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 Q2 and H1 FY '25 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 the management's current expectations and are subject to uncertainties and charges -- and changes in circumstance. These statements are not the 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? Thank you, and over to you, Neeraj, sir.

Thank you. Well, 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 September '24 quarter and investors presentation both are available on the company's website. We are first going to discuss a brief on the performance of the company for the September '24 quarter, which may be followed by the questions. So consolidated sales for the September '24 quarter is INR 759 crores, which is higher by 14% from September '23 quarter. Primarily, this increase is due to higher specialty sales, which has grown for us by about 12%, higher volume and better margins. EBITDA for the quarter is INR 107 crores compared to INR 72 crores in September '23 quarter. The improvement in EBITDA is backed by higher specialty sales, enhanced volumes and better BOPP film margins. The specialty has increased by 12% in September '24 quarter compared to September '23 quarter. On YTD basis as well, the specialty sales is running higher by about 13% compared to last year. The company has reached specialty sales of 70% of total volume in quarter 2 FY '25 as against 64% in FY '24. The quarter 2 EBITDA would have been even higher but was impacted by known repetitive inventory loss due to drop in the raw material prices during the quarter. BOPP film margin has been running at INR 25 per kg in September '24 quarter as against INR 19 per kg in June '24 quarter and INR 18 per kg in September '23 quarter. The BOPP film margin has improved in quarter 2 due to better demand, partially due to pre-Diwali season. Coming to BOPET vertical. BOPET vertical, which is about 9% of company sales during quarter 2 FY '25, has also witnessed better margins and posted double-digit EBITDA in quarter 2 FY '25 for the first time since its commissioning in FY '22-'23. This is largely due to better demand. I'll move to outlook. The company is expecting improved sales for the specialty as well as domestic BOPP film margins are expected to remain broadly range-bound in FY '25. First, rationalization on renewable power for Maharashtra plant has started from mid-quarter 1 FY '25 and is seeking to achieve estimated annual impact of INR 22 crores to INR 25 crores from the same. The company is working on some more power cost rationalization projects, impact of which should be visible from FY '26 onwards. Moving to Speciality Chemicals subsidiary. The subsidiary has commercialized multiple chemistries, including for the adhesives, [ OPs ] and masterbatches and is facilitating improvement in EBITDA and return on capital employed for FY '25. The Speciality Chemicals subsidiary is advancing well to achieve high teens EBITDA and 30%-plus return on capital employed in FY '25. I move to the growth projects related to packaging. We started Rigid Packaging vertical under brand name Plastech in second half of FY '24, which is related to, of course, packaging industry. The business vertical is growing well with addition of injection molding from quarter 1 of FY '25. The vertical is moving in line with plan and is expected to achieve profitability as well as 90%-plus capacity utilization from FY '26 onwards. Work on CPP and BOPP lines is progressing well. We are expecting CPP line to start commercial production either from quarter 3 or quarter 4 of FY '25. The BOPP line is estimated to start commercial production from first half of FY '26. As indicated in past, both the lines will be the world's largest production capacity lines and will increase company's production capacity by close to 50% in a phased manner. With high-speed [ large decline ], it will rationalize cost of production between 3% to 4%, depending on the product. We move to Petcare division, Zigly. In Zigly, we have launched multiple private labels and enhanced our Petcare services to improve gross margin as well as optimize certain costs, thereby reducing losses. Growth and net debt status. The company is looking for about INR 300 crores to INR 350 crores of growth CapEx in FY '25, mainly related to BOPP line and some projects to enhance specialty sales. The financials remain strong. The company's net debt at September '24 is INR 698 crores, which is 2.2x to EBITDA and 0.5x to equity. So with this, I will take a pause and would like to open the call for questions, please.

[Operator Instructions] The first question is from the line of Nirav Jimudia from Anvil Corporation.

I have a few questions. So first is when we look at our BOPP volumes, our share of specialty volumes have been consistently going up. And you mentioned that the number should further look up as we progress towards subsequent quarters. So just wanted to understand from you, like in the annual report also, you have mentioned that we have launched 10 new innovative products in FY '24. So out of our total BOPP sales, how much is the share of specialty volumes in the export market? And if you can help us understand which of the geographies we are majorly exporting to.

Ladies and gentlemen, we have lost the management line connection. Please stay connected while we reconnect them. We have the management line back on the call.

Sir, my question is predominantly on the specialty volumes for BOPP. When we see our annual report, it mentioned that we have launched close to 10 new innovative products in FY '24. So if you can help us understand, like out of our total volumes for exports of the BOPP, which of the major geographies are we currently exporting to?

So we are actually exporting to multiple places but a large part of the specialty goes to U.S. and Europe. And of course, as you know, we have subsidiary operations in U.S., Japan, Korea. So all these places, we sell specialty. If I have to sum up, broadly more than 80% of whatever we export is specialty today. So I hope I answered your question.

So out of the 70% of the specialty volumes, close to 80% is in the exports, correct?

Yes. So I said whatever we are exporting, more than 80% is specialty.

Got it, got it. And sir, when we compare ourselves with the local competition there in Europe and U.S.A., how we are placed in terms of our products? So just wanted to understand when we say specialty, what sort of product differentiation we offer to the customers there so that we can have an edge over the local competition?

So you will notice the large part of our specialty, we are one of the top 4, 5 players across the globe. So if we have to indicate large product basket, let us say, thermal lamination, where we are the market leader globally, we have highest production capability as well as the market share in the world for thermal lamination. Similarly, for the coated level as well, we are 1 of the top 3 players in the world. So all major product categories where we operate in specialty, we are one of the top players.

Correct. And sir, is it possible to quantify the market size for the specialty-grade BOPP in India or let's say, in the export markets where we operate?

Our market size versus the competition?

Correct. So no, even if you can share the total market size of the specialty grade BOPP in India and in the export markets where we are currently operating on?

You see, in India, we practically dominate the BOPP-based specialty products. So the more than 2/3 of the specialty product, which is getting sold in India is from Cosmo. In overseas places, it depends on the geography. But for the large product basket, as I said, we'll be having a reasonably good market share in large product categories in which we operate in specialties.

Got it. And sir, generally, when we introduce a new product, how much time it takes for the customer to approve our product and volumes to be at a reasonable level?

It depends actually. So we, at times, develop particular product for a customer or the end user of the FMCG company. So in that case, generally, we take some kind of a softer commitment for the volume for the 1 year, 2 year, 3 years' period. Otherwise also, the -- it depends on the product how you develop. But generally, in our experience, we have seen the -- if the product is good, you easily get the good ramp-up.

Sir, second question is on the Speciality Chemicals. So I think we have close to around 17,500 metric tons of capacity spread between masterbatches, adhesives, and coating chemicals. So if you can help us understand based on the current capacity what we have, at what level of utilization rates we have operated in Q2? And when can we see the full utilization of these capacities? And what sort of turnover we are expecting once we are fully utilizing this?

So you see in quarter 2, we did close to INR 48 crores of top line in Speciality Chemicals. And as you know, 1 part of the growth is expected to come with the BOPP and CPP lines getting commissioned, which we said CPP line is expected to get commissioned by the end of the year, current financial year. And from next financial year, BOPP line is expected. So with both, of course, the volume will increase for the Speciality Chemicals division. Besides this, of course, third-party sales is also ramping up in the Speciality Chemicals division. Our current capacity should be able to generate close to INR 300 crores of BOPP top line at full capacity utilization, depending on the product -- I mean, the vertical because within Speciality Chemicals, we operate in masterbatches, coating chemicals and adhesives. We may be running for masterbatches close to 70%, 75% of the capacity utilization. And for adhesives and coating chemicals, maybe between 50% to 60% of the capacity utilization, which we expect to increase from the next year.

At a very broad level, we are running at a run rate of INR 400 crores. And with the current capacity, we can touch anywhere between INR 325 crores to INR 350 crores.

Got it, got it, sir. And sir, this quarter, we have seen the jump in the profitability. So was it because of a product mix change? Or because the number looks very, very superb in terms of when we see last quarter versus this quarter? So if you can help us understand the improvement in the margins for Speciality Chemicals.

Yes, so it has 2 parts. One is the operational EBITDA of the company, which in any case is ramping up compared to last quarter. There is an uptick in the quarter 2 operational EBITDA in Speciality Chemicals. Besides this, during quarter 2, there is onetime income also related to government incentive in the Speciality Chemicals, which is non-repetitive in nature.

Yes. And then so the prior period, it is not repetitive. Otherwise, the incentive will be accruing on a yearly basis.

Got it. Is it possible to quantify that, sir?

Close to INR 7.5 crores, non-repetitive in nature.

Got it, got it. And sir, last bit from my side. If you can walk us through the current market size of BOPP in India. What are the imports coming to India? And how many new lines are scheduled to come up over the next 2 years?

Yes. So there's not much import coming into the country unless there are certain films that do not get manufactured in the country. Overall, local demand is close to 50,000 tonnes a month, and India is exporting another 15,000 to 20,000 tonnes of film. And this largely matches with the supply situation. Over the next 2 years, some 5 to 6 new lines will come up. And we expect that on a monthly basis, they should add close to 15,000 to 20,000 tonnes of new capacity. And India is growing at roughly 10% to 15% on its demand in terms of BOPP. So we have to really monitor the situation once these new lines are added up.

Got it. So just to add here, sir, this 5 to 6 line is including our line also, which is coming up next year, right?

Yes.

All right. So if you can split between CY '25 and CY '26 out of the 6 lines, how the scheduled commissioning of the lines would come up, that would be helpful.

Yes. Most of these lines will start from -- I would say, majority of them are happening in next year, firing 1 or 2 lines. So majority of the additions will happen between April '25 until December '25.

[Operator Instructions] The next question is from the line of Aditya Vora from Share India Securities.

Congratulations on a great set of numbers. Sir, I had a couple of questions. One is in terms of your packaging, your Rigid Plastics, you highlighted the fact that you are going to start -- I mean, you're going to achieve 90% utilization in FY '26 with profitability. Could you break up for me in FY '25, '26 and maybe '27, what could be the revenue and EBITDA potential?

Yes. Next year, we should be close to INR 125 crores to INR 150 crores in revenue if we do not do any expansions. However, we are looking to add some more injection molding, given that we will be fully utilizing our injection molding capacities. But yes, right now, it's looking between INR 125 crores to INR 150 crores.

Right. And what EBITDA would you be doing? What EBITDA margins would you be doing on that, a ballpark number?

Given that we will still be small in size, we expect to generate between 8% to 10% EBITDA. But as we continue to scale this vertical, the EBITDA margins should improve.

Right, right. And in the packaging space -- I'm sorry, in the Rigid Packaging space, FY '25, is it fair to assume that would be a loss?

This year, yes, we will be making a loss.

Okay, okay. Sir, and secondly, I wanted to know about the Suncontrol Films. How is that shaping up, and again, revenue and EBITDA potential for the next couple of years? And how is -- I mean, how is that product being received in the market?

So right now, we are doing sampling across different parts of the country and different parts of the world. We are getting very good responses on our samples. We continue to introduce new products because in this business, we need to have at least 80 to 100 SKUs. It could be even more. So we continue to launch these new products, do research and launch these products. So we are hoping within this year, we'll be able to commercialize the line. And once we commercialize the line, we should be having a good chunk of channel within India and globally. Obviously, the work will start from there. But yes, we will be launching close to 80 to 100 products by the end of this year and also ensure that right from the beginning, at least we have at least 50, 60 distributors in India and at least 15 distributors globally.

Right. So on the Suncontrol Films, how are we competitively placed? And I wanted to know the positioning we are. There is Garware and then there are imports from China and Korea. So where is Cosmo placed in that entire value chain in terms of pricing and strategy?

So see, what we have smartly done is we have come out with a product which competes with Chinese product quite well. And we have some very high-range products also. So we have come out with products at different price points to take care of local competition and international competition, including Korean competition. And obviously, it's not just about Indian market. We are going to -- at least in the initial years, we'll be focusing a lot on scaling up our exports. And the good thing about us is that we have presence, our own presence in Europe, America, Canada, Japan, Korea. And we are also looking to have some small sales presence in Mexico in the times to come. So we will have a lot of local presence, which should help us scaling up this business faster. In the Indian market, nobody has educated the Indian customer about the benefits of putting this on their residential or official windows because the payback period is simply awesome. And the way the global warming is going up, it is going to become a need for every household or every office to have these films. So this education will obviously require more efforts and energy from us, which will happen in the second phase.

Right. So you're talking about the architectural filling, which will happen in the second phase but the first phase will not be that?

Yes. First phase is to acquire market share, both in India and globally. And the second phase, we will educate the local market, which would require a lot of marketing efforts. That is going to happen in the second phase as such, where we'll have to spend on the marketing side.

Okay. And lastly, just a bookkeeping question. You mentioned about the spreads for the September quarter. I think it was about INR 25, if I'm not wrong. What could be the current spreads or anticipated spreads in October and November? Has it gone down? Or how is the situation in the BOPP spread?

They have become a bit subdued because of Diwali. It always happens because 10 days before Diwali and 5 days thereafter, the demand really takes a dip every year. So the prices had come down but we have also seen a revival. So some price improvements have happened post Diwali. And I feel another 15 days, 20 days, it should further improve. Having said that, we continue to focus very nicely on the speciality, which is tracking well for us. And we are not seeing any significant impact to Cosmo because of these swings into the commodity market.

[Operator Instructions] The next question is from the line of [ Ayush Dujenwallah ] an individual investor.

Great set of numbers. My first question is around our target for Speciality that we had set for 80% in FY '26. Could you maybe talk about, are we on track on that target? And also with 80% of our volumes, how should the revenue mix be? That would be my first question.

See, average selling price for specialty is higher compared to commodity part of business. So with 80% volume in specialty, more than 90% will be in terms of the value. We expect this year to be close to 70% of our volume coming from the specialty [ and wrapping up ] FY '25. So -- and as we indicated, our target exit rate for FY '26 is 80% of the existing volume. So I think things are moving very well in that direction.

Okay, great. Sir, my second question is around the cyclicality of margin once we have the specialty coming in. So in commodities, we see the margin fluctuate quite a bit, right, from 25% to 10% at the lowest. How should we think about the fluctuation in terms of margins when it comes to specialty? Some broad range in terms of movement. Yes, sorry.

Sure. So specialty has 2 parts, as you will see from our investors presentation. One is specialty and semi-specialty. For specialty, it's largely insulated from industry ups and downs. Semi-specialty part of it will have a delta over the commodity margin. That delta always remains, but it is a little -- it has some impact coming from the industry ups and downs, but the impact is much lower compared to the commodity part.

Okay, okay. Sir, my third question is with 35% increase in BOPP capacity next year, how should we think about the Speciality percentage for the new line over the coming years, if you could give some indication?

So see, right now, we often feel restrained because of capacities. So the new capacities will help to scale up specialities even faster. We are also adding assets to do more value addition in the coming months. So obviously, we will add a lot of capacity, which is going to be very, very cost efficient because it will be one of the most cost-efficient lines in the world. So we will add a lot of capacity. It definitely takes some time to scale up the Speciality. But the good thing is in BOPP, we have a very strong pipeline, and that pipeline will help us scale these numbers much faster than a normal player can do that.

Okay, okay. So Pankaj, this is a bit of a broad question. I mean, in terms of the industry and Cosmo in particular, any secular trend that you are seeing this year or maybe since last year which makes you feel a lot more positive or excited about a couple of years of our future in terms of Cosmic? Any -- some insights if you could provide overall would be very helpful.

Yes. So we see a lot of things actually. First thing is that many brands are moving towards recyclable structures, which are possible with polyolefins, which basically is polypropylene and polyethylene. That is one thing. So our market is shifting more and more towards BOPP globally, not just India. Second thing is that our U.S., which had become subdued for 1 year, 1.5 years, actually, a local leader left, he joined us and the market was also very subdued. That is picking up. And we feel that the political changes happening in America will also make that market much more robust. And third thing is one of the local players have shut down their capacities over there. So all those 3 factors are giving us a lot of robustness in U.S. sales. That is the second thing. Third thing is that Speciality Chemicals vertical is coming out very well for us, so all the efforts that we have made in R&D are shaping up the chemical vertical, and we are able to make quite a decent profitability. In Zigly, we have done many improvements in the last few months, whether improving our intake margins, whether launching private labels, focusing on Petcare in a very substantial way, cutting down cost. So Zigly is also showing a very positive trend where month-on-month, we are seeing a sales growth and also improved margins and reduced losses. So Zigly, again, is very positive. We feel that we will be able to make profitability in this business much faster than anybody would have done this. And now we are opening up many new centers. So we were consolidating in last 8, 9 months to do all these improvements. And now we are at a stage where we'll open many new centers over the next 6 to 12 months. Suncontrol is another business which will help us improve our EBITDA margins. It's generally a very profitable and technology-oriented business, and we have done a very decent job in terms of making the right set of products in the first go. Obviously, this business will take a couple of years to be properly profitable. But once it starts turning profitability, it will give very good results. So we are, in general, quite optimistic with all the things that we have done in the business. Even in the polyester, we are coming out with a couple of product lines where we feel very confident, where there are hardly 1 or 2 players in the world. And there also we will start tracking our Speciality business in the years to come. So whether it is a film business, whether it is window films, we are also about to launch paint protection film in the market. That's a beautiful addition to our window film, or chemical or Zigly, all these businesses are doing very well. And even the plastic business will have far more stable profitability, unlike film, which in the past used to see a lot of up and down. Plastic also is a business which goes directly to brands. It's a cost-plus business and should have much more stable things. So we feel very optimistic about our future.

Excellent. That's great to know. Just a word of appreciation before I hand over the call to the next participant. I have some industry friends who are a buyer of Cosmo films, and they always have very good things to say about the -- especially the quality of Cosmo, which is far superior compared to any which is available in the market. So great job on that.

Thank you. Just to add there, any customer which wants to do export, I have seen 7 or 10 customers are more comfortable with buying Cosmo and using film for their export operations. So thank you for that appreciation.

The next question is from the line of Arya from Maximal Capital.

My first question is regarding there is an inventory write-off in the current quarter. Could you please quantify the amount, if possible?

Inventory you asked?

Yes.

Which inventory? Inventory loss you are asking?

Yes, yes, inventory loss, one-off loss, which has happened this quarter.

INR 7 crores.

Okay. My second question is, as we can see the net debt is increasing quarter-on-quarter. So could you please specify the exact -- specifically [ you used and guidance ] for net debt in the quarter?

So see, we feel that we will peak our debt this year because the next year, we have not planned any substantial CapEx. So it will peak this year and, from the next year, you should start seeing this coming down.

And even at the March '25 also, you will notice net debt to EBITDA to be close to 2x only. And of course, net debt to equity should be close to 0.4 or 0.5x.

Obviously, we have done a lot of CapEx in the last 2 years and many of these CapEx will start delivering results. We expect Plastech to be breakeven, slightly profitable by quarter 4. Zigly, we have cut down losses. Film profitability is getting better. Chemical has started showing promising results. So all these things will start playing out where all the CapEx that we have done in the last 2 years will bring returns on capital employed.

Sure. And sir, lastly, the margins are also improving quarter-on-quarter, which is [indiscernible] So could you please guide numbers for the [indiscernible]

We normally do not give guidance still. But in general, we are quite positive about the way things are happening in our different businesses.

And on the top of it, the order book for this specialty is running one of the highest actually, highest ever.

The next question is from the line of [ Raj Kumar ], an individual investor.

Congrats for the good set of numbers. Sir, all my questions have been answered. Just 1 question. I just want to know what is the U.S. sales that we are getting? And out of that, how much is done locally and how much is by way of exports?

Which sales, sorry?

Sales in the U.S.

Yes, sales in U.S. is all -- we basically ship from here to U.S. and then our U.S. operations manage the local sales. Right now, this year, we expect close to $40 million of sales, but the monthly run rate is constantly going up. And more than likely, we should end the year with a $60 million run rate, $55 million to $60 million run rate. And I said earlier that U.S. is looking very promising to us. We are also scaling up our efforts in Japan and Korea because Cosmo is really known as a top quality player in the world. And even Japan is normally the most difficult market, but we have recently now deployed 2 salespeople in Japan packaging market. Earlier, we were just selling our lamination films and now we intend to also start exporting packaging and label films to begin with. In the times to come, we should be able to start showing some growth in Japan. Japan is normally a bit slow market in the beginning. But once it starts scaling up, it scales up better. And obviously, Japan has one of the highest margins in the world, so that's the next target after U.S., but U.S. looks very promising to us.

Okay. Sir, just continuing on the same question. So is there a risk of any potential tariffs because President-elect Trump is talking about? So will there be any risk for our business?

See, they are talking about a special tariff for China and a similar tariff for rest of the world. And U.S. is a net importer, so that should not impact anything adversely. If at all, it can have positive impact, given that tariff on China will be exceptional.

[Operator Instructions] The next follow-up question is from the line of Aditya Vora from Share India Securities.

Sir, my question was on Zigly. Could you just tell me what the first half GMV and net loss would be?

You are asking first half GMV?

GMV and the net loss, the cash burn which you had.

Just a second. The GMV will be close to INR 17 crores, INR 18 crores. But as I said earlier, that month-on-month we are growing. And so next quarter is expected, I mean, every month is better than the last month. And net loss also between quarter 1 and quarter 2, we have reduced our EBITDA losses quite significantly.

Perfect. And secondly, from a structural perspective, if I look at your EBITDA margins in FY '21 and '22, they were obviously highest. But again, that was the COVID effect and we don't foresee the COVID pricing coming back. But going forward, considering we have new segments in the form of Suncontrol Films, Rigid Plastics and also Zigly, Petcare losses will go down. Structurally and also Speciality Chemicals is doing well along with the Speciality Films at 80%. Do we see structurally less dependence on commodity and also structurally margins going way higher to the 16%, 17%?

See, absolutely. There's only 1 caveat to this that once we add new capacity, initially, some of these capacities will go into commodity. But if I give a 2-year horizon, then yes, structurally, we'll change the margins of this company forever. And we'll be sitting in a very positive zone where we'll be sitting a lot more on Speciality Films in the film business. Chemical continues to scale up. Zigly in 2, 3 years, we do expect to start breaking even. Sunshield also start to make money in a couple of years. So yes, in 2, 3 years, the dynamics for the company will change quite dramatically. Irrespective in the short term, we expect a lot of good things because Speciality month-on-month is growing. Plastic will turn profitable within quarter 4 of this year. So yes, in the short term also, there are a lot of positive things. In 2 years, we feel that there will be quite a dramatic, permanent change to the way we have operated in the past.

That is great to hear. And I mean, if you structurally improve your margins with less dependence on commodity, I'm sure your multiple will be rerated by leaps and bounds. I mean, you're going towards the packaging -- from a packaging company to more of a consumer B2C company.

Yes. And as I said earlier, we are about to launch paint protection films also. And that market is also scaling up very fast in the country as well as globally. So that is another consumer product that we have just launched along with window films, which gels very well with the window films.

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

Sir, my question is on Zigly. So sir, as you were saying that it looks like it will be profitable far earlier than many other players. So sir, where can we see profits at EBITDA level in Zigly?

See, it's very difficult to put a number at this stage but I definitely see 2 to 3 years, it should start breaking even and make money. Having said that, this is a business is also dependent on how much we are continuously investing because if you keep opening new centers, new centers definitely take some time to make money. Online is again a very difficult business where churning out money is not that easy. So we will be doing much better than others, but it is also dependent on those 2 factors that online, how we can convert that business into profitable. We are much better positioned than what we were earlier, far better positioned. But then it is also dependent on how much CapEx we continue doing it. But 2 to 3 years, we feel that we should start doing breakeven and start making some money.

Okay. And in FY '26, since we don't have any major CapEx plan, should we expect actually [ sharp ] debt to fall sharply as -- or management has something in the mind that they are not announcing now but they want to do some sort of a CapEx?

Yes. So see, one is we are going to have, I would say, close to INR 150 crores to INR 200 crores CapEx next year on the value-added assets. So that is one thing which is going to happen next year. Second is our working capital for BOPP and some of our new businesses will go up. So next year, some rationalization of debt will happen, but we do not see a very significant change next year. But a year thereafter, yes, you would see because we are not ordering any film lines at this stage. And so if we do not do that for a couple of years. So yes, FY '27, you will see a significant reduction in the debt. Next year, I would say that we will reduce somewhere between INR 50 crores to INR 100 crores.

The next question is from the line of Saroj Gupta from Svan Investments.

Sir, just wanted to...

Sorry to interrupt you, sir. I request you to use the handset.

Yes. Sir, just wanted to understand your view on the Suncontrol Films. As you alluded in the earlier participant question that it will be starting in the next financial year. So have we done the trial production? Have we got any approval from the customers? And how are the process on the SCF?

Yes, yes. So we have done -- we are doing trial production. We have already got approvals for many SKUs, and we wanted to build close to 80 to 100 SKUs before we commercially launch the business. So yes, the progress is quite satisfactory until now.

When can we expect the commercial production to start for SCF?

Next year. By end of this quarter 4, we should be -- either quarter 4, we should be doing commercial launch or early quarter 1, we'll do the commercial launch.

And sir, in terms of capacity, can you explain us how big the capacity will be in SCF? And your view on the paint protection after that, how shall we -- one look at the paint protection films?

Yes. So as far as is -- sorry, window film is concerned, it's 250 million square feet. And as far as the PPF is concerned, we have got this. We have done the designing ourselves and getting it done through an outsourced facility. So there's no CapEx involved in paint protection. It's an awesome product. I'll encourage investors to use paint protection in their car and give feedback to us. But we are just doing trialing for that in the market this month, and commercial launch will happen in next 1 or 2 months.

So PPF will come first and this SCF will come probably in FY '26? In terms of the revenue, how big both this could be?

In the short term, it may not yield very quick revenues because it does take time for distributors to build confidence and -- but within 2 years, you should see a very significant movement in this vertical. So I would say first 1 or 2 years, we'll go in building customer confidence and taking a pie out of their share. But once it starts scaling up, it will scale up to very significant numbers.

Sure, sir. And last question on Zigly. Can you help us understand what was the EBITDA loss during the 1H?

Last quarter, I can share. I don't remember H1 numbers. Last quarter, it is INR 5.5 crores.

INR 5.5 crores at INR 10 crores of GMV, right?

Yes, you're right. The other [indiscernible] higher than revenue. And now we have done a lot of rationalizations and now it has come down to close to 50%.

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

So we think the company is expecting improved sales of Speciality during FY '25 and is running well about 13% higher specialty sales on a YTD basis compared to last year. In a step-by-step manner, we are decommoditizing the business model in principle, Suncontrol Films, paint protection film, they will be value add. Among new business verticals, Cosmo Speciality Chemicals is already making high teens EBITDA. The other new verticals related to packaging capacitor metallizer or Rigid Packaging are expected to earn EBITDA from FY '26. While Zigly may take some time to become profitable, it should be a significant value creator. So many, many thanks for joining and we really look forward.

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