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

Ladies and gentlemen, Good day, and welcome to the Q2 FY '22 Earnings Conference Call of Mold-Tek Packaging hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kumar from Motilal Oswal. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and a very warm welcome to Mold-Tek Packaging Limited. 2Q FY '22 post results earnings call hosted by Motilal Oswal Financial Limited. On the call today, we have management team being represented by Mr. Lakshman Rao. We'll begin the call with key thoughts from the management team. Thereafter, we will open the floor for Q&A. I would now like to request the management to share their perspective on the performance of the company. Thank you, and over to you, sir.

Good afternoon. Thank you very much, Sumant and Jacob, and thank you all the participants being present on the call and for your interest in our company's performance. I'm very glad to inform you that company has recorded almost 100% jump in PAT for the H1, ending September 30 compared to the previous year. And on the Q-on-Q, that is a sequential basis, Q2 on Q1, the company has posted 45.6% growth in PAT and 30.7% compared to the last year Q2. So overall, the performance is well supported by growth in the paint segment, and secondly, by the Food & FMCG. In spite of raw material price hike of almost 26% compared to the Q2 last year, company could sustain its margins, or rather improve its margins, from almost INR 37.2 per kg in the Q2 last year to INR 42.7, which is more than 14.9%, say 15% growth in the EBITDA margin has been achieved in spite of a huge raw material price hike, which was INR 80.16 in the previous Q2 last year has gone up to INR 113.5. So a jump of INR 34 is almost [ 42% ] increase in the raw material price, but we could successfully pass on the price increase to our clients based on our agreements we have with them. And with the better utilizations of units at Mysore and Vizag and to some extent, at Satara, the profitability has shot up by 30.3% compared to Q2 last year, 45.6% compared to Q1 -- of the previous Q1, that is June quarter, and by 97% H1-on-H1. So going forward too, the company has solid plans and expansion projects coming up to support the group. And those details, I would like to share with you on Q&A to have more clarity and specific nature of disclosure. So I now give the call back to Jacob to start the Q&A session.

[Operator Instructions] The first question is from the line of Rishab Kothari from White Oak Capital Management.

This is Rishab. I had a couple of questions. So firstly, could you help me understand which were your key client additions for the quarter?

Yes, the new clients are added are mainly in the Food and FMCG city. Vikasha Dairy, Swagruha Foods, Kumaran Sweets, The Bread Basket and The Cake World. These are all the clients that were added in the Food & FMCG segment and couple of them are in the edible oil segment.

Sure. And also, could you highlight on the key contribution of, say, the top 5 or top 10 clients to your overall sales?

Yes, overall sales -- almost 70% of the overall sale was contributed by the top 7 to 8 clients. Almost 14% plus contribution come from Asian Paints alone. The second biggest is sometimes Mondelez, sometimes Nerolac and sometimes Hindustan Lever, and I think it's Hindustan Lever, which is around 10% of our sales. And then going down [indiscernible], we have KNP, we Berger Paints. And then we have food companies like Amul and others who are contributing 3% to 4% to the sales. So the top 10 would certainly contribute to 70% of our sales.

These figures are for H1, right?

Yes, these figures are for H1.

[Operator Instructions]

We have 3 questions. Can you talk about the raw material scenario of the company? There are a lot of volatility in the raw material pricing. And so what is your perspective on the margin side, on the raw material side?

If you notice for the last 6 months, the raw material price have shot up. From December where they were INR 90,000 per tonne, they were almost that INR 135,000, that is INR 1.35 lakhs, per tonne in the month of Jan, Feb, onwards. And they did drop a bit in April, May. But again -- sorry, May, June. And again, from this quarter, that is July onwards, price started forming up. In September, they touched almost like INR [ 125,000 ] per tonne. So now currently, actually, the month of October, again, they crossed even INR 130 per kg. And I think this is the peak. It cannot be worse than this because crude price has not really shot up to that level when compare it to what it was 6 months ago to today. And other input costs also have not shot up as much for the refineries. But however, shortage of raw material might be reason that has caused this kind of havoc in the raw material price side. But I think going forward, things should taper down gradually and reach at least, [ INR 100, INR 110 ] range by March the next year. However, our agreements with all of our clients is based on raw material price. That means even if it goes down, we have to pass on the benefit to them. And even if it goes up, we need to -- and they automatically rise in prices up as on 1st of every month. Some people like Asian Paints and others, we have 1 month or 2 months agreements. And with 90% of our rest of our clients, it's all based on the price on first announced by the Reliance. So that way, we are more or less covered the vagaries of raw material prices. And then coming to the performance, the improvement is mainly because of better utilization of capacities, especially in the new plants, which have been set up at Mysore and Vizag specifically for Asian Paints. And those two plants capacity utilization has shot up. And in fact, we are again expanding those capacities in this current financial year because of the projections given to us are very aggressive and -- they're in line with what they've given 3, 4 years ago, but they are little bit [ aberrant ]. So we need to start that growth little earlier. So the company has taken all the assets to catch up with the demand increase as early as from January 2022.

[Operator Instructions] The next question is from the line of Suvarna Joshi from Axis Securities.

And congratulations on a good set of numbers. I have a couple of questions. The first one, if you can just help us understand for the volume breakup in absolute terms for IML as with non-IML and across the 3 key industries that is Sales, Lube and F&F segment?

The percentage of the sale of paint has gone up from 53%, 54% last year Q2 to 59% this year. Lubes fell from 23% to 19%. And Food & FMCG also has reduced a bit from 23.4% to 21.5%. So the major growth for the current year is contributed, 48% growth has come from paints, 12% to 13% from lubricants, and around 20% from Food & FMCG.

Sure. Sir, this was under...

You want absolute numbers?

Yes, sir. That would be really helpful.

Yes, in the Paint sector, it is INR 94.5 crores, Lubes is INR 30.7 crores, and Food & FMCG, INR 34.5 crores. So totaling to close to INR 160 crores.

Sure, sir. And how about the absolute volume numbers, if you can help us.

Yes, volume numbers are also similar, but Paint is almost 4,815 tonnes, Lubes is 1,568, which is a degrowth actually. And Food & FMCG is around 1,200, which is also a little bit growth, mainly because of drop in edible oil container sales in this Q2 compared to the previous Q2.

And sir, the drop in edible oil containers would be primarily because of the rise in raw material costs or -- what explains that drop if you can...

Two reasons, which I last time also explained in June, July quarter -- June quarter, which is a very big impact in edible oil is the basic raw material that is crude oil, the import has gone up by almost 50% to 70% during the last 6 months, and it continue to be high. Now recently, government has taken some steps to reduce import duties and make it a little easier for them to import the vegetable oil, crude oil before refining. So that price hike has not enabled those client companies to use our expensive containers in the place of tins or blow-molded containers. So there is price hike in our containers also because we pass on the raw material price hike to them. So what they used to be, let's say, at INR 100 or INR 110, now start up from INR 220, INR 130. So for them, the INR 20 to INR 30 for even a can of 15 liter is a big margin. And as it is the basic oil price has shot up, so they were not able to cope up with the price hike and pass it on to the consumers. It's being a commodity product. It's very price sensitive. So they were -- even in the months of -- only in October, we see, again, the volume is picking up because of the festive season, only in September and October. I think there was a gradual decline of offtake in the edible oil sector.

Sure. Sir, that was very helpful. And now coming to this point, again, when the volumes [ uptake ], so if I see the press release, our net revenue has grown over 34%, whereas in the quarter, the volume growth is about 8%. So is the understanding right that the balanced growth that we have seen that is approximately to the range of 26-odd percent is contributed by realization growth? Or would there be an element of product mix as well in this 26% growth in realization?

No. The main raw material growth is the inflationary number. The income gone up by 34%. Yes, mainly because of the input costs have gone up, and we could collect it from the clients. So if you look at the raw material price of INR 80 in the Q2 last year to INR 113, it's a 45% jump. And our raw material generally is to constitute somewhere around 55%, 60% of our sales. So 55% to 60% of 45% comes to almost 25%. So whatever is the difference between the volume numbers and rupee numbers is mainly due to the inflation of the raw materials. And that's why I always encourage all of you to look at per kg EBITDA as a main basis for our productivity or improving profitability. [indiscernible] shot up from INR 37.2 in the year last year, Q2 to INR 42.76 in this year, which is almost a 15% improvement in EBITDA margin.

So now, again, on this EBITDA for kg aspect, in the quarter 1 con call also, you mentioned that INR 42 seems a little unsustainable. Now again in quarter 2 because of the increased raw material prices, which we were able to pass on, it as kind of same at INR 42. Do you think that for H2 also we'll be able to match up this number? Or there should be some kind of decline over there going forward? Or any guidance on the EBITDA per kg? Because I remember you might guide that we'll be able to maintain anything between INR 38 to INR 40 for FY '22. And gradually, with the product mix changing, we should aim for INR 44, INR 45 per kg on the EBITDA level?

Yes. I hope you won't complain that we get better. I'm just joking. What I'm saying is -- yes. So what -- we want to be conservative in our estimates. And this time, I would say it's not majority reason for improved EBITDA is improved performance of our units 8 and 9, that is at Vizag and Mysore, where the capacitation has reached almost 90%, 95%. But of course, the overall company's numbers have gone up only a couple of percentage points. But today, because of the demand from Asian Paints, both Mysore and Vizag, our capacity creation has picked up. And even other units have supported, from Hyderabad or from [indiscernible] to Satara to catch up with the increase in demand. That's one of the main reasons for improved EBITDA. And going forward, now slowly, the edible oil facts are coming back into picture for the last couple of months. I don't know how it will go after Diwali. But -- and our sweet packs also picked up in the last 2 months, slowly and contributing about a couple of crores in this quarter and maybe probably INR 4 crores, INR 5 crores in the next quarter. So these new additions and new packs will certainly improve. Our comps are also are slowly in picking up. We now added 2 more clients in the pumps division. And we are working with another big client for a small modification, which we -- if it's accepted by them would lead to production from month of December or January, almost like 1 million pumps a month. So going forward, I think now I can talk about a margin of INR 40 to INR 42 or could be INR 42 for the full year is possible going forward if the raw material at least remains where it is today. Because if it keeps going up, our edible oil sector might get further impacted. That's only worry we have. All other sectors are almost agnostic to raw material pricing because they cannot sell their products without that. Whereas in the case of edible oil or other alternatives like metal tins because they are not completely shifted to our kind of plastic packaging even today. So they sometimes shuffle the numbers. So they take less number of our containers and more number of metal tins and keep the price differential also so that people who are more interested in buying INR 30 less or INR 22 less, they might pick up a metal can. So that is the only volatility we have going forward if the raw material price further goes up. The rest of the things will remain well. And in fact, pumps and sweet boxes are going to add some decent numbers in Q3. And you all know that our Q4 is the best. Generally, the fourth quarter is the best because high creams and cheese and all the food product consumption should starting from January. So I think the H2 should be better than H1, definitely because H1 -- in Q1, we got affected by COVID in the month of May and June, that's why Q1 numbers go, they are much better than the previous year. They're still less than Q2 by big 40% or so. So going forward, hopefully, if the COVID is under control, it's view should be better. So probably we can look at INR 42, INR 43 kind of EBITDA margin for the full year.

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

Just 2, 3 questions on my side. So firstly, if you can help with the revenue breakup and the volume breakup between IML and non-IML?

Yes. revenue break up -- and even the [indiscernible] tonnage breakup dipped a bit a little bit in this quarter for IML products basically because our sales have grown mainly in our unit 8 and 9, which are meant for Asian Paints, who are still not into IMLs. So it has dipper from 62% to 59% in tonnage, 66% to 62.5% in value.

Okay. And sir, secondly, sir, currently, you are operating in an inflationary environment. And if you see all the industries are facing this pressure with the gross margin side, et cetera. So do we sense that -- because at least from the numbers, that is not visible because even in such a challenging environment, we have been doing INR 42, that is EBITDA per kg. So that is quite commendable so -- but do we still sense that there is some pressure from our clients?

The pressure from clients -- when the prices go down, they take the advantage and we pass it on immediately. So this is an understanding which has been going on for last 20 to 30 years. So there is no such pressure as established clients asking us to change the formula. Of course, they -- only edible oil, which is hardly 2 years relations we have with them. As I explained, they are not really completely shifted to our containers. That is our volatile segment, which I think is the worst has been already seen because the drop was considerable, like more than 20% drop in volumes in edible oil container sales in the last 6 months. So now because of festival, they are forces that the market may be demanding our containers, which are more attractive, more tamper-evident and they're not counterfeit. So there's again a rise in October, but I don't know how far will it last if raw material still goes up. But we are not putting all our eggs in that basket because we have many other new products that are being added to our range. As I told you a couple of new pumps are under development, which may start yielding some numbers from January onwards. We have -- seed boxes already picking up numbers. And as the 4 new small restaurant packs and packs for butter and ready-made food, we have under development, which will be coming into production by December, January. So whatever dip in edible oil, if it all, happens, [indiscernible] or if it really stays where it is today, I think we can continue to do INR 42 EBITDA per kg going forward.

Okay. And sir, last question, sir, any volume guidance for, say, FY '22, '23? And will it think about INR 35,000 for FY '22? So any change there? And going forward, how do you look at it?

Yes. Actually, this year, we are currently, in the first 6 months, the growth is around 26% in tonnage -- tonnes. But to sustain this may be difficult because this is based on the [indiscernible] Q1 of last year. However, the numbers are positive, and we hope to close at least in the region of 18% to 20% volume growth in this current year. Maybe 20% is possible with the new products that are being added if they are added in time as I'm thinking. So as guided to you last year or a few quarters ago, a 20% CAGR growth is on par for this year. And for next year, we have actually a couple of major developments that are happening. One is we all know that in IBM, we are making an entry. And IBM products for pharma, cosmetics and FMCG, we find good traction and reasonable inquiries are coming in our way. Of course, the project to -- the pilot project to start would be April next year. So it might not have immediately in the first couple of quarters, but next financial year, those numbers will be definitely sizably added. And you all know that the Q1 and Q2 of this year, mainly Q2, got impacted by second wave of COVID and ice cream sales have fallen again from May onwards, affecting the Food & FMCG numbers, which I hope if so it is not there next summer. It will considerably add because -- We have a couple of new SKUs developed for Hindustan Levers and even 1 SKU for Amul during this low time. We are in discussions with Arun Icecreams for about 2 new SKUs if that also is added. Next year, we could see a very good jump in numbers for Food & FMCG, apart from pumps, which now 2 more new models are getting into production by January or February. So next financial year, maintaining a 20% CAGR also, we are very confident. And in fact, if you notice today or yesterday -- I think 2 days ago, we gave a notice for funding raising plan Board meeting on third of November to write some funds in the quantum of which will be decided later because of 1 opportunity that is coming on our way which we have been waiting for quite some time, the details of which I can't disclose now. But if that happens, then there is a sudden spurt of activity and investment in the next 6 months. So if that happens, reaching the 20% growth next financial year is not a big deal.

The next question is from the line of Rishab Kothari White Oak Capital Management.

Yes, sir, I just want to -- could you help us understand your relationship with Asian Paints? So they contribute -- they still contribute approximately 40%, 45% of your sales. So just wanted to understand what percentage of Asian Paints containers are actually supplied by us? And what is the sort of breakup of Asian Paints' containers, like IML or non-IML breakup? And what percentage of containers -- what percentage of IML containers do we supply to Asian Paints?

See, my numbers will be approximation because I don't have their internal data. But based on my observation of how they share the business volume, Hitech gets maximum volume of their business followed by Mold-Tek. And then there are another 4 to 5 suppliers for them at various locations. So on average, they have at least 4 suppliers to each location. And we are there at every location other than their North location, that is Rohtak. And we are trying to enter that also through our plant at near Kanpur. Hopefully, it may happen next year onwards. So having said that, Hitech gets almost 40% to 45% of their total requirement, at least 40% in my opinion. And we hope it may get around 20%, and the rest of the 3, 4 players get that remaining 40%. So let's say they get about 10 percentage. So we are at 20% of their overall requirement, is my guess. And then coming to your question on IML, non-IML, they're completely non-IML. They have a little bit of HTL, but not IML at all. So whenever they -- if they intend to go for IML, then the IML numbers may come into picture. Today, HTL is south of their 20% of the business they deal with us. Or say they do 100% with us, in that 25% to 30% are HTL. The remaining 70% are still screen printing and BOPP printing, which is now, in fact, is not really a very modern decoration. So as of now, IML from Asian Paints is zero.

Okay. Sure, sir. So -- But like you mentioned that approximately 60% of the tonnage comes from IML products, right?

Yes. [indiscernible] IML and HTL together.

So that's IML and HTL together?

Yes. Yes.

Okay. Okay. Understood. And none of the other paint companies are also going for IML products as of now?

No. No. No, there are -- Berger is having a couple of new brands in IML, and Nerolac has a couple of brands, but not the main brands because the cost -- small cost differential -- But their main concern was whether suppliers are not ready, and if they have to move to IML, their dependency on Mold-Tek will go to almost 100% as of today. But I heard a couple of our other companies also making smaller containers of 1 and 4-liter in IML. And that might provoke paint industry to go for IML, going forward.

Sure, sir. So can we expect that as the paint industry moves more towards IML, we -- our role is going to increase substantially even for Asian Paints?

I guess so, because the kind of infrastructure, the kind of accord integrated facility is like making the label ourselves, which is a very big important [indiscernible] process. The label itself and label availability in time and maybe quality for molding makes a hell of a difference for the output of IML production. So in that segment, we have gone leaps and heads [indiscernible] something else. So going forward, probably, if any paint company moves towards IML, they will be dependent on us much higher than what they are dependent as of today.

And if I may just ask 1 more small question. So -- Do you have any idea about Hitech's progress on transitioning towards in-mold labeling?

I know Hitech has acquired some logos long ago, a few years ago. And very old news. I heard 2 years ago, news 2.5 years news, when we all met in one of the IAG meetings. Was that they were still serving to control the reductions. That's what I heard. But I -- maybe you guys have better information than me on this side.

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

Congrats for a good set of numbers. Sir, can you provide us with respect to the CapEx plan for the current year and possibly for the next year?

Yes. As you are aware, just for [indiscernible] purpose, what were the investments what we made in 2014, '15 was more than close to around INR 140 crores, INR 150 crores, whereas last 5 years of investment are for the [indiscernible] of INR 260 crores. So more than 2x investments were made in the 5 years compared to the first 30 years, mainly because of our widening product range, increasing number of SKUs in our product range. And of course, we are of expanding our footprint late locations now. So coming forward, we also announced that at Kanpur, we started adhesive premises to catch up with the time because of the COVID delays. And I'm glad to inform you last month, we started commercial production there, meeting the needs for Nerolac. Now Berger is setting up a plant there and they're going into production by next year. April, they say, probably June, July, they will certainly go into commercial production. So we also have their word, if not their commitment, that they will also be buying from us because we have been associated with Berger from more than 25 years now. And that plant at [indiscernible] has to be set up during the next financial year. Already we acquired the land and other formalities are being completed. And as early as the Jan-Feb, we may start construction. And we're ready for production by calendar year, middle or end second half of '22. So that investment of [indiscernible] will be in the tune of INR 20 crores, above INR 20 crores. And we have announced our entry into IBM IML recently. -- that is injection blow molding, which is completely a different line of activity comparing to injection molding what we do, but similar in nature. But the wider applications of IBM are mainly in food, FMCG and pharma. Pharma regulated market that is whatever drugs that are made in India, tablets or [ nutri-feeding ] [indiscernible] or whatever by many pharma companies in India have to be supplied in IBM molded containers with majority of them with children resistant caps. So there are a couple of big players like [ 3D and Prevena and Prevea ] in the field, but not many of them or others have abilities like Mold-Tek has in terms of mold manufacturing in terms of getting better productivity through proper processing, which is similar to IM in initial model. So we feel that our entry into IBM will lead the growth for us in the coming years, if not immediate year like '22 to '23 may not be a big jump in numbers. But from '23, '24 onwards, I could see that segment adding good numbers to the Mold-Tek Group. And our strategy is to have the USB IBM with IML, which none of these top players are adopted. A couple of small players are doing here and there, but not in an organized setup. So having the ability to manufacture a label and even robotics, we will be able to penetrate fast into that IBM or IBM retirement. [indiscernible] anticipate around INR 30 crores investments happening next year in the land building, of course, land is already acquired building and machinery for the Phase 1 of IBM and maybe part of Phase 2 during the second half of financial year '22, '23. So I foresee expansion of Satara, Mysore and Vizag plants, mainly Mysore and Vizag to catch up with the number of projected duration paying for the year 3 or year 4, need another INR 15 crores to INR 20 crores. So going forward, next year, the visibility is there for at least INR 65 crores to INR 70 crores investment made. And we are now, as I told you, working on 1 opportunity. If the opportunity turns around, in fact, there are 2 opportunities we are changing. If that happens, we may have to make some quick investments as early as June next year, in the next 6 to 7 months. So if those things happen, the investments could even cross INR 100 crores in the next financial year. Otherwise, definitely around INR 60 crores for sure.

Correct. So INR 60 crores for the current financial year, correct?

No, no, I'm taking about '22. Current financial year, already, we invested about INR 38 crores, and we have plans to invest another INR 15 crores, INR 16 crores -- So the current financial year will end up something like INR 55 crore to INR 60 crores. But if those 2 opportunities which are starting to happen, we may have to rapidly do that even from the month of December itself. So those 2 opportunities come up next year, INR 55 crores, INR 60 crores also won't be sufficient. Probably we will grow for INR 100 crores, INR 120 crores of investment.

Correct. And sir, Mysore and Vizag initially had capacity of 3,000 metric tonnes per plant. So now the second investment will increase the same to how much?

It was -- initially, it was only 17,00, 1,800. Then last year, it was made 3,000. And now we have been asked to -- in at least in Vizag, we have to make it 4,500. And in Mysore, we have to get revised the estimates, but previous estimate itself is 4,200. So if the [indiscernible] means we have to make it the INR 4,200 crore. At Vizag, the indications is that it may have to be a little higher than 4,200 tonnes. So overall, weighing on these 2 units at least 3,000 tonnes.

Right, right. And how are things shaping up in the fund segment with the [indiscernible] in the first quarter. So how are things in the second quarter? And do we revise our estimates for the full year?

No, no, no. Actually, the funds, as I explained in July conference call, the numbers of sanitizer pumps have almost come to nil because the use of sanitizer handwash has considerably come down, given [indiscernible] of the second wave of COVID. So the numbers were not so great in terms of sanitizer pump. But now our consideration was on baby oil, shampoos and other kinds of other segments. Most of them whom we are working on for baby oil and shampoos for campus. They are both are MNCs, details of which probably I'll be able to talk in the next quarter details. And their numbers are also comfortably good. They're talking about 0.57 million tonnes per month each. So those numbers when they are added, as I explained in July. The next financial year, we'll see a good jump in pump.

Okay. Got it. And lastly, if I may...

Hardly a 1 million a month.

Okay. Okay. Got it. Got it. And last Mondelez -- So we were suffering quite a bit since last 2 years. So like are we on track to at least touch the historic revenues?

No. The Mondelez revenues are stabilize it like what they were last year. There's no drop or no growth. And they're stabilizing their quantity, some export opportunities to Thailand and Vietnam, they're giving us, which is making the numbers steady -- And they also have plans of expanding it beyond the current level of 3 million pieces a month, which the last 2 years ago was even 5 million. Currently, they are averaging around 2.5 million to 3 million, some bad months, it is 2 million, and a good month, it is almost 4 million to 4.5 million. So on average, I guess, they will be growing at a pace of 3 million per month, which is what it was last year.

[Operator Instructions] The next question is from the line of Kanika Individual Investor.

My question is 2 questions here. One, can you share some development on the business potential, which you are working on from the take-away restaurants food packaging? How is it shaping up? And how we see the potential in that particular thing because that's growing pretty quick? And the second one is your new venture, which is the packaging for pharmaceutical industry and cosmetic, if you could give us a little more details about how your discussions are progressing and how you see the opportunity in that, one is domestic and in terms of if there is a potential driven -- do exports packaging for those kind of products?

Coming to your first question, the Food & FMCG, but for the COVID period, the growth of revenue is still better because whatever has impacted has impacted ice creams and cheese and butter and chocolates and that kind of consumables were very badly affected last year and partially affected this year. And going forward, I hope all this will be our past and there won't be an impact of COVID on day-to-day life. Then the Food & FMCG sector will boom again, and numbers can go up. I mean I'm talking about our absolute numbers of food sales can grow at least 25% to 30% in the next 3, 4 years. And the size of the industry, if you ask me, it's very difficult to predict because none of the -- I would say, hardly 5%, 10% of the industry has shifted towards IML containers. And that itself for us, it is INR 120 crores turnover last year. Probably another INR 100 crores must have been met by another 5, 6 players who are there in the small container business in the country. So this is hardly a INR 250 crores business as of today but the potential, in my opinion, can be a few thousand crores, like INR 3,000 crores to INR 5,000 crores, if everybody start adopting more hygienic and self-decorative packaging products for Food & FMCG. You take spices, you take [indiscernible], you take products, you care of mass consumption, are still coming in labeled and manually produced containers, manually decorated containers. But there will be a day when most of these companies who are -- whoever is and whatever way related to food have to use IML containers because they're made hands free, and the decoration is also hands free. And the product is completely compliant to FSSC 22000 standards, which are not really implemented in India. So going forward, for those implementation becomes stringent, more and more companies have to shift to IML the food containers, whatever they sell in the supermarket has to happen -- 90% of them in the food side have to be in IML containers. So the scope is very high, but incidents like COVID have reduced the progress and they have extensive use of IML. But otherwise, the fortune side of COVID is it is driving people towards more hygienic and more [indiscernible] friendly products because in IML, the sticker is also polypropylene. So you will be able to grind the containers altogether. Whereas a container with a paper label or sticker will be contaminating the grounded materials. So world over, the IML has been preferred for most of the Food & FMCG products because of that concern. In India also that concern is slowly improving. So going forward, that's why I'm very bullish about growth in Food & FMCG sector for our container. And coming to your question of IBM...

Can I just add to the particular part, specifically, if you could also share -- the companies like Jubilant Foodworks and -- which is the Domino's, they're getting into biryani packets and -- so I'm saying a lot of organized players and even this food distribution side is getting traction -- a strong traction. And particularly the consumption is happening from people who are at the upper middle state of the population. So my sense is that you -- I'm sure you would have had some discussions with these people. So in which direction in the plain view, you see the that they are open to adopt it?

Yes, they are. Now I -- in fact, the names, you said half of them, we are in touch with them. And even PVR and even Coke and Pepsi, we are in touch with them. But last 2 years, it is so bad for everybody. that they're all keeping this kind of new developments on the back burner or they're periodically get in touch with us to find out what's happening. Another negative is the rising prices of raw material of plastic, which is again making them think twice before they change from cardboard, and other types of cheaper packaging. So it might be a challenging task, but the changes start getting in, the numbers can roll into multiples. That will be I guess so can now, so let's leave it there. And coming to the injection blow molding for cosmetics, FMCG and pharma, we are already in touch with at least 4 top players in pharma. You know Hyderabad is a hub for pharmaceutical industry. And our company has various contracts in different companies, including [indiscernible], [indiscernible], Hetero, NetCo, [indiscernible]. So you can name many of them we have supplied some bulk containers in small qualities and they have listed our brand. And that initial contract is already there. And our position as a leading packaging company in the country is already known to them. So when we are moving in, we are always getting some good response from them. And in fact, to tell you very frankly, COVID, though the consumption of medicines have gone up in U.S.A., the consumption of vitamins and other ordinary drugs have come down because people are more worried about COVID treatment, and for the time being, they forget about their general health and maintaining the vitamins and others stuff, which U.S. consumes in bulk. So in fact, the pharmaceutical companies in this segment are not really growing, they are just total for last 1, 1.5 year. But one point you all have to identify, and you can do your research, that FDA approvals are -- FDA approved pharma companies, the number has shot up more than 50, 55 from 10 to 20 2 years ago. So more and more pharma companies in India today are eligible to supply these tablets or medicines to pharmaceuticals to USA. So more and more demand has to emanate. If not, America is consuming more and more portion of their consumption might come from India. So that would be an opportunity, which we will be entering into. And I'm confident in the Food & FMCG, and mainly FMCG, and cosmetics, we may get better opportunities quickly because we're already serving to GSK, we are serving to P&G, we are serving to Hindustan Levers, Dabar, most of these companies like Hemani, we are in touch in them there in some other small way. And Proctor & Gamble, we have been associated with them for quite some time. So all these companies who have needs of either Food & FMCG products or health care products, which are OTC counter products or you look at cosmetics in future, there will be a requirement of IBM with decoration or without decoration. So both place, we are setting up our facilities. And we foresee that once we are into that segment, let's say, in a year or 1.5 years, we will be definitely seeking a reasonable market share, which as it is today, [indiscernible] has a turnover of INR 500 crores. [indiscernible] is about INR 600 crores in these bottle. All put together, it's more than INR 2,000 crores, INR 2,500 crores, I would say, INR 3,000 crores market. So for us to capture 5% to 10% might take some time, but it's not impossible. So we are very excited about our entry into IBM. But as I again said, the numbers will start contributing only from '23 onwards.

Right. Sir, the last question, a quick one on this. My one -- I want to know your -- how the management is thinking on this particular part. ESG is a very important factor. And since we deal in plastics, there would be a negative connotation to it in terms of packaging and how it gets reused post usage, first usage. So what are your thoughts in terms of -- do you see any significant risk to the business valuations or if you're -- where you're supplying if they get more concerned the ESG, how can that impact us? And how are you preparing for it?

[indiscernible] what we read about all the issues that are related to plastic are all around the film and the purchase and use bags and tin containers of various packaging products that are used, which are very difficult to collect, regrind and reuse. Two things make it very difficult. One is the film at is or water or anything and drain all around and spread the product across the street, across the streams or even seas. And all this collection of this material is not worthwhile because of their commercial value being negligible. And when you collect also, you won't be getting a cohesive grinded material, we cannot have a good demand in the market. So what you are talking and listening even in Europe or even in America, is one-use, single-use film like material or thin vacuum formed or thermoformed formed containers or spoons and -- even spoons and cutlery are not removed anywhere in Europe. If you notice, when you go to the restaurant out there, everybody is still using them. So what they say single-use there is basically film, purchase the bag -- shopping bag and wrap polyethylene around the various products like cigarette packs, you see millions of billions of them they are rapidly with a very thin film, which will never be collected by anybody for no significant value. And then you come to milk packets, they have been consumed billions a day, and those films will be contaminated with milk, will be thrown around. So that collection and that product getting back into recycling is almost very less, maybe unless it is a restaurant or a place where they have a bulk sale of coffee or other beverages. You won't find those sachets are being supplied -- I mean, collected. So these are the items which are the main culprits of choking a drainage, or causing underground drain issues, animals getting affected by eating such film or whatever, whatever we all read in the papers. So if you read the environmental guidelines recently had given also, they are talking about the thickness of 30 microns to 50, and that's becoming 80 microns or maybe 100 microns in next 5 years or whatever. None of our products are less than 500 microns. They're all thick, they are usually collectible. And in fact, there is a value. If a container of paint is collected by 1 seller on the road, somebody threw it after using, even if he clean it, spending INR 5, INR 10, his time and water, he will be getting almost INR 40 to INR 50 for a 1 kg [Foreign Language] because the grinded material is sold is sold at INR 90 to INR 100 now. So the collection seller will get INR 40 to INR 50 each [Foreign Language] he gets it. And for a small ice cream pack, probably what weighing around 50, 60 grams, even if he collect 10 of them, he would be getting another INR 20, INR 30. So grab picker also not bothered about it film or cling material, which is contaminated, which is difficult to collect and regrind is the concern today. Maybe 10 years down the line, what more concerns may come up is something which I can't guess. But going forward for the next 5 to 10 years, you cannot live without plastic containers and plastic forms of packaging. You can maybe probably avoid filing by going for different types of paper and different types of other applications. Again, paper comes from the environment, tree cutting and pulp requirements that will be a concern. So you have a double edged knife in those segments of packaging. So a film also cannot be completely overruled. But there are jute and other replacements, which again have natural limitations of volumes. So it's a real challenge for the film and printing and companies who are in that field, in my opinion, than a company involved in molding.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Lakshman Rao J. from Mold-Tek Packaging for closing comments.

Well, thanks, Sumant, and Jacob for convening this con call, and thank all the participants for showing their interest in our company and participating in this call. Thanks for your time, and you all take care. Good day. Bye.

Thank you so much, sir. Thank you so much.

On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.