Ester Industries Limited (500136) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 FY '22 Earnings Conference Call of Ester Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.

Thank you. Good day, everyone, and a warm welcome to Ester Industries Q3 and 9 month FY '22 Analyst and Investor Conference Call. We have with us today Mr. Arvind Singhania, the Chairman, and Mr. Pradeep Rustagi, the Executive Director of Corporate Affairs. We will begin this call with opening remarks from the management, following which we will have the floor open for an interactive Q&A session. Before we begin, I would like to point out that some statements made in today's discussion may be forward-looking in nature, and a note to this effect has been sent to you earlier. We trust you've had a chance to go through the communications and financial performance. I would now like to invite Mr. Singhania to make his opening remarks. Over to you, Arvind.

Thanks, Gavin, and thank you, everyone, for joining us today. I have, alongside me, Mr. Pradeep Rustagi, our Executive Director, Corporate Affairs. I will begin the call with brief overview of all our businesses, post which Pradeep will walk you through our financial performance for the quarter. Starting with the headline numbers. We are pleased with our performance for the quarter, wherein we have delivered strong top line growth of 43% over the previous year. The growth was largely broad-based with all our business verticals performing well. So EBITDA in absolute terms is better as compared to Q3 FY '21. EBITDA margins in percentage terms, however, were compressed on expected lines given the sharp rise in input costs visible across sectors. Eliminating the impact of increase in feedstock prices from raw material consumption and sales value, EBITDA margins during Q3 FY '22 would have been about 26%. Moving on to individual businesses, starting with Specialty Polymers. As I've been indicating, demand momentum continues to remain strong, as can be seen by our volumes for the quarter, which enhanced by 59% over the previous year. Sequentially as well, we have seen a volume growth of 8%. Product offtake for both new and existing products remains strong, reflective of the underlying demand for the products. Sales of our marquee product, MB03 remains strong with volumes of 305 metric tons for the quarter as against 88 metric tons during Q3 FY '21 and 240 metric tons during Q2 FY '22. We expect this trend to sustain. Despite higher sales volumes, our margins for the business, though were marginally impacted on account of product mix, not as good as the last quarter. As most of you know, Specialty Polymers is largely export dependent and the overall margin profile varies with regards to customer mix, geography mix, et cetera. Sales of Innovative PBT stood at 164 metric tons in the quarter, as against 250 metric tons during Q3 FY '21 and 284 metric tons during Q2 FY '22. Innovative PBT is manufactured by us for a global chemical leader. Basis orders in hand and forecast received from the customer, we expect to match the performance of last year and achieve significantly higher sales in both volumetric and value terms in FY '22, '23. Besides the legacy products, sales of our newly introduced products as well continue to remain strong. We are confident of scaling up the volumes of both existing and new products over the coming years as well as given the strong demand we are seeing from our customers. Volumes for LMC 03 as well, for which we recently started commercial sales, are picking up, and we are hopeful of seeing good volumes from this product over the next 2 to 3 years. Lastly, we are also close to achieving techno-commercial qualifications for our innovative product MB16. Steady pickup in volumes for such products will help us significantly scale up revenues from this business. Moving on to the Film business. Q3 witnessed yet another solid performance from the business and revenue expanding 35% over previous year and 15% over the previous quarter. Demand momentum remains steady, helping sustain the volume run rate. Domestic demand, as we have been indicating, is growing at 11% to 13% on an annual basis, which augurs well for the business on a medium- to long-term basis. In the near term though demand supply may be slightly skewed in favor of the latter, with excess supply hitting the market, in turn exerting pressure on the realizations and margins. Our volumes for the quarter stood at 14,248 metric tons as against 14,299 metric tons in the corresponding quarter last year and 14,591 metric tons for Q2 FY '22, translating into a marginal dip. Despite the lower volumes though, consequent to higher feedstock prices, selling prices on a sequential basis have improved. Higher proportion of value-added products also contributed to higher realization. We are working, as we said, towards increasing the share of value-added products. And I'm happy to report that we have been making steady progress towards that. The share of value-added products during the quarter stood at 23% compared to 20% during the previous quarter and Q3 FY '21. Our aim, as we have hinted earlier, has been to increase the share of high-margin products to 30% of the overall product mix, and we are well on track towards attaining that. We are confident that the better product mix will help us sustain the overall profitability of the business. Commissioning of our new 48,000 ton per annum plant in Telangana in October should help us further scale up the growth and profitability profile of the business. Moving on to our Engineering Plastics business. Q3 was a good quarter for the business with good revenue momentum. Our volume for the quarter stood at 2,910 metric tons as against 4,420 metric tons during Q3 FY '21 and 2,974 metric tons during the previous quarter. Reduction in volume is vis-a-vis previous quarter, mainly on account of lower demand for OFC grade engineering plastics. Volatility in OFC volumes quarter-to-quarter is a regular phenomenon. Though demand for EP compounds improved in the festive months of October and November '21, the slowdown in auto sector, especially 2-wheelers, impacted demand in the month of December. Better pricing and margin environment resulted in higher profitability for the business as compared to Q3 FY '21. EBIT margins for the quarter stood at 21.3% as against 19.1% during Q3 FY '21 and 23.7% registered during previous quarter. Higher margins during the current quarter were despite having limited holding of low-cost inventory. Again, to build business in EP as well, our objective is to improve product mix by increasing the share of value-added products. We are also confident that the realization of the unit will not only help us better serve our customers, but will also help us in sustaining margins by lowering operating and logistics costs. To conclude, I would just like to state that all our businesses are well positioned to embark on their next growth phase. Specialty Polymer has revived well on expected lines after a challenging year. Demand momentum for legacy products remains strong, while newly introduced products as well have been garnering favorable response from the clients. Product pipeline as well continues to remain encouraging, giving us the confidence of sustaining the momentum over coming years. Film business as well continues to perform well. Demand in both domestic and export segments remains steady, helping sustain the volume momentum. Realizations as well are expected to remain steady in the medium to long term, although in the near term though one can expect some pressure owing to excess supply. Besides favorable macros, our efforts towards improving product mix by increasing the share of value-added products and commissioning of new units should help us improve the margins and profitability trajectory of the business. Engineering Plastics business as well is expected to perform well, supporting the Film and Specialty Polymer businesses. EB has seen a sharp revival in the last 6 quarters going to shortage of feedstock material, increasing prices of feedstock, and revival in the man force for fear of COVID-19. We expect the threat to sustain in the near term. Furthermore, the relocation of the unit should also help us in sustaining the profitability and margin profile of the business. That concludes my opening remarks. I now hand over the floor to Pradeep to walk you through the financial performance. Thank you.

Good evening, everyone, and thank you for joining us today. I will quickly walk you through our financial performance for the quarter and 9 months ended December 31, post which we can begin the Q&A session. Starting with the top line. Revenues from operations stood at INR 365 crores as against INR 256 crores reported during Q3 FY '21, that is higher by 43%. On a 9-month basis, revenues stood at INR 1,017 crores as against INR 695 crores, higher by 46%. The growth has been largely broad-based as all the businesses have seen good traction in their revenues. EBITDA for the quarter stood at INR 64 crores as against INR 58 crores generated during the Q3 FY '21, higher by 10%, while on a 9-month basis, the same stood at INR 187 crores as against INR 183 crores generated during 9 months FY '21, higher by 2%. Margins in percentage terms were compared during the period in the review largely owing to sharp increase in input costs and freight expenses. Finance cost for the quarter stood at INR 6 crores as against INR 4.7 crores outgo reported during Q3 FY '21. While on a 9-month basis, the same stood at INR 16.3 crores as against INR 13 crores outgo reported during 9 months FY '20. As of December 31, 2021, our outstanding interest bearing term debt net of free cash stood at INR 190 crores, while interest-bearing working capital liabilities stood at INR 92 crores. Interest-bearing debt, net of free cash, as a multiple of annualized EBITDA, remained at a comfortable level of 1.13 as of 31 December '21. We are committed towards maintaining prudent debt equity level and will not jeopardize our balance sheet at the cost of growth. Depreciation for the quarter stood at INR 10 crores as against INR 9 crores reported during Q3 FY '21, while for the 9 months, the same stood at INR 29 crores as against INR 27 crores during 9 months FY '21. Profit for the quarter stood at INR 36 crores as against INR 33 crores generated during Q3 FY '21, while for the 9 months the same stood at INR 106 crores as against INR 108 crores generated during 9 months FY '21. To conclude, I would just like to reiterate what Arvind had said earlier, all our businesses are well positioned to deliver consistent growth and drive the next phase of growth for the company. Thank you. Over to you, Gavin.

[Operator Instructions] The first question is from the line of Sumant Kumar from Motilal Oswal.

Yes, sir. So my question is for the BOPET segment. So can you talk about the contribution margin in this segment? And where do you see the spread moving going forward?

Sorry, can you repeat the question. Your voice is not very clear.

Okay. So I'm talking about the contribution margin in BOPET segment. And how the spread is going to move forward?

You're talking about the value addition or the contribution margin in BOPET film business?

Yes. And the spread.

Yes. So spread is nothing but value addition, which is the difference between selling price and raw material costs. So in the September '21 quarter, for a 12-micron corona film, it was INR 36. December, it improved to INR 46. And currently, it is in the range of INR 62 to INR 64 a kg.

Okay. So do you think the moderation in the spread from this level?

I'm sorry, your voice is not clear at all. I can't hear you.

Are you on a speakerphone? Can you use handset?

Yes. Mr. Kumar, can you please come on the handset mode, if you are on speaker?

Yes. My question is, do you think this spread is going to sustain? What kind of moderation you're looking -- is going to happen in the coming quarter?

In the medium to long term, the margins will remain healthy, although the short term, with the start up of some new capacities, it could moderate a little bit.

Okay. So your other competitor is also talking about the supply side. So can you talk about the supply in the industry, where the supply is going to come and how much -- we have seen a volatility in the business and the margin is in the higher side, so from here, how much supply is going to come and what kind of moderation you can see in the margin?

So in this year, we expect about 3 lines to start up -- 3 to 4 lines, including ours, which is a total capacity of about 120,000 to 150,000 tons per annum. Of course, when the line starts up, it doesn't start producing 100% straight away. So it always takes a few months for capacity to build up. So on an average, this year, you could see, if namesake capacity is 150,000 tons, you could see additional capacity of anything between 80,000 to 100,000 tons coming into effect this year.

'22, '23.

In '22, '23.

Okay. So in that case, you see the supply is going to hit the realization as well as the margin?

Yes, there may be some moderation in the margin. But there is a healthy demand growth in the Film business.

The next question is from the line of Alpesh Lad from Dolat Capital.

I just had 2 questions. One is regarding the specialty polymer segment. We have seen a decline in sequential margins. So is it mainly because of lower share of iQ PBT? Or like is there any other reason for the same? And do you see like a margin contraction going forward as well?

No, no, no. There is no margin contraction going forward. This is an aberration because of product mix. Every quarter doesn't have the same product mix. Sometimes the product mix maybe a little more favorable than the other quarters. That's why you see this. [Foreign Language].

Okay. Okay. Okay, fine. And my second...

Because margins here are pretty much fixed in all the products. Rupees per kg is fixed. As a percentage, you may see the drop in margin, but that is because raw material prices have doubled over the last 1 year. And with the margins being fixed rupees per kg, then the percentage margin will fall no?

Right, right, right. Okay. So like we have a...

We don't expect these higher raw material prices and crude to remain at $90 a barrel or $95 a barrel. As soon as the crude oil starts moderating, raw materials will moderate, the selling prices will come back, margins in rupees per kg remaining same, percentage margin will increase.

Okay. Okay, fine. And the second one is in Engineering Plastics segment, like what kind of momentum do you see going forward? And do you see any challenges from the rising crude oil prices?

See, crude oil prices affect the price of raw material. And like I've always said, it's a pass-through model. So raw material prices went up, we were able to pass this through. Margins remain healthy despite the increase. And when the raw material prices or the crude will come down, raw material prices will come down, our selling price will come down, but hopefully, the margins will remain the same. We are bullish about the Engineered Plastics.

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

Sir, firstly, you were speaking about the new capacities that are on the anvil to be on stream. So if you could give more color in volume terms and from which geographies are these capacities going to be?

Geography is India. The capacities are coming up in India. [Foreign Language] There are some coming in the North, some will be in the Central part of India, Western part of India. Total capacity increase expected, nameplate capacity increase is going to be about 130,000 to 150,000 tons. It's actual effect in terms of volume terms in next financial year in FY '23 should be in the region of 80,000 to 100,000 tons of additional capacity in practical terms.

And globally, how things are in the pipeline, what kind of capacity addition we are seeing on the global scale?

On the global scale, most of the capacities coming up are in China. So China is no threat to us.

Right, sir. If we look at the size of the market and the import that the country takes, how are the dynamics going to change post this expansion? Firstly, the incremental demand. And secondly, what percentage is imported in the country?

Very little is imported into the country. Imports are negligible. We don't have an import threat.

Okay. Then how is this capacity going to get exhausted? What is the incremental demand? And what kind of additional capacity then will be in the system?

Yes. So the additional capacity will get used up because of the increase in domestic demand, which is about 11% to 12% or 13% per annum. And plus global demand is growing at about 5% to 6%. So export will increase and it will get consumed with the increase in domestic demand and global demand.

I would request Mr. Kapoor to rejoin the queue for follow-up questions. The next question is from the line of Sachin Kasera from Svan Investments.

Yes, sir. Sir, one question regarding this CapEx and debt. So if you could just explain the Slide #30, total CapEx declaration is INR 587 crores?

Yes.

Yes.

And all of this for policy?

That is in the subsidiary Ester Filmtech, the project coming up in Telangana.

Wholly owned subsidiary.

Hello? Hello?

Yes, sir.

So the INR 584 crores CapEx is in the wholly owned subsidiary of Ester called Ester Filmtech, which is implementing the 48,000 tons per annum Film project in Telangana.

Okay. And you have given certain projections. This is basically your assumption of the revenue and profitability subsidiary will make in '24 and '25, right, sir?

Yes. Yes.

Okay. But which would mean that our debt will go significantly, right, to almost INR 500 crores, INR 600 crores post this plant getting commissioned?

On a consolidated basis, but EBITDA will also go up.

The EBITDA will also go up, no?

And sir, what type of assumption -- if I see, before this upswing started, the EBITDA margin used to be in the range of 15% to 17% in the Film business. Currently, they are in 28%, 30%, and we are projecting around 24%. So what gives us the confidence that -- and with so much of capacity coming in, this 23%, 24% margin you will be able to achieve?

Please understand there may be short-term volatility because of capacity. But in the medium to long term, and with the increased capacities and economies of scale coming into play, and the Telangana project, the cost of production is going to be much lower. So therefore, it will have a big impact on the margins for us.

Okay. Okay. But sir, any numbers that you can share with us over a 2-, 3-year period, what is the peak debt to equity that you are comfortable with, or debt-to-EBITDA you're comfortable with?

Sachin, we can talk to you on this offline. But it will always remain prudent. So let's say, it'll always remain below 3x -- much below 3x EBITDA, more like 2x EBITDA.

The next question is from the line of Rahul Nadkarni, an individual investor.

This is Rahul Nadkarni. I just had a few questions. One, in terms of the CapEx, plant, which is coming up, what is the current status? Because last time I think land leveling works were going on. So what exactly is the current status of that -- percentage progress.

Yes. So the project time lines are running absolutely on schedule. And we are way beyond the land leveling. The building a complete. Erection of plant and machinery have started. And we are absolutely on time in terms of commissioning of the project, which is in September, October of this year.

So basically, Q3 FY '23, the revenue from that plant should kick in?

Well, it will start.

I understand it would be a gradual scaling, but it will still start.

In Q3, we'll definitely start our production.

Okay. Got it. That is one. Second, in one of the questions which you answered, you mentioned the spread has gone up from around INR 46 to around INR 62. So if this team for the, I think, basic film which is there, so is it fair to assess that if the same momentum is to continue, you will see a drastic increase in the margins for Q4?

Q4 is also looking good up to now.

Okay. So like INR 14 per kg, which was mentioned, like from INR 46 to INR 62, around INR 16?

No January was lower.

Yes. So this is a February number. January was a little bit lower, INR 57. So like I said, Q4 is looking good, better than Q3 in terms of Film.

Okay. Okay. And for that, you mentioned that freight rates were also the reason. So from export point of view, how are the freight rates now? And have they reduced?

Freight is still extremely high. But the prices have gone up, freight rates have gone up, everything has gone up. I mean the world is feeling the pinch of inflation and higher rates and commodities across the board.

Understood. Got it. In terms of Specialty Polymers, you mentioned that the product mix has been one of the reasons for the tight change in the margins. So in terms of this Innovative PBT, which I could see in terms of drop in terms of volume, so this innovative PBT we had a contract renewal, which was supposed to happen. So has that contract been renewed? Or do the volumes continue from that player, irrespective of the contract?

No. So we have discussed with them. There is no need for contract renewal. They are buying, they've given us a forecast. And this year, our volumes will be similar to last year. And next year, we hope to almost double it.

But any specific reason why there was a drop seen on a year-on-year basis?

It's not really a drop. It is virtually the same.

If you annualize with the 9 months' data, you will get the same number as we achieved last year.

There's no drop.

In the 9 months, we have done 792 tons as against 1,042 tons last year.

But fluctuations are there.

Sorry?

annualized number remains more or less similar, but there will be constant fluctuations based on requirement of the customer.

And they are increasing our volume and they have given us a clear indication that next year's volume will be substantially higher than this year.

Is it possible to mention what is the FY '23 estimate volume for Innovative PBT?

2,000 tons plus.

2,000 tons plus. Okay. And what did we do in FY '21?

Close to 1,000 to 1,050.

So what has been a 9-month number for Innovative PBT?

792 tons.

792. So broadly, we are looking at doubling. That's what...

That's the indication that we've been giving.

Okay. And then just one last question on the Engineering Plastics plant. So when are we looking to complete that shifting to the new place which will improve the margin?

I think it should be over by about August. August, September.

'22?

Yes, yes. Correct. Land has already been acquired.

Understood. So again, for that also the Q3 numbers should result in improvement in margins for that.

Q3, you will start seeing the difference. Yes.

Okay. And how much is -- is it quantifiable? What broad level of impact it has?

I think just the shifting should improve the EBITDA margins by anything between 1% to 2%, just because of shifting. Because of saving in logistics cost.

Okay. And you were doing some CapEx also for the Engineering Plastic, if I'm not wrong. So where are you on that?

Shifting. The Engineering Plastic business is being shifted. That's the only reason we have CapEx involved. And then we are increasing capacity also by another extruder.

Okay. So when would that be completed?

That's what I said, August, September.

Okay. Okay. So the shifting and the addition of extruder...

They are both going to happen together.

Okay, they are happening together. Understood.

Yes.

So only shifting will result in a 1%, 2% increase in margins, and obviously, whatever extra you can sell because of the additional capacity, that would result in the additional revenue and margin.

Additional revenue and additional margin, yes.

Congratulations on great set of results.

The next question is from the line of Sachin Kasera from Svan Investments.

Sir, regarding the share of value-added products in the Film segment, if you could tell us a bit. I think in 2 years, between '20, '21 it came down, this year again it has gone up. So how do we see the share of value-added in FY '23 and for the commissioning of new plants what are the type of plan in terms of increasing share of value-added products?

Can you just please repeat once. I'm not very clear with your question.

I'm saying, the share of value-added products in the Film business has gone [indiscernible] has gone up 23%. With the commissioning of new plant, how do you see the share of value-added products in next 2 to 3 years in the Film business.

After commissioning of new plant, in the initial period, the new plant will start contributing to large commodity products, and slowly and steadily, the proportion of volume from that plant also will be shifted to value-added products.

Basically, this 23% is based on our existing capacity. Once the new capacity is added, the absolute number of value-added products will go up, but as a percentage, it will come down because you have to add if the denominator goes up.

Sure. And how do we classify for the value add, what is our benchmark for that?

The benchmark is a certain additional value add per Kg that we get. So let's say, if we're getting more than INR 25 per kilo, then it's classified as a value-added product over and above commodity sell.

No, because, sir, the commodity margin itself has gone up. So that's what is creating a bit of confusion. It is linked to the margin security that you get on commodity or it is on asset number?. Because the commodity margin itself has gone up significantly in the last 2 years.

Yes. So it is over and above that.

Over and above that. Okay. So it's always linked to the commodities. If commodity is 10 and 12, then it's value added. If commodity is 20, we should [indiscernible], something like that, right?

So the value added products have to bring in more than commodity margins at any point of time.

Okay. Okay. And do commodity margins fluctuate? So if commodity margins were to come down because of the extra capacity, will the margins, commodity, specialty and value add also come down accordingly?

No, not necessarily. It depends on raw material pricing. And in some cases, it is linked to commodity. In some cases, it is not linked to commodity. So in some cases, if raw material prices were to come down, some products, the absolute margins will also reduce, but still be higher than commodity. And in some cases, it is not linked to commodity, where the margins, if raw material goes down, will increase.

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

Sir, I missed the percentage of value-added Films in this quarter numbers and for the 9 months?

You want the absolute volume?

Volume and as well as the turnover. And potentially, sir, how the raw material basket has shaped up, as sir has spoken about raw material prices moving up significantly year-on-year. How the price movement has been quarter-on-quarter? And then another 2 small questions, then I am done.

First, I'll share the proportion of value-added Films in terms of volume and value in the total sales value of Film business. So in June '21, we did 20%, but whereas value was 28.5%. In September '21, again, we did 20%, but the value proportion was 28%. In this quarter, we have done 33% in volume terms and 31% in value terms.

Last word, 71%?

31% in absolute terms.

Okay. And volume terms?

28%.

28%. Okay. Sir, what should be the trajectory, sir, as sustainable ballpark numbers -- in what bracket are we expecting the value-added Film contribution to be, going forward?

Our target is to cut 30% in volume terms based on current capacity.

And sir, when the new capacity will be upstream, what kind of value addition are we contemplating there? And if you could give some more color on it.

See, once the new capacity starts up, our total capacity will almost double. So as a percentage, value-added proportion will fall as a percentage after the start up of new capacity. But over a period of time, our target is, again, to take it up to 25%, 30% of total volume.

Right, sir. No, so when we are putting up this new capacity, are we coming up with the extruder and the metrics what we have done earlier to introduce value-added segment or this will be a plain vanilla film.

No, no, no. We are putting up metallizer. We are also going to put up another coater. So this will help us to achieve our overall target of 25%, 30% of the overall capacity.

Okay. Sir, also congratulations on the revamp in the presentation for investors. Sir, the volume part and all are really making a lot of sense for us in understanding the numbers. So thank you to the team for making these very good changes. Very informative, sir. And sir, coming to the raw material part, sir, if you could dwell more into it, sir.

Raw material, as you know, I've already mentioned in my discussions here that raw materials have doubled over the last 1 year, largely on account of increase in crude oil prices. And crude oil, as you know, has gone from $40 a barrel to $95 a barrel today. And therefore, there has been a phenomenal increase in raw material prices. And we don't know, I can't predict where oil will go in the future, whether it will continue to go up, remain steady, or go down, but...

Only the breakup I'm looking, sir, for the raw material market breakup within MEG, PTA prices. What have been the price trends Q-on-Q, sir?

You want quarter-by-quarter?

Last 2 quarters comparison if you could give me. How the June shaped, how September shaped, and how December quarter?

Yes. Yes, September, the PTA was INR 66, then it increased to, in December quarter, INR 68.5, and currently, it is INR 72. MEG in September was INR 55, in December it was INR 60, and now it is currently at INR 61.

Right, sir. So these are the major components, sir, for this, and coming to the...

These are the biggest components.

Biggest components. Correct, sir. Sir, I missed your point when you explained that even on the higher volumes, the margins were lower for the Film segment. So what were the key reasons? Is it only the product mix part, which you have explained, or any other thing, sir? When we look at the volume numbers -- when we look at the numbers for quarter 2 to quarter 3, the volumes have dipped by -- I think so from...

No, there was hardly any dip. It was almost the same. Margins in absolute terms have improved, but as a percentage have gone down because of increase of raw material.

Okay. Right, sir. And sir, lastly, on our Engineering Plastic segment, sir, what is the update on the relocation? And are these numbers sustainable? Earlier, we were...

I've already answered that question that the relocation is going on well and it will be finished by August, September.

Okay. And these margins are sustainable over a period and now we are building on these margins. So if you take every quarter numbers, we are seeing improvement. So now on a longer-term horizon, what should be the base margin, sir, for this segment?

I think the margins -- we're expecting these margins to sustain over the short to medium term period.

Okay. Because, sir, if I can recollect, sir, earlier, it was I think so the shortage and because of the pandemic effect that we posted, we started posting these higher margins of 20% for this Engineering segment, plastic engineering. And at that time...

Effect of COVID is not gone as yet. The world is still facing the effects of COVID. Freight rates have tripled or quadrupled, raw material has doubled. I mean, if you see across the board, across all commodities, across all sectors, whether it's steel, whether it's cement, polymers, anything and everything, the prices have gone through the roof. So COVID effect has still not finished. COVID MAY finish very soon, I'm hoping, but the effects of COVID may last for a while.

Sir, just to sum up, quarter 4 as of now, barring I think for the January month, which Rustagi sir has also articulated, is shaping up better and we can look forward for similar or better volumes in all the segments for Q4 ending March 2022.

I will just say that Q4 is looking better than Q3, and that's it. I don't want to elaborate.

Yes. Only on the volume and the utilization level, sir, are we contemplating better volume for...

At the end of the day, what matters is profitability, and the profitability looks better in Q4 as of now.

Correct, sir. And lastly, sir, on the net debt number, sir, if you could share, what are the net...

Net debt is about INR 280 crores. Working capital and term loan put together is close to INR 280 crores as of 31st December '21.

Okay. And how much has been drawn for the new plant at Telangana, sir?

That will be a subsidiary.

Yes, so can you give me the net consolidated number, sir?

Consolidated, yes. Close to INR 500 crores.

Okay. For the project in specific, sir, how much has been drawn and how is the CapEx planned for the next year?

For the wholly owned subsidiary, we have drawn so far INR 250 crores. Foreign currency and rupee debt put together.

Okay. And what will we be closing this year, sir, for March, [Foreign Language]?

But I think you should not count the debt of the subsidiary because that's a plant under commissioning, that's work in progress. That should not be looked at this stage. The right time would be March of '23.

Okay, sir. But on a whole basis, sir, it will impact the number. Even in CWIP also, it will be a lumpy figure over a period of time when the things will get capitalized. But we will get a fair idea of how things are shaping up. That was the reason for this.

Fair enough.

Yes, yes. Thank you, sir, for answering all the questions. And thank you again for the presentation, sir. We are looking forward to a good trend to continue, sir.

The next question is from the line of V. Surendra, an individual investor. I would request you to unmute yourself from handsets and ask question. There seems to be no response from that side. [Operator Instructions] As there are no further questions from the participants. I now hand the conference over to the management for closing comments.

Thank you, everyone, for attending this earnings call for Q3 FY '22, and I look forward to seeing you for the next earnings call for the full year of FY '22. Thank you very much.

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