Mold-Tek Packaging Limited (533080) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Mold-Tek Packaging Q3 earnings conference call, hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shailee Parekh. Thank you, and over to you, ma'am.

Thank you, Ayesha. Good evening, everybody. On behalf of Prabhudas Lilladher, I extend a warm welcome to all of you for the third quarter earnings call. We have with us Mr. Lakshmana Rao, Chairman and Managing Director of the company; and also the finance team of Mold-Tek Packaging. Sir, I would like to -- I would request you to take us through the quarter numbers, post which we can open the forum for Q&A. Thank you. And over to you, sir.

[Audio Gap] conference call of Mold-Tek Packaging. Thanks for your interest in our company and its prospect. We are to inform you, in spite of very difficult times of economy, the company could achieve 8.19% volume growth in the Q3. Earlier 2 quarters, it was close to 16% volume growth. So with this -- for the first 9 months ending December, we have clocked a volume growth of 13.75%, which is a shade below what our expectations, basically because of very big slump in the month of September and October, which were unprecedented in the recent past. In spite of that, the company could make a 8.2% growth, which has given an overall growth of 13.75% in the first 9 months. Accordingly, the profitability also has gone up, and our profits are at PAT level, are up by about 15.8%. And overall profits are -- for the 9 months ended December, are up by 24% compared to the last financial year. And coming back to new additions, quite a few new clients were added. Prominent among them are Kellogg's and Bunge, that is Dalda company, Baskin Robbins and many other small- and medium-size oil and food companies. So I will be available for question and answers soon after these remarks, and I request the participants to ask me freely whatever concerns and ideas or our future plans, what we have. And then that way, we can communicate better. So over back to the -- Shailee for proceeding.

[Operator Instructions] The first question is from the line of Kaushal Shah from Dhanki Securities.

Sir, if you can please share the quarter 3 volume and revenue number for the segments, paint, lube and FMCG?

Yes. The quantums are like this, the quantity of sales in paints is 2,894 that is close to 51.5% of the overall sales volume. Lubes is 1,705, that's about 30%. And food and FMCG is 1,016, that's about 18.1% of the sale volume. If you want sale value, for paint is around 49%; lube is 27.8%; and food and FMCG is 23.5%.

Okay. Sir, if you can also share the IML and the non-IML?

Yes. IML sales have gone up again compared to the previous quarter -- previous year quarter 3, that is currently stands in value terms at 69% as against 63.8% last year. In terms of tonnage, it is 65.1% against 59.8%.

This is the IML, right? So what is...

That is IML. All label sales.

Okay. Okay. And also sir, if you can share the performance. We added 2 new plants for Asian Paints. So how is that performing? And your thoughts on the growth in these 3 segments: Paint, lube and FMCG.

Yes. Actually, but for those 2 plants, the paint industry also has clocked a negative growth for us. In fact, the new plants have added almost INR 39 crores in the 9 months period. Out of INR 330 crores, it's almost -- 12% of the growth has come from the new plant of Asian Paints. If you remove that new plants, the overall paint in this year other than these 2 new plants, stands at minus 7% growth. So thanks to the new plants, they are timely starting and -- production. We could get a sizable handsome growth in this year, apart from the growth of food and FMCG. Food and FMCG, in the year, in the 9 months of the period, in spite of the severe economic conditions and slow growth, we clocked a 34% growth on the food and FMCG numbers. So that -- and the new plants are the main reason for us to continue to grow at a decent rate of 13.75%.

Sir, recently, Asian Paints declared their numbers, and they have spoken about a decent volume growth number for Q3. So any particular reason why we were impacted and our older plants have not done well in terms of volumes?

That could be two reasons. One of the strategies of Asian Paints, which has worked for them and for us, is spreading their wings in Mysore and Vizag and capturing those areas with more efficient supplies and low cost manufacturing because those 2 plants got excellent subsidies and the price advantage of local transportation. Thereby, instead of material coming down all the way from west and maybe sometimes from north, they moved those 2 plants very strategically. And thereby, they could achieve decent growth. I wouldn't say great growth in Q3 if you see the volume numbers. Bottom line might have improved considerably but the top volume numbers growth is hardly good single digit. So -- but if you look at Asian Paints, per se, in our company's growth, even if you remove the INR 39 crores orders that have come from the new plants, we still grew in Asian Paints by almost -- we have done -- just same as last year. I wouldn't say there is a growth. But if you remove the INR 39 crores from the sales what we did, we are maybe 1% less in Asian Paints sales for the other plants. That means we can say, Asian Paints also has grown mainly because of the manufacturing -- start of manufacturing in the new plants of Mysore and Vizag. So that is also the same reason which has sustained our growth in this first 9 months.

And within FMCG, sir, if you can share, so we have a fairly decent edible oil segment, and we also have the nonedible oil segments. So if you can just share how these -- the FMCG category is doing for us?

Yes, categories wise, I don't have the details now. But food and FMCG altogether, last year, we clocked a 40% growth. And this year, in the first 9 months, it is 34%. And I hope to close this year also anywhere between 36% to 40% for the overall year in the food and FMCG.

Sir, any comments on our EBITDA growth. So that is basically because of the raw material price reduction? Or that is -- there is something more to it?

See as I told you, raw material price reduction is a onetime advantage. We pass it on either in a monthly or a quarterly basis. So this time, the EBITDA is 34.36 for stand-alone basis because I don't want to add RAK into it. And as against 34.1 last year. So there is a marginal increase in the EBITDA per kg because basically we brought some of the advantage, price advantage to clients and vice versa in the case of price going up. In spite of that, there is a marginal increase in the EBITDA. Now we are close to 34.36 per kg.

Okay. And sir, your comments on the growth that we are likely to see for the full year financial year, the current financial year '19/'20 and the next year, 2021.

Yes. The fourth quarter started very well. In the month of January, we have seen a spurt in sales, almost 22% to 23%. We might close the month as against January 2019, and the volume of February orders are also really heartening. I hope the fourth quarter, we might be in a position to achieve 20% volume growth.

Okay. And for the next year, sir, based upon your interaction with customers and the 3 segments, how do you see your overall growth for the company as a whole in the next year?

This year, with the fourth quarter clocking 20%, we will be achieving our basic objective of crossing the 15% threshold. Probably, we close the year at least 15% to 16% volume growth. Going forward, if the economic situation, even if it recovers marginally, we again aim to achieve 20% volume growth next year because the plants at Mysore and Vizag have now picked up steam. And the last 3, 4 months, the capacity utilization crossed 70%, 75%. And the indications from Asian Paints are positive. They're asking us to ready for the next year production capacity. So we are adding some balancing equipment. And by April, May, we might see a surge in these 2 new product -- plants capacity addition. And this year, if you notice, the plants have really taken up only in the last 6 months. Though the initial supply started in April, the real numbers started in the last 4 to 5 months effectively. So next year, that impact would be much favorable. And that's why I'm very confident of achieving a 20% volume growth next financial year.

The next question is from the line of Archana Gude from IDBI Capital.

Congrats on a decent performance against the challenging business environment. Sir, last quarter, we spoke about expanding our footprint in Kanpur. Can you just throw some light on that?

Not really. Not much has happened in that because of the general slowdown that was happening around -- even the client has the opinion to hold on for a while. So instead of starting the plant by March, probably, we may push it to June or third quarter of -- second quarter of the next financial year. Of course, we are supplying from Hyderabad, and they are bearing the freight cost. So by setting up there, we thought 2 advantages: One is, we'll be able to take more volume of their business in Kanpur, and we'll be able to reach the northern markets. But given the slowdown situations of general paint industry, especially other than Asian Paints, we thought it will be prudent to delay this by a few months. So most probably, the next year, middle only, we'll be in a position to start Kanpur operations in a small way and catch up by end of the financial year.

Okay. And sir, how much will be probable CapEx for this, next year?

It will be starting with a very small plant of around INR 8 crores to INR 10 crores investment. And that will be ramped up by '21, '22 because Berger is setting up a plant. They also postponed. They initially thought of '21. Probably, now their plans are to start commercial production in '22. So probably, we will also defer our second leg of expansion there till that time.

Correct. And sir, in the press release, you have mentioned that the company has entered in 2 industrial segment, agro and the growth finance, sir. So what kind of opportunity do we look into this segment in terms of volumes right now?

We think this is also a very good virgin market for us, a new segment, which we have never dealt with. We are finding very good response from some of these growth enhancers and fertilizers, micronutrients, aqua foods and many other sectors, which were earlier never touched upon are being now exploited. We have some big clients. I can't name them now because we are in the final stage of negotiation and first supplies can happen even in the month of Feb, March. So those are the new segments, which can add the numbers next year. The initial years, I don't expect more than maybe INR 25 crores, INR 30 crores of turnover coming from these segments, but they have a potential to reach up to INR 100 crores and INR 150 crores in the next 3 to 4 years. And another segment, which we are now entering is sweets and that is out of the Indian traditional sweet packaging. We are in talks with all the leading sweet manufacturers in the south and west, especially. And they have shown desires to some sweet boxes with IML decoration and already the design for finalizing in consultation with them. And hopefully, by this festival season, that is in June -- at least by June, we'll be introducing a range of packs that's 1/4 kg, 1/2 kg and 1 kg sweet packs. And we see -- that will be contributing probably, if not in the next financial year. In the year '21, '22, they can handsomely add to the numbers. And we are also in talks with the GRB Ghee. If you recall, last year, we introduced this square packs, and the sales of that have now reached about INR 3 crores to INR 4 crores a quarter. INR 2 crores in last quarter, but this quarter, we are anticipating fourth quarter maybe to around INR 3 crores. And next financial year, we are anticipating INR 25 crores of turnover coming from the ghee packs, including special packs we are developing for a very big ghee company in the west. So as I said 2 years ago, we always plan. We had to create some cash costs, which will, over a period of 2 years, will be contributing handsomely both to the top and bottom line. So this is the advantage of being in food and FMCG, where variety of segments can be attacked. And gradually, we can sustain a good growth momentum of 15% to 20% volume growth.

Right. And sir, this RAK, this capacity has been completely absorbed in the other plants?

Yes, RAK machines have come back long ago. They have come back as early as June itself. I think the last consignment has come in June, July. And now there is nothing there, but we have to continue flexi desk, paying hardly some INR 3 lakh as a annual rent per annum because we want to recover some juice from one client who is under litigation and amount about INR 1 crores is still held up there. So for that, we need to continue our presence as a flexi desk in RAK industrial area, which hopefully, we may have to continue with a nominal cost of maybe INR 5 lakh to INR 10 lakh per annum as against losses of almost INR 4 crores, we suffered last year until last year per annum. So there will be negligible write-offs from the next financial year. In the current year also, we have taken a write-off of almost INR 1.8 crores so far -- INR 1.9 crores. I think in this quarter, we have taken INR 58 lakhs. And first quarter, we taken INR 1.3 crores. And there would be another INR 1 crore, INR 1.2 crores. Sorry. Q4, in this year, we've taken INR 1.3 crores, and another INR 1.2 crores need to be taken by end of the financial year. Later, there won't be any write-offs in the next financial year. So you can see a big release in terms of consolidated numbers being much more healthier than what it is today.

Okay. And lastly, on the tax rate front, sir, what should we -- considering tax rate for this year and next year?

Sorry?

The tax rate for this year and next year?

Tax rate is now currently 25 point something, thanks to financial conditions.

Okay. So no -- like the standard tax rates that is what we should assume for this year and next year?

Exactly. That's it.

[Operator Instructions] The next question is from the line of Jatin Damania from Kotak Securities.

Just wanted to check on the feedback on the edible oil because if you look last quarter, we had seen a substantial jump in the contribution of the edible oil to the tune of INR 20-odd-crores. So if you can help us, given the data in terms of the 9-month contribution, and how do we see our growth going ahead? Because as per the press release, we have increased the capacity of the pack by almost 200%. So what is the growth that we are foreseeing? And what was the...

Yes, yes, yes. The 200% is almost achieved. In the first year, 9 months, the sales of edible oil pack has shot up from INR 13.9 crores to INR 26.4 crores. And we hope to close this year somewhere around INR 36 crores, INR 37 crores. That is almost from INR 18-point-something crores last year to INR 36 crores, INR 37 crores, about 100% growth.

Okay. Sir, that means we are expecting near about the INR 10 crores of the financial addition in the last quarter from the edible oil only?

Yes. INR 9 crores to INR 10 crores, yes.

Yes. And sir, secondly, now since -- you have both the facilities like Mysore and Vizag is currently operating at 75%. And probably, it will ramp up to another 80%, 85% by end of Q4. Are we expecting any new expansion going ahead? Or what is the volume drivers from FY '22 onwards? Because '21, will expect the company to report 20%. But what about 2 years or 3 years down the line, where do we see growth coming from?

See, until next 3 years till 2023, '24, that is 5 years from last year, that is from '19 to '24, we have a gradual incremental capacities to be created for Asian Paints alone. That itself will be a growth driver of about 10%. If you look at the capacity being 4,500 tonnes or maximum, say, 5,000 tonnes now, has to become 14,000 tonnes by '23, '24. So we are talking about a growth of 14,000 tonnes on a base of 20,000 tonnes last year. That means we are talking about a 70% growth coming up in 5 years. So if you take it on a CAGR basis, it's close to 10%. So out of next 5 years growth, 10% of the growth is expected from Asian Paints new plants alone. And if you notice our food and FMCG, the broadening of the product categories from ice creams today to edible oil and then to ghee. And then we are now talking about sweet boxes, and then we are entering into nutritional and fertilizers and micronutrients. On that is -- now recently, to tell you another breakthrough we got is the detergents market. In detergent, 4 kg pack, 2 kg pack, we have started giving our rectangular containers, and they are well accepted by couple of leading players in west. And now we are in talks with another player in Lucknow -- that's Kanpur Lucknow area. So with these packs getting adopted by other than edible oil and regular food companies, we notice new segments to exploit. And at least a 10% growth or 8% to 10% growth can come from these new areas. Considering the stagnant areas of lubricants and remaining paint industry, at least grows by another 3% to 5%, achieving a 20% volume growth until '23, '24, is not a long far cry. Only thing is, if there is a kind of a depressive environment like what happened a few months ago or we are still coming out of it, I guess, we can positive -- we can positively look forward to a 20% growth for the next 4 years. But if there is any kind of such a depression happens, we'll not get affected that bad. Probably, we may have dipped down to 14%, 15% of growth.

Okay. So that was a detailed answer. Sir, just wanted to go back to your third quarter numbers. Sir, as you have seen that in paint segment ex your Mysore and Vizag, we had seen a 7% de-growth. But sir, what happened to food and FMCG segment? Because there was also a degrowth in terms of the revenue contribution in food and FMCG. Have you seen any cancellation of the order or the postponement of the -- in terms of the execution of -- delay in the execution of any new orders in FM -- food and FMCG segment?

Yes. In food and FMCG, there is no reduction. It's stagnant. I agree that there's a stagnance in the quarter, particular quarter, but if you look at the 9 months, it grew by around 34%. Basic thing is, in the months of January to Feb, you can say, Feb to June, the ice cream sales shoot up 4 to -- 5 to 6x than the regular volumes. So during the winter, the ice creams and curds and yogurts or whatever you name it, and all the frozen foods quantum falls very drastically during the winter. So far, our major food companies are ice cream, frozen foods, dairies. So now we are expanding more into other areas like sweets and ghee and other perennial demand products like micronutrients and other products what I just mentioned. So during the third quarter, the stagnancy is mainly because of dropping those and general slowness in the economy. And new products that have been introduced are just catching up now, especially the ghee packs, what we introduced last year. And they will show good numbers probably next year.

Okay. Sir, that means that can we extra because if you look at the last 3, 4 quarters, we are doing a run rate in the range of INR 24 crores to INR 26 crores in food and FMCG segment. Is it possible to cross INR 30 crores in the Q4? Or probably, it will take some more time to cross that number because you are...

We are aiming at INR 30-plus crores in Q4. In our projections, recently, we concluded in the first week of Jan, we put a target of INR 30 crores in Q4. Let's see. There are indications it could be happening.

The next question is from the line of Ankit Merchant from SMC Global.

Yes. While most of my questions have been already answered, but I just have a few questions. One is related to the promoter's holding. So in this particular quarter, the promoter's holding has slightly gone down. So what is the reason being, sir?

If you notice, I have put some internal message to some of the promoters who have pledged their shares for their various personal requirements to clear the pledge. So if you notice, the pledged shares has come down considerably. I don't have the exact numbers, but from some 12 lakh to 14 lakh shares. Now currently, the pledged shares are down to 7 lakh shares, somewhere around that. And in the process, I even told them whether they can sell a small quantity if they require. But to clear the pledged shares because that is causing unnecessarily negative remarks in the markets. So that is the only reason. Whoever promoters have their pledged shares, they have sold some quantities to clear their pledge and that is evident from the reduction in the pledged shares.

So is it safe to assume that most of the pledge shares are now already...

Maybe another -- maybe 1 lakh shares might come out because I am insisting on a zero pledge by April. So most probably, if at all, the promoters who have pledged to the shares, there are 2, 3 of them. They are -- no, no, not the core promoters, but they're the list of promoters. So my internal instruction to them is to, somehow or other, they clear the pledge shares and make it a zero pledge share company by April.

So would it sustain at this level, the promoter shareholding? Or any...

Yes, yes. It will remain at this level.

Sure. Another question is related to the debt. So if you could highlight what has been -- what's the current debt level? And what is the cost of funding or -- with the cost of debt for us?

Now I think -- what is our credit rating reflects are? We are A+ rated company, so our cost of funds is below 9%, somewhere around 8.7% -- 8.3% to 8.6%.

Yes. And the quantum of debt for the...

Quantum of debt is not going up. It is stagnant in the long-term debt. But in the working capital, as the sales are growing, we are gradually using little higher limits. If you want exact numbers, you have -- long term is INR 34 crores, including the RAK repayment. And the working capital limits are around 76 -- our limits are around INR 90 crores, but we are using around INR 76 crores.

Sure. My -- another question is related to the ex Mysore and Vizag facility. So what is -- at what current utilization are we operating at in those plants? And even for Vizag and Mysore, how is the utilization going on? And going ahead in the future, what is your expectations while it is for the next year for each of the facilities, be it Vizag, Mysore, and ex of Vizag and Mysore?

Yes. This year so far, in the first 9 months, we did 1,600 tonnes in Mysore and only 840 tonnes in Vizag. Whereas, annual rated capacity is around 3,000 tonnes. And I hope next year, full year, I'm talking about, this is for 9 months, 2,500 tonnes against 6,000 tonnes is what we did. And I hope, this year, probably, we will end up around 3,600 or something like that. That is about below 60% capacity utilization. And next year, we are ramping up this 6,000 to 8,000. And in that 8,000, I'm hoping at least 70% capacity utilization. That is from 3,600 tonnes, we hope to reach 5,600 tonnes next year for these 2 plants. So a 10% growth on our base of around 22,000, 23,000 tonnes is what we are anticipating to come from these 2 new plants. And apart from these 2 plants, the average capacity utilization for other plants is -- remains somewhere around 70% only, 71% maybe.

Okay. So by -- if -- my question is, so by FY '21, we would be at the peak utilization as things improve if the microeconomic situation improves and the volumes improve. So by FY '21, we would be reaching at about 75% to 80%. So would that trigger a new round of CapEx for us?

There will be a 75% capacity utilization next year is my guess too, because now the capacity is 37,000 tonnes. And we are anticipating to add another at least 2,000 tonnes at each -- 1,000 tonnes each at Vizag and Mysore, taking the overall capacity to 39,000. And there will be definitely another 2,000, 3,000 tonnes of value capacity addition in the existing plants, where already capacity utilization came close to 75%, 80%. We better add additional capacities to make it on-time deliveries and ensure some hikes, spikes in the demand. So probably, the current 37,000 tonnes as of now would reach 41,000, 42,000 by end of the next financial year, that is 2021. So a 5,000 tonnes investment for that would be in the region of INR 15 crores to INR 20 crores. So that will be easily tackled by our internal cash generation. This year, the cash generation is anticipated to be INR 60 crores as against which we are including dividend outflow. After affecting the dividend outflow the cash flow will be in the close to INR 60 crores, which was INR 35 crores last year. And this year, it will be close to INR 60 crores. And the effects -- I mean the investments in the current financial year are close to INR 42 crores. So there will be net cash flow. And probably, we can see even reduction in the working capital limit utilization or at least stagnation, in spite of a projected 20% growth for next year.

Sure. Sir, and the tax rate will remain at...

25%, yes.

25%. So in...

25-point something.

Sure. And this particular quarter, we were at 20.9%.

Sorry.

This particular quarter, I believe, we were at 21%.

This quarter, it is less than 25%, is it?

Yes. It is less than 20%, 25%?

Why?

Some differed tax advantage has come in this quarter beginning. That's why, it is around 23%. 22%, 23%.

Okay. Okay. So next quarter onwards, would it be back again at 25%?

Back to 25%. Yes.

Okay. Okay. And my last question is: one, related to how is the Cadbury models sale going on?

Actually, one of the points I failed to mention when the last question was asked about food and FMCG, lack of growth in this quarter. The one of the main reasons is though the other products have increased, Mondelez numbers have come down. So that is one of the reasons which has impacted the food and FMCG sector growth. They are picking up now, again. I think they have introduced a new range of toys in their packs, Jungle Book or something in January, and their numbers are slowly picking up. In Feb, they have given a decent quantum of projection. So one of the reasons of last 6 months dip in food and FMCG growth is -- has come from reduction in Mondelez volumes.

Sure. And how is the HUL products?

Sorry?

HUL...

HUL numbers will shoot up now because they go very slow during winter like any other ice cream company. Now they have given the huge predictions from January middle onwards, and they have added 2 more products. Last year, they took only 750 ml. Now they have added 500 ml and 125 ml packs. So there will be -- 3 packs will be supplied during this summer. And I'm glad to inform you Baskin Robbins also added us as a main vendor, starting from January. So small supplies were made in this month. And the numbers are expected to shoot up in the next 6 months.

Just one last question, if I could squeeze in one. We were also in talk about the Zomato and Swiggy for their packaging. So any particular movement on that front?

Which one, sorry?

I believe we were in talk with Zomato or Swiggy for the packaging of food and items.

Yes.

Yes. So any particular signal...

No, Zomato and Swiggy, we have made some packs as an offer, which were having tamper evidence and other features, but I think it's not fitting into their budget as of now. As you know, when the situation is a little depressed, they won't try anything new in the market, but they're in touch with us. And thanks to their efforts, we developed a range of hinge packs, which are getting accepted by dates and Lion Dates has placed orders on it, decent quantums. And some other product applications are also, we are finding for this pack. But from Zomato and Swiggy, things are yet to start off. Even in Pepsi and Coke, where we proposed to develop the sippers. Those projects are also kept on hold in the last 6 months.

[Operator Instructions] The next question is from the line of Richa Agarwal, Equitymaster.

Most of the questions have been answered. Sir, in the last call, you had mentioned that you'll be going with the flexographic printing by Jan because of which the EBITDA margins should improve. So just wanted to get an idea, has it started? And what kind of improvement we are looking at?

The flexographic mission supposed to be dispatched from Italy on -- in this week, got postponed. It's leaving Italy on 10th February -- 10th or 12th February and reach here by first week of March. So there is a month delay, you can say. It's mainly because of the manufacturer's delay in offering the trial. He was supposed to have given the trial by 20th. He has requested 3 weeks extra time and requesting our team to come there on 10th of Feb. So if they go by 10th and clear it around middle of February to start and can be installed by first week of March. But I'm confident those numbers only reflect in the next financial year, obviously. Because by the time the mission gets into commercial production, it will be end of March. And...

Assuming everything else remains same, what kind of EBITDA per kg improvement are we looking at?

At least, INR 1 is what I'm guessing. So from 34 level, we should see 35 as we gradually convert all the jobs onto this new flexo machine and improved volumes also should add to the EBITDA numbers.

And once it is introduced, how much time does it take for the entire conversion to be?

About 3 months. We'll immediately start off from middle of March. But to convert from roto to flexo, almost 200, 300 jobs, it might take about 2, 3 months. So impact will be felt more in the second quarter. But there will be a gradual movement in the cost reduction and speed of -- our agility to handle new product development will improve right from March.

Okay. And sir, the new segments that we are entering into like agro and micronutrients and the detergents, the EBITDA margins are in the range of INR 33 to INR 35 per kg? Or is it...

Yes. They are not higher like small food products. They are medium range. I would say, in the region of INR 33, INR 35, yes.

The next question is from the line of [ Rupen Masalia ] from [ RN Associates ].

My question is pertaining to the composition of overall business in probably next 3 to 5 years. Like currently, food and FMCG accounts for approximately 24% of total business. So in next 3 to 5 years, where do you see this pie growing? And with the higher focus on food and FMCG, what would be the CapEx intensity, overall EBITDA margin and capital efficiencies in the form of return on capital employed, ROE? So if you can throw some light on that.

Yes. We are anticipating to double our sales in the next 3 to maybe 4 years. And one area of positive sign is food and FMCG, from currently, let's say, it ends up this year at INR 100-odd crores, maybe INR 105 crore or INR 110 crores, can easily go up to INR 250 crores to INR 275 crores in the next 4 years. That means, while the overall growth may be doubled, we may see 2.5x growth in food and FMCG. Basically, because the paint industry side, our numbers, which are around INR 190 crores last year, will be more than doubling because of this 2 plants will be almost 4x expanded by that time. So current 6,000 will become -- sorry, 14,000 tonnes. So that's about 2.5x growth in Asian Paints numbers. So while the percentage might remain at -- from 25%, it may go up to 30%, 33%, but the numbers per se, in food and FMCG, are expected to go up by at least 2.5x in the next 4 years. So the percentages can change from currently 23% to somewhere close to 33% in the next 4, 5 years because paint numbers also will shoot up.

Right. Right. So sir, like about the CapEx intensity for paints business, lubes business vis-à-vis food and FMCG business.

Yes. Paint, the intensity is, unless it is a greenfield plant. Actually, the greenfield plants, even if it's a food industry or a paint or lube industry, the costs are overall same because in the paint industry, you need bigger machines and more space, but you don't need very hygienic conditions as you require in food industry. So the cost per tonne will be lower in paint industry. But if you look at the value addition, they will work out similar for, let's say, INR 1 million of value addition, whatever investment is required in paint industry and food industry will be more or less same. That way, capital intensiveness is similar if you look at the profit as a motive. But if you look at only as a quantum or revenue, intensity is more in food and FMCG.

Right. Right. And final, is around EBITDA profile because food and FMCG is predominantly IML-led packagings vis-à-vis the traditional use for paint and lubes. So in that case, naturally, per kg EBITDA would go up and so would be the return ratios, capital return ratios. So is that correct?

You are correct. The EBITDA margins in food and FMCG are much higher per kg basis, if you look at. Sometimes, they are as high as 3x that of per kg of a paint and lube industry in some of the products. There are cases where we -- while the -- our overall average still is INR 182, that is for the paints and other industry, the sales for small cups is as high as INR 300. So there is a much bigger value addition in smaller cups. But again, the volume you sell in quantum is lower. So overall, it is better to have more and more of food and FMCG business because it will contribute higher sales and -- I mean, higher profitability.

The next question is from the line of Kaushal Shah from Dhanki Securities.

Sir, one -- a couple of clarifications. You shared the volume numbers for Mysore and Vizag. If you can also share the revenue number for these 2 plants? Sir, what revenue did it do in the 9 months?

Revenue in Mysore in the 9 months is around much higher. It is around INR 25 crores. And in Vizag, it is INR 14 crores.

Okay. And sir, you also shared the capacity expansion plan. You said, I think if I understood correctly, we are going to increase capacity from 6,000 to 8,000 in both the plants. So that's a total increase of 4,000 tonnes?

No, no, no. Total increase of 2,000 tonnes.

Okay. And what will be the CapEx for that, sir? And if you can also share the CapEx for the next year, which is financial year 2021. What would be the total CapEx? How much...

We are framing up the budgets for next year's CapEx, but it will be much less than INR 42 crores what we invested in this year and INR 81 crores we invested in '18, '19. So I hope it will be in the region of INR 25 crores to INR 30 crores because these 2 plants have to be expanded. That won't take much because there we'll be adding mainly the machines, that molds, which will be hardly INR 4 crores to INR 6 crores, but more investment might come if we go ahead with the Kanpur plant as planned. If we defer that, the CapEx may be limited to INR 120 crores next year. But if we go ahead with the Kanpur plant, which will decide in the course of the next couple of months, then probably it will shoot up to INR 13 crores -- to the region of INR 13 crores.

The next question is from the line of Shailee Parekh.

Sir, I have a couple of questions. One is on the -- is a follow-up on the CapEx question that was just put up to you. So just to clarify, to go from 37,000 tonnes to 41,000 tonnes, we are going to be spending about INR 15 crores to INR 20 crores. In case if we do decide to go ahead with Kanpur as well, this number will stand revised upwards to about INR 30 crores. Am I understanding this correct?

Yes, INR 30 crores. And then the capacity might go up to, say, 43,000 tonnes.

Okay. So 2,000 tonnes more?

More, yes.

Okay. So that was my first question. My second question was, sir, if you can tell us that for the paint segment as a whole, what kind of growth, therefore, are we looking at in FY '20, given that ex Asian Paints, there has been a degrowth. If I remove the volumes of Vizag and Mysore, there has been a degrowth in volumes, which even you have mentioned. So for the year as a whole, what kind of growth can we still look at in paints? Would it still -- do we still end at about 20%?

We had 20%, thanks to the new plant. If that is not there -- you are asking that question? Or do you feel...

Yes. I'm just asking, sir, paints volumes as a whole. What kind of growth are you looking at by the end of FY '20?

Yes. We might end up somewhere near the same 20%, 21% in paint industry because of these 2 new plants are now running at almost 75% for the last couple of months. And the projections for Jan, Feb, March also look very healthy. So it might improve a bit from, say, 21% to 22% overall.

Okay. And my last question was, sir, if you can also call out, what has been the revenues from ice-creams in 9 months of this fiscal?

That I need my assistants to provide you the data. I can ask Rambabu to provide you separately...

No problem. I'll be in touch with Rambabu later then.

Sure. Sure.

And sir, my last thing was, is it -- is there any possibility for you to even broadly break down -- I mean, of course, I do understand that 6,000 tonnes is dedicatedly for Asian Paints and for the paints industry. But of the remaining 31,000 tonnes, would it be possible for you to break down the capacity between paints and food and FMCG and lube? Or just paints, lubes and FMCG on the other side?

Yes, yes. See basically, the food and FMCG weight wise, they are much lower. So even today, last full year, we have done about 3,400 tonnes out of 21,000 tonnes. So I would say that the capacity is fungible to some extent, say, out of 31,000 tonnes. Though, we have dedicated as a 6,000 tonnes maybe as a food and FMCG as of now, another 2,000, 3,000 tonnes can be fungible from the machines, which are making the products for paint and lubes by changing the molds and robos. We can use those molds. So unless we see a product range is being introduced and that's getting good tractions on the market, there is no need to create facilities in the food and FMCG. So -- and our management philosophy is also to procure the machines as and when the capacity demands are increasing. And fortunately, in our industry, there is always a 4 to 5 months lead time. If somebody want to introduce a new range of products, like, say, for example, Levers or GSK somebody has decided to go for new set of packaging, they give 5 to 6 months' time because the molds themselves take 4 to 5 months to develop, and their field trials will take couple of months. During that period, the expanded capacities can be created parallelly. So -- but for last 2 years of expanding in new greenfield locations, otherwise, our capacity calculations or creations can be as in line with the demand growth.

Right. So it would be fair to say that as of now about 8,000 tonnes is what gets utilized towards food and FMCG, of which, like you said, 2,000 tonnes is fungible. And then, the balance 29,000 tonnes, I mean, is what gets -- including Vizag and Mysore, is what is used towards paints and lubes.

That's a fair estimate.

Okay. Great. That's all from my side. Ayesha, we can continue with the queue, please?

The next question is from the line of Akhil Parekh from Elara Capital.

Sir, my question is on the -- this Mysore and Vizag plant. You mentioned that we did almost 1,600 tonnes in Mysore and around 840 tonnes in Vizag while the sales were around respectively INR 25 crores and INR 14-odd crores. So if you then just work out sales per kg, it comes at around INR 156 per kg from Mysore and INR 166 for Vizag, which is in line with our non-IML per kg -- sales per kg data. But if I remember correctly, you have said that the new plants will go on HTL and the realizations will be better than -- and in line with IML. So I just couldn't understand why there is a discrepancy in the sales per kg number?

No. I think whatever the numbers you said, INR 156 per kg and INR 166 per kg is still better than the prices what we realized in other plants because the raw material prices have fallen drastically in the last 6 months from average price of INR 90. For the last full year, it is INR 94. It is now -- the 9 months average itself is INR 89. And last 3 months, it is INR 82. So that is why you might see that the sale price is also lower. But it is still better than the overall average of our paint sales.

Got it. So it means the mix has not been diluted. It's just purely a function of low raw material prices.

Low material cost, yes.

Got it. So that is helpful. And I think that is why our blended sales per kg also is on a lower side basically for this quarter.

It was down from INR 184.

Correct. From INR 185 to INR 178 basically.

INR 178 or something like that, yes. Yes. INR 179 now. INR 184 to INR 179. But if you look at the EBITDA, it is still better. It was -- from 33.87 it has gone up to 34.36.

Correct, correct, correct. That helps. And sir, one last question on this edible oil and ghee estimates, which we -- which you had told last quarter around INR 71 crores, basically, which we should expect for FY '20. But now if we look at the edible oil, you are saying we should be doing around INR 36 crores for entire year and ghee should be around INR 24 crores, right? So roughly comes out around 60 odd...

Ghee, INR 24 crores is what I'm projecting next year. This year, it will be close to INR 5 crores, INR 6 crores. INR 20 crores will be next year, 2-0.

Okay. Okay. So roughly, basically, INR 40 crores, INR 42 crores from edible oil plus ghee basically for FY '20?

Yes, yes.

Then this is lower than -- much lower than our estimate, sir. Because last quarter -- till last quarter, what we were guiding was around INR 60 crores to INR 70 crores basically from these 2 segments.

Yes, yes. There is a considerable dip in volumes in the last 6 months, mainly in the edible oil segment. Actually, we were hoping that we can even cross INR 50 crores turnover in edible oil alone, INR 25 crores to INR 50 crores, but that's going to be around INR 36 crores, INR 37 crores. There are considerable reasons. One is the slowdown in the economy and general resistance to save costs and not to try something new. And second is, what they say, I don't know how far it's correct. In Gujarat and western part of India, the oil field production and oil availability of raw oil has come down considerably in this third quarter, that is October, November, December. And the filling lines are, I mean, kind of idle in the considerable times, especially in Indore and that region, they say there is no lack of -- there is no supply of basic oil for them. So general, when the depressive things go on, people will be not testing on the new tax and spend less on advertising. All this also impacted conversion into our sales. But going forward, we still see new states are getting added. Now in this year, we added a couple of big clients in Rajasthan, couple of them in U.P. and recently one in Orissa. So slowly, the spread and acceptance of these trade fuels is increasing in the market.

Got it, sir. Got it. This is helpful. Sir, just one clarity on CapEx number, which is INR 20 crores for FY '20, right, roughly?

Without considering Kanpur plant, it will be in the region of INR 20 crores to INR 25 crores. If we consider Kanpur, it will be INR 30 crores, INR 32 crores level.

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Lakshmana Rao for closing comments.

I thank each and everybody who has participated in this conference call and shown interest in our company and its future prospects. I also thank Shailee of Prabhudas for arranging this conference call and to the convener. Thank you, everybody, and wish you all the best in the coming quarters. Good luck. I hand over back to Shailee for her comments.

Thank you, everybody, for joining in on the call today, and thank you, Lakshmana, sir. It's always a pleasure to host you. Good evening, everyone.

Thanks. Bye-bye.

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