Cosmo First Limited (COSMOFIRST) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the investor call of Cosmo Films Limited to discuss the Q4 and FY '22 results. Today, we have with us from the management, Group CEO, Mr. Pankaj Poddar; and Group CFO, Mr. Neeraj Jain. Starting off with the statutory declarations. Certain statements in the conference call maybe forward-looking. These statements are based on the management's current expectations and are subject to uncertainties and certain -- and changes in circumstances. These statements are not guarantees of future results. [Operator Instructions] Please note that this conference is being recorded. Now may I request Mr. Neeraj Jain to take us through his opening remarks, subsequent to which we can open the floor for Q&A. Thank you, and over to you, Neeraj, sir.

Well, thank you. Very good afternoon, ladies and gentlemen. We will start the call with a brief performance of the company, which may be followed by the questions. First, talking about the March 2022 quarter results. The company has posted record consolidated quarterly EBITDA of INR 165 crores during the March '22 quarter. With this quarter result, in fact, the company has posted uptick EBITDA performance continuously in a row from last 13 quarters now. Consolidated sales for the quarter is INR 821 crores, which is higher by 22% compared to last year's similar quarter. The EBITDA has increased to INR 165 crores, which is 31% higher compared to last year's similar quarter. And this has happened for a couple of reasons. First, higher specialty sales, which, in fact, has grown for us almost 17% on a full year basis. Better operating margins, BOPP's margins have been running close to INR 45 per kg compared to previous quarter of INR 43 per kg. When I said previous quarter, means December 2021 quarter. And INR 36 per kg compared to March 2021 quarter. And third, of course, the much better performance by the overseas subsidiaries, subsidiaries taken together have contributed INR 19 crores of EBITDA in March 2022 quarter as compared to INR 14 crore in March '21 quarter. Better performance in subsidiaries due to higher sales and higher specialty growth. And hence, EBITDA, along with the lower effective tax rate led to increase in PAT by 45% for the quarter. Now I will move to full year results, consolidated sales for the full year is INR 3,038 crores, which is 33% higher compared to last year. The EBITDA has increased to INR 620 crores for the full year, which is 44% higher compared to last year. And of course, the higher EBITDA is a result of primarily 3 factors: higher specialty sales by almost 17%, better BOPET film margin, which for the full year has been average running at INR 40 per kg compared to INR 29 per kg last full year. And uptick performance was by the subsidiary, subsidiaries taken together for the full year contributed INR 94 crores of EBITDA as against INR 32 crores in FY '21. And primarily reason being the higher specialty sales and overall better volume. Now if you look at trailing 12 months basis, the company's EPS has increased to INR 222 per share compared to INR 127 last year's end. Again, based on trailing 12-month basis, company's ROCE stand at 29% and return on equity stand at 39%, which, of course, is one of the best in the industry. Considering that company's business activities have expanded beyond films to say, Specialty Chemicals, including master batches, coatings, textile chemicals, and we are also going to soon launch adhesive and B2C Pet Care business. And also, we are going to soon launch the consumer application films. The Board of Directors of the company at its meeting on 9th of May has recommended the change in the name of the company from Cosmo Film Ltd. to Cosmo First Ltd. to reflect the company's diversification and company closely. And of course, this is subject to shareholders' approval. If you look at in the industry as such for the flexible packaging, Cosmo Films is known more for industry-first niche solutions and more for the first to come with innovation. So taking clue from the company's Board of Directors feel in wherever business is in operating we should be first in terms of the innovation. So that's why the Board of Directors recommend the company's new name should be Cosmo First Ltd. The Board of Directors of the company have also recommended for approval by shareholders bonus issue of 1 equity share of INR 10 each for every 2 equity share of INR 10 held by the shareholder as on the record date. The bonus issue reflects basically management's confidence in business strategy and the growth prospects. Coming to balance sheet side. The company's net debt stand at INR 303 crores as at March 2022, which is less than 0.5x of net debt to EBITDA and 0.3x of net debt to equity. And of course, with these financials, it reaffirms the strong financials that's why the credit rating also during the year has been enhanced to AA minus by CRISIL. The company is looking for about INR 200 crores of CapEx in next financial year, which will be largely on value-add CapEx on the BOPET line. We'll further discuss about detail about it. Second, on the CPP line and the BOPP line, which we already announced earlier. The financials of the company are expected to remain fairly robust even with this CapEx because it may be noted that the CapEx on BOPP, BOPET and CPP line will happen in part over the next 3 years. Of course, the bottom line addition from the CapEx will come from the coming years. Now I will move to specialty films. Specialty films growth has grown from last 3 years on an average by 18% for us. The company's specialty sales for FY '22 now stand at 63% in volume terms and 70% in value terms. We are in process of ordering several other value-add assets to further enhance growth in the specialty portfolio, and we are looking for 80% run rate target for the specialty film by the end of FY '23. Some of the key products, which will drive specialty sales growth includes synthetic paper, coating film, the technical film and the thermal lamination. Of course, to add to it, some new products are in pipeline like the direct thermal printable film, we call it DPT film. The company is also going to launch heat control film, which will be typically used in offices and homes, and we expect by the end of the FY '23, we should have this film in place. Now I will move to growth projects. In the coming years, B2B segment, which includes growth in the specialty sales, specialized BOPET lines, world's largest BOPP and CPP line and the other vertical B2C segment, which includes direct-to-consumer pet care and very specific Specialty Chemicals. The other business verticals, which will drive the growth. The specialized BOPET line commissioning may start from quarter 2 FY '23, in fact, later part of quarter 2. The line will add close to 20% capacity. The company is targeting complementary growth from the specialized BOPET line that's the shrink labels, the other high-end specialty. This will partially substitute imports happening in India and is also an excellent opportunity to convert known recyclable PVC film market in India, which is close to 30,000 metric ton industry. The company has placed order for new BOPP line, which will be world's largest production capacity line and will increase company's production by close to 1/3. The line is expected to commence commercial production by FY '25. Further, as announced earlier, the company has also placed order for CPP line, which will have close to 25,000 metric ton capacity and expected to commence commercial production in about 2 years from now. The CPP film will promote sustainability and it will offer monolayer structures. The capacity addition now to summarize, BOPET, BOPP and CPP lines will allow the company to further expand its specialty film portfolio. Moving to Zigly. As you know, pilot launch of the Pet Care division under the brand name Zigly has delivered better than forecasted results. And now the company is in a phase to rolling out its digital-first omnichannel business model for Zigly. The company now plans to enhance presence by increasing online sales by launching the app and open stores between 15 to 20 stores in FY '23. Moving to Specialty Chemicals. The Masterbatch line is doing fairly well for full year impact in the first year of operation of the company. The company could use more than 50% of the capacity on the Masterbatch line with exit quarter 4 run rate of 62% capacity utilization. In the first year of operation company is in fact positive on the Specialty Chemicals. On textile chemicals business, the commercial production has started from the quarter 2 of FY '22, and we already commercialized more than 50 products, which are getting supplied to 40-plus customers. The company continues to conduct extensive trials with the customers and expect much more products and much more customers to add in the coming months. Now the -- for the Specialty Chemicals, I would say, FY '23 will be year for the scale up. I think these were the updates from the management side. Now we would like these calls to open for questions, please.

[Operator Instructions] The first question is from the line of Ravi Naredi from Naredi Investments.

Sir, when you have just mentioned in the highlights, when you demerged Zigly when it gained some decent top line or bottom line or just now?

So if you got your question right, your question is then we would demerge the pet care division?

Yes. Yes.

So I think that is on cards, as we announced earlier. So currently, we are at the stage of scaling up the operation for the Zigly, practically current year FY '23 will be our first year of operation in terms of the scaling. So definitely, I mean, it will be medium term, it will not be long term, but that's on [indiscernible].

So we may think in financial year '25, we will be able to demerge this?

Frankly, that's Board of Directors to decide. But as I indicated, it will be medium term, it will not be long term.

And sir, secondly, what is the purpose of Korean plant we have established there. Can you tell how much we have invested there? What is top line and bottom line?

So actually, the company has acquired GBC's commercial printing business more than a decade back. And with that acquisition, we inherited the Korean plant, which actually is a very good plant to cater particularly to the Japanese market, which is fairly sensitive market in terms of quality, et cetera. We definitely see a value add from the Korea plant. So we continued operation in the Korean plant, while the -- some other plants we actually shifted, over a period of time, from overseas location to our efficient plant in India.

So what will be the top line and bottom line in financial year '22 for Korean plant?

Broadly, the Korean plant cater to Japanese need. So it largely supplies to Japan. But other than these third-party sale, I don't recall the exact number, but it will be less than $10 million.

$10 million. And it is in profit?

Yes. Korean operations are in profit.

The next question is from the line of Faisal Hawa from H.G Hawa and Co.

With so much deglobalization taking place, would it not be a better idea to be expanding in locations abroad, where more modern plants are needed and also with the ongoing shipping crises and also the import tariffs that countries are putting up. Can we see at a more multi-locational manufacturing activity from your end?

We believe that India has significant demand within the country and our costs are still very competitive in the world. Therefore, when it comes to film business production, we continue to expand within the country. However, when it comes to some of our other businesses, we are going to evaluate in the future, whether we should expand overseas and more so for Zigly.

And secondly, sir, I missed the answer on the value addition that we are enjoying at this point of time. That is one. And second question, one more question is that -- I mean, how are we really being able to adjust the organization's culture towards now a B2C business, which is the pet care business and where the more start-up kind of a mindset is required. So have we developed any best strategies to do that because that could be a really good case study going forward also for most other companies?

So as far as all our businesses are concerned, they are run by separate teams. It is not that everything is being run by a common team. Zigly has a separate team, Cosmo Specialty Chemicals have a separate team, heat control films have a separate team, films have a separate team. And accordingly, the culture is also designed in line with the needs of the business. However, as a group, we have a very progressive culture. We are employer of choice. We are first when it comes to our people. And therefore, we do not see any issues around that.

And about the value addition, sir, where does it stand at this point of time?

Could you please repeat your question?

What is the VA now that we are enjoying for BOPET and BOPP films?

Value add, right?

Yes, value add.

So value add, it will all depend, I mean, on the type of the film, as we indicated at the beginning of the call, the gross margin was running close to INR 45 per kg. And of course, depending on the exact nature of the film, the variable cost component varies between INR 15 to INR 25. So that means if we add 45 plus other variable costs, this will be the total value.

The next question is from the line of Nirav Jimudia from Anvil Research.

Congratulations for excellent set of numbers. I have only one question. So the last 2 years have been very eventful for the entire industry like in terms of the demand growth, what we have seen and similar improvement in the margin. So -- but if you can just help us explain in terms of what were the challenges being faced by the company over the last 2 years, our learnings and lessons through that -- through these challenging times or the challenges being faced by the company. And if you can explain this with respect to the new product launches as well as some of the process improvements, what we have done over the last 2, 3 years, that could be helpful, sir.

We love challenges. That makes the life more interesting. Obviously, we're all living in a [ wooca ] world, where in the morning, you plan for something. And in the afternoon, you do not know what event will happen, which is going to make changes to your planning. Having said that, we believe that business success is a lot about people. I would say that close to 90% is about the team that you have, it's about your people to people dealing and so on. And that remains our focus, if you have the right set of people, you can meet any of the challenges. When it comes to the first challenges, we have started many new businesses in last 2, 3 years. Building up the team, ensuring that we have the right set of culture, ensuring that the strategy is right those have been some of the areas that we've worked vigorously in last 2, 3 years. When it comes to film, we ensure that our customers take the benefit of BOPP being one of the most sustainable materials. So we help them creating recyclable structures. We entered into specialty business with more vigor. And every year, we make sure that we have better growth than the previous year. As you all know that getting into value-added is a vast tough task, you need to have a portfolio of products. You need to have continuous innovation. You need to have ongoing trials with the customers. So Cosmo we did very well in terms of not just growing year-on-year, but making sure that every year's growth is better than last year growth. So I think the place was full and Cosmo team really did very well to surpass those challenges and making Cosmo successful, not just in our existing film business, but launching our new business very nicely, and we already have started seeing the benefits of it.

So sir, like if we can just correlate with our, let's say, power cost or the wastages what can happen out of the film production? Because our is also a power-intensive industry where on an annual basis, we may be incurring around INR 130 crores, INR 150 crores of power cost. So have you done anything towards that side in terms of controlling some of the costs by entering into some contracts with the outside agencies, where we can get a power on a sustainable basis, which helps us to run our plant also smoothly. So one up on that side. And second on, have you been successful in reducing the wastages or in a way improve our input output ratios for the films?

So I would talk about the larger subject. Cosmo has been working on reducing the carbon footprint by 50% by 2030. And we also want to eliminate some of the carbon that we emit by planting thousands of trees. Those are 2 very broad level objectives that we have set for ourselves. When it comes to power, we are increasingly shifting to renewable power. All our plants have solar power, then our Baroda plant also has wind power. We have done a very large agreement again for Baroda where we are going to ship almost 50% of our total power requirement into renewable sources, which is going to be effective within next few months. One side, it is going to make us more sustainable company. At the same time, it will also reduce our variable cost because we all know that the cost of dilution of renewable sources is very limited -- it's just the onetime CapEx that you have to do. We are also evaluating various possibilities for both the Maharashtra plant. Maharashtra government's policies, I would say, still need more improvement to encourage more and more renewable power. Having said that, we identified certain areas where we can increase the renewable power assets for us. Even when it comes to wastages, we are working on various fronts. Last year, we were able to reduce our wastages by close to 8%, 9%. But more than reducing wastage but we're also making sure that some of these wastage can be re-consumed in the factory again. So we have increased the reprocessed [indiscernible] consumption in the last year by more than 25%, which is a pretty large achievement for us. We've also worked towards reducing the number of trucks that we use to reduce the carbon footprint. And we were able to do that reduction by having better truck utilization and thereby reducing overall the carbon footprint by 15% when it comes to usage of trucks. So your company has taken a lot of initiatives to be a more environmental friendly company and, at the same time, be more sustainable and reduce the cost.

The next question is from the line of Shrinath M. from Motilal Oswal AMC.

Congratulations on a great set of numbers. I had a couple of questions. The first one is, we are looking at about INR 900 crores expansion over the next 3 years in the films business. What kind of asset turns should we expect on this INR 900 crores?

Yes. Different businesses will have different terms. If you talk about our film business, it has a turn of 2:2. If we talk about our chemicals business, it will have a turn of maybe 10. If you talk about Zigly business, it will again have an excellent turn as we continue to scale up and revenue from online and off-line goes up, it will also easily have a turn of maybe 5. So I mean, and these turns will continue to improve as we scale up the newer businesses. I don't know if it answers completely.

Yes, just that your presentation gives the detailed breakup of the films' CapEx, but the chemicals' CapEx is not very clear. How much are we likely to invest in chemicals over the next 3 years?

About our chemical businesses is a Specialty Chemicals more innovation business than putting too much CapEx. So it's a very asset-light business. And with a very good ROCE.

So any tentative CapEx number?

So just to add to what Pankaj said with respect to specialty chemical CapEx. Predominantly for a particular level of operation, we have done the CapEx in FY '22. As I indicated at the beginning of the call, FY '23 will be year for the scale up for Specialty Chemicals business. There was no any significant need of CapEx in FY '23 [indiscernible].

And my second question was a slightly broader question. Is there an overall strategy in the company on how to enhance shareholder value, especially of the minority shareholders? So I just wanted to think -- I mean, get your thoughts on an overall strategy for minority shareholders?

So shareholders to us are extremely important. They also come first in our Cosmo First branding. And if you really see, we've always been a very good dividend paying company; if you see last 20 years of history. And recently, now in the last Board meeting, the Board members have approved bonus shares. In the recent past, we've also done buybacks. So these are some of the measures that we have taken and we'll be very happy to hear if you have any specific suggestions which can make mutual sense for the investor and the company both.

So a couple of thoughts was that I think this year, we declared about INR 35 as dividend overall 2 interim dividends. INR 25 and INR 10. INR 35, right? And our full year EPS is about INR 222. So the dividend payout ratio works to about 15%. Can it be higher? That is a question which we need to ask ourselves? Can it be 20% to 25%? For example, one of our competitors has an explicit dividend payout policy of 20% of consolidated profits. So can our payout ratio be higher. That's number one. Number 2, we had significant results actually. So why this 1:2 bonus? And it could have been a more liberal ratio. So any thoughts on these 2 things, payout and the bonus ratio?

Well, if you see, I mean, the competitors who have all kinds of examples, we have kind of examples may not be paying the dividend at all of course one example, you have…

Yes. But we have to look at best practices only.

So then look at companies who don't have dividend payout, we should look at those who have because they enjoy higher multiples than our company does. So there must be some reason. There must be some correlation between payouts and multiples, PE multiples. So that is something we need to bear in mind. Broadly, if you look at, I mean, last one became history or so, the company has been paying between 15% to 20% of that [indiscernible] in the form of dividend. FY '22 has been a record performance for the -- and accordingly the dividend in terms of per rupee also, it has remained at the record level. But of course, having said so, it's up to the Board of Directors to finally decide on the dividend. But it's in alignment to the company's further growth plans, the CapEx. Accordingly, the dividend payout has been considered for the FY '22 but I would -- I will take your first part of your question in a little different way. I mean not only the above the rewarding the shareholder -- and in the large part of the reward may come in terms of the capital appreciation of the share. And that of course that purpose company is planning fairly effectively the growth, the diversification also in fees like one of business will have very superior kind of the role we expect it to have fairly superior goals and impact on that. On one hand, company is trying to overall increase the ROCE performance for, of course, the capital appreciation in the value of the share. And on the other hand, another business where we are investing, of course, the Zigly is expected to generate a fair amount of valuation for the shareholder. So in overall, if you look at I think one is the rewarding and the second, of course, the company's continued effort these directions.

So capital appreciation, we should look at 2 parts. One is the earnings per share and the average the multiples. So company is in control of earnings per share, but the PE multiple is a function of the market, what the market decides. So market seems to favor companies with higher commitment to minority shareholders actually. So that is what the numbers seem to suggest, like one of our competitors is enjoying a PE multiple in excess of 15, whereas ours is kind of sub-10%. So we should maybe think of how we can raise our PE multiples. The earnings will come for sure, but the PE multiples also will decide the capital appreciation. So I thought that maybe a 1:1 bonus would have been the most common thing because you have ample reserves. So what was the thinking then 1:2?

As I said, I mean, it's the Board to decide finally the Board [indiscernible] various factors behind this.

If the company proposes something, there's a good chance that the Board may approve that, but the company may have proposed 1:2 only. So I was just thinking -- I was just wondering is there a thinking behind that?

Yes, there are considerations behind it. Multiple things were discussed. Those were closed meetings. And obviously, you can accept a lot of the stuff which happened in the Board meeting. But to be honest, yes, all these things are discussed in the Board meeting. As you know, we have a highly celebrated kind of a Board with some very respective members of the -- from the society, and I'm sure they have taken an informed [indiscernible] And one final…

Mr. Shrinath, sorry to interrupt, but for any follow-up, may we request you to rejoin the queue please. The next question is from the line of [ Saurav Dutta from Minerva India ].

Just wanted to understand the reason for the decline in EBITDA margins in Q3 FY '22 and Q4 FY '22.

I am so sorry, actually, you need to repeat your question.

I wanted to understand the reason for the decline in the EBITDA margin sequentially from Q3 FY '20 to Q4 FY '22. There's a slight effect on the margins.

Well, actually, I mean, this is an industry, as we said in the past, where in terms of the percentages may not be the best way to look at. So while in terms of the absolute value, the margin has increased, as I indicated at the beginning of the call, BOPP overall margin was INR 45 per kg compared to INR 43 per kg previous quarter. And last year, of course, the number was much lower. So -- but seeing the value of the sale depends to a large extent toe only raw material price, in percentage terms, it may be up or the down depending on the raw material because ultimately we all have to shift the large part of the raw material increase to the customer. So that way in percentage forms, it may not be the best way to look at for this industry.

The next question is from the line of Shubham Agarwal from Aequitas India.

Congratulations team Cosmo for a super set of number. Sir, my question was regarding the heat control film that you talked about. I just wanted to know a bit more like when are we planning, what's the time line? What's the market size? And what kind of revenue and margins that we can do out of this?

So heat control is a very underdeveloped market in the country. And we feel there is a very large potential to educate the customer, how heat control can reduce their air conditioning lower, be more sustainable and make their houses look better. So it will require a lot of education to the consumers in India. And the margins in this business should generally be quite strong. There is a lot of imports happening in the country. When it comes to heat control film, there is a lot of Chinese low-quality, poor quality material is coming, which eventually has to stop and be replaced by the right product, which can actually make a difference to the shopping malls, to the commercial complexes, to the industry, to the consumers at large. And we ourselves have very strong aspirations when it comes to this business.

And any sort of time line that we have in mind for launching this product?

This should be launched early next financial year.

So this will be more post that BOPET line.

Yes, this will be value addition to the BOPET. We have done a lot of changes to our BOPET line. The -- there's a lot of barrier to entry because we have modified our line. We have added a lot of assets after this and given our strength to R&D, virtually everything will be done in house. And we feel that technologically, we'll have the best products in the world and the most cost effective, both at the same time.

And sir, secondly, my question would be forward looking to FY '23. So obviously, this year was very good and realizations and margins have been pretty good. But for FY '23, how do we see the revenue growth? Or from there, if you can break it up between specialty chemical, BOPET line that is coming up, and any other initiatives that you are taking, the growth from the growth perspective, if you can break it up, it would be helpful.

We cannot give forward-looking numbers, to be honest. Having said that, the growth will come from polyester business. The growth will come from Specialty Chemicals business and Zigly business. So there will be 3 areas where growth will come. On an overall basis, we expect minimum 15% growth to happen in the current year.

Okay. So my -- I was trying to understand out of the 15% growth, how much would be contributed from specialty chemical assets.

Sorry, just one rider there. This, we are assuming that raw material price will remain same as last year. And at times, our EBITDA percentages and sales percentage growth numbers do get impacted. Last year, because of the commodity shortages worldwide raw materials were at all-time high. So we have to factor in that. But this 15% number that we have given is assuming that we'll have same set of raw material costs. Now coming to a Specialty Chemicals. Specialty Chemicals will become a very important component of the business as we pass each year. Within 1 year, we have -- in the last year, we have done INR 90 crores sales when it comes to Cosmo Specialty Chemicals. And we will be more than doubling the sales in the next year.

And lastly, a bookkeeping question. So our tax rate this quarter seems to be on the lower side, I think 19.6%. So any specific reason? And will this go back to 25-odd percent?

Sorry, come back again?

The tax percentage.

So see, tax will now most likely will stay around 25% because if you do not take any exemption, then it is expected to stay at 25%. We are doing an valuation, whether we should stay with the old regime or shift to 25%. Within next couple of quarters, 3 quarters, we should be able to complete our assessment, whether we want to stay in regime or the new regime. But irrespective, our tax rate should be around 25%.

The next question is from the line of Sanjay Shah from KSA Securities.

And congrats on a good set of numbers. So my question was regarding our subsidiary. After taking over a U.S. subsidiary ACCO Brands, we have been struggling even in Korea and U.S. to generate some profit. But in the last few quarters, we are doing decent over there, especially this quarter. So can you highlight upon how that business is panning out? And how do you see the future of these subsidiaries? Do this profit will grow from here on? Or it's still challenging.

See, one of the critical changes that we did to our strategy that these operations as a stand-alone was very small. And as you understand that Japan, Korea, U.S. are all high-cost countries, and they were making losses. The simple thing we did was to make best use of our assets. We spread them out, and we ensured that we increased the sales of all our products and not limit ourselves to lamination films. This strategy has played very well for us. Our sales in U.S. has grown from $30 million to $65 million. And we do expect that the sales will continue to grow from here and will generate decent margins to Cosmo.

So my second question is regarding our entry into the heat reduction film. So what we understand, correct me if we are wrong, there is -- this area is very crowded. There are many people and established branded players. So how will compete them? How do you see facing these challenges?

Unfortunately, India does not have any branded player. As I said earlier, India is importing films from U.S., China, Korea and some other countries. And we feel that there is clearly a space for one established player. We feel that the margins in this business are very nice. The important thing is to crack down on the technology part, which we have been working for more than 2 years. And as we said, that we will be the first company in the world who will have complete backward integration for everything that we are going to use in that film. And therefore, we'll be technically very superior and cost-wise will be very superior. And therefore, I mean, obviously, any brand development takes time. It will not happen overnight. But we feel that we are on a journey to make a very successful business in the times to come.

The next question is from the line of Manan Shah from Moneybee Securities.

Congratulations on a good set of numbers. My question was pertaining to Slide #3, where you mentioned each 1% shift in specialty adds to around INR 4 crores to INR 5 crores to EBITDA. So I just wanted to understand whether this still holds true in the current pricing scenario. And if we are moving from 70% to 80%, would that mean that it would add another INR 40 crores to INR 50 crores to our EBITDA?

You are right on both questions.

The next question is from the line of [ Bipen Sheth from Buren Capital ].

So I was just taking a look at your balance sheet. And while consolidated net debt to EBITDA or equity is continuously coming down. That's not the case with gross debt, and we continue to carry reasonable amounts of investments. So is there a particular reason we are doing this? Is there an arbitrage in the cost of borrowing versus the yield on these investments? Is that behind this decision?

There is arbitrage, but we are not doing this for arbitrage but we want to have a very strong war chest as well as money available for our future expansion plans.

So is it fair to assume that the entire composition of the treasury or the investment portfolio is liquid in nature?

Yes. I think liquid in different parts. I mean, some is liquid at a very short notice, some is liquid after some months or some quarters. So depending on our needs, we have different guidelines for every investment.

And the other thing is that we've laid out a CapEx plan of some INR 800 crores, INR 900 crores. And actually, it won't happen in 1 particular year. It's going to be spread out over a period of time. Now while we continue to carry debt at a net level and, in fact, reasonable amounts at a gross level, when you look at the business? And yes, it has transformed over the last 3, 4 years, pretty dramatically. But what used to be a single-digit margin business now looks comfortably placed to do at least mid-teen margins. Is that a fair take? Or is there a cyclicality which we must protect against and perhaps just pay down debt?

There are 2 parts of our business when it comes to only films. Obviously, in the medium to long term, we intend to become a large Indian conglomerate However, when you talk about only film business, 65% close to 65% of our business is already into specialty but the business -- where the margins remain stable because we are linked with our raw material cost. 35% business is still cyclical and we intend to make less and less cyclical by moving more and more towards specialty. We cannot be 100% specialty company because some of our customers continue to push us to supply some commodity and in many cases, let's say, if you are exporting and customer wants 20 tonnes, they may have a demand for only 15 tonnes of specialty, so we end up giving them commodity, but we will move this number to 80%. And then even with the new expansion, our focus will be that at least on an overall business 80% of our volumes remain in specialty.

The next question is from the line of [ Vipul Shah from Sumangal Investment ].

Congratulations for a very good set of numbers. So sir, when you say 80% of your sales you aspire from specialty. So is it by value or is it by volume?

It is by value, however, by volume also we intend to achieve.

On your CapEx plan, you have not given CapEx plan for your Specialty Chemical business and your pet care business. So can you give the figures what you want to spend for these 2 business over the next 2 years?

So I have already stated that chemical business did INR 90 crores last year in the kind of the first year for the business, and we intend to more than double in this current year.

No, no, I'm talking about CapEx.

Yes. CapEx, both these businesses have a limited CapEx. The chemical business is more about innovative products and doesn't involve too much CapEx. I do not think so that next 5-year CapEx will be more than INR 50 crores to INR 75 crores when it comes to chemical business. Though obviously, these things can change over a period of time. But irrespective, Specialty Chemicals do not require a huge CapEx. Similarly, we believe we are operating on a lease model when it comes to stores or warehouses and also for online as we all know that the CapEx is very limited. So both these businesses, the CapEx from our size is very insignificant versus for our film business where CapEx continues to be much higher.

And sir, lastly, on BOPET lines, what is the amount we have spent till date?

Close to INR 250 crores.

And for BOPP where, INR 350 crores CapEx is lined up, how much is spent till date?

Well, we have already placed order for the line. So advances have been paid, and the remaining part of the CapEx is to be done till FY '25.

And lastly, I missed the asset churn -- no, no. Last question, please, if you allow?

Sir, we have participants waiting in the queue for their turn. If you would return to the queue for the follow-up. The next question is from the line of Shrinath M. from Motilal Oswal AMC.

Again, I had one broad question. Is there a long-term 5-year kind of a target from INR 3,000 crores currently. Is there a ballpark aspirational target for the management? Over 5 years out.

You see, over the 5 years, I mean, although it's difficult at this stage to quantify exact number. Broadly, we are looking for $1 billion.

$1 billion of revenue.

Yes.

The next question is from the line of Kirti Tibrewal from Yashwi Securities.

I wanted to ask, sir, can you please will production or sales volumes for the year or for the quarter?

So as you said, I mean, overall Specialty Chemical did close to INR 90 crores of top line, volume numbers, we are -- sorry, we would not be able to share on the call.

So is there any outlook for the cost increase? Like is it going to increase? Or is it going to stabilize?

See, if you unravel the film business, as you can see in the quarter 4 results, the margins are a little better in absolute value. So far, whatever raw material cost has increased, that has been passed on to the customers.

And so any price increase or realization which -- any price hike you're going to take?

That's something which is a continuous process so that there's no specific date or plan for price increase that keeps on happening from time to time.

Any definite time behind like, like if you're going to go take a price hike in the coming quarter or something like that?

[indiscernible] time line for the price increase.

Yes, sir. Any price hike or any percentage wise?

We would not be able to indicate any time line for the price increase. As I said, it's a very continuous [ person ] it keep on happening. It's a business day-to-day decision.

The next question is from the line of Faisal Hawa from H.G Hawa and Co..

So sir, how do you see the recycling business coming up in the future. And because [ Ucatch ] has also announced something similar and even Polytech has done it. So you feel that it could almost pick up like an extension of each and every films company or business. And second question is that how do you see the -- do you see any opportunity in the tetra packs business because you want to be first in almost everywhere. So the tetra packs can now be manufactured by others also and this could be a huge opportunity going forward. And so you feel that there are some other opportunities also in the recycling space where paper is replacing plastics or films and other materials, is that not very [indiscernible].

So as I understood, your question has 3 parts. One is on the recycling. You see all our plants today also are equipped and have been doing recycling for the waste getting generated within the plant. So -- and on the top of it, in any case, companies looking for the recycling of post-consumer waste as well. So I think that's very much on the radar. We immediately have no plan to launch any kind of tetra type kind of product. But synthetic paper is an excellent product and which if you will touch it, it provide you a feel of a paper although it's plastic. And the target is basically any durability which you need to provide, like, for example, the university certificates, the school certificates, passports, maps, visiting cards, wherever you intend to provide the feel and touch of paper, but with added advantage of durability, the synthetic paper is an excellent product to have. So we are fairly optimistic about the synthetic paper for the coming years.

They're used for capacitor manufacturing -- because now electronics will be a big -- electronics and mobile manufacturing hubs in India also.

So your question is CapEx [indiscernible]?

[indiscernible]

So your voice was -- not able to understood your…

Which -- [ Explore ] is also going in India. Explore.

Yes. So I mean, if you do recall, I mean 2 quarters back or so, we announced metallization capacity, which is eligible in fact for the ELI incentive also. So I mean, that's for the capacitor side.

Ladies and gentlemen, that was the last question for today's conference. I now hand the conference over to the management for closing comments. Over to you, sir.

So I must say I mean, Cosmo First Ltd., it stand for 4 decades young Indian business conglomerate that ties on innovation to unlock value in diverse sectors, including film, consumer care, Specialty Chemicals and direct-to-consumer pet care business under Zigly brand. So to sum up for the investors, the company is taking all required steps to transform into a specialty packaging and specialty chemical company with B2B and B2C segment in years to come. Specialty polyester line, BOPP line, CPP line, which are expected to get commissioned between FY '23 to '25 plus focus on enhanced specialty films, diversification into Specialty Chemicals and pet care, we are the factors to drive growth in the coming years. The company's focus very clearly will continue on improving its specialty films, R&D and sustainability, which should yield results in coming years. At the end of the call, I will repeat the statutory declaration. Certain statements in this phone call may be forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. These statements are not guarantees of future results. Thank you very much for joining.

Thank you very much, sir. Ladies and gentlemen, on behalf of Cosmo Films Ltd., that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.