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

Ladies and gentlemen, good day, and welcome to the Mold-Tek Packaging Limited Q4 FY '25 Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavesh [indiscernible] from Emkay Global Financial Services Limited. Thank you, and over to you, sir.

Good morning, everyone. I would like to welcome Mr. Lakshmana Rao, Chairman and Managing Director, and thank him for his opportunity. I shall now hand over the call to him for opening remarks. Over to you, sir.

Good afternoon, everybody. Thank you very much, Bhavesh and -- for coordinating this call today. Thanks all participants for participating in the Q4 and annual results of Mold-Tek Packaging. I'm glad to inform you that the company has closed reasonably well for the full year with a growth of around 11.8% in sales. In terms of volume, it is 7.3%. And the EBITDA has gone up by 7%. And due to high provision of depreciation and financial costs, the PAT has come down marginally by about net profit down by 9%. However, the future looks very bright because one of the greatest news for the quarter is our Pharma division, which has started just a year ago, barely a year ago, has crossed the breakeven in the Q4 with a short up of turnover from mega INR 2.5 crores in Q3 to INR 6.7 crores in Q4, resulting in company making profits for the first time in the Pharma division, too. So this will augur well for the coming years, as the traction that is created in the Q4 will continue to spread in the full financial year of current year and apart from additional new products which are being added in the pharma sector. Another positive development is a degrowth of paint industry, which was a 6.7% drop last year, has become 6.8% growth in this current financial year, auguring well for the company's future growth. So this is all the headlines. We can have more information exchange through question and answers. Can I now give back this line to operator to organize the question and answer?

[Operator Instructions] The first question is from the line of Jaiveer Shekhawat from AMBIT Capital.

Mr. Rao, congratulations on a good quarter. Sir, my first question is on your Pharma division. We have seen a good pickup during the fourth quarter. So one, if you could explain in terms of the approvals that you have received, where are we in that cycle? And also in terms of your revised revenue targets for possibly the next year and the year beyond that for the Pharma division? That will be my first question.

Yes. Regarding the Pharma, yes, what all we discussed a couple of quarters ago that several companies have visited and passed our company audits with flying colors. And some of them, I would say, have started picking up volumes in this quarter, that is Q4, resulting in a sudden spurt in numbers to about INR 2.5 crores to INR 2.3 crores per month, which enabled us to reach a number of INR 6.7 crores in the Q4 compared to INR 2.5 crores or INR 2.6 crores last quarter. And that will continue to improve, if not at the same pace. Definitely, this will become the base now. And going forward, we are looking at a number beyond INR 30 crores for the full year. It can be better based upon some of the new products which we are launching for the pharma industry in India. In fact, there is again a minor expansion taken up in the facilities, apart from 6, 7 machines we started the business with. We are adding 5 more machines in injection molding category, which are -- a couple of them have already arrived and 3 more machines are coming in June. And the corresponding molds for the same are getting ready. Hopefully, by end of May or middle of June, they will also be here for production. So by end of June, we'll be having some more new products that will be bringing in revenues. And we are confident that the former division from INR 11 crores in the current financial year should be seeing 2.5 to 3x growth in the next financial year in terms of top line. That is current update. And to -- we see much more growth coming up in a couple of years down the line because this is only the beginning. And out of more than 18, 20 -- I don't know, I lost count, 20 companies which have given us the audit clearance, hardly 4 or 5 of them started commercial buying. So we expect some more players to start buying commercially in the coming quarters, which may add up numbers more rapidly. So as we meet over the quarter-on-quarter, definitely, I'll be able to update and revise the projections. But for now, we'll be certainly crossing INR 30-plus crores turnover in the current financial year from Pharma and probably INR 50-plus crores in the '26, '27 years that we can review as we go forward.

Sure. Sir, that's very helpful. I just wanted to touch on the capacity utilization. You mentioned in your slides that you have already achieved over 50% capacity utilization. So given that you are now seeing some traction, I mean, are you aggressively investing in expanding these capacities? Or are you still in that wait-and-watch mode before you expand very aggressively on the pharma fronts?

I would say now the gears have changed a little bit. We are no more very cautious about the investment. We are now more confident and the results are very encouraging. The way our ability to develop new molds and new products, how it has been attracted in the pharma industry is very heartening. I see a very big gap especially in new product development in this country for packaging and pharma packaging. And Mold-Tek with its tool room and product development abilities can definitely play a major role in that. So currently, the expansion is adding a few more machines in the existing land and building. But to be cautious, we have applied for further land just next to the existing land in Sultanpur and preliminary approval has been received from Telangana government for about 2.5 acres of land, which is very adjacent to the current facility in Sultanpur, Hyderabad. So this will be in future uses for pharma expansion because -- yes. Can you hear me?

Yes, yes, please go ahead.

Yes. So we are now aggressively adding that land also with -- for future expansion that is required in the pharma segment.

And sir, what kind of capacity increase are you doing there? And what would be in terms of tonnage capacity?

Currently we're close to -- yes, around 1,500 tonnes per annum current capacity. That will be at least 3,000 tonnes during the next few months. Probably by end of December, we'll have molds and machines that can produce up to 250 tonnes per month. So during this year from 1,500 tonnes, probably we'll go to 3,000 tonnes capacity in terms of manufacturing capacity by end of March '26. The land and building, which is now currently available at Sulkanpur will be more than enough to capture -- cater to this requirement. But further enhancement beyond 3,000 tonnes, if that will be certainly required in the next financial year '26, '27, would take up construction in that new plant -- new land we acquired. So this current plant, which we currently have on hand, and what we can add in Sultanpur land can cater to up to 3,000 tonnes per annum or you can say closely INR 100 crores turnover.

Sure. So very well understood. On the paint side, I mean, the quarter growth looks very tepid. It's only around 2 percentage. So if you could explain what has been happening with both Grasim and Asian Paints and other clients. And you've also been talking about IML adoption increasing plus recycled polymer also increasing. So what kind of a growth expectation do you have from the paint segment in the next year?

Yes. I agree this quarter, the paint segment growth is hardly 2%, but if you notice last year, it was negative. So that way, it is a little better in terms of -- comparatively, there's a growth of around 13% over the 12 months period for the overall paint industry in this current year compared to minus 5% -- in this Q3, I think, sorry, I'm talking wrongly. Minus -- year-to-year, there is a growth of 13%. And in value terms, it is 13%. In terms of quantity, it is 6.8%. But for the quarter in question, it is only 2.07%. So we are foreseeing this to change, and it will get better. Our trend in April or even May is on the positive side. The growth will slowly come towards double digit, is our hope, from 6.79%. Hopefully, we'll touch about 10% growth in the next financial year given the traction -- 2 reasons. One is Aditya Birla Group has asked us to enhance our capacities, which we did by January. And those capacities have started functioning from March, April onwards, and their numbers are improving now. This is a brownfield expansion. So the delta for investment is marginal, but the numbers can start growing a little more rapidly. So that is one positive thing for ABG. And coming on Asian Paints side, they are shifting more and more brands into IML. And today, we have set up all -- earlier, it used to be only Hyderabad and Satara has the capabilities of giving IML products. Now we have Vizag and Mysore also robust and have been installed. So now all 4 plants started manufacturing IML products for Asian Paints, which was not the case a year ago. So we hope that will stabilize or rather improve a bit in our share from Asian Paints. So with these 2 positive developments, we are hoping to see a double-digit growth in paint segment in the coming financial year.

Sure. Sir, on your CapEx side, I mean, earlier you had guided that you will do INR 70 crores, INR 80 crores, but when I see the number for FY '25, that has reached to almost INR 140-odd crores, which is the trend that you have done over the last 2 years as well. So -- I mean, which segments have you ended up investing a lot more? Is it largely coming from the paint side? Or are you investing across other businesses and why?

No, it's equal. Actually, in pharma and printing, especially in printing, we invested more than INR 25 lakhs -- INR 25 crores in the current financial year -- previous financial year, wherein we have added 2 flexo machines, 1 offset machine, several die cutting machines and roto gravure machine that has more than increased the printing capacity by more than 70%. That's one of the reasons why we clocked a very healthy 25% increase in the Food and FMCG sales in the Q4 because our ability to manufacture IML has enhanced from February, and that is further enhanced in May. So this is -- was the reason last year, as I told in my previous quarterly interaction that printing -- rejection of a printing machine and further delay in printing machine acquisition has caused a drop in Food and FMCG because we couldn't make IML labels in time. So whereas in this year, we are well equipped for that. And the proof of the pudding is growth of 25% in Food and FMCG in Q4. That is a good positive turnaround because going in Q1, which is an ice cream and dairy product season, we are more than ready to capture the increasing demand, which we let go last year.

Sir, my last question is on your realization. Given that, I mean, crude oil prices have also corrected sharply, I mean, are you already seeing adverse impact of that on your revenues possibly in the starting quarter -- on first quarter, given you have already seen April?

In fact, on the contrary, we are more positive about improving the EBITDA per kg, which we have crossed INR 40 after long several quarters. Last 7, 8 quarters, we were below INR 40 EBITDA per kg. And in Q4, thanks to increase in Food and FMCG sales and Pharma sales, the number has shot up to INR 40.15, which indicates that a better margin scenario is going to emerge in Q1 because in Q1, we'll be having much better capacity utilization and higher sales of Food and FMCG, which will be always there in the Q1 due to summer. Consumption of ice creams and dairy will reach peak. And this time, we are ready with our capacities, and we saw very good improvement in April. And if same trend continues, we might have a positive Q1 growth.

The next question is from the line of Shirish Pardeshi from Motilal Oswal.

I have a few questions. I think first is hearty congratulations for Food and FMCG. Just wanted to understand the growth what you have delivered in FY '25? What are the top 2, 3 things you have done right? And can similar growth can come in FY '26?

Yes. One major thing we did is our Pharma has got into breakeven right in the fourth quarter, which was not really expected. I was confident, but I was a little skeptical until we did it. And in the Q4, our team did a fantastic job, achieving INR 6.6 crores turnover in the quarter, as against INR 2.5 crores in the Q3 or INR 2.4 crores in Q3, something like that. So almost 3x turnover has been achieved in Q4, and that will be sitting as a base for the coming quarters. So we are now looking at anywhere between INR 30 crores, INR 35 crores kind of top line for Pharma in the next financial year with a very healthy EBITDA margin, which will take up the overall company's EBITDA margin. And second heartening thing is capacity utilization started improving from March onwards, especially in the new expansions we created at ABG for Cheyyar -- at Cheyyar and Panipat, which started at least from March onwards. I wouldn't say in entire Q4. But from March onwards, we see good traction in ABG's numbers, which will continue during the current next financial year. So we are more optimistic about '25-'26 because of these 2 factors, Pharma and ABG growth. And as I said, with the enhanced printing abilities and the printing volumes, we are in a position to capture thin walled growth into double digits again, which slipped last year below 10%. I think it's somewhere around 5%, 6% last year. It has now reached 11.76% overall, thanks to a big jump of 26% in the Q4. So going forward, Food and FMCG also will be growing. Another reason of my optimism is our Panipat, Food and FMCG production is starting in June in a small way, but that will start adding up by end of next financial year into a reasonable number. And our square packs also, we have already started manufacturing at Panipat. Last 3 months, we have a couple of clients nearby. But now the client number has gone up to 8 to 10 clients. So square packs, a full set of product range is being created at Panipat starting from June. Already a couple of packs are being made there. Other 2 packs that is 17- and 10-liter also will be starting from June onwards. So square packs, thin wall, ABG, pharma, these all 4 are on a good run. So we are more confident about next financial year as we see today.

So one follow-up. In Food and FMCG, how many new customers we have added over the last 2, 3 quarters? And what is their contribution?

Several clients we add every year in the Food and FMCG. Notable is Marico recently and Mankind for their protein nutritional powder, which is a sizable number. These 2 are major, but there are several other small and medium clients. In fact, as I said, last year, we let go a lot of clients because we couldn't service them due to lack of printing facilities and in-time supplies, which now we are overcome with the expanded printing capacity and able to retain more and more clients than what we let go last year.

Okay. In terms of paints, Asian Paints was giving us a good strong view, saying that they are now looking at regional -- packed with IML printing in the regional language. So I'm sure you would have been part of that journey. What kind of opportunity you see over the next 2, 3 years?

I certainly am positive about growth with Asian Paints because last 2 years, we degrown in Asian Paints overall numbers. But now with the kind of major brands being shifted into IML, and they've given us a clear advice to have IML facility at all 4 plants. In fact, including Hyderabad, there are 5 plants. With that initiative, I'm confident our numbers can become positive rather than dropping. It can even grow in the next financial year, is our hope. If that happens, that's why I'm confident of a 10% growth in Paint segment in the next financial year.

Okay. So one follow-up on FY '26, overall paint, what would be Asian Paints and ABG volume contribution?

I can't share such details of individual clients...

But total, you can say that, top 2 clients?

Top 2 clients are definitely Asian Paints will continue to be our #1 client, #2 client is HUL -- in terms of tonnage, Grasim comes #2. Gulf, Castrol are close #3s. Hindustan Unilever is #4. So that's -- they continue to be in that same order, I guess.

Okay. Just last question. On Slide 14, you have given various segmental number in terms of volume. Can you just break down each segment, what is the EBITDA we have achieved for full year FY '25?

For segment-wise EBITDA, you're asking?

Yes.

No, I don't think we have -- that data we can't share as of now.

Okay. I'll take it from Adi separately.

Yes. Probably, you can take it. It will be -- as I said, in the Paints, it will be close to INR 30, INR 32. In thin wall, it will be close to INR 70. In pharma, it will be close to INR 90 to INR 100. But exactly pinpointed segment analysis, probably you can get later.

No, I was more interested, sir, this quarter, you have delivered more than INR 40 and which was our target. So I just was more curious which segment has driven this?

Definitely, it's Food and FMCG and Pharma because if you notice, Food and FMCG has clocked a 25% growth, which is one of our high contributors. Pharma, which was 0 last year, has contributed at least 2% of the sale. I would say it is more than 2%. It is around -- in revenue terms, it is 3.3%, whereas weight basis is only 1.8x. That means you can understand the realization is much better in Pharma. Though it is a small number, INR 6.5 crores, its contribution to the bottom line or EBITDA would be reasonably good. But going forward, that will become the norm.

The next question is from the line of Richa from Equitymaster.

Congratulations for stellar performance in Pharma and FMCG. Sir, my question is related to EBITDA margin per kg and the kind of trajectory that they could take, given the volume growth guidance that you have given for different segments. So I believe -- I mean, what is your degree of confidence that we'll be able to reach INR 42 per kg kind of margin, I think that you were close to a few years ago, by FY '27? Do you think that would be possible with the mix that we are moving towards?

Yes, we are aiming towards INR 42, if not immediately, definitely in the next 1 or 2 years. It can easily cross INR 42 in my opinion, because pharma brings in at a much higher EBITDA margin, close to INR 100 or more. Food continues to be at least INR 70 to INR 80. But of course, the paint and -- paints and square packs, they continue to be in the region of INR 30, INR 35. So overall, as the numbers in pharma and food and FMCG improves, this number can move towards INR 42, INR 43 in the next coming quarters. So that is internally our target too, and I don't see it very far away.

Okay. And sir, just talking about thin pack and FMCG, I think you suffered some kind of muted growth because of the capacity constraints, and we witnessed 25% growth, but I'm assuming that could also be on the lower base. So going forward, what would be the normalized growth rate in food and FMCG considering increased competition plus the kind of capacity optimization that you have done?

Yes. In terms of printing, we've now gone up considerably. We see a growth range that means 15% to 20% in the next financial year too because earlier, we lost several clients or didn't entertain smaller clients mainly because of a lack of printing capacity. April saw 20% growth, but how May and June will -- or next part of the year goes is still not clear. But we are anticipating or targeting a growth of 15% to 20% in the Food and FMCG segment as well.

Okay. And sir, my last question is on capacity. Could you -- maybe I missed the CapEx number that you are aspiring for in FY '26. And I believe most of it will be for pharma capacity, right?

It will be partly for pharma for sure because that is where we are investing again on some land and probably completing the buildings at Sultanpur area in the existing land. There will be certainly INR 20 crores, INR 25 crores investment will happen in pharma in the current financial year. And already, we have committed INR 20 crores of investment in molds and other machinery, which are yet to arrive. So I see this year CapEx in the region of INR 70 crores to INR 80 crores because Mahad plant is yet to go on stream. It is being serviced from Satara plant. But that plant construction -- is not a big plant, but it would require at least around INR 14 crores, INR 15 crores of investment there and pharma requiring around INR 25 crores. We are further adding a little bit more in printing, not very big investment to the tune of around INR 7 crores to INR 8 crores. So all put together, our budget for the next financial year CapEx is INR 75 crores to INR 80 crores. But for any sudden jump in pharma requirements, we have already factored a INR 10 crore land, which we are acquiring next to -- INR 10 crore worth of land next to our Sultanpur unit in Hyderabad, purely for future pharma growth. So having said that, the buildings are not yet planned in that location because there is enough space and land available in the existing Sultanpur unit. So that will get filled in this year for sure. Probably the new land what we acquired now are -- about to acquire now would be future, let's say, from '26, '27 onwards, we'll be investing in that facility. So overall CapEx, we wish to keep between INR 70 crores to INR 80 crores for the next FY.

Okay. And sir, you mentioned around 3,000 tonnes per annum by the end of FY '26 for pharma. May I know the revenue potential? I think you guided for INR 50 crores kind of revenue, but what is the potential of 3,000 tonne per annum kind of capacity from pharma?

See, today, pharma selling price can be somewhere around INR 300 to INR 350 per kg. So given that -- even you take conservatively INR 300, we are aiming at, let's say, INR 90 crores to INR 100 crores overall best capacity -- ideal capacity by end of this FY that we'll be ready for filling up probably in '26, '27.

[Operator Instructions] The next question is from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, I wanted to understand regarding our Pharma business. So are customers currently unhappy with the current suppliers? Or is it because of the demand we can see such a sharp jump over the next 2 to 3 years?

No, I can't say that whether the clients are unhappy with our competitors. I don't think so. That would be a major reason because they've been in business for quite some time. Companies like Gerresheimer and 3G are in this space for more than 10 years now. What I'm saying is our ability to quickly develop new products, new features. For example, I'll just give you one example. Somebody want to develop a 2-bottle holder for an application. While 3G or Gerresheimer take 4 to 5 months to develop such a new product, including a new concept, which is not breaking the patent rules, would take them 4, 5 months to come up. And whereas Mold-Tek could do it in 1.5 to 2 months. So that -- such kind of opportunity I'm seeing are plentily coming up in pharma space also. I was under the impression all the time that food and FMCG is the only area where dynamic packaging needs will arise. But I also, to my pleasant surprise, found pharma also requiring such agility in developing faster molds and samples. For example, I'll give one more example. There are several companies which have some standards. Let's say, 200 ml bottle means it should be, let's say, 15-gram weight or 18-gram weight. But some particular need of a client would come, due to whatever the effervescents of the tablet or more stringent rules of longevity of the product, they may ask for a 22-gram bottle. Instead of 18 gram, they want a 22-gram bottle. Most of our competitors might take external help to develop such a small change and might take a couple of months to submit such samples. Whereas with our tool room -- in-house tool room, we do that kind of changes within a couple of weeks. And the client wanted for stability test and get his commercials done based on the stability test approval. So for him, saving a couple of months is a big deal. So such agility is what our tool room can bring to pharma. And that I feel is a big gap we are going to fill in.

Got it. And sir, how are the demand-supply dynamics in the pharma that -- in the 3 products that you are catering to currently?

Yes. Demand-supply, there is adequate capacities everywhere and the growth is also positive, but for this disruption of American tariff confusion, there is some disruption here and there, but things are all fine, and we are looking at capturing a market of existing market, not looking at the growth because our numbers are hardly anything. Like, say, if you talk about INR 30 crores, INR 35 crores, it is hardly not even 1% of entire pharma packaging requirement in the country. So whether that INR 3,000 crores, INR 4,000 crores market grows up by 2% or 10%, doesn't matter much because we are looking at replacing the existing competitors or gaining market share through our innovations and faster development. So I'm not much concerned as of today about the overall pharma packaging growth because we are looking at capturing current market opportunity.

Got it. And sir, if I look at our Paint segment, sir, if I compare -- sir, there was a conference where the Burger CEO said that the paints volume have grown from -- by 13% or 14% over the last 5 years. That is from '20 -- I think, '18 or '19 to 2023, 2024. But sir, if I look at our paint volumes, they have grown by 9% to 10% over FY '19 to FY '24. So that means that we have lost either customer market share or competitors or gaining our market -- the incremental volume that we should get competitors are getting. Sir, any thoughts on that?

Yes. As I told a couple of quarters ago, we are consciously letting go some of the low value-add opportunities in paint segment. We are not running after low value-add pail companies and letting go people who don't see value in IML or in terms of our quality. There are several clients who are settled with screen printing, who are settled more than enough with, what we call, heat transfer labels. So such companies, with low value add, we are letting go. That is one of the reasons why there's a stunted growth in Paint segment. Whereas in the Lube segment, lube as it is, is not a rapidly growing segment. In terms of volumes, they are more or less stagnated. But in spite of that, for the current year, it is a minus 2%. It so happens, it will vary between plus or minus 5% every year. So lube is not a great contributor anyway. Coming to paints, Yes, now with the Asian Paints moving into IML, at least for the top brands, and we created facilities at all locations. We are now all ready to capture better numbers from Asian Paints, is our hope. And ABG certainly has given us an opportunity and whatever growth they clock in, it will reflect in our numbers. So overall, this year, I can say paints will grow -- paint -- paints will grow at least by double digit.

Sir, is it fair to assume that in IML segment that we cater to Asian Paints, we would be the largest vendor or supplier?

Yes. As of today, I guess so. So I don't have clear information about our competitors' abilities and -- I mean, infrastructure. But today, the indications are those -- majority of those volumes we are catering.

Got it. Sir, just a final question from my end. Sir, our capacities are fungible, sir, so can we -- like -- so suppose the lube segment is not growing a lot. So can we repurpose our capacity so that they can cater to pharma or any other segments? So basically pharma where the compliance would be an issue. So can we repurpose our facilities in the segment that are not growing that much?

I will answer you properly. The paints machinery are fungible for square packs and lube packs. So between pals, lube packs and Q packs, that is square packs, we have complete fungibility. They are as good as meant for that particular application. Coming to pharma, the food and FMCG machines are fungible with pharma. The smaller, medium-range machines with robotics are more suitable to pharma rather than a 500-tonne machine meant for a 20-liter paint -- for a paint container. So of course, it can be, but with inefficiency. So the fungibility factor between paints -- let it be lube or paint or square pack is complete, 100%. Similarly, the fungibility between food and FMCG machinery and pharma is 100% fungibility. But using a pharma small mold and a big mission of paint doesn't suit properly. It's not economical.

Got it. Sir, just a final question, sir, what would be the volume growth that we can expect for FY '26? And what would be the EBITDA per kg estimate? Can we expect it to move by towards INR 42 in FY '26?

See, I don't want to make a guess now. Definitely, I will answer this question next quarter when we meet after the Q1 results. Our internal target is that, we already said it, we wish to see [ 50% ] volume growth this time with the EBITDA also coming between INR 41 and INR 42. But I would like to save my comments till at least June, July. Once we see the Q1 numbers, I'll be able to make a better prediction.

The next question is from the line of [ Mehul Panjwani from 40 Cents ].

Sir, who are our competitors for the Pharma segment?

3G, Gerresheimer, what is it, Gopaldas are three and BERICAP's only in the cap segment, but in mainly bottle segment and other product segment, these are the major. Parekhplast in tube segment. 3G, Pravesha and Gerresheimer are the major players.

Sir, since these guys -- our competition is already established in pharma and we are a new entrant, how do we -- what would be our unique sharing point?

I just explained to you the speed at which we develop new products, make minor variations in the existing products due to our in-house tool room is one major positive. Second is our product mix. We have canisters, we have EV tubes, we have bottles and caps, child-resistant caps, and we are coming out with a new variety of special purpose caps. That makes us one place supplier for a wider range of products. Like I don't think this kind of range is there with everybody. A couple of our major competitors may be having. Even 3G doesn't have effervescent tubes in their portfolio or canisters. So like that, they have broken their product to limited range, whereas we are going ahead with a full set of applications. That is one positive. Second, as I said, tool room and our ability to develop new products is what gives us an opportunity. For example, if somebody want to launch a product in U.S., they have to first develop prototypes. They have to develop a trial batch of 100,000 or 50,000 pieces and then market it and wait for 6 months for stability and approvals across the supply chain. And after 6 months, they come back to you and ask for commercial production of, say, 5 lakh or 10 lakh pieces a month. So in this kind of a cycle, Mold-Tek can be their best bet because we are -- in-house tool room will be able to develop molds, modify molds and quickly give them the first slot of 50,000, 30,000 pieces from the temporary molds if needed. And then once they have 6 months, 7 months lead time to get the stability done and see the commercialization, then we quickly make the commercial molds and give them no loss of time. So that kind of advantage is what we bring to the table, and that's been well appreciated by at least 3, 4 clients within this 1 year of our existence in pharma. So I see that is going to be a major positive going forward also for Mold-Tek.

One follow-up question on this. So sir, what is the entry barrier for our competition to have this tool room available in their setup?

See, last 39 years or maybe close to 39 years correctly, exactly, we have been in the injection molding field with the tool room as our backbone and having invested in very high-end machinery like 5-axis CNC machines, spark erosion corrosion machines, wire cut machines and you name anything. So whereas it is not an easy task for anybody to develop a tool room. Even a company, in my opinion, like 3G doesn't have their in-house tool room, which is capable of developing complex molds. They may be having some maintenance or some kind of a tool room, I guess. It's not easy. One is machinery is not a great deal. Anybody with money can buy that. But the skill set, designing abilities are very difficult to find in our country. Very rarely, you'll find people with strong capabilities in the client. That is one of the entry barriers.

Sir, this is a great thing what you have elaborated. So I'm just wondering that what was -- why we were held back on -- not being in the Pharma segment if we have this edge over the competition and the market is also there, we have the ability and the capability. Still, we are not...

Of course we are doing now. We can't make the announcements in the newspaper, people don't believe it. It's -- our team has to go make presentations and prove this point by developing some products, which we are doing now and then gain their confidence and orders. That's what is happening. That's why within 4 quarters, we could cross the breakeven, with generally any pharma packaging company would take 2 to 3 years.

Right. So sir, can we say that after 3 years, maybe pharma will be the dominant segment for us?

I wouldn't say it will be a dominant or #1 segment, but it will certainly be one of the leading segments in Mold-Tek's growth history. I think it can -- as you said, can happen to be the dominant contributor in terms of profit.

At least in comparison to paints, maybe.

Yes, yes, it can in the next 3 years because there is ophthalmic range. There is nasal spray range. There are other devices which can be added once we start getting the confidence of the industry.

Yes, because, sir, when we're talking about paint industry...

So that way -- can you hear me?

Yes, I can hear you, sir.

That way, there is a large scope, including injectables, vials, plastic pails, diabetic pens. We have plenty of things to do. We are just at the beginning. So that way, as you said, maybe 3 years -- if not 3 years, 4, 5 years down the line, pharma could be the largest contributor of EBITDA for Mold-Tek. If not in revenue line also could be. But I can say in the EBITDA side, it could be one of the major players, segments.

Right, right. Because, sir, I don't know, you can correct me if I'm wrong, but the size -- the potential size of the Pharma segment will be far, far -- significantly higher than the paint size, right?

In quite just in numbers, Paint segment will be still bigger in terms of what paint industry can buy. Maybe higher than -- in terms of plastic tonnage, it will be higher because of the huge size of containers they buy. But in terms of value addition, in terms of EBITDA and the variety of products, pharma will be much, much bigger. And the ability to -- if you can export, that is another area. We have now started touching upon. Within 1 year of our existence in pharma, we have made one supply to United States, and we have at least 3 or 4 companies showing interest in our products for export to U.S. So that is another great opportunity we want to parallelly explore. That to become a reality, it might take a few more quarters. But our direction is already set. We have taken one export manager, who is only dedicated himself in trying for the U.S. export opportunities. And even our office of Mold-Tek Technologies in Atlanta also helping us wherever it is necessary to touch base with some of the pharma companies in U.S.

Sir, once we have...

Not got anything from exports as of now, I'm just keeping that for future.

Right. So sir, once we taste some success in U.S., would we also look at European market?

Europe also, we have already in touch with the German company. Already, our products are under stability test for the last few months. And if there is some positive developments there, we may get 1 or 2 opportunities there also. Even Bangladesh has a large requirement of EV tubes that is effervescent tubes. They buy from India. So there also, we have started knocking at the doors of some clients. So simultaneously, we are looking at export opportunities. But they -- to become sizable, probably it may take a year or 2.

[Operator Instructions] the next question is from the line of Yash Bajaj from Lucky Investment Managers.

Sir, I had a question regarding the paint segment this quarter, which grew 2% in volumes. Now taking into consideration that the Satara plant has also kind of the utilization has gone up, upwards of 50% and the ABG volume has also picked up, then what is the reason for a 2% kind of volume growth this quarter?

As I said, ABG -- capacity of ABG utilization of the enhanced capacity started only from middle of March, and it is looking strong now in April and May. Whatever the indicated volumes, they are now able to lift from April onwards. So in the quarter of Q4, there was not much momentum. So it was only just 2%. But as I explained in the -- for the last few minutes, the numbers of paint industry growth will come into double digits starting from this quarter, that is Q1.

Okay. And there was an issue that I think I believe our Satara plant, which was catering to the Asian paint plant, which was having -- which was going through underutilization because of some maintenance issue. So has that been...

No, all that we completed in the last third quarter itself. And from fourth quarter onwards, as you said, the capacity utilization is 57% in the overall year, which was almost like -- what is the capacity utilization in the Q4 in Satara? I'll get you that answer. So next -- this year, currently in April, it's almost running at 75%, 80% capacity as of now -- as we are talking now.

The next question is from the line of Jaydeep Taparia from IDBI Capital.

Sir, I had one question. I wanted to ask the contribution of IML in value and volume terms for this quarter?

Yes. IML capacity has shot up to 75% in Q4 compared -- IML and HTL together is 75.5% as against 64.4% last year. That's up by almost 25%, in terms of tonnage. So that's a sizable jump again, thanks to Asian Paints slowly coming into IML in these last few months. One by one, they are adding their grades. So the sizable numbers have moved in. And even in HTL, Asian Paints has moved. Even in their low-value paint segment like ABG, they also moved into HTL from screen printing. So we see a drop of screen printing by 26% and the entire growth has moved into labels, 25.7%. So now today, out of 100%, 76% is almost labeled containers, IML and HTL.

[Operator Instructions] The next question is from the line of Manish Mahawar from Antique Stock Broking.

Congrats for a good set of numbers. Sir, just first thing, in terms of paint as a volume or value-wise, what is the contribution of RCP at the moment?

Now the current statutory obligation of RCP for paint industry is somewhere around 20%. But I think very soon, like June or July, statutory obligation is going to go up to 30%. So in the paint industry, already major players have started using 20% even in the lube industry. And going forward, it may even become 30% in the next couple of quarters.

But what was the contribution for our volume -- in RCP contribution in our volume overall -- on the paint volume?

Overall contribution of paint in the volume is around 44.7% of our total volume. So for example, in the year of '25, we have made 18,000 tonnes of paint pails and lubricant 9,200 tonnes. So about -- out of 38,000 tonnes, 27,000 tonnes continue to come from pail business. That is 71% of our overall sales.

And how much of that is RCP, sir?

RCP consumption this year is around 6,000 tonnes -- close to 6,000 tonnes. So out of 27,000 tonnes, 6,000 tonnes means what, 20%, you can say.

And what I understand is your realization of RCP is lower than your normal PP, right?

RCP is now currently available in a wide range of price range depending upon the quality, right from INR 83, which is of very low quality. Raw material price is INR 105, let's say. There are RCP available at INR 110 per kg. Companies like Manjushree, Srichakra, they make very high-end RCP and they charge more than virgin prices. So now today, our average price is somewhere around INR 95 per RCP. Some of them are bought at INR 83, some of them bought at INR 95, some of them are bought at INR 105, depending upon the -- sometimes client decides which one to buy. Sometimes we take whatever is available or whatever is suitable. So based on that, RCP consumption is now reached 20%, and it is expected to go up in the next couple of years.

Okay. Understood. And in terms of -- just can you share one data point. In the IML and non-IML, you shared a volume contribution for 4Q. Can it possible to share in value terms, sir?

In terms of value, yes, 77.4% is now labels compared to 48.5% last year.

Okay. And what was for the year, sir -- this year as a whole?

For the full year, it is 74.4% in value terms compared to 68% last year.

The same as 4Q and FY '25, remain same number, right, sir?

No, Q4 is 77.4%. 12 months is 74.4%.

Ladies and gentlemen, I take the last question for the day and would now hand the conference over to the management for closing comments. I would now like to give the conference over to you for the closing comments.

So I think the questions are completed. So I take this opportunity to thank each and everybody who participated in this conference. And as I said in my opening remarks, the investments that have been made in the last 3 years started bearing fruit, and we look forward to a much better future in the coming quarters, not only in pharma, but also in ABG and thin wall segments. And I hope we'll be in a position to present a better performance in the coming quarters. I thank you once again for your interest in our company's details and keep in touch. Bye. Thank you Emkay for organizing this conference call.

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

Thank you.