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

Yes. Thanks, Mallika. Hello, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to the earnings call of Mold-Tek Packaging Limited for 1Q FY '22. We have with us Mr. Lakshman Rao, the Chairman and Managing Director of the company, along with the entire finance team of Mold-Tek. So without further ado, I would request Lakshman, sir, to start with his opening comments, post which, we can open the floor for question and answers. Thank you, and over to you, sir.

Thanks, Abhishek and Mallika. Thank you all for showing your interest and participating in this call. I'm glad to inform you that in spite of severe COVID second wave, company could post good results, of course, based on a weaker Q1 last year. However, the revenues are up by about 104%, in volume terms, it's around 63% up. Whereas the PAT has gone up by almost 7.7x, thanks to the better revenue mix and price realization. The profits have gone up from INR 1.52 crores to INR 12.08 crores PAT. That's a considerable increase considering the kind of second wave we have faced -- all of us faced. Especially we are -- also were hit in May, a couple of our toolroom engineers, unfortunately, we lost them due to COVID, and in spite of various cares -- medical care and attention we have given, that happened. But the rest of the 200-odd people who were affected at all 8 units completely recovered. And company has taken steps to provide family insurance, free medicines and all kind of support during those 2 months, especially May, and then followed by June to take care of our employees and their near family/ I hope that this COVID will be under control going forward, and countries can look forward to normal life and normal economic activity. If that is so, the company is well poised in all its segments. Paints are growing because there's a lot of pent-up demand and the major leaders of the paint industry are indicating very good next couple of quarters until Diwali. And then followed by Food segment, where we also anticipate our new sweet boxes. We'll be taking off -- already we have received a couple of decent orders, which can take those segment forward in Food & FMCG. And Pumps division has been already receiving orders from Wipro and couple of medium-sized companies. But Reckitt Benckiser's audit has given us a Green Channel client selection. So hopefully, some business from Reckitt Benckiser and Hindustan Unilever is also anticipated in the Pumps division going forward. So all segments are well set, and we hope the future will be brighter for us. Our QR-coded IML containers concept has been well received by Asian Paints and Castrol, and they both are showing interest to pursue that proposal, which will offer 100% anti-counterfeit feature in their supply chain. So this is on the board as of now. And I think more we can discuss on questions and answers, so I give the call back to Mallika to arrange for the questions and answers.

[Operator Instructions] We have the first question from the line of Kaushal Shah from Dhanki Securities.

I had a few questions, sir. The first one was if you can share the volume numbers of our 3 segments, paints, lubes and F&F?

Yes. Volume-wise, it's 52% in paints -- 58% in paints, 24% in lubes and around 18% between food and pumps. Pumps is just 0.4%. Overall, it's 18%.

Okay. So -- all right. Sir, some color on our expansion plans? We were planning to do a debottlenecking in Mysore and Vizag. So on that, also, if we have begun any work on the Sultanpur, Hyderabad plant? And also how our pumps businesses -- we were, I think, doing 1 million production. So how is it currently? And what is the ramp-up likely?

Yes. Yes, Vizag and Mysore already capacity have been added. Additional buildings are also completed and new machinery has been installed. And in fact, Vizag is growing more rapidly. There too, the machinery and buildings are ready and ready to go. The plant at Hyderabad, new plant for further enhancing the food packaging production has been in place. We inaugurated it in the month of June. So that is adding additional capacities in Food & FMCG products. Coming to Kanpur, though we were to start in June, because of this COVID second wave, we deferred it by a couple of months. And by September, we'll be starting our production at -- commercially -- I mean, lease this premises in Kanpur. And meanwhile, we have procured about 2.7 acres of land at Sandila Industrial Estate in Uttar Pradesh, which is next door to Berger Paints' upcoming plant. So that plant we'll construct in the year '22, '23 and go into production simultaneously when Berger is ready to go. Meanwhile, our plant at Kanpur, near Kanpur, the lease in premises will be serving mainly Godrej, Nerolac and a couple of our edible oil clients in and around UP. So this is how we are planning to ramp up the capacities. Already, the installed capacity currently is almost 42,000, up from 34,000, 35,000 in the beginning of last year. So we have about 20% capacity has been already added. And going forward in this year, there will be further addition at Kanpur, mainly Kanpur. So probably the capacity would go up to 44,000, 45,000 by end of this financial year.

Okay. Sir, regarding the pumps, what is our current run rate on a monthly basis?

Yes. Pumps, yes, we started only in the month of March, April, I think from Feb, March little bit quantities. But going forward -- currently, the orders are around 1.5 million a month. We have recently concluded Reckitt Benckiser's audit, 2 days of audit, we got a Green Channel clearance. So hopefully, some volumes can be expected from them in the month of August, September going forward. Unilever is also are in touch with us for a separate type of pumps. ITC and Godrej, who have also committed to buy from us, have stocks till June, July. So they also start buying from August. Going forward, I think by third quarter of this year, starting from October, at least the capacity utilization will go up to 2 million to 2.5 million a month and can reach probably 3 million in the fourth quarter of the current financial year, which will be touching over 50% of the capacity setup. The capacity is close to 6 million to 7 million. So hopefully, by end of the first financial year of pumps, we'll be reaching about 50% capacity utilization. And the year -- following year, '22, '23, it should be close to 70%, 75%, which is our average in all our other segments.

Great. Sir, two final questions. So on the Pump segment, sir, we were, I think, if I recollect correctly, we were planning to do some revenue number of around INR 15 crores or INR 20 crores for the current year. So that number we are confident of achieving?

We will be very close to that.

Okay. So we can do around INR 15 crore revenue in the Pump segment in the current year?

Yes, INR 12 crores to INR 15 crores, you can say it.

Right, right. And sir, just one last thing. On the overall company level volumes, I think we were targeting a decent growth over the last year, 21 in the current year. So given that the first quarter has been a little muted, so I think we were targeting around 32,000 tonnes roughly volume number for the current year. So do we kind of stick to that number? Or do we increase or decrease that target?

No, we are still targeting at 32,000. Though there was a setback, we could have achieved around 7,500 to 8,000, in this quarter, we hit only 6,000. But going forward, with the new products and other traction from other segments, if there is no COVID waves again in this year, probably we can still keep the target of close to 32,000.

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

Yes. Sir, can you please highlight the total capacity which you're expected to add and CapEx for that particular plant?

Yes. Kanpur, initially, it is in leased premises, so the plant expenditure for that would be hardly around INR 5 crores. But additional investments will be at Sultanpur here in Hyderabad, where we have plans to widen our product range and probably expand our food containers range also. That could be another INR 5 crores, INR 6 crores. So apart from INR 33 crores already committed in the financial year so far for the expansion and payment of some of the machines, which are received early in the year, the overall investment again this year will be in the region of around INR 50 crores, which was INR 59 crores last year. As of today, the visibility is, we would be needing around INR 50 crores investment in the financial year. Already INR 33 crores has been either committed or completed. And we have acquisition of 3 -- close to 3 acres of land at Kanpur, and buildings to be built at Sultanpur, Hyderabad. And maybe starting of the buildings at Kanpur towards the end of this year for the -- our own facility there. So all these put together and the additional molds and machines, we see a requirement of around INR 48 crores to INR 50 crores of investment again in the financial year. That will take our volume, which at the beginning of last year was somewhere around 34,000, 35,000 tonnes to close to 45,000, 46,000 tonnes.

Okay. And the new capacity which you are speaking about like in Uttar Pradesh you said, that are closer to the Berger Paints, right? That's separate from the Kanpur one, right? Or is it the same one?

Yes. The current capacity is close to 44,000 tonnes and Kanpur will be hardly around 1,500 tonnes. But the additional capacity that we'll be creating at Sultanpur may not become really operative in this financial year because the building itself will take some time. And those numbers we can only look at next year. So this year, with Kanpur and some more additional machines at existing plants, we are aiming at reaching a capacity of 44,000 tonnes from around 34,000, 35,000 at the beginning of last year.

What would be the peak sales, like a peak utilization of 45,000, sir?

We are aiming at 32,000. So you can say close to 75%.

No, I was talking from a value perspective, like at the peak utilization level of say, 40,000, 45,000 tonnes, once the new capacity comes in, what kind of sales revenue we are targeting?

See, even the capacity is 45,000 tonnes, I would take 75% to 80% is a feasible capacity. So taking at 36,000 tonnes, and now the per tonne realization is much higher, close to around 200 -- INR 2 lakhs per tonne, I think. So it will be somewhere around INR 750 crores -- INR 220. So it will come to around INR 800 crores of revenue is possible at peak capacity utilization.

Got it. Got it. Sir, second question is on Pump segment, right? Like last few calls that you had mentioned that this segment was particularly dominated by the Chinese imports. Have this stopped completely? Or what is the status right now?

They have stopped completely importing because it's not viable and there is a lot of duty increase and all. But they're all carrying huge stocks even today, that's come down considerably. The indications from a couple of major clients who have committed to us is that they will be free by July. But I think it may slip into September, a couple of more months because the consumption has not really gone up. So their stocks are yet to be consumed. But they're all in touch with us, and they have appreciated our modern facility with 100% complete quantity checking machines what we installed, which none of our competitors have. So they all committed, but their stocks are still yet to be depleted. What they procured from 7, 8 months ago or end of last calendar year, they're still carrying. So hopefully, things will be more positive for Pumps division from October onwards.

Sure. And sir, next year, you said our capacity will be around [ 50 million ] and 70% to 75% of utilization rates we are targeting. So how much can be the potential revenue target at that utilization rate?

Yes. Once we reach say 5 million to 6 million pieces a month, we are talking about a turnover of around INR 4 crores per month. So 48 gross revenues are possible, 45 to 50 you can say, 45.

Okay. And would the margin profile be very different than what we are right now for this particular product or it will be on the higher side?

It is definitely higher than the average, and it will be close to or better than Food & FMCG margins in terms of per kg.

Sure. Sir, last one question on the IML versus non-IML, if you can please provide the volume and value numbers?

Yes, not much of difference actually in the IML. The total IML stands at 63.2% as against 65% last year -- last quarter. Basically because of reduction in the sale of our edible oil square containers, which are 100% IML. But this quarter, we had a drop in square container sales, mainly because of huge price rise in raw material and also oil prices, edible oil prices have shot up during the last 2 quarters, which has resulted in majority of the oil companies going back to metal cans or pouches, and thereby, the overall reduction in the IML has come from 65% to 63.2%.

This is for the value terms or volume?

In value terms.

And volume terms?

In volume, it is from 61%, it became 60.9%, very nominal, in tonnage, from the Q4 to Q4. If you look at the last year to now, 62.1% has become 61%, you can say.

The next question is from the line of Hitesh Taunk from ICICIdirect.

And congratulations, sir, on a very good set of numbers as far as top line recovery is concerned. Sir, my question pertains to the gross margin. During this period, we have seen kind of a bit normalized gross margin. Was it because of delay in passing on higher price days? Or it is a kind of lower mix of FMCG products in top line, vis-à-vis the Q4 of FY '21? Can you throw some light, sir?

Yes. In the Q4 of last year, Food & FMCG was 23%. Today, it is 25%, including Pumps. So that is one reason for improved margins. But whenever the raw material prices come down, there is a lag in passing on the price benefit to the clients. So that is also another reason for the improved EBITDA margins, both contributed. Otherwise, this could have been -- a part of this should have been in the Q4 last year because the price was gradually increasing in the last 3 months of Q4, whereas in these 3 months, it was gradually coming down. So whenever price comes down, we have some advantage in the margins.

But sir, the gross margin, I'm talking about gross margin, which shows kind of nearly 100% decline on a Y-o-Y basis.

100%?

94 bps dip in gross margin on a Y-o-Y basis to be very specific, sir?

You're talking about Q1 to Q1 or...

Yes, yes. Yes, yes. Q1 to Q1.

Yes. Q1 to Q1, it's considerable because last year, the capacity utilization is almost near breakeven point. So the fixed expenditure of staff cars and other cars stayed where they are. And whereas this time, though there is a COVID wave, we could at least utilize 6,000 tonnes in this quarter as against 3,670 tonnes last year. So we are much ahead of BEP, breakeven point. And that's why the margin percentage increase is considerable.

Okay, sir. Probably, I'll take this on offline. Sir, the second thing, can you please give me the revenue breakup on segment-wise revenue breakup? I had that volume breakup, but can you give segment-wise revenue breakup, sir?

For the current year -- current quarter?

Yes, for the current quarter, sir.

Yes, it's INR 71 crores for paints and about INR 29 crores lubes. Around INR 30 crores for food and about INR 3.5 crores for pumps.

Okay. Great. Great. And sir, my next question pertains to the new product of QR-IML product, which you have recently launched on a trial basis. So based on your recent experience or on a trial basis experience, what kind of change in margin you can predict? Because you said like in your opening remarks, this could be -- I mean you are pushing this to the Asian Paint and all. So I believe that this would be largely replacement of non-IML products. So it will be largely beneficiary on a gross margin point of view. So what kind of revenue potential or, say, gross margin improvement do you see for introducing this product going forward, sir? Any calculation or rough figure or ballpark figure would be helpful.

See, today, you all know that IML products contribute much better than non-IML products. And the gap between them is considerable. Let's say, if gross margins on non-IML is less than INR 30 per kg; in IML, it's close to INR 40, INR 45. So -- even in paints I'm talking about. So if Asian Paints shift some of their quantities from non-IML to IML, it always helps a lot in improving. But how much quantities Asian Paints would shift is a guess as of today because they are yet to take a call. But this time, with QR-coded IML, they wanted to try for couple of their brands, but a decision is yet to be taken. So it will be speculative if I mention the benefit. But if they take a call to shift to IML and with QR-coded IML, definitely, there will be a sizable improvement in the margins. And you have to count on one more thing, not only I'm looking at that margin, I'm rather looking at shifting their business share to us. So even if they shift 1 or 2 brands completely to Mold-Tek, it can add more than 20 -- 15%, 20% of sales growth in Asian Paints contribution itself, which can be sizable.

Great, sir. That's really very great, sir. And sir, sorry, I missed the volume bifurcation, sir. You said about 58% from the paint and 18% from the food right, sir? For Q1.

Yes. In the quantities, yes; 58% paint, 18% food and pumps.

The next question is from the line of Miraj Shah from Dalal & Broacha Stock Broking.

A majority of my questions have been answered already, but I'd just like to briefly touch upon one point. Sir, in the gross margin side, I think that the gross margins have declined in this quarter compared to the previous quarter. So can you just give us a brief about where are we in per kg cost for raw material?

See raw material costs for last quarter was 112 on average, which is now actually 118 for this quarter. But from the peak of April -- March ending and April also, the price went up a little bit. But May and June, there is a drop in the raw material price. And one more thing, the EBITDA margins per kg have not really reduced. In fact, they have increased from Q4 from INR 41.88 to INR 42.42. This quarter, it is INR 42.42 in spite of low capacity utilization. So as I explained in the earlier questions, this is due to 2 reasons. One is when the raw material prices are coming down, we get the advantage of delay in passing price reduction to our clients. That's one reason. Second reason is the better realization and our product mix. As food and pumps, volumes have gone up from marginally, though, it is from about 23% in Q4 has become 25% in the Q1.

The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.

Sir, my first question is that one of the reasons for Asian Paints not buying IML was other vendors not being able to supply. So this time around, why are we confident that QR-coded IML technology could [indiscernible] Asian Paints. What could be the reason?

No, I'm not very sure whether they will shift to QR-coded IML because as you said, they're still waiting for other vendors to become IML capable as of today. And they've -- QR-coded IML has attracted their attention because of its ability to give them last point anti-counterfeit safety. Actually, when we entered with this anti-counterfeit IML, we were not aware that the companies were already QR-coded systems they are using. But when we interacted with them, we understood they are using their QR-coded systems right up to the point of sale through QR-coded traceability and linking it with on a website. So now it becomes easier for us to convince and add the last step that is the QR-coded reverse printed IML, which will give them complete anti-counterfeit feature. And they don't need to invest on their software or too much on their IT solutions. And there are companies providing those services also, including giving geographical location of where that container, specific container, which is QR-coded by a unique number is sold and who purchased it or at least, if not the person's name, the mobile number and the location of sale, they will be able to get it online. That facility is also available now. So it becomes much easier for us to convince them to get into our reverse printed IML. I hope that they will take this decision to adopt it. But we'll only know after a month -- in the month of August, their marketing team is discussing to see if 1 or 2 brands of their's can be taken into this. But as I said, it is not yet confirmed. It is only at the consideration stage as of now.

Sir, assuming we find acceptance, what could be the increase in the container cost because of this, I mean, as compared to what they are paying currently?

It's hardly anything. For a 20-liter container from HCL to IML, that price differential will be hardly INR 6 to INR 8, that is considering a container cost of around INR 210, INR 220, it's about 3%, 3.5%. And the paint, they sell in it in some brands, the cost is almost INR 10,000. So it's nominal.

Okay. And alongside the paints, are we also switching this to other sectors?

Yes, all sectors can use this concept. Actually, lubricants will be definitely dying to use this because their products are the most, which were duplicated in the market. So they were very keen. Castrol has already developed their art work and asking us to make a trial batch and supply them. So in the lubricant side, Castrol is already taking steps to give a try. Hopefully, in the month of August, the first small batch will go on, they will put it in their supply chain and check the efficacy of it. Because most of the lubricant companies have some scheme or rather going on for customer promotion. So those schemes can be effectively implemented with this hidden QR code. And outside QR code, which we also, again, give a dynamic QR code can help them in unique identification and traceability of the product throughout their supply chain, right from our plant to their plant filling and then to distribution points dealers, sub-dealers, right into the shops, they can trace it with the outside QR code. But the inside QR code, which can be scanned only once, that's what gives them the anti-counterfeit feature. So I'm sure lubricant companies will take it much faster than the paint companies because even technology-wise, lube companies are a little ahead. So of course, Asian Paints is very far ahead. So these guys can adopt without much ado in their supply chain software.

And sir, lastly, has there been any global sort of read across for these counterfeit solutions in developed countries also QR-coded IML technology is new or how do they counter the counterfeit [indiscernible]

No. Yes. One of the ways the developed countries also tackle. But in fact, in their -- in those countries, more than anti-counterfeit they will use it for promotion. They will use it for product data information not as much as in the anti-counterfeit. But in a country like us, where we have a lot of duplicate market, parallel markets, it has become the most important thing. We can even add data about the product, how do you apply the paint, what are the benefits of this paint compared to the other. Everything will be there, the moment you scan it, you are taken to the website, and you will be giving all this data. And one more dynamic, very interesting thing in this QR code is that the promotion schemes, let's say, the promotion scheme ends on 31st December. On 1st December, the QR code, which was printed long ago can be disabled. And a new promotion can be started from 1st January, and that is kept in the software of the -- or website of the company, and whatever, let's say, instead of silver coin, hereafter it will be a gold coin, whatever, 2 grams or whatever. And then by changing that website in their portal, they will be effectively changing the scheme after this particular cut off date. So it is so dynamic for promotions. That is what made developed countries to adopt it. But here, in India, more than -- of course, that also can be done, promotion, but more than that, the anti-counterfeit can be completely implemented. It's an exciting feature, but how our industry goes for it and when they will adopt it, is time to tell. But once they start using it, one by one, I'm sure they fall in line because everybody is concerned about duplicates in the country. Even we have approached the agriculture ministry in Telangana, where there was a big duplicate seed racket has been found recently, where duplicate seeds were sold to the poor farmers, and it is impacting their crop and output. So those products can also come through our containers, which will enable the end user not to suffer from this kind of duplicate products. So the applications are many. How it will be adopted in the industry need to be watched in a couple of years, next 1, 2 years.

And sir, lastly, in terms of new product launches on the food side, obviously, last year, we were not able to gain much because of COVID restrictions. But how is the pipeline or in terms of responses from customers for new products launching in the F&F segment?

In the Food, FMGC, we have launched the sweet boxes last year, but as you correctly said last year, not much marketing could be done. But even now the marketing is limited to Zoom calls and a couple of very rare visits, but our sweet box demand has started picking up and in this festival, those numbers may start taking off. But I don't -- again, I don't count on it very much for this year because any product has a life cycle. It takes a couple of years to penetrate and come into a sizable business quantum like our pumps, which could be INR 10 crores, INR 12 crores, INR 15 crores this year, can become INR 40 crores, INR 50 crores in next financial year, '22, '23. Similarly, the sweet box is maybe INR 4 crores, INR 5 crores this year, they can become INR 15 crores to INR 25 crores in the next financial year. So like this, there are some more products for restaurants or some takeaway food products we are launching in this year. They will be in the market by December, January, and they will be adding numbers in the coming season. So like that, every year, we have plans to add at least 5 to 10 or maybe, say, 6 to 10 containers of different shapes and sizes for different applications, which will keep adding to our growth in the coming years. So sweet boxes is the one which already getting into the market, and we are introducing some cheese and butter packs by October, November. And a new range of ice cream containers by December. So probably about 10 to 12 new products -- I'm saying number of SKUs will be available from our product range starting from the new year.

And sir, one clarification of your pumps business that when you mentioned the INR 4 crore per month run rate from FY '23, how many customers are you assuming you will be dealing with?

See we hardly need 4, 5 big clients to get those volumes. And one good news is Wipro is setting up a huge plant in Hyderabad very close to our plant, about 25 kilometers, 30 kilometers. And that plant is supposed to have started by this November, December. But I think due to COVID, it got postponed to maybe middle of next year. And then their own capacity requirement projected is 2 to 2.5 million per month. So our capacity, even if it reaches 5 million to 6 million, that will be more than 75%, 80% of our installed capacity. So Wipro alone can take almost 40% to 50% of our capacity by next year middle and other clients like, Reckitt Benckiser, ITC, Godrej, who are at various stages of using our -- I mean, testing our pumps would be on board by, I'm guessing by before this year ending. So effectively, next year will be the year where we can see good contribution coming from the pump segment.

And with Wipro, we are targeting significant market share, is it, in pumps?

Sorry?

With Wipro, are we the largest supplier of the pumps for Wipro?

No, no. We started with Wipro for their supplies to their Nashik and a little bit to their Bangalore plant. Their Hyderabad plant where actually they plan to use our capacity is -- got delayed. It was to start by now, but they delayed it due to COVID, and they're talking about December, but I guess it may go to next financial year. But when they start in Hyderabad, they have committed to buy from us considerable quantities, major quantities from us.

The next question is from the line of Akshay Chheda from Canara Robeco.

Sir, my first question would be, sir, any new client additions that we did in the last quarter? And any new areas that we got into like say in Q4, you had explained about the agrichemical as the new space where you had got in. So any other areas where you got in? And my second question would be, sir, you had mentioned about EBITDA per tonne -- EBITDA per kg for around INR 36 to INR 42. So still -- should we still consider that as the safe range or any pluses or minus there? Yes, so these 2 my -- these are my 2 questions.

Yes. In the new client addition, I'm glad to inform you, we have received a major order from BPCL, Bharat Petroleum, because we are not very active with the public sector because of their controlled pricing and other practices. But this time, we got a decent order of INR 70 crores -- worth of INR 70 crores to be supplied in the next 2 financial years from BPCL, starting from June. I think small supplies have been made in June. From July onwards, there will be supplies of around INR 2 crores to INR 3 crores per month to BPCL. And we also received another major breakthrough with Gulf Oil. Their new range of products, they have selected our containers, which will be adding at least again INR 15 crores to INR 20 crores to the top line in this year. So these 2 are the major additions in the pail segment. Coming on the food and FMCG, there are list of clients who are added for various applications, CG Foods, Chemagro, and Ganpati Herbal like that, different -- Satyam Foods, BIO Veda Action Research Company, [indiscernible] Aqua Solutions. So we're getting into Aqua products, we're getting into some research products, we're getting into some various applications of food processing or nutrients, micro nutrients and other segments. So like that every month, we are adding at least 10 to 15 new clients, small, though they are not very big clients, each may be worth around INR 1 crores or INR 2 crores a year kind of business, but with our existing product range. So they adopt with their art work, whatever is the product they sell and those companies are getting added on a monthly basis. So coming to your second question of EBITDA margin, you might have seen that in spite of low capacity utilization in the Q1, we have achieved INR 42 EBITDA per kg. But going forward, that may be one reason -- one benefit of raw material price coming down has partly helped it. But I still feel achieving somewhere between INR 36 to INR 42 is still possible. INR 36 [Foreign Language]. Will it be close to INR 40, is a point where we are trying to work on.

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

Sir, I missed the volume breakup of 3 segments. Sir, if you can repeat that, please?

Yes, volume breakup was 58, 24 and 18, paint, lubes, and food, FMCG and pumps.

54, 28, 18?

58, 24, 18.

And 18. Okay, got it. And sir, secondly, on market share. I think in the last call, you have guided that we are roughly around 25% market share as we were told by our suppliers like Reliance. So assuming we did almost -- for paint category, to begin with, so we did almost INR 250 crores of top line in paints last year. So is it fair to assume the market size would be roughly around INR 1,000 crores. How to look at it, sir?

I'm talking about the organized sector would be in that region. There would be another INR 500 crores to INR 600 crores of unorganized sector also. We are dealing only with the organized sector players, top 5, 6 companies in the paint industry.

Okay. So the other way to look at it is, sir, packaging costs would be almost 7% to 8% of the total cost. Is that fair? In paint?

Yes, yes, it is fair.

So -- and overall organized...

It depends upon the kind of paint again. For the low-cost paints, it works out around 7%, 8%, but high cost paints like Royale and other, what you call, elastomers and other products, there the -- emulsions and other products, the cost of the paint is very huge. So ranging from INR 5,000 to INR 6,000 for 20-liter. So in that case, your pail -- our pail cost will be hardly say, how much, it's about 4% to 5%.

4% to 5%. So basically I think even if we consider Asian Paints as a benchmark of 50% market share in organized and if they have INR 20,000 crores top line, so the organized market comes at around INR 40,000 crore market and maybe 10% of that is roughly INR 4,000 crores. That number actually...

No, it won't be 10%. The packaging cost will be in the region of 5% to 6%, but the packaging includes cartons, it includes tins. For their enamel range, it will be only tins. Nobody can use plastic containers for enamels. So enamels are still sold in tins. So considering that even if we calculate 5% as the packaging cost, INR 2,000 crores could be the organized sector packaging cost, of which may be INR 1,400 crores to INR 1,500 crores could be INR 1,200 crores, INR 1,400 crores -- sorry, INR 1,200 crores could be paint sold in plastic. The rest could be tin and other ways of packaging.

Okay. Okay. And sir, similar such for lubricant. So we did almost INR 105 crores, INR 106 crores last year. So what is the market share here in lubricant?

There also you can take in nonpublic sector because public sector this is the first time after long gap we are getting back into BPCL. Otherwise, our sales were only to the private sector players. So there again, you take 5% to 6%. So about 5 times 500, so about INR 2,500 crores could be the sale value and maybe around INR 1,000 crores -- INR 600 crores could be the packaging cost. And you add another INR 600,000 crores for the public sector. Public sector is also huge. Indian oil, BPCL, HPCL together hold almost 30% to 40% of the market share.

Which we are not majorly focusing on currently?

No.

So our addressable market would be like, say, INR 1,400 crores of -- within 2 categories, paints and lubes put together would be INR 2,000 crores roughly would be our addressable market for these 2 categories? Is that fair to assume?

Yes, yes. INR 2,000 crores is fairly the size of the market.

Thank you. Mr. Rao, I would like to inform you that the audio from your line is slightly faint.

Okay? Can you hear me better?

Yes. Better now, sir. The next question is from the line of Disha Sheth from Anvil Wealth.

Sir, I wanted to ask that when you mentioned that INR 800 crores of sales, is it possible this year in your view. We are at INR 500 crores to INR 550 crores right now? So when...

INR 800 crores top line you mean to say?

Yes, yes. You said that we have the 45,000 capacity. That would be by which year?

Yes, yes, 45,000 tonnes capacity will be operative in this year, but of which we are hoping to utilize at least 75% to 80%, that's about 32,000, 33,000 tonnes. If the raw material prices stay here and we arrive at INR 200 to INR 220 per kg sales realization, we should be able to reach that number in the next financial year provided there is no COVID and no pandemics.

Yes, yes. Agreed. Okay. And sir, now since raw material is going down, but our IML sales and QR sales are going up. Sir, EBITDA per kg [indiscernible] is it possible and 42.4 per kg?

See, last year, full year, we achieved INR 36.72 per kg. And this year, our target is to at least reach INR 40. First quarter, we did INR 42.4, but I want to wait and see how it shapes up. Our target is to reach INR 40, INR 42. I think it will be definitely better than last financial year.

Okay. Sir, and what is the value breakup of paints, lubes and FMCG? Volume I got it, value breakup?

Value breakup I gave already, it's 53% for paint. It's okay, 22% for lubricants and about 25% for food and pumps.

The next question is from the line of [ Suvarna Joshi ] from Axis Securities. I'm sorry, we're unable to hear you.

Yes. Am I audible?

Yes. Now, yes.

I just had one question as most of my questions are answered. In the previous con call, you had mentioned about some supplies being made to Dhanuka Agritech for your nutrient business. So could you just help us with an update on that? And how is the business shaping up in the agrochemical space?

Yes. We just started in the last quarter. And again, there is repeat orders, but the volumes, what they are now testing are not very huge. I have to get real numbers. But we are trying to pressurize them or showcasing them the benefit of for QR-coded containers. Just the first call was made by our marketing, and we are yet to give a demonstration because they also are using QR code for traceability, but not for this complete anti-counterfeit. So we are trying to push to them the concept of divestment in QR codes. Just about a couple of weeks ago, we started showing them the video and some samples. We are yet to hear from them. But I'm sure they will also find it very useful to control anti-counterfeit in their products. If they do so, probably, our business will start improving.

So do you expect the business to kind of start generating revenues from second half of FY '22? Or you see that happening only in FY '23?

See, sizable numbers will happen only next year, but definitely, it will start in this second half in a small way with the existing brands maybe or with the new brand, whenever the clients decide. As of today, I can't divulge the full information. But certainly, there is at least 2, 3 players seriously looking at introducing QR code. Whether it will lead to huge number growth, I doubt in this year. But definitely, it will be in the market, and it will create still in the minds of all the top management in these companies because it's a top management agenda, the security of their product, anti-counterfeit controlling duplication is something the directors and top management of any company would look at it. So it will reach -- the message will reach them once we put a couple of products in the market. And then certainly, I hope there will be attraction towards our product. But as you said, it could happen only next financial year in a decent manner.

All right. Sir, and one more update, if you can just help us with is we were -- sometime back we were in talks with the GSK for their packaging needs as well. But because of the merger with HUL, is there any update on that front as well?

No, thanks to COVID, all these new developments are shelved by HUL also. They are in touch with us for other products. But this particular GSK Horlicks brand product, there's no talk from them as of now. And unless they also revise their plans for changing the packaging, it may not happen. So like this COVID has impacted everybody in terms of thinking of new products and changing their filling lines. I think that this will be -- will not happen in this financial year for sure. But whenever it happens, we'll be there because HUL is also our client for a long time. So they have us in their books. If they have to take a change in the packaging, they will certainly give us an opportunity.

The next question is from the line of [ Akshay Chaturvedi ] from Cosmea Financial Holdings.

Most of the questions are answered. I just [Technical Difficulty]

Sir, your voice is breaking, [ Akshay. ]

Is it okay right now?

Yes, better.

Okay. Sir, I just wanted you to throw some color on your clientele in the paints business. As you said, you serve only to the top 5, 6 players. And I would imagine Asian Paints would be your biggest contributor. Could you name the other competitors [Technical Difficulty]

They are Kansai Nerolac, AkzoNobel, Berger, [ Nippon ] Paints. These are the top players.

Okay. Okay. And sir, what would be the share of basically of Asian Paints you said? I remember you mentioned around 25% of Asian Paints demand is served by you?

Yes, around 20% to 25% is served by us because they have 4, 5 suppliers, and Hitech is their largest supplier, which is kind of warehouse company. So they get almost 40%, 45% of their business share. And among the remaining 4,5 suppliers, we are the second largest, I guess.

Okay. And how much would Asian Paints contribute to your overall paint segment?

So they contribute, even today, 25% to 30% of our top sales revenue is coming from them. Because of the new plants we set up for them at Mysore and Vizag, those numbers have gone up in the last couple of years.

So 25% to 30% of overall revenue they contribute you're saying?

Yes, overall revenue. 30%, yes.

Okay. All right. And sir, last question would be on the -- this clarification of the Kanpur plant. Currently, you guys are operating from the lease facility. Am I correct from November '21 you started...

Correct. Correct. We're just starting in September with [indiscernible] cater to Nerolac's needs. And we have acquired land at Sandila Industrial Estate recently. The buildings and all will take 1 year, 1.5 years. So by end of '22, '23 financial year, we'll be moving into our own premises. So that will be catering both to Berger Paints and Nerolac apart from edible oil sector in that area.

Okay. And that would require each around INR 5 crores to INR 6 crores of CapEx?

No, no, no. That will be INR 20 crores, but this current year will be INR 5 crores to INR 6 crores for the leased premises. The bigger project for Berger and Nerolac together will be happening in '22, '23. That will be a INR 20 crore project.

Okay. So the new plant from your own facility you're saying will come by the end of this fiscal or the next fiscal?

Next fiscal, '22, '23. We just acquired the land.

Okay. September, you said you're starting a new facility. I [didn't get that ] in September this year.

September, we are starting in the leased premises.

[Foreign Language] September, you're going to start under the leasing terms.

That was the last question. I would now like to hand the conference over to Mr. Abhishek Navalgund from Nirmal Bang Securities for his closing comments.

Yes. Thanks. So basically, I would like to thank the management for addressing all the questions, and also thanks to all the participants for joining us. Thank you.

I too take this opportunity to thank you all for the interest in our company's operations. And all of you, please take care and stay safe. Thanks, Abhishek, and thanks, Mallika. Bye.

Thank you very much, sir.