a bit of both. So obviously, fundamentally, what you're saying is it sustainable. And I think that, yes, unless some other things slip back into some issue in terms of the packaging or the QRiousCodes or whatever, I think it's sustainable.

Okay. Yes, that's what I wanted to know whether this is sustainable because these are like record numbers from your end and wait to see those numbers back.

Sir, since that was the last question, would you like to give any closing comment?

I just want to thank everyone for taking time to attend our call and very happy to answer these questions. My best wishes to everyone.

Yes. Thank you, everybody. Thanks a lot.

Thank you, sir. Thank you to all the participants for joining on this call. This brings us to the end of today's conference call. Thank you.