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

Ladies and gentlemen, good day, and welcome to the Mold-Tek Packaging Limited Q3 FY '21 Earnings Conference Call hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Navalgund from Nirmal Bang Equities. Thank you, and over to you, sir.

Yes. Thanks, Mallika. Hello, everyone. I welcome you on behalf of Nirmal Bang Institutional Equities on 3Q FY '21 Earnings Call of Mold-Tek Packaging Limited. We have with us Mr. Lakshman Rao, the Chairman and Managing Director of the company, along with the finance team at Mold-Tek. So without further ado, I request Lakshman sir to start with opening comments, post which we can open the floor for Q&A. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. Thanks for your interest and participation in this conference call of Q3 and 9 months results. I would like to inform you that the company has performed pretty strongly in this quarter. It is one of our best quarters so far, with a volume growth of 36% in sales that resulted in a robust profit increment by 70%. In a nutshell, we have recovered the entire deficit due to the collapse of sales in COVID period of Q1, the core COVID period, which was more than 40% drop in revenues, which we recovered fully and ended up with a 1% overall sales volume growth for the 9 months period and also -- profits also more or less same as that of the last 9 months period. So this quarter has helped us to completely wipe out the deficit of Q1. And going forward, the Q4 also looks pretty strong. It started on a very strong wicket, and we hope to end the entire year on a higher single-digit growth percentage of close to 8% to 10%, if plans go as per our predictions. And going forward, we have many new initiatives which include pumps and also QR-coded IML development, and new packs that have been launched recently for food and FMCG and the new adhesive packs being developed for one of our major clients. This will be adding for growth triggers for the coming quarters. And our plants are also being expanded. All the 3 plants of Asian Paints, which are at Satara, Mysore and Vizag, as per the plans given by our client, we are expanding those capacities. Some of the machines have been received. Some of them are coming in March. And by April, those Asian capacities will be available. So future looks strong and bright provided there is no repeat of this pandemic or any such calamities. But for that, the company is well positioned and diversifying its product range to enhance the return on capital. The EBITDA margins are steadily growing up. In spite of difficult year, I'm glad to inform the per kg EBITDA has gone up to INR 36.46 in this quarter. And in fact, the raw material price have shot up by more than 15%, 20% during this quarter. But we could effectively pass on this price increase to clients and could able to get the pricing adjusted for the enhancement of raw material price. The -- for 9 months, the EBITDA margin is still better than last year at INR 34.47 because it was very low in the Q1 at INR 25. If you take only this quarter in isolation, it is up from INR 34.36 to INR 36.46, about 6% improvement in the EBITDA margins. And even the net profit margin has gone up to 11.24% from 8.7% last year. So it's more than 28% increase in the margin as such. So this is the basic information which I want to share. And definitely, we will discuss more in the question-and-answer session. I now transfer the call back to Mallika to start the question-answer session.

[Operator Instructions] The first question is from the line of Karan Bhatelia from Asian Market.

Congratulations for a good set of numbers. Sir, can you share the numbers for IML, non-IML volumes?

Yes, IML volumes are more or less steady at around 63%, which was the case in the last full year; and non-IML is around 37%. In terms of value, 65.4% from IML and the balance from non-IML products.

Correct. And similarly, for paints, lubes and FMCG, your value and volume?

Paints have gone up actually 55.74% as against the last year full year numbers of 52.4% or do you want to compare with Q3?

Comparable number.

49% last year Q3 has now become 55.7%. And 28% of lubes has come down to 22.5%. And food and FMCG from 23.7% to 21.7%, that is quarter-on-quarter.

23.7% to now?

21.7%.

This is in terms of value?

In terms of value. In terms of tonnage, it was -- 51.5% has become 58.9% in the case of paints; in the case of lubes, 30.4% has become 24%; and in case of food and FMCG 18% has become 17%, value wise.

Value, you've already given, sir.

No. Value is percentage-wise. What I've given in the first time is the quantity -- sorry in Rupees -- sorry, you're correct. What I gave now is tonnage. 18% is -- has come down to 17%.

Okay. Okay. Got it. Got it. And sir, can you throw some light on the new CapEx, that is per pumps at monthly average -- production average of 7 million, 8 million pieces, what could it do on sales? And are the margins better than the IML portfolio?

Yes, when the capacity utilization reaches a reasonable level of 70% to 80%, obviously, the profit margins will go up, and they are much higher than the current even IML pricing. However, to reach that, probably it may take a couple of quarters. Thankfully, we have already have clients like Reckitt Benckiser, Wipro, Godrej, Asian Paints confirming their volumes, and pumps are under various levels of testing. Actually, Wipro and Godrej has taken a trial lot also. Volumes will start picking up slowly from Feb and March. But by April, I hope it will be definitely a big contributor, a reasonable contributor. And by end of the year, we see those capacities getting occupied at least 75%, 80%, yielding a total sales of at least INR 30 crores for the next year and probably INR 50 crores to INR 60 crores for the year '22-'23.

And sir, what realizations are you targeting in this maybe on a per kg kind of basis?

The pumps pricing is -- mainly, there are 2 things, not only the raw material but also you have consumables like spring and washers, which we buy. Considering that also as a raw material because it's also kind of a variable cost, the -- in a price -- I'll just give you an approximate example of INR 6 sale value, there will be INR 2 of raw material and consumables. So you can see the rest of the INR 4 as a value addition which has to take care of depreciation interest and power and labor. So we -- it has a much better contribution than other products. But for the numbers to reach the size, it might take some time. Once it takes volume like, say, 5 million to 6 million or 7 million pieces a month, it will be contributing much higher than any of our products as of now.

Right. Right. Right. So apart from the plants that you mentioned in the previous con call, any additions we've seen lately?

Sorry. In what you are asking additions?

Pumps, pumps. Any new clients that we have added lately?

No. As of now, it is basic pumps of 24 mm and 28 mm. But we have also plans to enhance the product range with 34 mm for shampoos. We are talking with 1 client for that development. Even if the development is cleared by them, it will take about 5, 6 months to start that product. And we are also talking with another client regarding triggers. So as I told you in the last quarter, once we enter into the pumps, it opens up an arena of opportunities, which can be trigger pumps, which could be small spray pumps and then shampoo pumps, hand care and personal care containers. So it will open up a whole lot of opportunity for us. This is just an entry, like what we did in IML some 7, 8 years ago, an entry into a different high-end product range, which can lead to a sizable business in the coming years. It is not a 3 months', 6 months' time period. It will take at least 1 year or 2 to make this at least some couple of years, we can reach some INR 100 crores kind of segment we can create.

Got it. Got it. And sir, 1 last question, rotating around the pump segment only. So the total CapEx here is somewhere INR 30 crores, INR 35 crores?

No, no. In the pumps, it is only -- INR 15 crores is the CapEx. This year, we ended up with almost -- we'll be ending up with almost INR 50 crores CapEx, including some of the machinery which are received late in the service period which fell in this current year. So in this year, we'll be ending close to INR 50 crores.

Total CapEx you mean?

For the pumps, it's only INR 15 crores, 1-5.

Including the working capital requirement?

Sorry to interrupt, Mr. Bhatelia. Sir, there is a disturbance coming from your line. I would request you to mute your phone while the management answers your question.

So it's excluding working capital. I'm talking only about the direct plant and machinery, buildings.

[Operator Instructions] The next question is from the line of Ashish Kacholia from Lucky Investment.

Yes, sir, congratulations on a good set of numbers. My question is basically about the pumps business that you're entering into. In the In-Mold Labeling business, we had some technology advantage. Do we have some technology advantage in this business which can enable us to sustain the higher margins and value addition in this business going forward? Or other players can also enter and reduce the value in this segment?

No. There's certainly a lot of valuation in this segment there also. It's not just buying molds and producing...

Sir, we can't hear you clearly. Can you just speak a little bit into the mic, sir?

Yes. Can you hear me now better?

Much better, sir.

Yes. Actually, this product also is a little technically complex product involving very precision molding and assembly. So none of our Indian present pump manufacturers have used automatic filling lines. There are some Indian-made semi-automatic machines for assembly, but we went ahead for fully automatic and including online testing machines. And then in the molds, there are a lot of complexities that involve -- these pumps will be checked for 600 mercury pressure for leak resistance, and most of the pumps that are there in the country today fail at that level. So we make sure that the pump components are designed in such a manner that we have complete control on the quality of the outcome. And going forward, widening the product range, utilizing some of the components of some extra capacities in a particular pump, let's say, in a 24 mm cap pump, we can utilize a couple of components of 28 mm also, thereby reducing the number of molds and hence investment. These kind of technical tricks of the trade are not available with each and everybody who doesn't have tool room capacities and abilities to design their own product. So that way, there is a -- I mean kind of a threshold for competitors. And there is also -- widening of the product range is very important, and able to give volumes is another area in pumps we generally notice. Even if you use a couple of -- I don't want to name the brands, the top brands in handwash, if you -- you will notice that the pumps don't work after a few strokes in India because of the ventilation system of the pumping is very bad. Because that makes the mold easier. So people adopt those easier molds to give a substandard product. Of course, in China, there are a lot of improvements. And those quality pumps are not even made in India as of now. So we are directly going into -- a step ahead to go with that kind of quality and ventilation in the pump, so you are sure of the pump working for, say, 5,000 -- 4,000, 5,000 kicks. So this kind of high quality and high volume lines with fully automatic online testing, I can say we are the first to start in India.

Okay. And sir, my other question is to, you mentioned a number of, say, INR 100 crores sales from this particular line of business. For that, how much CapEx we will need -- how much CapEx will we need to reach that INR 100 crore sales from this segment?

See, currently, the INR 15 crores, what we invested, if it fully runs, let's say, around 8 million a month, we are talking about almost 90 million pieces in a year. At INR 6, we are talking about INR 55 crores, INR 54 crores kind of turnover. So INR 15 crores, INR 54 crores. So to reach 100 million, you may need another INR 15 crores investment.

Got it. Sir, and just on the other our regular lines of business, what is the kind of growth rate we are seeing over the next 2, 3 years, given that we are now -- COVID seems to be behind us now?

Yes, the Paint segment is pretty strong, growing very rapidly, and I'm glad that a couple of brands of Berger and Nerolac also have adopted IML. So the IML in Paint is slowly increasing, which was much lower compared to lubricants. And Paint sector is expanding rapidly. Berger is setting up a plant in Kanpur area. It is supposed to go on stream by end of '21. I think now they're going into end of '22 kind of time lines. We are going to be there in Kanpur by that time. We are now starting this year -- middle of this year a small premises there, which will be expanded by end of '22 -- year '22 to be ready to catch up with the Berger's requirements. So going forward, we see Paint segment will still strongly contribute to our growth. But Food & FMCG, which has taken a beating in this year due to a drop in ice cream sales and also Cadbury's lickable sales, which are now coming back on track, both these segments, would be, again, back on growing track next year. So we hope to see the Food & FMCG, which has been growing at around 23%, 25%, will continue to grow even at 30%, 35% in the coming quarters if normalcy prevails.

Okay. So overall, then the segment should grow in a 15%, 20% kind of number?

It's currently 21%. 23% last year. And this year, 9 months, it's around 24.5%. So probably next year, it should go up to 27%, 28% because the Paint also will grow rapidly. So as a number, both the numbers will compete. So the 50% to 55% bracket for Paint will continue to be there because our plants at -- Asian Paint plants, Satara, Mysore and Vizag, all 3 are being expanded. We are expanding those capacities marginally, not very marginal but something like around 8 to -- 12% to 15% in one plant and, I think, 20% in other plant. All these volumes will be adding to the growth of Paint segment. So Paints also will be growing. Hence, in the overall picture, number might go up from 23%, 24% to 27%, 28%.

So my question was basically, the overall growth of the segment itself for us, could we be growing at, say, 20% kind of a number for next year?

20%, I'll be very disappointed because this year in spite of ice creams completely washed out, we grew by around 22%. So we should aim at least 30%, 35% growth for Food & FMCG next year.

For Food & FMCG, 30%, 35%. And for the Paints and Lubricants business?

Lubricants growing is difficult, as I told you, it's kind of a...

Yes, mature industry, and Paints?

Probably 5%, 7% as per the economy, it may grow. But Paint industry, we can still see a growth coming in the tune of around 20%.

20%. So that means we are taking share from the non-IML segment. Is that the case? Because the industry is not growing at that pace, right?

No, no, no. Actually, non-IML to IML, we stopped counting because if that really happens the numbers can shoot up in our case because the majority of our competitors are not even -- not ready even today. The shift in a big way is not happening. So 18% to 20% growth in Paint segment is still possible. Lubes, I may be happy even if it hits around 5%.

Got it. And lubes is what percentage of our sales?

Sorry?

Lubes is what...

Lubes, it comes to 30% -- 22.5%.

So just about -- so about 25% of our sales is not going to grow much. The other segments are all going to be growing fast. I mean, that's the summary?

Exactly. That's very simple.

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

Hello, am I audible?

Yes.

Yes. I was reading your annual report of FY '19/'20, and one individual customer has around 40%, 41% of the revenue. So what is your view on the customer concentration rate?

See, this 41% is not a correct statement. Probably, it's around 35%, Asian Paints as a single client. Going forward, our commitments and their dependency also is pretty strong and long-standing. Since 1989, Asian Paints has been our major client. And today, on their commitment, we set up 2 plants at -- 3 plants rather, Satara, Mysore and Vizag, which are contributing to their sales in the plants nearby. And yes, the risk of dependence on a single client will always be there. But their dependency on us and their requirements also are pretty strong, and we foresee no problem in the near future.

Okay. So that customer who has 35% is Asian Paints, right?

Yes, Asian Paints.

Okay. Also, 3.42% of the promoter holding is pledged. So is there any plans to reduce this in the future?

The pledged amounts have come down considerably. It used to be close to 10% a year ago. I think it's now around 3%. And some individuals who have some personal needs might have borrowed on that. I'm not really concentrating on that because our promoters group is not only the core people of 5, 6 people but some extended family and friends are there on whom I don't monitor closely. Majority of the big shareholders are big promoters who constitute, say, 80% of the overall promoters group. They don’t have any sizable pledges at all.

Okay. Sir, Mold-Tek Packaging is the promoter of Mold-Tek -- is one of the promoter of Mold-Tek Technologies, but Mold-Tek Technologies is also one of the promoters of Mold-Tek Packaging. So it seems like a quite a complex structure. So can you please elaborate on this?

There's nothing to elaborate. As you correctly said, there is a cross-holding on both sides. The second cross-holding has happened only in the recent past. Mold-Tek Technologies buying stock of Packaging to some extent, very nominal, 1 lakh shares and warrants, all put together. But Packaging has been holding almost 9% of Technologies for last several years. So that is just a point of some convenience and cash flow availability that has made us to make Technologies also buy into Packaging. No basic math behind that.

The next question is from the line of Naushad Chaudhary from Systematix.

Congrats on a good set of numbers, sir. Just a clarification on INR 100 crores of revenue which you are targeting from Pumps segment. So by which year we expect this INR 100 crores to touch?

I think it may take 3 years, starting around INR 25 crores to INR 35 crores in the next financial year '21/'22. Maybe it may go up within 3 years to INR 100 crores plus. Not necessarily pumps. It will be pumps, triggers, sprays and related products of health and personal care.

Okay. And what is the margin profile of this category? And what are the trade terms in terms of credit policies and other stuff?

See, we will be dealing mostly with all major FMCG companies like Wipro, Godrej, Apollo, Asian Paints and then Hindustan Lever, Reckitt Benckiser. So there is no concern of -- about credit period. They generally ask 30 to 60 days. But if at all, we deal with smaller clients where their volumes are low and price realization is better, we may be carefully handling the credit with [Technical Difficulty] credit terms is not a major concern.

Sir, I can't hear you properly. Can you speak a little louder or come closer to the mic, sir?

Yes. The credit terms are not a point of concern because all our major clients are world-class MNCs like Reckitt Benckiser, Procter & Gamble, Asian Paints, Apollo Hospitals, Godrej, Wipro. So these clients, we don't worry about credit period. And if we deal with any smaller clients, we'll be definitely tightening on the credit terms, maybe against delivery or advance.

Sir, overall, I wanted to understand the profitability of this category. If I have to compare in your existing segment, would it be similar to Paint or F&F or Lube, what would be the...

Similar to F&F and could be better also as we improve the capacity utilization. But for the record, you can take it -- for the calculations, you can consider it F&F level.

So more than 30%, 35% of EBITDA margin?

It should be.

Okay. And in terms of our overall EBITDA margin, sir, what I see now the raw material prices are sharply going up and we have seen in this quarter some dip in our gross margin as well. So any commentary on the raw material going forward, sir? Do you see...

Raw material is still strong. There are a couple of plants shutdown in Europe and Middle East is the reason they are citing. I don't know really. I heard one of them is true that there was a plant shutdown. That is one of the reasons of shortage and price increase. Even now in January, the price is stabilized. There's no increase in this month. And going forward, at this level, I don't see an opportunity for them to further increase the prices. And some Korean supply is also just coming into the market, I heard. So raw material price may stabilize at this level, but it can't stay here forever. Maybe in a quarter or 2, they will again go down, is my guess.

Okay. So let's assume if it is stabilized at this level, do you see your margin is going up further because you take typically 1, 1.5 months to pass on the increased raw material prices and whatever the operating, yes.

Yes. You're correct. Already last quarter, we suffered -- some bit of price increase has been observed by our own profit. That's why the EBITDA per kg has come down from INR 37.2 to INR 36.46, just a drop of less a INR 1. But if you just notice, the price has gone up by almost 20%. From as low as INR 88 to INR 89, the price has gone up to INR 108. That means we could -- this INR 1 per kg is nothing when compared to INR 17, INR 18 price increase in the raw material. So we could either absorb the pricing by cost control or pass it on to the clients wherever it is possible to retain our profitability. Probably going forward, already, the prices have increased a couple of months ago and they have been steady for the last 1 month. So most of the clients would have increased their prices starting from Jan, Feb. So this quarter, we may be able to sustain or might improve back to INR 37 level. So you can see our profit margin or EBITDA margin staying in that range of INR 36 to INR 37 for the next quarter also.

The next question is from the line of Nidhi (sic) [ Riddhima ] Chandak from Roha Asset Managers.

I'm Riddhima Chandak from Roha Asset Managers. My question is on the -- on our capacity. So as we are expanding our capacity in the Paint segment and also in the -- coming up with the new capacity of Pumps. So how -- what would be the total capacity expansion? And in total, how it is?

Yes, it was 37,000 tonnes as of March 2020. And now currently, it has been expanded to 41,500, including Pumps. We have added about 3,000 tonnes in other segments, including Paint, Lube and Food, I don't have a breakup of that. And for Pumps, it is about 1,000 tonnes of material consumption. It's close to 1 crore pumps per annum. So at around 11 grams. So you can say approximately the capacity is 1,000 tonnes. So as of today, the capacity has been enhanced to 41,400. And we are adding some more machines at Vizag, Mysore and Satara. Put together, that is another 3,000 tonnes that will be operative by April, I can say. Some of them are coming in March. Some machines are coming end of March. So effectively, from April, we have another 3,000 tonnes. So totally 7,500 tonnes, you can say, is the addition during the current year. That's close to 20%.

Okay. So that means by the end of FY '22, our total capacity would be approx 44,500 tonnes?

End of -- no, no, beginning of '21-'22. That means by April '21, calendar year -- calendar month, we shall be ready more or less with 44,000 tonnes.

Okay. And any more -- another capacity expansion plan we are planning in the next 1 or 2 years?

Yes, we have a small plan to expand the capacity at Kanpur -- create a capacity at Kanpur. That won't be large. It may be a few hundreds -- 600 tonnes to 800 tonnes to start with in a leased premises. We have already closed on couple of premises. And that will be expanded to a 3,000-tonne full-fledged plant in the year '22-'23. So until then, this will be a small addition. And at Hyderabad, we have a site at Sultanpur offered by the government, where we are starting building construction this year. Hopefully, we'll start in a month or so, and that will be ready by end of the year. There, we are planning to expand our F&F and Pumps and Health Care product range. So there may be investment to the tune of INR 10 crores to INR 15 crores there. That will be a major investment in the next financial year. And hopefully, next financial year, also, we may not need INR 50 crores. But at least as of today, it looks like INR 20 crores, INR 25 crores, but it can go up based on the opportunities we get from the clients.

Okay. Okay. So -- and how much we spend in the current year fiscal, FY '21?

Current year, including the payables that are coming up till the end of March, it's close to INR 50 crores, including buildings, additional buildings.

Okay. Okay. My other question is on the margin. So as we are now expanding in the Pump segment. So as you stated that it is a high-margin product. So going forward, how much like margin expansion on a consolidated basis we are looking for, overall?

Our internal target is to reach INR 40, but I would keep INR 37 as a benchmark for the next 1 year. Maybe in a year or 2, it can go up to a level of INR 40 per kg in couple of years' time as the numbers increase from these segments, new segments.

The next question is from the line of Apurva Mehta from AM Investments.

Just wanted to confirm that you are targeting this year to close at around the 8% to 10% volume growth or on the value terms?

Volume growth. I never consider value because as raw material is -- it is raw material-dependent price. So volume growth, we're aiming at around 8% to 10%.

Okay. Okay. And next year, what will be our -- we will be having around 41,500 -- 44,500 tonnes of capacity. What kind of utilization we are targeting next year?

See, as I always say, any utilization could be pegged around 70% to 75%, at the most, 77%, 78%. So now this year also, what is the tonnage we achieved in this quarter, if you notice, number of tonnes is 7,800 tonnes.

Sorry to interrupt, Mr. Mehta. I would request you to mute your line while the management answers your question. There is a noise coming from the background.

So out of 9,250 tonnes per quarter what is available, in this quarter we achieved 7,800 tonnes. So almost like 80% capacity utilization. That is the best you can take. In a good quarter, we'll be able to reach 80%. In an ordinary quarter, it could be 70%, 75%. So in 44,000 tonnes, we can achieve 75% to 80%.

So next year, can we see around 35,000 tonnes of utilization, roughly?

Yes, it should be because we are now close to 8,000 tonnes. So getting another 10% growth is not a big deal if all quarters go normal.

The next question is from the line of Disha Sheth from Anvil Shares & Stock Broking.

Sir, what is the margin difference between IML products and non-IML? That is my first question. And the margin difference between Paints and FMCG categories? And third question -- okay, okay, then I'll ask the third question.

Yes. The IML and non-IML, the differential is almost 8% to 10% better margins in IML products. And coming to your Paint and other products, in Paint and Lubes, we -- let's say, on average, we have about INR 25 to INR 30 per kg and Food & FMCG, it can vary from INR 40 to INR 80 also because they are smaller in size and volumes are high. So we will be in a position to demand better pricing and margins in Food & FMCG. Similarly, in Health Care and Pumps, it is still better, but we yet to experience it. As per our cost sheet shows, we have pretty strong margins like Food & FMCG. But I can comment only after a couple of quarters once we see the realization.

Okay. Great, sir. Sir, and just 1 question, sir, on the sustainability of the plastic packaging, like for recycling purpose or anything, any questions from the clients or how are we placed?

See, time and again, government raises this issue of plastic waste management. And as you all know, world over, it is a point of discussion, but to put it into practice it's very difficult. To start with, they kept 50 microns -- below 50-micron thickness products like films should be banned or should be replaced or controlled. That is what is present control any government is exercising. And we are -- all our products are more than 100- or even 500-micron thick or rather 500 micron is a minimum thickness. So our products are far away from the films and such flimsy plastic material, which is the main cause of environmental disturbance. So currently, the containers plastics are predominantly used everywhere, and they are the most suitable for refrigeration or transportation and ease of utility and giving sealing and tamper evidence and all kind of features. So I don't see any threat for our kind of products, but there may be -- I hear from Maharashtra government is asking reuse of scrapped material. So implemented, we can follow that. It's not a big deal because our injection molding is a very flexible operation, wherein 10% to 20% mixing of second material will not cause any harm or any deterioration of the performance of the container. But of course, you can't use it for food containers. But for Paint and Lubricants, mixing of seconds material is not a big deal. So if that is accepted by our client under the pressure of government, we can follow it. It's not a game changer.

And sir, when you said the INR 89 per kg has become INR 108, that is which raw material? What is the name of that raw material?

PP -- polypropylene copolymer. That's our major -- 95% of our material is PP copolymer.

The next question is from the line of Ashish Kacholia from Lucky Investment.

Yes, sir, 1 more question. This -- the way our in-mold labeling product has been a -- it's a development in the plastic packaging industry for the Paint business, is there anything else that can come along and kind of disrupt this business? Some flexible packaging or something which is -- which we don't understand being external investors. Are you seeing any kind of threat on the horizon for this business to be disrupted?

No, no, no. We travel to [ key ] exhibitions and exhibitions all over Europe, and there's nothing in the pipeline, which is replacing or better than IML containers as of now. And going forward, actually, we are introducing the QR-coded IML, which I briefly mentioned in my note also, that QR-coded IML is the -- they are talking about Version 4.0 packaging in Europe, where the [ traceability ] up to the last container could be achieved through the QR code printed on the reverse side of the IML. And that area of the IML can be peeled off at the time of purchase -- sale so that the data on the QR code will be taken by the seller at his counter -- selling counter, and it closes a loop up to the manufacturer. Like Hindustan Lever is selling some ice-cream and that ice-cream tub is sold -- at the point of sale while they're reading the QR code of the selling price, if they peel the IML, there will be another QR code inside the IML and that will give the entire data where it is manufactured, is there any scheme, any discount? And that also makes few people to tear the IML label, thereby showing a damage to the container which cannot be reused as a duplicate. So this kind of QR code, we have -- just installation stage. This will also be a future growth area for Mold-Tek in the coming years.

So when does this get operationalized?

We already are in the stage of installing the equipment. In line with that only, we have purchased INR 10 crores worth of printing machine last year, and this QR code equipment is just being installed on the machine. And already one of our clients has shown interest to test it with a scheme. So that will be -- maybe in the next 3, 4 months, it will be in the market. And once it start getting accepted and benefits of this QR code is understood by clients, I'm sure this will be a new rage.

Does this give us some additional value addition in our sale and which kind of makes our sustainable?

Yes, it is not only that. You are tearing the IML which is not tearable actually. We create a space which can be torn. And on the back of the IML, you see the QR code. And there will be a incentive for the client to get that torn and scan it so that they purposefully break that IML label. And if there is a scheme or any free gift or some INR 100 off or something, it will be there on the backside of the QR -- of the IML. So thereby, the IML decoration is damaged purposefully and the QR code is read. That will not only gives a small benefit to the client end user, but also the entire data of where it is sold, when it was sold, how long it took the dabba to be sold. All these data analysis can be done if they integrate it to their ERP system. So that is the rage and the future of packaging in Europe and U.S. now. So we are getting into that as a first mover once again.

It is already operational in U.S. and Europe?

Yes, in some of the products, not all.

Okay. Got it. Got it. This is only for IML or this can be even for the non-IML?

Sorry?

This is only for the IML or even for the non-IML?

Only for IML.

Okay. But IML itself has not -- I mean, the entire range of products is still not IML in India, I mean. So it's going to take a long while, I guess.

Yes, yes, it will be a story of -- you can start this year, but for it to become a game changer, it may take a few years.

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

First of all, many congratulations for a very good set of numbers. I have 3 questions. One is in terms of the sales per kg metric, right, if I look at last 3 years, it's slightly on a declining trend or kind of a flattish while EBITDA per kg has been on a inclining trend. So could you please help us like why there is a discrepancy in terms of these 2 metrics?

See, there are 2 things can cause this purchase sale value reduction. One is the product mix. When we have higher sale of Food & FMCG, the per kg sale number goes up, typically. And when the raw material price is increased also, per kg amount goes up. And cost control is something which we have brought in because we imported the flexo machine last year, which has increased our efficiency of printing labels and reduced wastage considerably. So that is why you see, in spite of decrease in per kg sale, there is increase in EBITDA per kg. So raw material price also, we cannot pass on in the same month, we pass on next month. Sometimes we pass on in the third month because of our agreements with clients.

Got it. But would it be fair to say over the last 2, 2.5 years, the improvement in per kg -- EBITDA per kg is majorly because of the improvement in the efficiency rather than changing the product.

Improving the efficiency and the product mix also. Product mix this year, purposefully -- I mean, particularly this year has a little of the tradition because our FMCG food which used to grow faster didn't grow because of ice-cream sales were completely washed out in the last year summer. And the M2K Cadburys have almost withdrawn during the COVID period and restarted only in October, November this year. So these 2 are the reasons for per kg reduction in the -- our overall sale value.

Okay. Okay. Second, Food & FMCG, right? Like ice cream, I understand sales has not been happening because of COVID. How about edible oil because we were very bullish upon this particular segment, and we had quite high targets. But if I look at F&F contribution of volume and value-wise, it is still considerably low at 23%. You were expected to reach around say 28%, 30% by FY '21. Anything on that?

Yes, edible oil packs are -- generally, that segment is a price conscious segment. There also, we have pricing equal to our average of [ Paint ] business, like IML sales. What is the average pricing, we are able to achieve that. But achieving F&F kind of pricing in such big containers is very difficult. But we are now finding other applications of those containers. Slowly, we've got into tea packing, some bulk tea packers are buying it, detergents, some new trends. So there, we are in a position to attract much better margins. So -- and also, as I just commented for your previous question, if you are looking at Q3-to-Q3, that price variance looks odd, like the raw material price has gone up but per kg has come down. But if you look at the 9-month period, the raw material price differential is in tandem with the sale price differential.

Okay. Okay. Sir, any targets on the edible oil segment for this year, if at all you can give some broad?

Edible Oil segment, again, has grown very rapidly. In spite of COVID, I think it grew around 35% in the 9-month period. 35.7% is a growth of -- in Q3. And for the full year, it is close to 30%. So Edible Oil numbers are increasing considerably in spite of COVID. And in fact, new applications in the new segments are getting accepted, which might lead to sustained growth in Qpacks even going forward. And a range of -- another range of square packs we are introducing this year for one particular client. I can't reveal the name because they are introducing it only in the month of March, April. So that will lead to a new application altogether for a different set of molds. It's not the same as Edible Oils. Those packs are getting into market in the month of March. Going forward, that can add another new segment to us in the coming years.

Sure. And sir, just number, if you can give broadly how much we can expect from this Edible Oil segment for this year, FY '21?

In FY '21, so far, we achieved a sale of -- the 9-month sale is INR 36 crores. So probably, we'll be at around INR 48 crores to INR 50 crores for the current year.

Got it. Got it. And sir, last question, on the CapEx cycle, right, like one of the, I won't say it's a issue, but we'll have to continuously invest in capacity to get that incremental sales or profit. So the free cash flow generation continues to remain low. When do we think where will we be in a position where we can generate a sustained free cash flow basically? When do we think that the capacity is enough and we can continue to leverage good healthy free cash flows?

I don't think capacity will be ever enough. As the growing company with the new products being added, capacity creation is a must and should because in injection molding it's all set capacity. It is not that by changing a little bit here and there you can double your capacity or anything. But you look at now the -- in the year '21-'22, the company is going to gain a lot because of the brownfield expansions. All the plants at Vizag, Mysore, Satara, together, we are enhancing about 3,000 metric tonnes. I don't think the expenditure will be even INR 6 crores to INR 7 crores on that. So whereas for a greenfield project of 3,000 tonnes, we would have spent close to INR 15 crores to INR 18 crores. So this would be almost, I would not say 30%, but down to almost 40%. So with 40% investment, we would be getting a kind of 3,000 tonnes of capacity added during the next financial year itself. We are completing that by April -- March, April this year. So for next financial year, you will see the benefit of this brownfield expansion. Once we stabilize and have the locations in place, and then only growth will be brownfield and that's when we can still see major benefit accruing for -- with a minor -- with a lesser investment.

The next question is from the line of Amit Zade from Antique Stockbroking.

Congrats on good set of numbers, sir. Sir, my question is regarding our Paints category. So sir, if I'm not wrong, you have said around 55.5% tonnage in terms of volume has come from Paints category. So that roughly amounts to around 4,200 tonnes. So sir, in terms of growth, that comes around 47x to 48x of volume growth on Y-o-Y basis. Sir, just wanted to understand is there any seasonality here or -- because the category...

The major growth in Paints segment this year is due to our plants at Mysore and Vizag have become fully operational. They started last year, but they ran at a very low capacity utilization. If you want, I just can give you one comparison. Sales from Mysore and Vizag have gone up by 90%, from INR 14 crores in the quarter -- Q3 to INR 27 crores. So -- or if you look at the 9-month period from INR 39 crores last year to INR 62 crores. That's more than 50% -- 55% growth. So that is why the Paints segment is suddenly shown a much...

Got it. And going ahead, next year, again, we will see a new line coming in. So again, we could see good growth there as well.

[indiscernible] plants are expanding.

Got it, sir. Sir, my second question is, we were working on new product category which was sweet packaging, sweet containers and all. So sir, I just wanted to understand what could be the industry size for these new products? And where are we at this current juncture? And what -- by when can we see some meaningful contribution to the revenue from this segment?

See, when we introduced Ghee packs 2 years ago, it was not a big deal. But today, this year, we are getting more than INR 12 crores turnover for various applications of that twistlock pack. And probably, it will reach and stay somewhere around INR 20 crores, INR 25 crores in the next 2, 3 years. Similarly, the sweet packs and [ hinj ] packs, which are meant mainly for restaurants, food, ready-made packaged food or even kaju and what you call dry fruits and dates, all kind of applications, we may feel this year may not be sizable. Let's say, both put together might contribute INR 7 crores, INR 8 crores, INR 10 crores in the financial year '21-'22. But that can become another INR 30 to INR 40 kind of a segment in the next 3 years. So these are all seeds which we are planting which will become kind of cash cows in a period of 2 to 3 years. So widening the product range is essential for growth and sustaining our margins.

The next question is from the line of Ankit Gor from Systematix.

Sir, my question with regards to more on a longer-term basis. If you really see from FY '17 to now, our volume more or less remain between 19,000 to 22,000 - 23,000, and we haven't seen a sharp volume uptick during these years. What can bring that change, sir? Is it -- and what sort of constraints we have? Is it a management bandwidth or probably -- or a regional brand -- we are catering to more of regional brand? Or what can change this, sir, in a longer-term period, let's say, for a 5-year, 7-year period?

See, a peaceful regular economy could have given us a much better growth than the 10%, 11% what we have been achieving. Actually, in spite of COVID this year, we are aiming at close to 8% to 10% overall growth or at least 8%. It could have been something around 18% had it been not washed out in the Q1. So something or other was happening in the economy. It's not for Mold-Tek, it's for everybody. When GST was introduced, there was a big 2, 3 months of wide gap in manufacturing and selling in '18-'19. So that has impacted. And now this year, it is -- the pandemic has given a thrashing to all the entities in the country or in the world. So going forward, if we have natural, simple economical growth, we can easily look at a 15% to 16% CAGR and the top line growth and volume growth. And then in that case, within 4, 4.5 years, we could double our volumes. So if there is a normal economic activity for next 2, 3, 4 years, we can easily double our numbers in terms of tonnage. This year also, though you commented, 17,000 tonnes to 24,000 tonnes in 9 months and this year we might end up the full year at around, say, 26,000 tonnes. But you should consider that we lost almost 5,000 tonnes in Q1. So that 5,000 tonnes had it been there, it would have been somewhere around 30,000 tonnes, 31,000 tonnes. So from 17,000 to 21,000, in 4 years, it's almost like from 17,000 tonnes to 30,000 tonnes. That is almost say a 70%, 75% growth.

Right. So the context behind asking is, so -- though I know that we have a great potential and we have a great landscape there as well. But just to get leveraging our early mover advantage and getting a scale, just -- my context was that only, nothing else.

Okay, okay. I understand. So no -- the context, I understand now. What I'm saying is that these molds -- creating molding capacities is one challenge, yes, and using our in-house toolroom as [ capital constraint ], to break that, we have started using mold makers from China and Taiwan, which has enhanced our ability to add new product range faster. We are also expanding our toolroom. We are expanding our printing capacities to manufacture high-quality IML. So in all areas of operations, there is a growth. And adding new plants in North is one thing which has been, I can say, kind of neglected so long, which I want to close in this year. So once geographically we are present, those plants can grow. And maybe it is kind of a little conservatism, but we don't believe in investing and then wait for orders and then look at breakevens. We always find that there are clients available and there are commitments to the tune of 40%, 50% of the capacity and then we move ahead and create the capacities to -- so that our returns remain improving.

And sir, how do we see our brand portfolio within F&F? If you really see, sorry to say that, but apart from Mondelez and Wilmar, we don't have a pan-India presence brand. What are we doing -- is it like [ bucking ] up a marketing team or...

No, no. We have our -- Hindustan Lever is buying quite a few products from us nowadays. They have recently launched kulfi in our container, and earlier brands of ice cream are still continuing. The only thing is this year, the entire ice-cream business has been kind of completely depleted. So everybody is looking forward to a better season in this summer. So Hindustan Lever is there. Now we are in talks with Nestlé, but Nestlé and -- one of the complaints of Nestlé is our -- lack of plant in North. So that is one of their reasons. But they also have multi-supplier conditions, which they follow very rigorously. And hence, they also are not able to take a call because Mold-Tek will become a single vendor. So one of the reasons why we are sometimes not able to break into couple of these MNCs is not having a second source that make them take a step back. For example, I don't quote the name, you all know it, one of this client, which is the top brand,which has manufacturing facility in Hyderabad, we were to set up their injection-molded IML labels containers for them way back last year itself. And then it went through takeover by Hindustan Lever, and at that time also the same question, who will be the second supplier. So that is one of the reasons why we are not able to spread with mainly the big MNCs. Lever's, we got to break through. They have now adopted and because they are also indirectly have taken clearances from their management because there are 1 or 2 small suppliers in the West who are giving IML small containers. So citing them as a second source, they are now moving little rapidly. I think looking at these developments, I also -- I'm hopeful that bigger brands will shift faster in the coming quarters.

Sure, sir. And lastly, from my side, on the overall competition side, in COVID situation, COVID-19 problems, have you seen any suppliers -- because there are few IML small guys like Milton and [ Topsdown ]. But have these guys kind of reduce their scale and we've got opportunity there to cover their market share or any other gap probably in injection molding or for the HTL or screen printing, have we seen some consolidation happening, to us it is a large unorganized segment.

I'm not fully aware of their operations because they -- none of them are really sizable. Only one North player is there, he is somewhat -- but he's restricted himself to -- mainly to the northern states. So other than that, the western players are mainly to Amul and couple of other small cheese and ice-cream cups kind of products they are producing. And their cost of capital expenditure is very high, and they buy labels from outside. So they still struggle for maintaining their margins. So they don't feel it is a very high profit margin business for them because of lack of their backward integration. That again comes from scale. So that way, we have built up our strength.

But they have not scaled down their operations in these times?

They are just running like that. There's no major expansion phases, there's no stoppage. I don't know much about their activities, but I don't think they stopped either. There's one small company in Hyderabad itself they closed. They have couple of robots, and they approached us to acquire that company. But looking at their equipment and suitability, we more or less declined that offer. So that company stopped making those small tubs and restaurant cups they used to make. So IML is not for small players. That is one thing need to be understood. It need to have -- they should have technical abilities to set robots to produce quality products with low rejection rates and then backward integrate for cast advantage. This is not possible for small players.

The next question is from the line of [ Divyansh Karla ] from [indiscernible] Ventures.

Sir, I had one question. Can you throw some light on how we are procuring our raw material and is there any concentration from where are you procuring? And any challenges you might have faced in the procurement part of raw material? That's my first question.

We procure mainly our raw material from India itself. That is Reliance is #1, Indian Oil, IOCL is #2 and a few imports from -- what's the company name -- Basil in Europe. Because of some particular grades of application, we require that kind of material. So 95% of our material is indigenously sourced. And we have Reliance almost 75% to 80% of that 95%. Balance from Haldia and IOCL.

And is it -- has there -- do you think there's any price pressures from -- that which you are not able to pass?

No, we don't have much say in pricing of polymers in the country. As you know, there's a kind of monopoly. Nowadays, with Indian Oil and others coming in, there is some kind of competition. But again, all these prices are dependent on shortage across the world and what is the import price. Based on that, local people maintain their pricing. So on the price side of raw material, we don't have any say. That's why we protect ourselves by entering contracts with our clients that monthly, we review the pricing up or down as per the Reliance standard pricing. And in case it is major companies, sometimes they ask for 3 months review, which averages out. One time we may gain and the other quarter we may lose.

[Operator Instructions] The next question is from the line of Karan Bhatelia from Asian Market.

Sir, what is the gross debt on the books, short-term and long-term put together?

Yes. Both together, it is now INR 101 crores, down from INR 117 crores few months ago. After the rights issue, those funds have been deployed to reduce the working capital and term loans. So effectively, there is a reduction of INR 16 crores debt as of now.

Right. And what is the rate of interest put together on an average?

Rate of interest on average is around 8.5%, 8.7%. You can take it around 9%, including working capital and term loan put together.

Right. And sir, how has been the working capital shaped up because we cater to a lot of small- and medium-sized companies. So is the collection back to pre-COVID now? Hello?

Mr. Rao?

Hello?

The line for Mr. Rao is disconnected. Kindly stay on line till I reconnect you. Ladies and gentlemen, we have Mr. Rao reconnected to the call. Thank you, and over to you, sir.

Yes. Sorry about that. So the rate of interest was at around 9% on the overall working capital.

Yes. Sir, how has been the working capital shaped up because, I believe, we cater to a lot of small- and mid-sized companies. So have you seen recoveries back to pre-COVID levels?

Yes, yes. All our small-time sales are well protected with advances or PDCs wherever possible. So recoveries is not a big issue. There is some extended credit to couple of parties who have been dealing with us for long term. But there's no increase in the cycle period by more than 1 day or 2.

And sir, last question on [ sippers ] so how are things shaping there?

Sippers have not moved. The COVID has completed shielded that kind of products in this country.

So have you like provided them with samples or once...

That happened in 2019 itself. We have brought imported samples, given them how other countries, including China is consuming, huge millions of sippers every month. It was to take off and then some of it stopped by the top players Coke and Pepsi, prolonged for a few months, and then we are into COVID, and nobody is now talking about it, at least for a month. Unless the theatres and public places are opened, nobody will talk about this development. I think it passed for this year also.

And taperproof products for Zomato, Swiggy and such delivery apps, are we like on track?

Yes. Some of them, not all. I wouldn't say Swiggy and Zomato, they tried, but they have very peculiar need, like they want very flimsy and low-cost products with the tamper evidence, which cannot be achieved through injection molding. We have given this single packs which is well accepted as -- it has one side locked and other side openable, and the openable also has a tampering feature. But somebody can use some hot rod or something to lift it and open but not very easily. So that kind of pack is catching up with the majority of the restaurants, even for packing of dates and dry fruit and other products. Coming to Zomato and Swiggy, again, their operations are also, let's say, not actually affected because in COVID, I think the consumption has stayed or improved, but their developmental activities are on the back foot. So again, we may have to touch upon the development this year.

The next question is from the line of Omkar Hadkar from Mirabilis Investment Trust.

Yes. Sir, my question was on the Paint segment, the growth that you have seen. You partly explained that it's because of the utilization going up in the Mysore and Vizag plant, but even then the incremental sales growth for the industry is about mid-teens to high teens. So what explains the rest of the growth? Is it -- you're gaining share within the vendor ecosystem and particularly in Asian Paints? And if that is the case, is it sustainable, the market share gains that you have done?

No. If you look at the Paint for the 9 months total as a percentage, it has just moved up from 51.45% to 52.62%. That's hardly 1.1% growth in terms of overall mix share. If you look at it as a pure number, INR 170 crores has become INR 167 crores in the 9-month period. But in tonnes, it has improved from 9,850 to 1,300 (sic) [ 10,300 ] . That is hardly 4.5% growth in number of kgs. So it is not that we are breaking somebody's business to gain our share there. The growth of the industry in these 3 quarters is hardly -- maybe close to 0 because of COVID, and maybe less than that, maybe 2%, 3% less. But we achieved 4.5%. That 7% -- 6%,7% shift is basically because of Vizag and Mysore plants catching up with the numbers. And Asian Paints being the leader in the country, even if we gain a few points market share, that will reflect in our numbers because Mysore and Vizag is their new plants where they are ramping up their production. So going forward, till '23-'24, they will be ramping up these 2 plants. That is the commitment they've given us -- or outlook they have given us. And accordingly, we are also ramping up our capacities from 2,500 tonnes, 3,000 tonnes to 6,500 tonnes each, we have to build up in the next 3 years.

3 years. Sir, that's what I'm trying to understand because, let's say, once these capacities come in place, does it mean -- because most of it will be like a -- production will be shifting from some other plant, let's say, either Hyderabad plant to these plants. So it's not like an incremental growth for, let's say, Paint or for Asian Paints, how do you see post these capacities come into place?

Post this, we will be stabilizing with the growth of the paint industry levels, which is still around 10% to 12% annually. And we also see some replacement happening towards Mold-Tek because of our IML and superiority of our products. That may not be very huge. Because it's a mature market, I can still say 2% to 5% -- 3% to 5% we can see shift coming from major players to Mold-Tek.

[Operator Instructions] The next question is from the line of Kush Joshi from Kitara Capital.

Sir, my question is with respect to the Pumps business, and I understand this is mainly an import substitute product. So how competitive we are there compared to costing wise of this product to our customers?

See, when the COVID was at a peak, Chinese pumps were sold at more than INR 18, INR 20 per pump. Their natural pricing is somewhere around INR 5. So now they are back to the normal pricing. So our competition is not Chinese or anybody else because the cost of importing and duty will take that INR 5 to more than INR 6 to INR 6.50. The competition is within the country now. There are a couple of players already in North, NAPLA and [indiscernible] and they produce currently the pumps or the majority of MNCs. I don't know any player in the South as of reasonable capacity. So as a competitive strategy, we are now spreading our pump in terms of its quality and higher level of technology we deployed. So the proof of the pudding is industry leaders like Wipro, Reckitt Benckiser, Godrej, Apollo, Asian Paints and similar clients, ITC, are already considering our pumps. And they're watching -- taken quite a lot to observe how our pumps are performing compared to the pumps available in India. I'm very sure, at least our pump in terms of quality is much better. I can say at least better than even Chinese pump in some design aspects. And certainly, we can match the pricing with our huge capacity because we have created a capacity which the other companies took few years to create. We are starting with that level of capacity with some of the molds are 48-cavity molds, which can produce more than 2 lakh pieces -- 2.5 lakh pieces a day -- 2.5 lakh to 3 lakh pieces a day. So that kind of volume business when you achieve, you will have the scaling advantage -- scale advantage and better margins.

Okay. Understood. And okay -- and one more thing is that how we are compatible with compared to the imports? Because -- so are our products compatible with the manufacture customers is the filling lines and all that type has been done?

You mean the pumps?

Yes, yes.

Yes, yes. We design the pumps which are suitable and equivalent to the capping systems that are being used in the country, and they are all perfectly matching. In fact, keeping their products in mind, we designed our caps.

The next question is from the line of [ Mehernosh Panthaki ] from [ Dhanki ] Securities.

Congratulations on impressive set of numbers. I just had one question on the Mysore and Vizag plants. You have shared the revenue numbers. So can you share the volume numbers as well for this quarter as well as 9 months?

I don't have the volume number for tonnage for Mysore. I can give you approximately. For this quarter, it's somewhere around 1,400 tonnes between Mysore and Vizag put together.

For this quarter?

For this quarter.

Okay. And for 9 months, it would be around, approximately?

In 9 months, I think, it is around 3,300 tonnes or 3,400 tonnes.

Okay. Okay, sir. And just one more clarification I needed on the expansion side. You said that you've undertaken some brownfield expansion at Vizag and Mysore and even at Satara, and that would increase our capacity by 3,000 metric tonnes. So Vizag and Mysore how much has been added, around 2,000 tonnes?

Vizag 1,250 tonnes, Mysore 1,250 tonnes, Satara is 500 tonnes.

Okay. So around 2,500 tonnes have been added in Mysore and Vizag?

Yes.

So 6,000 tonnes goes to 8,500 tonnes?

Exactly.

Okay. And how much of the CapEx was incurred, you said, for this brownfield expansion of 3,000 tonnes overall?

All these 3 put together to the tune of INR 6 crores to INR 8 crores -- INR 7 crores to INR 8 crores, you can say.

The next question is from the line of Naushad Chaudhary from Systematix.

Just a follow-up, sir. Wanted to have some more clarity. Despite this pump being a B2B, what helped us to get 30%, 35% of EBITDA margin with 3x of asset turnover? So if you can help us understand what kind of risk do we carry in this to generate this kind of EBITDA margin because this is not something an R&D-driven products or nothing, not even a patented one. So why a client you has this kind of margin in these products?

See, the margin comes through capacity utilization and high volume of production. If you produce the same pump on 8-cavity mold and 8-cavity machine using the labor and power, and these manual or semiautomatic assembly lines, you will also find your cost like any other product. What makes the difference is, we have gone for high productivity machines, high productivity molds and faster and fully automatic assembly lines. That is why I always cautioned and been mentioning to you, these kind of margins are possible only when our capacity utilization improves to a level of 80%, 85% of the capacity, which I foresee can happen in the year '22-'23. So in the year '21-'22, it could still be there. It may be utilized to the tune of 50% of the capacity because once the COVID is gone, the consumption of sanitization has fallen drastically and imports also have more or less stopped because Chinese imports have become not only expensive but also cumbersome due to the procedures and the customs [indiscernible]. So majority of the companies which were depending on Chinese imports all these years partially are to find a local vendor. That is why we are able to attract the attention of all these big players quickly. And they also made some commitments after various times and scale. So this is a volume game, but with good margins if you set your technical and manufacturing processes in a proper manner. And this will lead us to many health care and personal product opportunities like not necessarily just pumps, you can talk about inhalers, you can talk about child-resistant cap -- capping systems. So like that -- tubes for tablets with So the idea is to enter into this segment with a generic product with high volume production and step into the personal and the health care for the long-term growth.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Abhishek Navalgund for closing comments.

Yes. So I would like to thank the management for answering all the questions, and also thanks to all the participants for joining this call. Thank you.

On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you all. Bye.