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

Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the Q3 and 9 months FY '26 Post Earnings Conference Call of Control Print Limited. Today on the call from the management team we have with us Mr. Shiva Kabra, Joint Managing Director; and Mr. Jaideep Barve, Chief Financial Officer. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to brief us about the business and performance highlights for the period ended December 2025, the growth perspective and vision for the coming year, post which we will open the floor for Q&A. Over to the management team.

Yes. Good afternoon, everybody. My name is Jaideep Barve, and I work as the Chief Financial Officer of Control Print Limited. Welcome to you all to the earnings conference call for the third quarter of FY '25-'26. At the outset, let me wish you a happy and prosperous 2026. We appreciate that you have taken out time from your busy schedule to attend this call. Mr. Shiva Kabra, the Joint Managing Director of Control Print Limited, also joins me on this call. For first-time joiners on the earnings call, more information about our company can be obtained by visiting our website. Just for information, the detailed presentation has already been put up on the website as well as in the investor presentation notification on the exchanges for this call. So let me provide you some highlights of the performance of CPL on a consolidated -- on a stand-alone basis for the third quarter of FY '25-'26. On a stand-alone basis, the total revenue till Q3 is approximately INR 322 crores, which is a good growth from approximately INR 280 crores till quarter 3 of FY '24-'25. Just for information, the total revenue for FY '24-'25, '23-'24, and '22-'23 was INR 395 crores, INR 347 crores and INR 295 crores, respectively. Regarding the operating revenue, this is INR 109 crores for the third quarter. Corresponding period of FY '24-'25, this was INR 94 crores. Coding and marking represents 92% of the business. There has been a steady growth in the coding and marking segment. Pipes, food, health care, dairy, steel and metal, cable and wire continue to be our top-performing business verticals. We are market leaders in cement, plywood, sugar and dairy. The business outlook remains bold for the track and trace division in FY '25-'26. We have developed new solutions and acquisition of new customers has been another plus point. We are getting good traction in the co-packing activities in the packaging division. The pipeline is also being generated for new machines, laminates and co-packing. The mass lab has now been reestablished into a safety division, along with masks, hard hats, ARC flash shoes, helmets, gloves, banquets, et cetera, were also sold this quarter. On a stand-alone basis, the cost of goods sold is around 41%, 42%, 43% of the operating revenues in Q3, Q2 and Q1, respectively. Just for comparison, for the entire year of FY '24-'25, the COGS was approximately 42%. That said, we remain committed to optimize the procurement costs and also look closer to the economy efficiency and effectiveness of operations. This we feel can definitely lead to a reduction in the operating costs, thereby increasing the gross margin. Manufacturing costs are approximately 2% of the operating revenue. In the earlier period, this was around 3%. Employee costs are 19%, 16%, 18% of the operating revenue in Q3, Q2 and Q1 of this year, respectively. Depreciation is 4%, and this is in line with the previous periods. Other expenses are 14% of the operating revenue in Q3. On an annual basis, this has remained steady at 13% to 14% in the previous periods. Overheads will also be closely tracked with aim to increase the overall profitability of the company. The EBITDA growth is at 21% Y-o-Y. PBT, excluding the exceptional items was at 35% Y-o-Y growth. The PAT growth was lower at 19% due to higher tax provision in this quarter. The way forward. We wish to consolidate the existing coding and marking business. We would like to increase the installed base, provide more robust solutions. An increase in prices has already been implemented. We want to develop new solutions and capitalize the available market opportunities in the track and trace segment. Similarly, the packaging business, both in India and overseas will be closely monitored and the emphasis will be towards increasing machine sales, co-packing and the laminates. The overseas subsidiaries will definitely be continued to monitor with focused growth targets. We have already provided them business plans, and they have been asked for execution. I now leave the floor open for questions. We'll be happy to address them.

[Operator Instructions] We'll take the first question from Mr. Saket Kapoor.

[Foreign Language]. I hope I'm audible?

Yes, Saketji, we can hear you.

So, Shiva sir, firstly, if you could just explain to us all the investors, how have our foreign subsidiaries and the consolidated results performance? What factors have again led to these lower profits on consolidation? And what's the road map ahead for you? And I'll just come up with a follow-up once you start answering.

So last time I said that we should have a lower loss in this quarter and almost like a breakeven in the Q4 in our foreign subs, mainly the Italian one. Codeology and Markprint are like combined about breakeven. So it's not that important. And what's happened is that, we had -- we've come out of the new model -- a new machine, a new packaging machine in Italy. But -- okay, so what happened in the past, I'll explain it to you. It's a long story. The reason why a lot of these machines were sold in the past. And I think that the quality control and that -- getting from a 90% machine to 100% machine takes a little bit of more effort. So what happened is, we didn't want to make to repeat the same mistake. So we are using more of a Control Print style of quality control and working out here to make sure the product is extremely reliable and robust because if that doesn't happen, the customers are going to have the confidence to take the production on it. So we've not been able to execute orders or like besides one machine or something, I think in the last quarter or this -- I mean, Q3 and Q2. So because of that, we have a little bit of a backlog. So it would -- the numbers would have looked better if we're able to execute the orders and book the revenue and then, of course, the profit. So now we are almost like we're pretty much through the machine. We got that first one out. We've got the second one for the first time in Italy, I think we're making 2 machines, which are exactly the same. And if this happens, then hopefully, we should start actually executing a few of the orders we have, like rather all the orders we have, which will help make the numbers in Q4 and maybe Q1 of financial year, whatever this, I mean, '26-'27 better. So I'm expecting that it's not like we're not on target, but there were some execution issues where we -- as a company, I mean, obviously, for us, the technology is first and then comes all the other aspects of it. So as we do that, I think that we're going to get a much better result going forward. And it's -- so I think the results is slightly worse than the reality. But like I said, it's not like we're not loosing money, but we should have been loosing less money than we were. So I don't think we're too far off our guidance. I think I said something like EUR 1 million something, maybe it's more like EUR 1.5 million, but we're not -- we should do better.

So to just understand it, it is the lower absorption of cost -- fixed cost that has resulted in these lower profits on a consolidated level? And going ahead, with the dispatch of the machinery, which is there in the order book and already ready to be dispatched, we will be seeing better operating number. This should be -- this is a correct understanding, sir?

Yes, that's correct. That's correct. So, I mean, I can also tell everyone, we have like about EUR 800,000 a year R&D cost. This is like the direct R&D -- people are just assigned for R&D and something else. So there's also other expenses associated. So if you -- if we actually -- whatever R&D they're going to do is going to benefit us globally because those same products are available for sale in India and Asia Pacific and maybe in the future in North America and other places. So I will say that it's also -- because we expense all R&D, we don't capitalize anything because this is what we do in India. And I think Jaideep may be better -- I do think that also -- and I don't want to make an excuse that it's an accounting style or anything because we follow this for a very long time. So I think -- but it's also making the Italian performance look a bit worse because they're not portioning the cost of their development to the other areas where the machines are being sold. So that's where the difference is. But the technology is benefiting Control Print worldwide, if you understand it. So the technology we're developing is benefiting Control Print worldwide, but all the costs are being apportioned to Italy. So it's also making them look a bit worse than what they are.

[Operator Instructions] We'll take the next question from Rushikesh Bhise.

Congratulations on a good set of the top line numbers. So my question is to Mr. Shiva Kabra. We spoke in July wherein you said that the gross margins were impacted due to the higher raw material costs in the packaging business. And at that time, you had said that you're doing some R&D wherein you are trying to crack something wherein -- which can help you in some cost saving and that could lead to better gross margins. So now when we see the numbers, the gross margins have actually become better for the consolidated numbers, but then the EBITDA has actually gone down. So I just wanted to know like what exactly is the scenario over here?

Yes, to answer your question, what the situation is that, we are still working on the development of the single polymer recyclable material. It's now under final trials. That's also one reason the machines are being delayed because the machine needs some modifications to work with this material. It doesn't work at the full speed, but it at least gives us an option of recyclability. So as a result, like I said, partly machines are delayed, now we are purchasing the materials from elsewhere and selling it, reselling it as per the customers' requirement. And definitely, when we manufacture the material, it will be cheaper, but also we are more focused on the recyclable material. So the margins have not changed much in this meantime. If anything, with the euro going up or something, I don't know exactly something or the other. It might have slightly increased -- our prices would have slightly increased, but with a slight lag. So I don't know until now if there's any benefit of all of these things. I think it's going to take another 4 months because we have some pilot line that we are starting in Nalagarh and which will shift later. So the lines only will be delivered in March and probably commissioned going to be April, May. So it's more of a pilot line, but we will still be taking some production out on it, relatively cheap to operate. It's just a lower volume, but we're talking about our volume will still work. The second question you had, what is the margins? And then you said something about the EBITDA, slow down to the EBITDA. So yes, there is a question that's there and Jaideep and me are looking at it very closely because both the other expenses and the employee costs have increased sharply. I know some part of the employee cost is something like gratuity and some provisions or something that has been made, which Jaideep will give you a better read on that. So that's some part of the salary cost. But even if I take that out, there is a salary -- there's a significant employee benefits cost increase. And the second part is that, the other expenses have also increased. So we are actually taking a look at both of them quite closely. Jaideep, I don't know if you got that number somewhere in this presentation. But -- so yes, so the gross margin, okay, sort of dipped to 58.1% from the previous. But I wouldn't give it too much importance right now. What I think is that, the more important thing is that, both the cost increase, the other expenses and the employee benefit expenses. And now I said like I said some part of the employee benefit expenses was some sort of an increase in some sort of provisions, which Jaideep will you tell you. And then the bigger part of the cost is -- there's some -- a major part of the cost is an increase in the employee benefit cost. So we need to really go deep into that, to be honest, to understand what's -- where all these things have happened from and how this came about. And then the other expenses also increased. So on both these things, Jaideep is doing a deep dive. So he's -- maybe Jaideep can answer that question better.

All right. That's quite helpful. Essentially, broadly, you're trying to say that at a gross margin level, the projects that we were trying to say it's yet to be fruitful. It is going to take like another 4 months to another reflected into the gross margin, if I'm understanding it correctly.

Yes, it will take 4 months to introduce the product. And then, obviously, once we introduce that and our cost of manufacturing is significantly lower, then obviously what we importing from Europe is basically much higher than what we get from here. So it will definitely make the margins better. What's important is the volume of the business should increase in the meantime for which the machines need to be placed and work perfectly. So I think that's also -- so both things are important. But yes, the margin will improve in the packaging business as a result of manufacturing locally.

We'll take the next question from [ Vikram Hirawat ].

My question is to you, Mr. Shiva. So this is more product related. I was wondering if laser printers pose any significant risk to the consumable business. Now I'm aware that Control Print does manufacture laser printers, but they don't -- from my assumption, they don't really have the same sort of recurring revenue from consumables because once you supply, there's no ink that goes into laser printers. And I'm pretty -- I'm aware that certain industries are -- for example, the pipe industry is now using laser printers for marking solutions. Is laser printer of threat to the consumables business or to the inkjet printers?

Yes. So if I can answer that question, the lasers have been around for about 2 decades now. And I don't deny that at least what I've seen in the '90s or even in the late '90s, they started, especially in certain high-speed bottling lines and certain things. So there are some fundamental limitations and I'm going to go through -- so this is technical. So the first thing is they don't work on all materials, okay? The second thing is, they don't give a contrast. So for a lot of people who want a branded type of print, they're not going to get a contrast like you said, when you print on a pipe, it won't give a contrast on LLDPE drip irrigation pipe. What it will do is like an engraved print, which doesn't work for most people's branding. The third issue for our own purpose in terms of the laser business, it's a different model because there are less people, so the cost is less because it's already less of a service thing. But there is also an AMC element to it. And the lasers have a life of about 5 years. So what you do is the frequency of replacement of the lasers is more frequent. And there is like an IV in terms of maintaining the few extractors and changing the filters of the laser and do some other things. So it's not a direct consumer, it's more of a service type of a contract and a spares contract that the services and spares that you're selling. And then the life of the machine being a bit less, you keep replacing the machine every 4, 5 -- I mean, of course, in the pharma industry and certain other things with the low usage, it might be 7, 8 years. But fundamentally, in most companies you replace like every 4 to 5 years. So from an earnings perspective, it's not that much different to us. But yes, there is an element in both things. But the most important thing that the lasers don't work on everything. There's a big safety issue with lasers, specifically when you mentioned pipes, all chlorinated compounds or halogenated compounds, iodine, bromide type compounds, chlorine, what happens is the moment you use a laser on it, it will create a chemical reaction on the surface. So it will, for example, release chlorine gas -- at that point of time. And the chlorine gas will attack someone's throat and eyes and also convert into hydrochloric acid by reacting with the moisture and the air. So both things are very dangerous. Now in India -- so if you look at the laser fundamentally, it's a Class 1A safety that's around it. It comes under some IC rules. I've got all the technical details, but I'll have to explain later. So the laser needs to be completely enclosed. It releases a whole bunch of small micron size film particles when you print. So we capture them with the film extractor, but still some are released. Now what happens is like abroad, what we've seen is that the laser is growing, but it's not increasing because in a lot of lines, people find it a struggle to enclose the entire line. So if I have a form-fill seal machine or even a pipe machine, where the laser is there, it needs to be enclosed completely. It needs to be that if the safety is open, the entire line is interlocked. So the laser will switch off at the power level itself and the line will stop and so on. So in India, none of these things are being followed, even though we are also part of the same rules. So I don't know what's going to happen. But in general, when we talk to the larger customers, and I agree that even they look at other people. So I'm not sure what's going to happen in general. I will say that even the so-called big companies out here don't follow the same sort of safety norms that they will in their own home markets of Europe and America or something. But I think they're more cognizant of these issues. So I think even as awareness grows, these things will happen. So in the pharmaceutical industry, again, there are a lot of articles there in a clean room environment. So they have issues using lasers. So there are pluses and minuses in this whole situation. It's a very technical question of what you're asking. But fundamentally, whatever we are seeing abroad in Europe, in Japan, in America, and of course, also in India that the Chinese guys are very aggressive in using laser for everything without any safety measures or any thought. But elsewhere in the world, people are much more circumspect and cognizant of the safety issues and the technical issues. And the other thing with the laser, specifically on some materials, it will -- because of the thermal energy, it sort of engraves into the material. So when you have certain thin materials or where the barrier property is very critical, it will also cause pinholes in that material. So like I said, there are multiple issues. We are also in the packaging industry and people are being forced to use more recycled material, even though nobody is doing it right now, but that's going to happen. So what happens is, the recycled materials behave differently than the virgin materials. So when you print on the recycled material, you might not get the same print quality, might be much more uneven. So there are various pluses and minuses in this whole aspect. But I think laser will keep increasing at a gradual rate. I think for us in our business model, it's not really an issue. But I don't see from your fundamental question, I guess it's been around for a long time, unless there's some method of overcoming, especially the safety issues and then the issues in terms of contrast on the material, there's no -- I don't see it ramping up very fast.

So to sum it up, you're saying that you -- this is not -- for now, you don't really see a big threat to the fundamentals of the business. And also there's some sort of industry risk or substrate risk and you cannot really apply laser to every particular product is what I'm trying to -- is what I understood.

Yes. So the laser is restricted definitely to certain products where it's there -- like certain people specifically because you mentioned pipe, I've answered that. I'm saying in certain places, people can use the laser, but it has safety issues. So some people are still using the laser. So you can use it on LLDPE drip irrigation pipes, for example, but you can't really use it on any of the PVC, CPVC, UPVC or any of the chlorinated pipes. So I'm trying to say that there is an element to the whole thing on an LLDPE drip irrigation, HDPE pipe when you do it, you need a lot of energy to get a small engraved print. Now for a lot of customers who want to brand their product, the contrast, they want much more contrast and visibility, you get my point, because it's just for internal traceability, that type of print is fine. But if you want -- that the customer should know that it's a supreme pipe, for example, and see it and you want to [indiscernible] logo whatever, then you need to have a high contrast print on it, which you can't get with a laser. So what I'm saying is, there are multiple issues in the laser adoption and therefore, the laser has picked up slowly. In China, it's picked up faster because in certain cases, in a lot of cases, most cases, they are ignoring a lot of safety-related issues around the laser, safety regulations that are already in place. And obviously -- but it's still -- even in China, the coating market has not decreased per se. It's just maybe a higher percentage of lasers has happened. But the rest of the market, including the CIB market is still growing or at least stable.

We'll take the next question from [ Hansh Kumawat ].

Sir, building on the previous participant's question, I'm trying to understand as to where was the delta in the gross margins and the employee cost. Can you throw some color on the other expenses?

There is lot of background noise coming from your end.

I'm sorry. Can you hear me now?

There is background noise.

Yes, is it clear now?

Yes, better now.

Yes, my question was regarding the decline in gross margins and the increase in employee cost and other expenses. Can you just throw some color on that as to where have we seen the delta over there apart from the gratuity and the other provisions that we've made? There seems to be a considerable movement in the employee cost per se. So that would be my first question.

Jaideep, please.

Yes. I think I'll take this question, Hansh. So what happened is that, as you rightly said, the employee costs have risen in the Q3 as compared to the Q2. And that is basically maybe a reason of adjustment of provisions. So you are aware of the new labor code, which has been mandatorily applied. So since 21st of November, now we are in the new regime of the new labor code. So as per the mandatory given, we have to absorb all the past service costs also. So we had a major impact because of the gratuity provision. And also we made some kind of staff incentive provision. So that's the result why like the staff costs -- employee costs have risen. Other expenses are on the higher side. But definitely, we are looking at more cost control measures like basically business promotion expenses or travel expenses have grown as compared to the past quarter. We would like to concentrate more on the like control aspect. And definitely, we are -- we'll try our best to get a reduction on this and optimize the cost. So in the Q4, we'll make sure the results are better in terms of the overheads as well.

But sir, in your Note 5, you have said that there is no material impact on the new labor code. So there seems to be some kind of mismatch over here, sir.

I'm not getting the last line, Hansh.

I'm sorry, I'm saying, sir, in your Note #5, notes to the accounts, you have mentioned that there is no material impact to -- because of the labor code. So just trying to understand as to then there is a mismatch.

No.

A couple of crores. It may be increasing in terms of the delta, but it's not a material impact on our overall results. Do you understand what I'm saying? If you're saying like the increase -- what I think is -- I don't know what the exact numbers are there, but I think that the employee cost increased by some thing. Okay, so about a couple of crores was the provisions is my approximate idea. And...

INR 5 crores.

Part of the delta, like you said, but it doesn't explain the entire delta. That's what I said before. But if you take out that amount, then the delta looks less, but it's not material in our overall results. I mean, I have to be honest about that.

Okay. And sir, my next question would be on the impact on the India-EU FTA. Where do we see ourselves placed because of this? And do we see the foreign players being able to enter the market per se and being able to take our share in the market? Can you give some color on that as well?

I can't hear you clearly. Can you please repeat this again?

I'm sorry. Is it better now?

It's better now. Yes.

Yes, I was just asking regarding the India-EU FTA. Do we see any foreign players entering the market post this FTA? Do we see any kind of movement coming from Europe in this space? Do we see anyone taking market share, taking our business from us? Can you just throw some color on this?

It's absolutely of no consequence either way. We make our exports a bit cheaper. I don't know actually what the duties were previously on stuff from India to there. The 3 main competitors, Videojet, Domino and Markem-Imaje, all manufacture in China primarily. And then Domino and MI have an assembly line right at the end for Europe. So they get the entire kit and they get like a sort of CKD or SKD or something and they just assemble it here. But some of the manufacture in Europe anyway to begin with, none of the imports are going to come via Europe. So I don't think that fundamentally anything changes. And more importantly, in our business, like I said, it's a sticky business because most people have a print of everyone is competitive, the service network needs to be there, everything else needs to be there and those are, I'd say, the most important critical factors for people to be successful in this business. So I don't think we are going to benefit much. I don't think we're going to in any way be impacted definitely negatively. We're not going to be impacted negatively. I don't think it makes a difference to our 3 key competitors. Yes, I don't see this not really having an impact on our business per se. One year down the line, it happened before. It could have helped a little bit in that the packaging machines and the packaging materials that we import from Europe would become a bit cheaper. But by the time I think this FTA is ratified, we'll already have our own production of the packaging materials, I don't see it being useful in that aspect.

We'll take the next question from Vineet Thakur.

I actually wanted to know a couple of numbers. So what would be our segmental performance in volume -- sales volume? What would be our sales volume of printer and installed base for 9 months?

So, Shiva, I can answer this question. The printer sales for the 9 months are a little over 2,100 printers. And our installed base is about 22,000 plus printers, anywhere near that.

And sir, what's our revenue breakup by region and by segments?

So within the coding and marking, we have 4 different schemes of revenue. So one is the printers, consumables, the spares and the services. So the breakup for the Q3 is 18%, 58%, 7%, and 15%.

And sir, what would be our offering about the Europe operations? When can we see a reversion of EBITDA margins?

Yes, Shiva, you want to take this question?

Please repeat that question...

I wanted some clarity since we were doing at 24 -- am I audible, sir?

Yes, yes.

We were doing 23%, 25% and 24% in FY '22 to '24. And since Europe fallen down to around 19%, what would be -- when could we assume we could get back to the original margins or we would stop bleeding money at Europe operations?

So I think -- okay, I mean I cannot say anything to everyone, but like if I look at it on a stand-alone basis, which is what is more important for us, in the stand-alone basis carries like I said, the track and trace business is breakeven. It might even be making money. Depending on how we apportion the overhead, it's making money on a marginal basis, it's profitable now. The packaging business even in India and Asia is loss-making as of right now. And obviously, in Italy and stuff like that, we have a much bigger losses that we are taking on that account. Now there are 3 different businesses fundamentally or 4 different businesses. One is the coding and market, I put the digital printing in that, that's like one business. That is still growing. The profits are there and the margins are consistent and the profits have increased, although we are still doing a breakup exactly of where the other expenses and the employee benefit expenses have increased. But we believe that the business has grown further in profit in line with the revenue, if not more, okay? I don't want to give the exact breakup because we're not providing it in the presentation. But fundamentally, that business is gross margins and revenue -- there's revenue growth of, I don't know, 14%, 15%, something of that sort in the stand-alone business. Some part of it has come from the packaging and the track and trace, which have grown faster, but from a much lower base. And that business is a profitable business and the margins are increasing because our costs are not increasing that fast. But we're doing exact checkup because the other expenses is something that we are confused about because we're not looked at in that depth. From the employee cost, I can say most of the employee costs, which have increased have increased in the packaging business, maybe the track and trace business and the other things and especially international business. Now as the packaging business ramps up in volume, like I said, we get past some of these technical niggling issues, which we believe we've resolved and we are able to execute the orders in this quarter and the next quarter. It's a slightly lengthy process because the machine is now fixed -- the customers will have to come to the factory, do a factory acceptance test and all these other types of things, which is a bit of a different longer drawn-out process as compared to what we do in our coding and marking business, where we just -- it's like a ready-made product and just ship it. So my view is that, as the packaging business moves up in terms of revenue, and I do believe that in Q3 or Q4 of this financial year, this coming financial year, even in Italy, it's going to be breakeven. And in India, it will be profitable hopefully by Q1 or Q2 of next year or Q1 of next year. So I think as that happens and the losses of the packaging business come down, even if we are not making money, the stand-alone and the consolidated will sort of merge. So my gut feeling is that, if you can make as much money in India in the packaging business as what they may lose in Italy in Q1 and Q2, at least will be sort of on a breakeven basis on the overall thing. And then you'll see a sort of homogenization of the stand-alone and the consolidated. And then the margins across the board will be quite similar. And then obviously, the longer-term plan is that the packaging business will grow and will be profitable in and of its own. And so will the track and trace business, I definitely expect them to contribute significantly to the bottom line in the coming financial year. So if you -- if I looked at the business and I sort of explained and I looked at different segments, then I think that the core coding and marking business is still as profitable on a gross margin basis surely. I can say that. But I think even if we've not done that deep dive and apportion the expenses perfectly between the businesses. But even if -- from whatever I can see from the employee point of view and other direct costs, which are measurable for us, it has grown in profitability. It has grown in percentage margin in an EBIT basis, it has grown.

And one last question would be, sir, what is our...

We'll take the next question from Shubham Jain.

Sir, my question would be if we are operating in an oligopoly market itself and we have so much of unutilized capacity, why has our market share remained or capped at around 20-odd percent? Is it the barrier to taking share from Videojet or Domino a matter of technology? Or is the lock-in of consumables at the competitor stronger than what we could have anticipated in the past?

So, Shubham. Can you hear me, clearly?

Yes, sir.

Yes. So I mean, I think this question has been answered in many con calls. Fundamentally, it's a very sticky business, and we have actually grown our market share slowly over the last few years. But because it's a sticky business it's difficult for the competitors to take our customers and for us to take our competitors' customers. So it happens, but it's a bit of a slower business. But technology-wise, I think we've got the best product stack right now, definitely.

So what could trigger a market share increase, let's say, hypothetically?

So definitely, one of the gains we've had is more like in our non-CIJ products and where especially the thermal inkjet and the piezo where we've gained market share. So as technologies change like some earlier person was talking about laser. So sometimes people are more open to using someone else's CIJ and a second supplier's laser going forward or a second person's thermal transfer or thermal inkjet. So I think that's one area where we feel maybe that's some opportunity to gain market share. And the second is to just continuously perform a bit better and just take the small market share gains because they're very profitable. So even the market is growing at 10%, we are growing at 14%, that's quite profitable for us. It's an extra 4%, 5%, it's a lot of money.

Right. Sir, and the second question would be, we are running some pilot projects with [ pharma cos]. And what is the typical gestation period from, let's say, pilot to getting a full-scale rollout? And what could be our potential, let's say, value addition in top line and bottom line, if you could -- from that, if you could just give some color on that?

So I cannot answer the top line and bottom line part because it's all hypothetical. But right now, the pilots are sort of over, but there's a lot of negotiation going on right now. Some contractual elements to the negotiation. It's not just a commercial negotiation. There's also legal aspects to it. So we are in the process of trying to finalize those deals. But it's one of those things that we have to go carefully because this is not a regular type of a sale of product. This is a patented technology we are giving and there are certain restrictions in what the customer expects us to do and what we can provide and so on. So I think given that we have the top 5 or 10 customers in India in the previous thing. So I think we have closed now in a finalization stage, in a commercial negotiation stage, but we are trying to close that hopefully in this quarter.

Okay. Sir, lastly, what is the...

It will be soon. But like I said, there's a little bit of back and forth because both people have given us and customers have also given to their legal teams just to make sure. So when lawyers get involved, everything slows down, it costs a lot more money.

We'll take the next question from [ Nitin Grover ].

My question is for Mr. Jaideep Barve. I hope I'm audible.

Yes, you are.

Okay, okay. So first of all, congratulations for an impressive growth in the top line, okay? We have published the numbers. I'm sure you can throw some color on the significant increase that we are seeing in the employee cost, okay? I think you did mention that some part of it relates to the change in the labor codes and another is on account of the increase in the provision on the side of incentive, right? Just wanted to understand what is the policy that you are following in terms of making a provision for incentive. Are you making an upfront provision for incentive before the sales happen? And because of that, there is a mismatch because the increase is quite significant. When I look at the numbers, it is a 28% increase in employee cost over last year and 22% over the previous quarter. And it is definitely impacting the overall profitability that we are seeing for Control Print for the third quarter, okay? So, yes.

Yes. So, Nitin, I would like to address your question this way. See, incentives are always a result as a planned structure process. So we identify the employees who need to be incentivized. We also have sales incentives policies. We've got incentive policies for the service managers, plus we've got incentive schemes for the back office team. So as and when -- I mean, for the people where the results can be quantified like sales and services, I mean everything is calculated. For the others where it is more of a non-quantified basis, what we do is that, based on our experience and based on the performance, we prepare a list and we get it approved and then the provision is made according to that.

See, your overall employee cost is like 23% of sales. I'm looking at the consolidated numbers. Do we expect a similar percentage to continue as we move forward? Or...

See, we are definitely looking at optimization of not just the employee costs, but we're also looking at optimization of even the cost of goods sold and the other worlds. So definitely, we will see some kind of a good improvement in the periods to come.

We'll take the next question from [ Pratik Jha ].

So sir, my question is like could you share some guidance on the printing core business? What kind of industry growth do you expect over like, let's say, 3 to 5 years? And how do you see your company growing in that period? Also, if you could like give us some color on the track and trace business, how you see that evolving?

Yes. So, Pratik, to answer your questions, specifically looking at the coding and marking business, it's going to grow at 10%, 11%, 12% depending a little bit on the Indian economy, like we're assuming that India is going to grow like 6%, 7% and then coding and marking was a bit like 1.5x that and so on. And we've been doing a bit faster than that. We feel that our product portfolio is better than the competitors. So we will continue growing at that right now, considering our lineup and everyone else's lineup and our edges compared to everyone else's for the next year or 2, I think because I can't predict 5 years down the line. But I'm sure we'll grow at the market. But maybe in the next year or 2, if we still maintain our product edges in the thermal inkjet and the piezo and certain other things, we may able to grow at faster than the market, like about 15% growth rate according to me, give or take, a couple of percent here or there. And obviously, if we maintain that edge, which we feel we've got a strong organization, strong everything, maybe we'll need to maintain that 15-ish percent growth for a longer period. Like I said, it's going to -- there is a technical element to it, although I said that it's very sticky, but it's also -- there's a technical aspect to it also the product does matter. The second part of the thing was the question regarding the track and trace business and how it's evolving. So I said like I said, it's already a few hundred crores like Jekson, ACG, those types of people are there. We're coming with a slightly different strategy. We're doing some more plain vanilla stuff right now. Now we've sort of finalized certain elements where we should be able to go for more high value-added business. And for us, it's more of a fusion of the track and trace into something which is going to give much more business intelligence to the customer rather than just meeting the compliance requirement because then we have to meet the compliance but how can we sort of connect that to resolve some of the customer issues. So first, let me try to conclude those 2 contracts, sort of conclude them and roll them out. They are pilots, the big pilots like the pilot has been commercialized now. And if that happens, we'll be busy with that anyways for quite a lot of time. And then we'll have to see what the market reaction is and whether what we believe we're providing the customers a benefit what the customer believes he's getting, if he's getting it, the market is big. And if he's not actually the theoretical benefit versus the practical benefit is not there, then yes, we'll still sell stuff, but then you might not grow at the same rate. So it's very difficult to say. We're making a technology platform play in both the packaging business and the track and trace business and digital printing. So they're very different from the coding and marking business where it's a very established platform and everyone knows what they're getting.