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 and 9 months FY '25 results. Today, we have with us from the management, Group CFO, (sic) [ 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 expectations and are subject to uncertainties and changes in circumstances. 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 ji.

Well, thank you. 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 December '24 quarter and investor presentations are available on the company's website. We'll first discuss a brief on the performance of the company for the quarter, which may be followed by the questions. Beginning with the financial results. Consolidated sales for the December '24 quarter is INR 701 crores, which is higher by close to 12% from December '23 quarter, primarily due to higher volume by 7.5%. Higher specialty sales, which has increased by almost 14% and better margins. The EBITDA for the quarter is INR 86 crores compared to INR 56 crores during December '23 quarter. The improvement in EBITDA from the December '23 is backed by higher specialty sales, enhanced volumes by 7.5% and better BOPP and BOPET, both margins. The company has reached specialty sales of 73% of total volume in December '24 quarter and 71% on December '24 YTD basis, which was close to 64% in FY '24. You will notice step by step company is improving on specialty sales. On December '24 YTD basis, we are running 14% higher specialty sales volume. BOPP film margin has been running close to INR 21 per kg during December '24 quarter, which was INR 25 per kg in September '24 quarter and INR 9 per kg in September '23 quarter. If we compare with September '24 quarter, the net revenue and margins are lower due to temporary breakdown in one of our production lines, which caused production loss of close to 5%. The BOPP film margin has also witnessed pressure for a few weeks in December '23 -- '24 quarter with some capacity commissioning in the domestic industry, though it recovered fairly fast due to strong demand. Quarter 2 FY '25 also had onetime income of close to INR 9 crores due to sale of one of our office space, which was idle and state government tax incentives. BOPET vertical, which moved close to 15% of the sales for the company has witnessed better margins and posted EBITDA in mid-teens during December '24 quarter. I'm moving to outlook. Though the BOPP base film margins are expected to remain a little subdued in FY '26 due to expected capacity addition in the domestic industry. However, we are optimistic and excited about 4 factors. First, improved sales of specialty films. So there are several new products in pipeline, which are expected to get launched in the coming quarters to further improve the specialty sales. Number 2, cost rationalization. We expect incremental cost rationalization of close to INR 25 crores in FY '26. Number 3, the new capacity kickoff for the BOPP, CPP and sun control films, which will add to top line and bottom line from FY '26. Just to indicate, even if we initially partly shift the production of some old aged line to the new BOPP line, the gross margin of the new BOPP line should be in double digit due to lower cost of production, though we do not expect much need for it and the same -- it may be required at the maximum for a few months at the beginning. Both BOPP and CPP lines will be world's largest production capacity lines and will increase company's production capability by close to 45% to 50%. The fourth factor, among the new business vertical, the specialty chemical is already making high teens EBITDA. All other new business verticals related to packaging should be EBITDA positive in FY '26, except B2C business, which may take some time. Even among B2C business, we expect sun control film to be EBITDA positive from FY '27. Moving to specialty chemicals. The specialty chemicals subsidiary is advancing well to achieve high teens EBITDA and more than 30% return on capital employed in FY '25. Rigid packaging. We started rigid packaging vertical under brand name Plastech in second half of FY '24, which is related to packaging industry. The business vertical is growing well with the addition of injection molding and PET sheet line in FY '25. The vertical is moving in line with the plan, and we expect more than INR 120 crores of top line with positive EBITDA in FY '26 from rigid packaging. Moving to direct-to-consumer vertical Pet care. Zigly, we have launched multiple private brands and enhanced our Vet care services, which favorably impacted top line and margins for the December '24 quarter. Our business model is moving more towards services and private labels, which is a high-margin business. Moving to growth and net debt position. The company's CapEx for FY '25 is estimated to be close to INR 430 crores to INR 450 crores, majority of which is already done at December '24 level. The CapEx is mainly on the BOPP line, CPP line and some projects to enhance specialty sales. The financials remain strong. The company's net debt position is close to INR 900 crores, which is 2.6x to EBITDA and 0.6x to equity. Of course, during the recent Board of Directors meeting, Mrs. Yamini Jaipuria has been appointed as Whole-time Director, Corporate Strategy, ESG and CSR for a period of 5 years. The appointment will take effect from the date of allotment of dean by Ministry of Corporate Affairs. 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 Rahul Jain from Credence Wealth. Please go ahead.

Thanks for the opportunity, sir. Sir, just to understand with regards to the specialty chemicals, our target is to be around 70%, 71% for the current year and move to 80% for FY '26. So if you could break this further into the specialty and the semi-specialty and also if you could share margins in term of EBITDA percentage for specialty and semi-specialty. That is my first question.

You see, I think you are referring the specialty films actually. So with respect to bifurcation into specialty and semi-specialty, broadly it's 50-50. From the period-to-period, quarter-to-quarter, there may be some minor changes in this ratio. While 71% is the YTD figure for the December '24, we are targeting in medium-term to reach to 80%, but this obviously will be excluding new capacity for the BOPP and CPP, which will take little time actually to expand the specialty further on the new lines.

And so at 80% also this semi-specialty and specialty will be roughly 50-50?

Yes, it's broadly 50-50.

And as we move to the 80% volume, you have mentioned in your presentations that each 1% shift could add about INR 4 crores to INR 5 crores to EBITDA. So assuming that from INR 70 crores, we are at INR 80 crores for FY '26, can we expect this incremental EBITDA to be in the range of around INR 35 crores, INR 40 crores because of the shift?

Should be.

Sure. Sir, in terms of your outlook in your presentation, you have mentioned about growing your top line 20% CAGR for next 3 years. So this is with the base of FY '25, which should be around INR 2,800 crores?

Yes, maybe a little more actually because we are going to commission the world's largest BOPP line, and we expect this to get commissioned in either first quarter or second quarter of FY '26. So which should add close to 40% to the existing capacity. So yes, answer is yes. Top line may grow a little even faster.

Sure. Last question, sir, with regards to margins. So your presentation and your initial commentary, you mentioned about margins. But when I exclude the other income, our margins are somewhere around 9% for the current quarter versus 11.5% for the previous quarter. That's fine. What I'm looking for is not the quarterly comment. What I need to understand is given the shift to specialty, number one, and also the cost rationalization, including the renewable power, where you expect around INR 25 crores incremental EBITDA coming in due to that and also the further rigid packing becoming profitable, specialty chemicals giving you larger profits. So from 9% EBITDA margins, excluding the other income, where do we see these margins moving up, say, next year and a year afterwards?

Well, frankly, in principle, we do not provide any future guidance. But all the factors which you mentioned, either for specialization of specialty chemical and the enhanced volume are going to favorably impact the current EBITDA level. So all the reasons which you mentioned are valid.

The next question is from the line of Gaurav from Invesco Enterprise.

I hope my voice is audible. So sir, a couple of clarifications. I will not ask any of the future projections or outlook, but some of the clarifications that has either happened in the past or in the recent quarter, which has just concluded. So there was a news that management was involved in certain Bhoomi Pujan at its site. So -- but in press release or presentation, there is no talks on that. So if you can just help us understand whether it is an existing plant or some new plant that you are building up? And for which product line, if it is a new plant, that new product line is going to be established in that plant? And what would be the size and some color on basically this new expansion or new site? That's the first.

It's a 62-acre land, which has been purchased by us. This would include growth for all our different business verticals. Obviously, it could not happen in a 1 year, 2 year, it will happen over a period of time. And to begin with, we will be putting one quoting line over there, which should get commissioned in the next financial year.

That's great. And also in press release, you mentioned that there was a breakdown in one of the line. And considering the impact, though 5% seems to be a small impact, but considering that the breakdown was just in one single line out of almost 35 different lines across different products that we have. So if you can help us understand what was the product line in which this breakdown was? What was the date when this breakdown happened? And what was the duration of this breakdown, if it is possible to provide this clarification?

This happened on one of our film lines. And I mean, it basically happened, I think, if I remember in December, and obviously, we have filed the insurance claim for this loss of profit, which right now is not accounted for because we account for insurance claim on cash basis. So we expect that some of this loss should get recovered from the insurance company. Initial survey has happened. And in the normal course, we get these insurance claims from -- within 3 to 6 months.

That's great. We also mentioned that BOPP film margins were impacted in the quarter gone by due to certain commissioning of capacity in the domestic industry. Since you track the industry much more vis-a-vis we as an investor track the industry, would it be possible for you to let us understand what was the quantity of this domestic capacity, which has been made live and who was the player who commissioned it? And your views on upcoming couple of lines also because I think one of the Kolkata-based player, I think Dhunseri Group, they have also announced that they are going to make 2 BOPP capacity lines, I think, in the region of Jammu and Kashmir, maybe in a year or 2. So your assessment on the impact. So I'll just combine 2 questions into -- 2 clarifications into this one single one.

So one BOPP line came in the last quarter, which was KG Flexx. The capacity for that is anywhere between 25,000 tonnes to 30,000 tonnes. And as we mentioned that the demand has been growing well. And there was a temporary blip in margins, but it recovered fairly fast because the demand has been growing. In the next financial year, there are 5 new lines, including ours expected to commission, out of which -- 3 lines actually are bigger lines and 2 are relatively smaller lines. And then as you rightly pointed out, Dhunseri is planning in FY '27 and FY '28 as per the news that is available with us. So yes, right now, next year, there is a bit of bunching of these lines, which can impact commodity margins. But my colleague, Neeraj has already talked about a lot of actions that your company is taking to ensure that we remain strong.

Sure, sir. So within this, when we are saying that our BOPP line, which is going to be commissioned either in Q1 or Q2 of next financial year, having a nameplate capacity of, I think, almost 67,000 tonnes per annum, right? And we say that we will be the lowest cost producer. So if my understanding, maybe you can correct me, I think most of these lines are manufactured by one of the German player only. So when we say that we will be the lowest cost producer, which will give us an advantage in terms of competing in this highly competitive market, which is assumed to happen either in 1 year or 2 years down the line at least, right? So what gives us that confidence that first, we will be able to fulfill our capacity or improve our capacity utilization and also sustain margins to have it a profitable venture.

So see, our line is the widest and the fastest with the highest output amongst all the 5 lines that are going to be installed. Our lines will have a lower operating cost or lower variable cost from anywhere between INR 2 to INR 4, INR 5 per kg vis-a-vis other lines that are getting installed. So that is one thing. As far as the sale of products from this line, we are quite confident because we are growing very nicely in the export market. This year, we have grown close to -- I mean, a bit lower than 20% in this year. And second thing is that right now, our market share in the domestic market is very less. We have to kind of keep refusing to many, many customers on an ongoing basis in the domestic market. And given our reputation, customers like to buy from us for the domestic needs and their export needs. So we feel that we will get preference in the market, and our line should get filled up, both with domestic and export happening -- going to happen in the next year.

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

So just carry forwarding the earlier participants answers and the question. So if you can just elaborate more on the recoupment of the operating profits from possibly any loss in the margins from the incremental BOPP lines, which are coming on. You touched upon on cost rationalization measures, which could give us incremental INR 25 crores to INR 30 crores in FY '26 plus the variable cost savings on the BOPP line by close to around INR 2 to INR 5. But let's say, if all the lines are getting commissioned in FY '26 and that could possibly put some of the pressure on the commodity film margins, how confident are we in terms of recoupment of this lost margins from these newer lines getting commissioned? If you can touch upon the other verticals also like in terms of specialty chemicals and the rigid packaging, like what sort of EBITDA or the sales we can do in FY '26 so that the impact of these lines could be lesser or possibly if we can negate those impact of commodity BOPP lines?

Yes. So see, at this stage, what we expect is that the next year EBITDA, in spite of the fact that margins will be under pressure should be better because this is -- one is a very significant capacity addition, and we stay strong because of a very large specialty portfolio and other cost reduction measures as well as the new line is far more cost efficient. We have to also remember that Cosmo because being the pioneer is also having some very old lines. And it is always possible for us to temporarily shut down those old lines. And if we compare the cost versus those old lines to the new lines, the cost delta is INR 15 plus. So even if we have to lost some old volumes to recoup the new volumes, we'll be very significantly plus on the cost side. Other than that, Cosmo specialty chemicals is doing quite well, as Neeraj mentioned earlier. We should be closing the year close to INR 190 crores at a very healthy close to 20% kind of an EBITDA numbers. Other than that, we also mentioned that Plastech, which was a new business and was making losses, will be -- we are close to breakeven now, and we expect to make profitable growth next year. So that is also on the plus side. Third thing is if you have seen Zigly this quarter, our sales has gone up in last 8 months. We have significantly ramped up our sales and reduced our losses. So this journey will continue even in the next year when it comes to Zigly business. And we will also be starting our window film business, which investors know that is, again, a very profitable business. Obviously, we do not expect to make money within the first year, but it is a business which is a pretty high margin business. So we are seeing a lot of good things happening in the business. The other thing is that our U.S. business and some of the other America business that we have been doing, which is more profitable, similarly, Japan, these are very difficult geographies where over the years, we have built very strong markets and these markets are expected to grow for us. So within U.S.A. and Japan itself, we expect a very, very significant growth based on the businesses that we have won recently and many of them are in the pipeline.

Sir, last quarter, you mentioned that like the run rate of sales from U.S. and Japan could possibly -- like we were at a run rate of $40 million and that could possibly go up to $60 million in FY '26 or possibly from Q4 of FY '25 because we were in the last call and you were mentioning that comment. So is this incremental $20 million at a slightly higher margin than what we have been currently doing for the $40 million? I just wanted to understand from you in terms of what are the levers for our growth for FY '26 apart from what you already mentioned.

So our current run rate has already now started touching $5 million in January for both these countries put together. And we expect that this should start touching $6 million within next 3 to 6 months. And as you rightly pointed out, these markets are highly demanding markets and we largely sell only specialty films in these countries. And therefore, the margin profiles are much better in these geographies versus the other geographies. It's very, very difficult to enter either America or Japan. But in both these countries, we are now a very well-established brand name. And therefore, more and more customers are looking to buy from Cosmo.

Correct. Sir, just 2 clarifications. So one, that INR 2 to INR 5 of savings in the variable cost, which you mentioned is as compared to the similar lines getting commissioned along with us, but INR 15 is as compared to the older lines, what we have been currently...

Older lines of Cosmo, INR 15 to INR 20 per kg.

It's a big number, correct. And second clarification on the sun control films, which you mentioned that there also, we have been confident in terms of growing the business. So let's presume that the business starts picking up for us. At what level of sales that business could give us breakeven?

So we anticipate that once we cross between window films and paint protection films, once we cross the sale of INR 30 crores to INR 35 crores, we will start making money. And just to -- I mean, without sharing too much details, we are also in the process of adding more product lines because we have created a very decent distribution channel. We have created a very strong sales team. So we will not be limiting ourselves to just 2 product lines. We would like to launch more product lines and our speed of innovation is quite decent. And therefore, we will be bringing more product lines to sell in the domestic market.

The next question is from the line of Jatin Damania from Svan Investments.

Sir, I have a couple of questions. So what is the current spread for BOPP, like you mentioned INR 21 per kg in December. So what is the current spread that is ongoing for Q4?

It is marginally improved as we speak.

Okay, sir. That's great. And sir, for the -- and the same question is for BOPET. What is the current spread...

There also it has marginally improved from the last quarter.

Sir, in the earlier participant's question, you indicated that the specialty chemicals would be almost around INR 190 crores of revenue and 20% of the EBITDA margin. So that's for the FY '25, but how do we see a ramp-up happening from the specialty chemical front over the next 2 to 3 years?

See, it's a research-driven business completely. As we know that the CapEx invested in this business is very less. All I can say is that we have made a very good product that we expect to scale up quite well in the next 2 years. Second is there are 2 more other products which are expected to be commercialized in next 3 to 6 months. Once these are done, we will share more details. But with all these things, it's very difficult to put a number, but we are expecting to see a good growth, both in revenue numbers as well as profitability.

And just to add to it, actually, this organic growth of our specialty film segment, the growth of the specialty chemical will get all benefit with the growth of the specialty films.

And the beauty is that for all our internal sales, we are also somehow making sure that we make very difficult for the competition just to copy things from us, which used to be a bit easily earlier. To that extent, we are adding more processes around it.

And second thing, now assuming that if current performance, you indicated that BOPP and BOPET spreads are marginally better than what it was there in the December quarter. So assuming that we do a quarter 2 numbers of INR 87 crores of EBITDA, excluding other income. So for FY '26, you are saying that we'll get an incremental benefit of INR 25 crores from power savings and there could be some operating efficiency which we can get because of a commissioning of a new line, which is in the range of 2 to 5. Is it fair to assume that?

That's right.

And how do we see a ramp-up in the rigid packaging? Definitely, we have seen the loss and the margin has been narrowed on the lower end. But if you look in FY '26, '27, what should one assume on the rigid packaging front?

Yes. So rigid packaging, next year, we definitely expect this business vertical to exceed INR 80 crores of sales. And as you said earlier, that we do expect to make EBITDA positive. Obviously, it's a journey in itself. And once we start getting more confidence on this business, we will be then subsequently looking forward to scale this up, invest more on this business because right now, we have scaled up with many reputed brands of the country. And in the times to come, we are also looking to export these products outside India. So within India, we have been successful with so many brands. And in the times to come, we will be exporting these products.

And last question, can you help us understand what was the EBITDA loss in rigid and the Zigly for 9 months?

For Zigly, you can also trace it in the others in the segmental reporting. So it should be close to -- at EBIT level should be close to INR 27 crores or so. For the rigid packaging, it could be about INR 4 crores to INR 5 crores.

The next question is from the line of Aman Kumar Sonthalia from AK Securities.

Sir, a lot of companies are exporting BOPP and BOPET film to European countries and U.S. So right now, U.S. is putting import duties on a lot of products. So is it advisable to set a plant there instead of setting plant in India?

See, first of all, U.S., not many companies are able to export. It's a difficult market to export from India. As of now, the custom duty in America for Indian-made products is a little less than 5%. Hopefully, there will not be any significant duties that U.S. will levy on India. But if these duties exceed 30%, 40%, then there could be a business case. But we have to see a lot of things. What duties are levied on Mexico, what are levied on India, if at all, and so on and so forth. And again, duties should never be a rationale for starting up a plant because if next U.S. regime, they remove these duties, then all these investments can have a very detrimental impact. So these short-term decisions should not influence our long-term thinking. And I don't think so based on this, we would take a decision to set up a plant there because the capital cost involved in America is far higher than capital cost involved in India.

Okay. So sir, a lot of company like Polyplex, Uflex, then this SRF for putting a plant in Europe and other countries. So is it more profitable to run the plant there or it is better to export from India?

See, obviously, these are -- these keep changing from time to time. When last year, for almost 1.5 years, the power costs went up in Europe. Those plants became highly negative. However, in the past, the same plants were very positive. So these things keep changing. BOPP has a lot of local demand in any country. So this has to be seen as a stand-alone business case. And it is very difficult to say that which markets one should look at putting up the plant. I'm sure whosoever is putting up must be doing a thorough exercise and accordingly, taking a decision. As we speak, Cosmo does not have a plan to put up a plant outside India.

Okay, sir. And sir, how is the margin outlook for BOPET for the next 2, 3 years -- 1, 2 years?

I wish anybody can predict that. But right now, the demand is looking quite good.

And no surface capacity is coming in the market?

Yes. Right now, only one capacity has been announced, which is expected to come in FY '28, which I believe was Polyplex, if I'm not wrong. So right now, there's only one capacity which has been announced as such.

The next question is from the line of Kamal Jeswani from U First Capital.

I want to know that how much of our exports goes to the U.S.? What is that as a percentage of the total turnover?

Right now, it is close to 12%, 13%.

12%, 13%. Okay. And when are we planning to start production for the sun control films and the paint protection films?

Early next year. Paint protection has already started. Window film will start early next year.

Okay. And when are your plans to demerge the Zigly business, as you had mentioned in the presentation?

We are continuously evaluating this. As we said earlier, it will take us -- last time we said 3 to 4 years and obviously, since then some time have elapsed. So I would say that now we should be looking at anywhere between 2 to 3 years before we demerge. But these things can always change because that really depends on how quick we are -- we continue to grow in Zigly. So it's very difficult, but we clearly have an intent to demerge it at some point in time, and it is not very far off.

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

So I have 2 questions. So firstly, at the outset, I would like to congratulate the management and leadership of the company to have this long-term vision of decommoditizing the business. So my first question is regarding our Cosmo Sunshield vertical. So in a previous con call, Mr. Poddar, you had indicated that our capacity for SCF is around 250 million square feet and PPF would be procured through an outsourced facility. Now previously, our revenue potential and margins you have highlighted very clearly for our other business verticals like Cosmo specialty chemicals and rigid plastic. So I just want to understand like what kind of revenues and what margins can we expect with such capacities since we have a peer company, which even you had highlighted without taking any names in the previous con call. So what should be our expectations for FY '26, FY '27 when it comes to revenues and margins for this vertical?

See, it will clearly take time because the peer company has been there in this business for several years. And we are a new player. Good thing is that we have made very strong products which are in test phasing right now. And wherever we are putting those products, the results are excellent. So good thing is that at least from a research perspective and the machine perspective, we are in the right direction. We have already established connects with a lot of distribution channels who are pretty happy to work with us in India. But see, it is not just India. We need to scale up globally. And therefore, a lot of work is going to be required for this. We expect that next year, we could be doing anywhere between INR 20 crores to INR 30 crores of business, if all goes well for us. And year thereafter, we should exceed INR 50 crores at least. And as I said earlier that we expect that close to INR 30 crores, this business will start becoming breakeven and then start to make money for us.

Okay. And this Cosmo Sunshield is basically all BOPET, right? It's not BOPP.

You are absolutely right. Paint protection is polyurethane and window film is polyester.

Okay. And we have PPF being done through an outsourced facility, right?

That's right.

So there was an announcement in December probably by the company. So have we started any sales with PPF? Have we earned anything out of it till now?

Yes.

Would it be possible to share some figure?

We will share in the next quarter.

Okay. Okay. Right. So -- and my second question, just continuing on what the previous participants had highlighted, all of the investor community is a little concerned about the commodity down cycle that is going to play out in FY '26. Now this year, we have had the commodity cycle play out in our favor. So if we look at our Cosmo specialty chemicals business, it has started generating 17%, 18% margins for us. But overall, if you see compared to the size of the company, it's pretty small. And when we see specialty film sales as well, we say if we are targeting 80% of specialty volumes by the end of FY '26, and 50% of this is going to be semi-specialty, we would probably expect at least some kind of effect from the commodity down cycle. So when do you expect our value-added businesses to be large enough to mitigate the effects of commodity cycles?

See, already, I think every year, we are displaying that. We had in between a couple of bad years where Cosmo still did quite well. And so yes, we have done it. Obviously, now the additional factor is that some of the diversifications we have done have resulted in initial learning losses and so on. But those are also going in the right direction and expected to make money. Some have already started making money like chemical. Plastic is expected to make money next year. Window film is expected to make a year thereafter. And Zigly also, we do expect that within next 3 years, we should start making money. So obviously, right now, film business in itself is doing quite well. It is just that to some extent, there is an impact of the losses from the new business. And once those new businesses also start making money, you will see even a stronger company in the times to come.

The next question is from the line of Vipulkumar Shah from Sumangal Investment.

So sir, this plastic business is packaging board, which paper companies like JK Paper manufacture. Is that the same product? Or is there something different?

No, no, there are different things. We are doing 3 things there. First is we are making many types of thicker sheets. Films are anything which are lesser than 250 micron. Once we go above 250 micron up to -- let's say, 1,000 or 1 mm, 1,000 micron, it is called a sheet. So one is we make PP sheets, polystyrene sheets and polyester sheets. And within that also, we make ESG sheets, which goes into electronic or automobile industry. We make barrier sheets for better shelf life. We make color sheets, so on and so forth. The second thing that we do here is these sheets are then converted into thermoformed containers, containers for curds, for ice cream, for multiple things. We also make thin wall containers through the process of injection molding. So this is basically the business model in plastic. And majority of the sales happen to the end brands directly.

So margins for that plastic business is higher or lower than the specialty films?

See, we should not be comparing against specialty films business. The important thing is here, the margins remain consistent because it's the cost plus pricing. So as we continue to scale up, you work with the brands. So obviously, many investors also look for the stability of margins and plastic certainly provides the stability of the margins. And the business gels very well with our film business because it actually helps film business also because we are now directly dealing with the brands in every case. In case of film, in some cases, we deal with brand, in some cases, we deal with the printers and converters, while in case of plastic, we only deal with the brands, we mostly deal with the brands.

Okay. Sorry for repeating, but so this is not a part of the film business, right?

No, no, no. We are treating it separately. There's a separate team which is running this business.

So what will be the raw material for this business, sir?

Yes. All the 5 businesses are under separate teams. Common functions remain common, while the business teams are separate for each one of them.

It's a very complementary kind of business, film business and rigid packaging.

No, no. My question was what are the raw materials for this plastic business?

Polypropylene, polyester and polystyrene.

Okay, sir. And lastly, regarding demerger of this Pet care vertical. So it is dragging down the performance of the company. So I have repeatedly in past calls also mentioned, don't you think that we should demerge this unit because it is dragging down the overall profitability and valuations of the company, sir?

At the right time, we will do it. I'm sure the same investors will love it when it starts making money because the valuations of our omnichannel business is far higher.

And last question, sir, can we expect substantially lower losses for Zigly business next year?

Already, if you see the last quarter, our losses have rationalized quite a lot. So we are looking a quarter-on-quarter improvement.

No, I'm asking only directionally. I'm not asking for figures, sir.

Yes, yes. Even directionally, we -- as a percentage to sales, our losses keep coming down. In the last quarter, even in the absolute terms, it has come down. Next year, when we are looking forward to quite a decent growth in Zigly, percentages losses will keep coming down quarter-on-quarter.

The next question is from the line of [ Saket Kapoor from Kapoor Company ].

Yes. Sir, firstly, BOPET contribution was 9% to our total sales mix. What is the current contribution from BOPET? And out of that, sir, how much is value-added? And if you could give the breakup?

So as we said at the beginning of the call, BOPET was close to 15% of the sales in the December '24 quarter.

Okay. And out of that, sir, value-added...

So value-added is also 20% to 25%.

Whatever we are selling under the book it is in value-added?

No, It currently has a mix between the value add and non-value add of 20-80.

Yes, sir, I just missed the number. Sir, we have been hearing from the government on this plastic waste management circular that will be applicable from April. So if you could just highlight the significance of the same for the print business and players like us. And the second question would be, sir, taking into account the CapEx that we have done, what is the -- what are the CapEx that will get commercialized for this year? I mean to say, what would be the additional volume in tonnages terms that we will expect for the next financial year?

See, as far as the EPR is concerned, good thing is that we use a lot of recycled both in flexibles and rigid. And in any case, we are continuously in touch with the government to explain them what is realistic and what is not realistic. But the good thing is that Cosmo as a stand-alone entity does use a lot of recycled product. Coming to your second question, our BOPP film capacity is going to grow by close to 40% in the coming year.

Okay. And in that aspect, you also mentioned it will be the world largest. If you could just elaborate what -- where are we coming from in terms of the largest BOPET film?

Yes. So this will have the 5 days with the highest speed with the highest output.

So what is the tonnage there, sir? And what is the current capacity will be replacing, sir? See, the last line in 2017, BOPET, that time we were the highest. Then after that, 1 or 2 lines got added, which had a similar width but higher speed. Now we are coming up with the line, which width-wise is similar to the last line, but speed is even higher. And therefore -- and even the tonnage per hour is also much higher. And therefore, this line will have the highest output in the world. [Foreign Language]

We expect to produce -- see, the nameplate capacity is close to 70,000 tonnes. But from an actual production perspective, we expect around 60,000 tonnes additional production from this line.

The next question is from the line of Aditya Vora from Share India Securities.

A couple of questions. One is, if you could help me understand what would be our mix in the specialty chemical business in terms of masterbatches, adhesives and coating chemicals? And how do we plan to ramp up the coating chemicals business considering it's a high-margin business in the specialty chemical business?

We can't share so many details on a call.

Right. But strategically, how do you see that going ahead?

No, again, we cannot share. This is a bit confidential to the company. These information cannot be put in the public domain.

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

Well to summarize, the company's specialty sales has increased by close to 14% this year so far. And similar trend is expected to continue in FY '26, which will strengthen the business model. Among new business verticals, specialty chemical is already making high teens EBITDA. Other new verticals related to packaging, whether it's capacitor metallizer, rigid packaging should earn positive EBITDA in FY '26. While Zigly may take some time to become profitable, it should be a significant wealth creators. At the end of the call, we would like to repeat the 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 no guarantees of future results. We thank you to all of you for joining the call.

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