Cosmo First Limited (COSMOFIRST) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Investor Call of Cosmo First Limited to discuss the Q3 FY '23 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 declaration. Certain statements in the conference call may be forward looking. These statements are based on management's current expectation and are subject to uncertainties 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 the Q&A session. Thank you and over to you, Neeraj ji.

Very good afternoon, ladies and gentlemen. I'm Neeraj Jain, Group CFO at Cosmo First, along with my colleague Mr. Pankaj Poddar, Group CEO at Cosmo First. Our financial results for the December '22 quarter and investor presentations are available on the company's website. First, we will start the call with a brief on the performance of the company, which may be followed by the questions. First, starting with the flexible packaging business. Well, from the offtakes, the quarter 3 numbers look lower compared to the previous quarters. However, considering the industry scenario, I think Cosmo has done quite well in quarter 3. The results could have been better; but of one-off items, the result got impacted by about INR 32 crores. We are going to further discuss these items. The results also include operating losses of BOPET line, which got commissioned at the end of the September '22 quarter as well as the operating losses of Petcare division. From last couple of quarters, the BOPP and BOPET industry faced excess supply caused due to bunching of few production lines as well as the temporary demand disruption in the overseas market. The domestic demand continues to grow. The bunching of the supply basically caused the margin drop, which actually impacted everyone in the industry although the impact on Cosmo got mitigated partially because of the ramp in the specialty film segment. BOPP margins have been running at close to INR 17 per kg during December '22 quarter as against INR 42 per kg figure of December 2021 quarter and INR 20 per kg during September '22 quarter. This is lower than average historical margins, which has been ranging above INR 25 per kg and this is in spite of the fact that some cost have gone up in last couple of years. It may please be noted that even in such a challenging market, the company's specialty margins remained intact in line with the last year close to INR 70 per kg. While commodity margin has come down broadly to 1/3 of last year margin, there is no impact on specialty margins. Semi-specialty margins have come down by about 30% compared to last year. The margins further details are available in company's investor's presentation. The BOPET line, which was commissioned towards the end of the last quarter, continued to focus on the perfecting recipes, processes and quality parameters for various specialty and value-added films. This is very broadly in line with company's larger strategy to enter into specialty segment in polyester films. There was EBITDA loss of close to INR 4 crore from the BOPET line during the quarter. The company is working on couple of the specialty products on the BOPET line, which are expected to deliver results from FY '24. The margins were also under pressure in the overseas subsidiaries from last year, primarily for 2 reasons. One is reduced gap between the India Raw Material Price Index and U.S. Raw Material Price Index. And second is weakening of foreign currencies against the U.S. dollar, particularly in Japan and Korea. The margin pressure in the U.S. is due to lower gap between the 2 price index, which we mentioned. This has already started easing out from the quarter 4 onwards. Now despite all these challenges and abnormalities, the company could post close to 12% EBITDA, which is very clearly better than the industry for the December '22 quarter and all of this is on the back of largely the specialty film portfolio. While the near-term outlook for both BOPP and BOPET film is expected to be challenging, however, as many production lines are not expected in FY '24, there's a good possibility of upward margin correction in FY '24. The downturn is temporary and is driven by supply side. The demand side continues to grow. The company is confident for its specialty film portfolio and shall continue to focus on the same. Now coming to December '22 quarterly results. The consolidated sales for the quarter is INR 730 crore, which is lower by 5% from December '21 quarter. This drop was primarily due to lower sales volume caused by planned maintenance shutdowns besides some other impact due to sales mix change. The EBITDA for the quarter is INR 86 crore compared to INR 124 crore in September '22 quarter and INR 161 crore in December '21 quarter. The lower EBITDA is primarily for 3 reasons. Number one, the one-off nonrepetitive items of close to INR 32 crore. This include onetime inventory loss on the raw material and finished goods close to INR 14 crore; scheduled maintenance of some of the production line which caused close to 10% drop in BOPP volume, generally as a company we prefer doing such maintenance activity during the low margin period; and of course the lower specialty film sale, but mainly due to inventory correction in Europe and U.S. We feel it's fairly temporary and already see from the quarter 4 normalization has started to happen. Besides the one-off items, there are 2 more reasons for lower EBITDA. The BOPP film margin which we mentioned INR 17 per kg compared to INR 20 per kg of September '22 quarter and INR 42 per kg of last year similar quarter and lower margin in the overseas subsidiaries for the reasons we already discussed. Now [Technical Difficulty] our financial remain fairly strong. The annualized ROCE of the company stands at 20% and return on equity close to 25%. These in fact are 1 of the best in the industry. The company's net debt stands at INR 355 crore at December '22 end, which translates to 0.7x of net debt to EBITDA and 0.3x of net debt to equity. Moving to specialty films. The specialty film sales have grown year-on year if you look at for more than last 3 years by about 19%. This is a temporary drop as we discussed in the specialty film sale. Specialty film for the December '22 quarter stands at 57% of our volume as against 64% in previous quarter and, as we mentioned, this is primarily due to inventory correction in Europe and U.S. We expect specialty growth to be broadly flat in FY '23 and is looking for double-digit specialty growth in FY '24. On BOPET line as well, the company is looking to kick-off few specialty products from the quarter 1 of '24, which include window film, security film, [ FATG ] film and many others. Moving to growth projects in flexible packaging. Work on BOPP and CPP line is progressing in line with the plan. Both the lines will be world's largest production capacity lines and will increase company's production capacity by close to 50%. Of course it will happen in a phased manner. CPP and BOPP line will promote sustainability as it will offer monolayer structure. The capacity additions that is BOPET line, the specialized BOPET line which we did in September '22 end, the proposed BOPP line and CPP line will allow company to further expand its specialty film portfolio. Moving to the specialty chemicals. The company's subsidiary into specialty chemicals has posted INR 34 crore of sales during December '22 quarter, which is close to 31% higher compared to December '21 quarter. We expect FY '23 to close between INR 160 crores to INR 170 crore of sales with positive EBITDA. Beside inventory loss in quarter 3, specialty chemical subsidiary should post full year profit for the FY '23. Company has reached close to 75% capacity utilization on masterbatch film line and of course the complementary adhesive business for the packaging segment is planned to be launched in quarter 4 of FY '23. This of course is going to add to top line, bottom line from the next year. Moving to Petcare division, Zigly. Company's direct-to-consumer Petcare vertical, which was launched in September '21 named Zigly, is progressing as per the plan. The company has opened 11 experience centers at the end of the quarter 3 besides sales through the online channels, online portal as well as the online app. We have planned experience centers to increase to 15 numbers by the end of the March '23. Current monthly GMV run rate is INR 1.3 crore, which is targeted for 10x growth in next 2 to 2.5 year. Zigly so far has served more than 10,000 customers with almost 1/3 repeat customers. Zigly is a valuation driven business, which should create value for shareholders in coming years. Currently quarterly EBITDA loss for Petcare division is about INR 4 crore largely because of the higher growth. Unit level positive EBITDA for Zigly the company is looking in next 2 to 2.5 year. Now moving to company's growth plan and net debt position. The company is looking for close to INR 500 crore to INR 550 crore of CapEx by March 2025 mainly related to value-add CapEx on the BOPET line, CPP line, BOPP line, specialty chemicals and some in Zigly. The net debt stand at INR 355 crore. We are expecting without even considering any bottom line addition from the new CapEx, the net debt to EBITDA should remain between 1x to 2x even at the peak level of the debt because of this expansion. A quick update on the buyback. In December 2022, company announced buyback of its shares from shareholders via the tender route with a total outlay of close to INR 108 crore. The offer ended on 9th of February 2023 and payment we should do by 28th of February 2023. I think with these updates, now we would like the call to open for questions, please.

[Operator Instructions] The first question is from the line of Anshul Mittal from Care Portfolio Managers Private Limited.

Am I audible?

Yes.

My first question is that can you please explain the rationale behind holding high inventory during this period and also has it been fully accounted in this quarter or there'll be some more impact in following quarters?

So during the last quarter, let's say especially from January till July, everything was in shortage and the supply chains were taking much more time during the transit. So for all the imported items, we had to keep higher inventory and post July the supply chain started getting corrected and even the raw material prices started coming down. So we started correcting the inventory situation from September-October time frame. I would say 70%, 80% of the things have been cleared. Still 20%, 25%, 30% at best is still yet to get cleared, which should get cleared in the quarter 4.

Okay. So going forward also sir, we will be maintaining high level of inventory or considering the easing supply chain, we are going to previous levels?

Now there is no need and in fact if you see the overall inventory, the inventory numbers have come down in this quarter versus the last quarter.

Okay. Understood. Sir, during your presentation, you mentioned that the decrease in spread was due to slowdown in export demand and also an increase in supply. So sir, can you please elaborate on which of these factors had a greater impact? And in a previous call also, sir, you mentioned that only 25% of new capacity will be added in next 3 years' of time. So how are we witnessing such a bigger impact in such a near term?

There are 2 impacts. One is just the way we bought more material from January to July, our export customers also did the same and they started correcting their inventory again from September-October and therefore in the quarter 3 this year, they bought much less than what they were buying earlier in the normal in the past. Your second question was largely on the demand situation in India. The demand in India is quite strong, but there is bunching of capacities especially in last 1, 1.5 years, 9 polyester lines have been added. Then last 1, 1.5 years, around 4 BOPP lines have got added. Though the demand is quite strong, but there is bunching and therefore supply became more than the demand. In polyester now till '25, there are only 2 new lines expected to come and therefore the pressure will gradually get released from the polyester film business. As far as the BOPP is concerned, there are still some more lines to be added in next 2 years till '25. In the next financial year, there are only 2 lines. But after the next financial year which is FY '25, there are I think 5 or 6 lines. I don't remember the exact number, but there are more number of lines coming in FY '25 in BOPP.

Okay, sir. So considering the spread, which has fallen to historically lower level, so do we see a bottom happening over here or will it stay over here for some time considering the increase in supply going forward?

I guess we can forecast that, but apparently polyester is suffering now for good 5 to 6 months and BOPP also the margins have come down. So it's a matter of time before some correction happens. The larger correction will obviously happen once the demand supply capacities get better. But in the short term, some improvement should certainly happen. Now whether that happens in February or March or April is anybody's guess.

Okay, sir. So considering the current economic slowdown so as we discussed previously that our target to achieve specialty mix to 80% was by FY '24. So are we still on that target or will it get delayed?

As of now looks like that the run rate will reach to 80%. Obviously we have got a jolt in this quarter. We certainly expect to achieve the run rate within next financial year. What we are targeting is that can we reach to 80% for the full year volumes. But run rate is certainly expected even with this last quarter impact that we had because any which ways, this is a temporary impact and not a permanent impact.

Okay, sir. Understood. Sir, can you please share the figures of volume growth in both the segments, specialty and commodity for both sequential and annual periods?

Yes. So we have already stated earlier that this year the specialty volume will remain flat because what happened is last year we had substantial growth and part of it was because people bought more during last financial year. So this year we're not expecting a growth in the specialty looking at the current scenario, it will be 2% to 3% plus/minus. As far as the quarter-to-quarter comparison, we had a degrowth in the last quarter because of the inventory corrections that customers did.

Okay, sir. How much degrowth would be there -- would that be?

So a quarter before we were at 64%, 65% while in the last quarter we are at 57%.

So that is volume terms, right.

Yes.

Okay, sir and also in commodity segment, can you provide the same for annually?

I mean commodity there is -- I mean obviously whatever balance is left is commodity so it's a simple calculation.

Okay. Lastly sir, on Zigly front given the economic slowdown, could you speak to whether we plan to continue with an aggressive approach in Petcare business going forward as well? And as Neeraj ji mentioned that breakeven will take another 2 years going forward. Am I correct on that?

We do not see any slowdown in Zigly or even otherwise in India. In fact the Petcare business is going very strong and we will continue to invest in this business. These kind of businesses do take 3 to 4 years before it turns into profitability and that is the forecast -- or not even the forecast I would say. That's how we feel today that next 2, 2.5 years we should be able to start breaking even and then start making money.

The next question is from the line of Varun Gupta from Augmenta Research.

So first question I would like to ask is how have the commodity spreads moved in the months of January and February?

They are running at similar level to quarter 3 as of now. There is no improvement. But obviously as I said earlier that it's already been 6, 7 months since the time polyester is impacted and 1 quarter for BOPP -- 4 or 5 months actually for BOPP now. So we do hope some better sense will prevail sooner than later.

Okay. Understood. One clarity I would like on the inventory side is how much inventory of finished goods are we carrying as we exit Q3?

In terms of days in India, we are roughly carrying roughly 15 days of inventory.

15 days of inventory of finished goods.

That's right.

Sir, you have mentioned that a lot of lines are going to be commissioned on the BOPP side and some lines are going to be commissioned on the BOPET side. So in your experience, when do you see the supply/demand balance to restore both for BOPP and BOPET?

See, obviously that depends on lot of factors as such so it's very difficult to predict properly. But we feel that polyester -- given that only 2 lines will come up in next 3 years so we feel polyester will largely get balanced in a year's time at best. BOPP next year there will be only 2 lines of BOPP. There will not be so much extra capacity next year. But FY '25 we do see some extra capacity happening there. Obviously I do expect that the industry players will start exporting more because some players in the past have not exported as much as the way Cosmo does it. So we feel better sense will prevail and there'll be more exports and therefore there'll be faster rationalization of demand and supply. But polyester largely 1 year and BOPP next year should be largely balanced, a year thereafter there'll be little bit of extra supply and FY '26 BOPP will again be rationalized.

Okay. So what are the spreads that are lagging on the BOPET side that we experienced in Q3 and what are they now?

As I said, there are no changes. The spreads are fluctuating anywhere between INR 11 to INR 13, INR 14 and obviously they are barely enough to even cover the variable cost as of today.

The next question is from the line of Yash Dantewadia from Dante Equity Research.

Congratulations on a good set of numbers in a difficult environment. My question refers to Page #14 of your investor presentation. Actually you have put specialty and semi-specialty volumes in 1 set and you put commodity volume in another set. But the difference between your semi-specialty margins and your specialty margins is almost 40% and 80% so it's a lot of difference. Would you be able to separate specialty and semi-specialty volumes and give that data?

I mean already we have disclosed quite a bit of information in our investor presentation. Anything beyond at this stage looks difficult.

Okay. And you said how are the export volumes looking just now for this quarter? Are they picking up because of Europe and U.S. situations?

Yes, we did see an improvement from January. It has still not reached to the earlier levels. But definitely there is an improvement from January and February is even better.

And in films, what was your capacity utilization for this quarter?

Capacity utilization in the current quarter is running full.

Running full. And the last quarter?

I'm saying the current quarter means the last quarter only, which is quarter 4.

The next question is from the line of [ Anil Nahata ], an individual investor.

To start with, I would like to understand that Zigly we are by and large on the plans we had envisaged for FY '23. What kind of a rollout we are looking forward to in '24?

Yes. So we will continue to scale up digital through opening more warehouses so that we can give faster delivery all over the country. Similarly, we will also increase our retail presence. Right now our retail presence is only in Delhi NCR and Chandigarh. We will scale it up. Now we are in the process of scaling it up to Bangalore and after Bangalore to Hyderabad and Mumbai. So in both the areas we will continue to scale up to become a pan-India player.

In terms of slightly more quantification, would it be a fair assumption to make that by the end of FY '24 the store count will be in the range of something around 45, 50?

I don't think so that we will touch that number as of now. We are looking at an aggressive expansion, but not as much aggressive that we end up doing lot of mistakes. So I feel that this year we have opened around 15 stores and next year we will look at opening anywhere like 20 to 25 stores and not beyond.

Okay. Got that. And today I would like to understand is that the ratio of sales between the stores and online. Is it something like 75%-25% or it is slightly different from that?

It is 75%-25%. It was earlier lesser. Last 2 months the digital has started picking up in spite of the fact that we have opened more stores. So our business strategy is now shaping up very well because the app has been launched, the website has -- lots of improvements have happened in that. And it's an ongoing journey because website and app, we are the first company to have an app for pet care in India and we continue to do a lot of improvements to make really a wow experience for our customers. So that's an ongoing process. But every month we are seeing digital is growing actually faster than retail in spite of the fact that retail also we are opening lot of stores. So digital is going through a very, very good growth right now and obviously the numbers are still small so normally to that extent, the percentage growth is looking better.

Okay. And Pankaj ji, if you can basically have some data around or rather expectation around you think our store should breakeven.

Breakeven we said that we at this stage we expect 2, 2.5 years.

No, no, I'm asking at a store level. Typically what is the kind of a time frame you would look for a typical store to break even?

See, that clearly depends on store to store. Some stores may become profitable in 1, 1.5 years' time while some stores may even take 3 years. So it is a lot dependent on that. And we are also right now experimenting with different size stores, with different services at different stores. So there's a lot of work going on in the background to understand the customer behavior in different parts of the geography. And so this is a learning curve for us and I would say anywhere between 1, 1.5 years to 3 years is what we feel that each store will start getting profitable.

Okay. And previously we had also spoken about some exclusive tie-ups with some brands and all that. Can you give some idea about that? How is it progressing?

Yes. So that's an ongoing journey. Obviously as we scale up -- see right now the challenge is that for many customers -- many suppliers especially outside India or even within India, we cannot give them a full container load or a full truckload. As we continue to scale up the business, we will keep adding many more partners. As of now, we've already added some partners who are exclusive to Zigly. And as the brand becomes -- I mean I can tell you the best thing is now suppliers from all over the world have started writing to Zigly. Recently a supplier from Japan wrote to us. So the noise is going everywhere and I'm sure as we scale up and as we become capable enough on our own to buy container loads, many more suppliers around the world would like to tie-up with us.

Fair enough. And we are looking forward to Zigly coming into Mumbai also where I stay. So moving on from Zigly.

I'm saying you will hear news from us within next few months.

Great. On the BOPET front when we spoke that this line is primarily for specialty products. I think this financial year we are not going to see any specialty product. But from FY '24 when you start looking at specialty products, I mean how quick a ramp-up of specialty can happen on an approximate basis?

See, we should expect that every year anywhere between 10% to 15% volumes will get converted into specialty and as each year passes, that run rate will get faster for next 3, 4 years. So maybe first year we have 10% 15%, second year we may have 15%, 20%, third year 20% to 25% because as we gain customers' confidence, then we normally see that more customers gets added. And the other beauty is that people know us in BOPP specialty so for some customers, this should ideally be a faster switch. And I can tell you honestly that the film quality that Cosmo is giving is really one of the best in the country. Customers have really loved it. The first batch is going to any customer and is absolutely liking the quality which Cosmo is giving. It is definitely different from what is available in the market today.

So you mean to say even at a commodity level, you should be able to demand a slight premium?

I feel so. Till now we have not taken that premium. But personally the way the quality is coming, even the large customers the first order itself they are gaining lot of confidence and the next order is much bigger from them. It's very clear that they are liking our quality. And at some point in time, we will be able to charge a premium. Right now we have to make sure that line is fully utilized even in a overcrowded market and the best part is even in an overcrowded market, we were able to run the line at almost close to full capacity last month.

Great. And as the specialty products, particularly the heat control films and all, will it be a B2B play or a B2C play?

In India, it will be a B2C player. Globally it will be a B2B play.

So are we in the process of setting up the distributor network and branding and everything associated with it?

It is a bit early right now because the product launch will happen in May as such and it's a very, very technical product with lot of different SKUs. So we will start this. We are in the process of hiring sales team right now, we have hired couple of people. And first is the confidence building and there also we feel that we'll be able to provide a very good product to the customers because all our assets right from day 1 have been planned to do this. So we feel we'll be able to give an excellent quality, but it will take its own time and first we would like to have few distributors, let them check the quality, give their feedback and based on the learnings, then we'll continue to scale up. So I feel that by March '24 only we will have reasonable number of distributors across the country.

So March '24 correct, 1 year from now. And you're also going to export this so it will be a B2B.

Mr. Nahata, I would request you to kindly rejoin the queue sir. There are many other participants who are waiting their turn.

Okay. Will do.

We have the next question from the line of Nirav Savai from Abakkus AMC.

I just missed out on the new capacity in BOPP and BOPET, which is going to come in '24 and '25. Can you please repeat the same?

Till '25 BOPET as of now, there are only 2 lines to come up. And BOPP put together I think there are 7 or 8 lines, which have to come up in next till '25.

Okay. So you said about '24, you'll have 2 lines followed by some 5 lines in '25, right, for BOPP?

'24, 2 lines and till December '25, 5 lines.

Okay. And if we were to see in terms of the new capacity which is coming in from the existing capacity, how much would it translate into these 7 lines in BOPP compared to what the capacity currently is?

Some are smaller lines and some are larger lines. But put together it should be to close to I would say 250,000 tons, 300,000 tons.

About 200,000, 250,000 -- 250,000 tons to 300,000 tons. Okay. And what would be for BOPET?

BOPET should not be much, it would be 50,000 tons to 60,000 tons.

All right. And then as you said that this specialty film business would be largely be a B2C kind of a business. And I mean in your internal assessment, how much time will it take to scale-up because initially it would be pure commoditized? Will it take 2 to 3 years at least to reach a certain size and scale in this B2C kind of a business?

These kind of security window film solutions does take time. It does not scale up overnight. You have to market the product nicely, you need to have a strong customer base. And the other important thing is lot of customers today do not have any knowledge about technicalities of window film. First is many customers do not know why they should have window film and even if they know, they do not know why there are so many varieties in window film. So people tend to use whatever their applicator says and I personally have seen many applicators also do not have enough knowledge to guide the customer properly. That is the thing that we want to really change in the country where every applicator is educated enough so that they can guide the customers properly. These films can make lot of difference to the customers. But unfortunately given the lack of knowledge, the market for this product is still not as big as the potential is. I feel that the total market is not even 5% of what it should be. So it will require many years of knowledge transfer to the customers, advertising it well, marketing it well, build new customers for the Indian market. So yes, it will be a medium-term journey from that perspective.

And so initial growth on the specialty side in BOPET, would it be purely led from exports or where we would be B2B and would that turn out to be much faster compared to setting up the entire distribution network brand, creating a market in India?

So see, window film is one of the specialties we are talking about. Shrink level is again a very large segment for us and that itself will help scale up both in India and globally. And similarly there are lot of other things which are very parallel to our BOPP business like thermal lamination films made out of polyester, cable films made out of polyester. So there are industries where we already have a presence and it is just that we have to enter with our BOPET film. So we'll be able to enter there even synthetic paper for that matter. So there are certain clear voids where Cosmo can play a part.

Right, right. So this would be more or less continuing scaling up the existing products, but newer products will take time to ramp up.

Other things should still be scaling up faster. B2C obviously is a journey, which every company takes some years to achieve scale.

The next question is from the line of Jiten Parmar from Aurum Capital.

My question is on the mix of specialty versus commodity. Since last couple of quarters the share of specialty and semi-specialty has come down from 69% to 57%, but presentation still mentions or maintains that we are targeting 80% by 2024. So just wanted to know what are your thoughts on that? I mean is that still achievable or it will be some more time for that thing to happen?

See, obviously we are not changing that target for us internally. Obviously this is temporary blip which has come because of the inventory corrections which our customers have done. So we are definitely working towards achieving our targets. I had earlier said that from a run rate perspective, we do see we should be able to do it next year. But whether the full year average will be 80%, at this stage it is indeed a very challenging target. But the management team is working overnight to try and get this done.

Okay. And what about industry-wide capacity additions which are scheduled for the next couple of years. Is there a...

We have answered this before. You can see in the commentary later.

[Operator Instructions] We have the next question from the line of [ Vipul Kumar Shah from Sumangal Investment ].

What is the cumulative investment till date in the [ film ] vertical and have we appointed any CEO for that vertical, sir?

There is clearly a business head for this vertical who is managing it from day 1 and obviously he's a specialist in this category. As far as investments are concerned, till now we have invested INR 50 crores including investment in infrastructure and all the losses that we've incurred in this business.

So what will be the cumulative losses, sir?

It is anywhere between INR 30 crores, INR 35 crores.

INR 30 crores, INR 35 crores. Okay. And can you share the investment which you plan to make for next financial year in this vertical?

So what we expect is over next 2 years this INR 50 crores can say become roughly INR 150 crores and then we are expecting that within next 2, 2.5 years business should start to break even.

And sir, lastly, you have mentioned this contribution margin so contribution margin means it's a gross margin only, right?

Yes.

The next question is from the line of [ Rahul Shah ], an individual investor.

As for the next financial year, are you able to give any outlook or guidance in terms of revenue and EBITDA margins for the business at a whole?

We normally do not believe in giving such guidances. But as I said earlier that things have started to stabilize now when it comes to customer demand in overseas market so at this stage obviously, there's a commodity content where it is very difficult to give any forecast. But in general, we expect that next quarter should be somewhat better than the current quarter.

The next question is from the line of [ Amit Agarwal ], an individual investor.

Sir, my question is regarding BOPET line. So it's a new line, what is the monthly run rate we have achieved in the last 3 or 4 months? And sir, by listening to your conference, is it right to understand that BOPET margin right now commodity business is less than BOPP business, that is INR 13 versus INR 17? Am I right?

You are right that BOPET is lesser than BOPP right now and, as I said earlier, that last month we were almost able to run close to 100%. So every month we are scaling up on this.

What is the turnover? Can you give the guidance for that monthly run rate?

The monthly turnover is close to INR 25 crore.

INR 25 crore. Another question is, sir, China has opened up after COVID. So does that help in getting better rates for BOPP or BOPET or it doesn't make no difference?

China does not impact our business.

China doesn't impact our business, even in export market also?

Yes, it does not impact. There are hardly 1 or 2 categories where there's a small impact. Otherwise in general, China does not impact us.

And my last question is regarding sir, if I see your stand-alone results and consolidated results, the difference between the turnover is INR 100 crores this quarter. Usually it used to be INR 50 crores every quarter between the consolidated results and stand-alone turnover. Could you explain that?

You see, it's a factor of 2 aspects. One is how much sales the overseas subsidiaries are doing and second is how much sales stand-alone India is doing overseas subsidiaries because that needs to be eliminated. So whatever figure of difference you will see between consolidated sale and stand-alone sale will be net of these 2 items. So to answer your question, last quarter the December '22 quarter, the sales from India operation to overseas operation was lower.

Okay. Is this a one-off thing or this is the usual thing going in future?

No, it's of course one-off because of the lower demand for which we discussed for the U.S. which should get corrected from the quarter 4.

My previous questioner asked about the investment made in Petcare? Is it INR 50 crores or INR 15 crores till now in Petcare vertical?

So Pankaj mentioned INR 50 crores investment so far.

The next question is from the line of Nayan Gala from Etica Wealth.

Sir, I have a couple of questions. One is in terms of the demand. So during the last couple of quarters, we have seen many global markets showing less signs of demand. So are we seeing some stability over there in terms of some revival in demand?

As I said earlier, demand is not impacted. It is just the inventory corrections and to some extent it has already happened in quarter 3. There is some balance left, which should get over in quarter 4.

Okay. And in terms of which geographical areas where we can expect to increase our revenues from?

U.S. and Europe, those are the 2 regions which were impacted.

Okay. And in terms of, sir, like we are going to launch the heat control film so by when can we expect that? And what will be the target turnover that we expect on that particular product?

This will be done some time in May '23 end. And this is a product because it's a B2C product in the Indian market, first year it will start to grow. So at this stage it's difficult to give a forecast for this.

Okay. And in terms of margins, how are the margins for this particular product?

The margins also initially -- I mean this product has a very good margin. First of all, let me say that. But first year will be a year with lot of trials and lot of samplings. So first year we may not have any excellent margin on this. But as we continue to build this business, this product will have 1 of the highest margins among all our product lines.

Okay. And any other player who would be manufacturing this in India?

There is 1 player. Majority of the film is imported currently in India. But there is already 1 player who manufactures it. We feel that we will be very, very superior in terms of the overall quality.

Okay. And do we plan to like -- the plan is to replace the import with the domestic manufacturing?

The plan is much more. Today we feel that most of the Indian buildings does not have a heat control film. We feel there is a huge opportunity to educate the customers and build the market. So it is not just replacing imports because most of the imports are happening for really low quality films. The plan is to really increase the market base itself by many times.

There is a follow-up question from the line of [ Anil Nahata ], an individual investor.

So my last question on the BOPET was we had announced a INR 30 crores, INR 31 crores CapEx for the specialty films on the electronic side. Is that a part of the overall BOPET plan or is it something different?

It is not with BOPET. This is something else.

Okay. So can you give some guidance around that and when is that coming up and what kind of business we see in that?

We will disclose this closer to the date. But this should be launched within quarter 1 of next financial year.

Okay. So basically 4, 5 months away from now?

Yes, 4, 5 months away.

Okay. And the last question for me was that when we look at the specialty film ratio in the BOPP, this quarter the turnover itself was lower and the ratio was lower still. I mean as the volume ramps up again, I mean there will be a far bigger bridge to cover in the next coming quarters. So already 2 people have asked about the aspect of about reaching 80% in the next 1 year. But my question is slightly different. When we look your reports, you started reporting between specialty and semi-specialty and probably in 1 of the interviews, you said that it is around 50:50. How do you see this ratio moving up going forward also?

So see, obviously both these segments are equally important. Obviously again specialty makes more money so every company would like to grow specialty more. But having said that, we would not like to leave the opportunity on the table even for the semi-specialty because that film also makes more margin than commodity. It's a very different thing. We are working on both all the time.

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

Well, to summarize, I think company's strong specialty film portfolio should deliver superior returns in coming quarters and years. Although there could be near-term outlook, BOPP and BOPET is expected to be challenging. We are working on several R&D projects in film business, which should continue to provide edge. Zigly is rapidly becoming well-known among the pet parents benefiting all pet lovers and company stakeholders. Specialty chemicals division should double its revenue from the last year while actively focusing on new product launches. At the end, a statutory declaration. Certain statements in this con 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 the future results. Thank you very much for joining. We really look forward. Thank you.

Thank you, sir. On behalf of Cosmo First Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.