Prospect Consumer Products Limited (543814) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Prospect Commodities Limited H2 and FY '24 Earnings Conference Call, hosted by Ventura Securities Limited. [Operator Instructions] Please note that this conference is being recorded. Before we begin, I would like to point out that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements do not guarantee the future performance of the company, and it may involve risks and uncertainties that are difficult to predict. I would now like to hand over the floor to Mr. Kaushal from ConfideLeap. Thank you, and over to you, Kaushal.

Thank you. Good day, ladies and gentlemen. On behalf of ConfideLeap Partners and Ventura Securities, I welcome you all to Prospect Commodities Limited H2 and FY '24 Earnings Conference Call. The company today is represented by Mr. Vimal Mishra, Managing Director; Mr. Ronak Khambhati, Finance and Compliance Officer; Ms. Bhargavi Pandya, Company Secretary. Now I hand over the call to Managing Director, Mr. Vimal Mishra. Over to you, sir. Thank you.

Thank you, Kaushal. Good afternoon, ladies and gentlemen. A warm welcome to all of you as we gather for the conference call of Prospect Commodities Limited, where we aim to delve into our exceptional performance during second half and full financial year 2023-'24. Before we delve into the specifics of second half and full financial year '23-'24, allow me to provide a concise overview of our company. We mainly started in 2015 as a partnership firm and mainly into trading business. We started to get into manufacturing by 2020, seeking the demand of cashew industry locally as well as globally. We formed a company with Prospect Commodities Limited in 2022, specialized in processing, exporting and supplying natural kernels through sellers in B2B market operating from Gujarat. Under our brand name, DRIFRUTZ, we have earned recognition for delivering premium quality cashew kernels to both domestic and international markets. In addition to our core product line, we offer various byproducts derived from cashew nuts such as cashew husk, cashew husk pellets and cashew shells. With over 15 years of experience, our product range exceeding 15 items. And currently, unit capacity with more than 1,200 metric tons, we have executed to excellence nationwide. Our state-of-the-art facility ensures end-to-end process geared towards meeting stringent customers' requirement h We source the finest raw cashews nuts from trusted suppliers in African and South Asian countries as well as within India. Our diverse product range includes enticing flavors such as almonds, pista, flavored cashew catering to varying consumer preferences. We have formed strategic collaboration with renowned retail brands like Amazon, JioMart, Flipkart and ONDC platforms for shelf space, enhancing our market presence. Additionally, our joint venture with Africa Negoce Industries has enabled us to cut cost by more than 20% through direct procurement from end supplier. Weekly shipments reduce inventory and improve capital management, ensuring a steady supply. We are also implementing new high-tech machinery to double our production capacity, while maintaining the same operational expenditure. As a customer-centric organization, Prospect Commodities prioritizes excellence in product quality and supply chain efficiency, making us the preferred choice for business seeking reliable cashew solution. Our vision is to ascend as an industry leader, penetrating the retail sector and achieving excellence in both B2C and B2B markets. The India cashew market is estimated to reach USD 2.9 billion by 2029, growing at a CAGR of 3.80% from '24 to '29. The market has seen a rapid shift in consumption pattern with flavored assorted cashew products occupying an increased share in the retail market space. To support efficient sourcing, the Government of India has taken several steps acknowledging the dependence of imported raw cashew nuts. Commenting on the financial highlights for the second half and financial year 2023-'24, it is evident that Prospect Commodities Limited has demonstrated a remarkable resilience and strategic process. During the second quarter -- second half of financial year '23-'24, the company has achieved a significant total revenue increase to INR 12.54 crores marking the year-on-year growth at 62.55%, The EBITDA reached at INR 1.76 crores with an EBITDA margin of 14.07%. And year-on-year growth of 37.90%, indicating operational efficiency, and notable profit after tax of INR 1.03 crores, reflecting a year-on-year growth of 95.72%, and a PAT margin of 8.20%. Further underscore Prospect Commodities' financial strength and sound decision-making additionally, the earnings per share stood at INR 2.51. For the full fiscal year financial year '20-'24 -- '23-'24, the company's total revenue increased substantially to INR 24.69 crores, showcasing its adaptability. The EBITDA was INR 3.02 crores with a robust EBITDA margin of 12.21%, indicating continuous operational efficiency. Profit after tax was INR 1.73 crores, with a PAT margin of 6.99%, highlighting the company's financial robustness. The earnings per share for the financial year '23-'24 stood at INR 4.22. Looking ahead, Prospect Commodities maintained an optimistic outlook, bolstered by strong second half performance and strategic initiatives aimed at achieving industry [indiscernible]. The company's consistent growth and financial stability position it favorably by continued success in the dynamic market landscape. Before we delve into our question-and-answer session, I want to express my sincere gratitude to all our stakeholders for being an integral part of our growth journey. Your support and involvement has played a crucial role in our success, and we genuinely appreciate your valuable contribution. With this, I would like to open the floor for question and answer, and thank you once again for all your presence and continued support.

[Operator Instructions] First question comes from Utsav Shrivastava from Kriis Metaverse.

So I just wanted to understand recently you've announced transaction of -- tie-up with Africa 1 country. So what are the details of this tie-up?

Can you please repeat again, the voice is not clear?

You have recently announced a tie-up with an African country for import of cashews. So can you just explain the [indiscernible] of this tie-up and how it will benefit the company?

Well, we have done an MOU with this supplier, Africa Negoce Industries, in Africa because the raw cashew nuts in India, generally we are getting the harvesting cash as a 7 lakh metric tons per annum. However, the processing, which is getting done within India stand at 21 lakh tons. So balance material -- raw material that comes from the African countries and the Asian subcontinent. So for that, we have done a very strategic tie-up with Africa Negoce Industries where we are procuring raw directly from the supplier itself. So we -- so far till last year, we can say that, we were buying this raw material through traders, importers. And now we have done this strategic alliance with Africa Negoce Industries, who himself is -- who themselves are cashew processor, and we have done a tie-up with them to supply us the raw cashew nuts on a continuous basis where we are able to secure on a backward integration, we are able to save somewhere around more than 20% in our purchase cost.

Understood. So this will contribute to our top line as well as bottom line?

Absolutely. So what we have focused this year, we have gone for a further forward integration as well as for the backward integration. With the forward integration, we have expanded our facility with more than double. So probably we are just waiting for government approvals, necessary approvals to start the new premises, new factory. So once we have that in place, so we will have a backward integration with almost same operating cost what we are having at the moment because it is -- it will be a fully automation -- automatic plant. And same time, we have gone for a backward integration as well, where we can improve our raw material procurement with less cost, which will help us directly in our bottom line as well and as well as in top line.

Next question comes from Vinay Nagori from Fintegrity Wealth Management.

I just wanted to understand now with the capacity expansion coming in, so till when can we reach the peak capacity? And now with the backward integration also in place, so what could be the margins going ahead?

See, we are waiting for the government approval at this stage. So probably we are expecting the new facility should start probably by end of July or in August itself. However, it depends on the compliance cost. Once we have all the approval in place, then we will be able to start it. And with backward integration, so we are expecting as of now -- EBITDA [ for this client ] at the moment is at 12.21%. So on a year-on-year basis minimum 50 basis -- 0.50 basis point we can consider as an income actually in addition on what we have done so far again year-on-year basis. However, the final numbers actually we will not be able to confirm at the moment till the time [indiscernible] as operating.

And sir, I just wanted to understand the vision for our company. So what's a 3- to 5-year vision for the company? And what all new products are we going to -- so we're just into cashews right now and a few other dry foods. So are we planning to become a brand from the commodity business?

Yes. For the retail, we have already launched almonds, pista, raisins with us actually. So in retail category, we already have other products added in our portfolio. Going forward, because the cashew being the main product which is being used in -- across all the industries. As you will see cashew is being used in restaurant industry, likely as a dry fruit. Now cashew milk is also coming out, cashew butter is also coming out. So the demand what we can see is INR 2.9 million market what we can see probably going forward by 2029. So it's a huge industry with 21 lakh ton capacity what India is processing at the moment. We are standing [indiscernible]. So we have a huge market penetration in front of us which we'd like to cater as much as we can. Going forward, we are -- actually right now, we have an installed capacity of 1,200 metric ton per annum, which we have no -- we have increased more than double. Going forward, we will further increase our capacity. We will penetrate the market. We will add more and more products in our portfolio. Going forward, almond is a target to us where we will start manufacturing by ourself in our capacity only. Flavored cashew, we've already started. The SKUs are ready. We're just waiting for the new facility to be operated [indiscernible] in the market itself. The other dry fruits are also in the pipeline, like the pista that will be going out, we'll add in our portfolio as well under the brand name of DRIFRUTZ. We will have most of all the dry fruits settle in our own portfolio and when you can see the demand in the market. So if you see during the festival season, cashew are always our big sale. So whatever material we have throughout the year, by the end of -- by the time Diwali comes, the material is getting sold out. Whatever quality you have, everything will be sold out. So demand is not a constraint in this market. Demand as much as we can sell, the demand is new.

Okay. That's interesting, sir. And sir, just a last question. I wanted to understand like where do we see our company in next 3 to 5 years? Like what kind of growth are we looking at? And because the market is huge and we are in a sweet spot. And also the capacity expansion, do we have land? So it will be -- will it be brownfield or greenfield?

Sorry, the last line, actually, I couldn't hear clearly.

So will the future capacity expansion be brownfield or greenfield? Do we have excess land where we can do the capacity expansion or we'll have to buy a new land or a new -- acquire a new plant?

The expansion what we are doing right now at this stage, we are starting directly with more than double capacity. However, we have a further possibility to increase our production capacity in the same premises. So we are targeting from more than double to at least 3x or 4x production what we can do in the same premises and basis on that only we've done the selection of the plant and we've processed to set up the new plant here. So we don't need to go for a further new capacity expansion on different land going forward. We think the expansion it will be done for the next 3 to 5 years. The growth what we can see actually probably in the next 3 to 5 years as the market stands very, very [indiscernible] here actually in India and the consumption is increasing day by day. So we will try to increase our production capacity, market share with a different vertical. We are entering into corporate SEZ as well. We are targeting sports as well. We are into B2B market. We are entering into B2C as well. So going forward, probably whatever the revenue we have done so far or whatever business we have done so far compared to the market in India, probably we may not be able to confirm the exact number at this stage, but there is a huge scope which we are looking at the moment, somewhere around 5,000 to 6,000 tons in the next 3 to 5 years, we are targeting to achieve as a production capacity within our own premises.

That's really something, sir. Just one suggestion. So our company's name currently is Prospect Commodity. So it gives a wrong impression that we are in a commodity business because now we are planning to get into branded business in the food business. So just a suggestion, if possible, we can just change the name in such a way that it reflects the true identity of our business.

Thank you so much for the suggestion. In fact, it came to me from other investors as well, and we are working on it. So we are just trying to find out the proper name which represent the actual industry -- dry fruit industry because commodities are absolutely different and dry fruits is absolutely different. But, yes, your concern is well noted and [indiscernible].

Next question comes from Mahima Rathod from Tiger Assets.

Sir, I had a couple of questions. So except Africa, where do we procure our raw material from? So you said some South Asian countries as well as India. So if you could give some detail regarding that?

See, what I heard -- actually I couldn't hear you clearly, but what I understood, you are asking for the raw material from where we are procuring in Africa, right?

Yes, that's right.

Okay. So we are actually -- we are procuring from West African countries at the moment, especially Benin because the Benin government actually, they have stopped exporting raw cashew nuts. So the nearby countries we are targeting. Lome is there, Ghana is there, Ivory Coast is there. So everywhere raw cashew is available. So -- and the government, they have -- they are opening the window for certain period of time for exports, and that's what we are targeting, so that we can have continuously raw material supply for probably 2 to 3 months, we may have export from Benin. After that, we may have supply from Togo. After another 3 months, we will have supply from Ivory Coast. And after that, probably from Ghana. So we are just trying to cater to all 365 days requirement from different, different part of the African countries.

Sir, could you give me a bifurcation of your domestic and export sales?

Export, we have recently started actually. We have not that much because the current capacity what we have. So compared to the demand, whatever the production we used to do, we don't have that much material where we can go and sell in the export market as well because the local demand stands so high. So whatever production was there, most of the material has been sold in the local market itself. Exports, we have recently started. So it won't be that much value, but we have started exporting in the U.S. market. So probably this is our fourth or fifth consignment is on the way at the moment, which we have started. We are going for target Middle East as well for our export consignment, followed by the Europe.

Okay, sir. And sir, what is the market share currently?

In cashew, basically, there are more than 4,000 process in India. Most of the factories, they are having annual capacity of 500 tons, 700 tons. So hardly 15% to 20% market factories are having a capacity of more than 1,000 tons within that domestic. So we fall in that category at this stage. However, there are new factories as well who do production of more than 5,000 tonnes per annum as well. So you want to -- we want to set up ourselves in that leap where probably we will have market share probably 1% of it, that also will target a revenue of more than INR 1,000 crores.

So we are looking to diversify in other products like you said, almonds and pista. So are we even looking at upstreaming or downstreaming products like nuts from those particular -- oils from those particular nuts?

See that's a byproduct we have actually because -- like CSNL it is coming from the cashew shell. So going forward, whenever we want to just add that premises on this factory with us, so it's very less investment actually in that, and we can always go for it. But at this stage, we have kept cashew as our top priority. But yes, going forward, we are open for this expansion in byproducts where raw material comes from our own factory itself. We will have the ready material in our factory and we can target the other industries as well. With cashew being a so dynamic fruit, each and every part of it is being used. Like the top shell is being used for CNSL oil, husk is being used for the tanning material, whatever the broken cashew or probably the small part of like powder, actually that is also being used. So each and every product of this fruit is being utilized. Nothing is waste in this. So we definitely would like to look forward to expand ourselves in other industry as well. But at this moment, the core target what we have is to focus on our factory, the new premises, which we will start shortly.

And sir, could you give some details about -- so you said you're furrowing into B2C. So what are we looking at in that sector? So as of now, you're doing B2B to wholesalers, right? So what are we targeting in the B2C market?

Yes. So B2C market, right?

Yes, sir.

So B2C, we are targeting through online channels and we will go for the retail distributors as well with our new facility because that's where we will have some capacity to supply material on a continuous basis as well. We don't want it to end up in a situation where we'll start supplying and later on, we won't able to fulfill the supply chain and also demand what we may get from the market. So we focus first on the B2B market. That's where we have set up our base. And now we are going for the B2C market, which will help us to increase our bottom line as well. And at the same time, it will help us to [ build ] our brand in the market as well. So going forward, we are targeting in B2C market through online channels, through social media platforms, through platforms like Amazon, Flipkart and D2C or direct from our website as well. We are looking forward to start it.

[Operator Instructions] next question comes from Pranav Shrimal from PINC Wealth Advisory.

Sir, I wanted to understand who are our customers?

Sorry, please come again?

Yes. Who are our customers, customers? Who do we sell to?

Right now, we are selling in the B2B market. So mainly our clientele base are the wholesalers whom we are selling. Recently, actually we supplied to Haldiram as well through our channel partner. We supplied to Haldiram as well. So going forward, because the capacity, what we had so far or what we are having at the moment is very small, where we are unable to target the big customers like the Bikaji probably the dairy products as Amul because we are already in discussion with them at the moment for the dairy brands actually. If we are able to supply them, so we will have a few corporate profiles in our portfolio. But as of now, mainly we are supplying in the wholesale market only.

Wholesaler is 90% of our sales, if there is some percentage you can give?

It will be more than 90% I can say because retail market we've targeted through online channels only.

Okay. And also when we are sourcing the cashews, do we enter into any forward agreement?

Sorry?

Do we enter into forward agreement for the price of the cashew that we are sourcing?

Yes, we prefer that. Actually, we don't prefer to go for a market volatility. We prefer to have a contract, forward contract or backward contract with our supplier as well. So we can have a steady growth. We don't want to get into so much of market volatility. It's probably somewhere around 80% of the business, what we prefer is to have the contractual mode only. So right now -- again, actually because next -- with next new capacity what we are going to start. So we already receiving the contract from the wholesaler, but we are actually refraining at the moment to confirm till the time we have production in place with us. But definitely, we prefer to have a long-term contract with our buyers. We don't want to take on ourself as a spot business -- spot opportunities here in the market.

Got it. And where are you sourcing our cashews from?

We are sourcing right now from the African countries, West African, especially. We are sourcing from them...

Okay. Mainly from Africa?

Yes, yes, yes. Mainly because the cost like the Indian raw cashew. The price of the Indian raw cashew is quite high. So we have a combination. So we are procuring from the Indian raw cashew as well. Same time, we are going for the African raw cashew as well, which gives us the balance in overall our procurement price.

Perfect. And what would be our highest selling cashew? As I can see you have 5 different types of quality, which would be the highest selling?

The 180 grade, it's the highest -- it's the most premium cashew, but the highest cashew which we sell because generally when we're doing production, so most of -- all the grades are in a single batch. So we may have 180 as well, we may have broken, we may have a split. We have 210, 240, 320, 400, DW, SW, NWP. So all the grades will come in a single batch. The highest selling grade is mostly 320 and 240. That's what the premiums cashews for middle range, you can say that, that is coming in the highest range.

Could you repeat sir, which one?

240 -- W240 and W320. It depends...

Okay. Okay. Okay. And our wholesalers?

Once you process the cashew in cutting machine, so if the cashew has not been broken in that, then you will have the whole cashew. So to differentiate it, we'll do the grading and sorting in the different machineries what we have in our factory. So accordingly, the grades are coming out. So mostly, we can see in India the cashew which is coming out and mostly sold in the market, that is 240 and 320.

Okay. And sir, our wholesalers are mostly -- are wholesalers who sell it to retail outlets or they are selling it to some business only? Do we have that number or?

We don't have such numbers actually because we are selling to the wholesalers. They may sell it to the distributor or probably the retailer. We don't have those numbers with us because we are just connected with them. We don't want to get further for that channel. So to approach directly in the market, that's where we are coming up with the brand name, DRIFRUTZ, directly in the retail market with our own packing and everything directly to our customers. So we do different packagings because B2B market is separate and the retail market is separate.

We have a follow-up question from Mahima Rathod from Tiger Assets.

Sir, just one question. So as we are importing most of our raw materials, so what will be the -- like what is our logistic cost is like. For example, due to the Red Sea crisis, what impact is it having on our logistic cost?

Logistic cost you are asking, right?

Yes, sir.

So we'll -- so probably I'll just give you the example. If we are buying raw cashew from India, the local raw cashew actually if we are buying, so probably we will get a price of somewhere around INR 125, INR 130. But when we are procuring from Africa, so landing till our factory, it comes somewhere around INR 105, INR 110. So that logistics cost basically it does not come in between because import duty is free under the least developed country agreement we have -- as in India we have with the African countries. So import duty is nil, GST stands at 5%. The shipping and logistic cost, everything comes so per kg probably roughly around INR 3 or INR 3.5 something, which is coming out to us. So that is not a concern that much when we are bringing anything in India.

[Operator Instructions] We have a follow-up question from Utsav Shrivastava from Kriis Metaverse.

My question is that are you -- can you give some revenue guidance for this year FY '25?

Well, we don't able to have those numbers right now actually available because we are focusing right now to start our new facility, which is having more than double capacity. Definitely, what we are looking is a 50% revenue increase, that should be the minimum what we are looking, but it may go for probably 75% or 100% plus as well. But at the moment, it's difficult to say till the time we get all the permission in place and we start our own factory.

What about margins?

Margins, we are looking to increase EBITDA, probably 0.50 basis points, you can consider as an increase on a year-on-year basis from here on EBITDA and PAT level as well. Our operating cost will stand almost the same because we are going for fully automation at the moment. So whatever additional production we are going to do, that will help us in our bottom line as well.

Next question comes from Sandeep Singh, an individual investor.

Sir, can you talk about your working capital days? I see those are pretty high. So can we talk through what we can do to reduce your working capital days?

Please come again, we could not hear you.

Can we talk about working capital days? I see that is very high. So what can we do to reduce working capital days?

Working capital, right?

Yes, days.

Okay. So generally, what is happening actually we are importing from Africa at the moment now. So once we transfer the payment from here, so they take 10 to 15 days to load the containers. The transit time itself stands 45 to 60 days, depending on the shipping line, depending on the space they get. So by the time we have material here, probably 75 to 80 days cycle is minimum. Apart from that, another 10, 15 days will require to clear the cargo and bring the material in our premises. So that's where it's a capital-intense business, there is no doubt because it will be a continuous cycle going forward, and that's why we went to -- we went with the agreement with Africa Negoce Industries because we -- cashew being a seasonal raw material. So we don't want to dump all material together at the same time. Actually, we've done an agreement with the Africa Negoce Industries. So they can have the stock with them in Africa and they can supply us on a weekly basis. That's where we can reduce this working capital cycle. And that's why we have done this agreement. Going forward, we see the improvement in this number. However, the industry -- the cashew industry stands with a high working capital just because of the nature of this business.

Okay. So what about overall CapEx cost for your new capacity? How much CapEx we'll be incurring this year?

So roughly around INR 5 crore plus investment what we are targeting in this new premises because all the new machineries and everything is in place. So probably, we have more than double capacity, for sure. But going forward, we will -- with a few changes, we may have this capacity further extended as well.

So can you specify currently what is the capacity? And how much can we add with this INR 5 crore CapEx?

See 1,200 metric tons is the current capacity we have. We are going for more than double at this stage.

Okay. So that is maximum we can go with INR 5 crore business or we can go beyond that?

So nothing like that. Going forward, we will add more capacity in the same...

What about '26. Can we -- can you suggest growth guidance for '26 number? FY '26 and EBITDA margin, what can we expect?

See numbers, I won't be able to share at this stage actually because once we have this new facility in place, then we will be able to update more -- with a more clarity on that. However, what we are targeting is a minimum 50% growth year-on-year basis at this stage. Once we have this new facility in place, then probably we may look for this 100% growth as well year-on-year basis. But at this stage, it will be difficult. But 50% what we are able to see clearly at this stage in this current year as well on a year-on-year basis. But once we have this new facility, probably by August in place, then we may have more clarity on this.

So when this new capacity to stabilized, so what would be our blended EBITDA margin -- stable steady-state EBITDA margin will be what once we have the full capacity stabilized and we are able to optimally utilize the capacity?

The minimum EBITDA margin we see is 0.50 basis points you can consider. That's what we can see easily at this stage. However, it will -- it may go further -- it may increase further as well in that because the operating cost will be less and we will have more production in that. So at this stage, we can see minimum 0.50 basis points you can add. Last year, we have done about [ 10.31% ]. So probably 50% basis point, you can add in that, that's a minimum what we are looking at this stage.

Okay. So you track on your...

[indiscernible] keep on increasing.

So you talk about customer like Haldiram. So are we planning to directly get in touch with large customer bypassing the intermediate distributor? Are we looking for...

We will expand our customers see because B2B vertical is different, corporate vertical is different. Retail segment, which includes retail distributors -- distribution, online sales, B2C, everything that is different and export is different. So we are focusing on all 4 parameters. So we won't get stuck with only 1 vertical. We want to expand in all 4 parameters, all 4 verticals. So going forward, we will have the distributor, probably we'll approach the wholesaler in North India as well. We will have a distributor in Maharashtra as well. We will have -- we're already having in Gujarat. We will approach the giant corporates as well and we will -- same time we will focus on exports as well.

And sir, last question for me here. So primarily, we are into B2B and B2C, we are starting off. So what are your plan? And 3 years down the road, what percentage of our revenue should -- will come from B2C? Not now, I'm not referring to now or '26, but say, FY '27? Do you have any target in mind? Any -- what plan we have on for that?

See, right now, we are targeting with 10% at this stage. Whatever the revenue we have, we are focusing 10% revenue as a B2C product actually. The revenue what we can generate from the online sale or the distributor. That's where we will have the more profit margin in that, and that will help us in bottom line. Going forward, definitely, we'll increase it. But to begin with, we are targeting roughly around 10% revenue with the retail segment.

That is in FY '25 or '26, 10%?

It's '24-'25.

'25. Okay. And what about next year, 10%...

[indiscernible] number. Once we see the feedback, once we have the right channels approach actually, whatever the feedback we receive, whatever the orders we receive. If we need to improve somewhere, immediately we will take some call on that. We will add more and more SKUs in this as well. Like, right now, we are going to add flavored cashews for 13 or 14 actually different players we are coming up with right now. So going forward, we will have more and more SKUs with us, which will help us to increase our sales directly in the B2C channel as well. So roughly around 10% is what we are targeting to begin with. Going forward, it may go to 20%, 25% as well in the next 2 years.

What is the difference between the margin? You mentioned that B2C offer better margin. So what would be the difference between your current B2B margin compared to B2C margin?

See, we will have 10% to 15% plus directly you can say additional margin in our bottom line when we target B2C segment.

[Operator Instructions] Next question comes from , [indiscernible] an individual investor.

First of all, congratulations. I wanted to ask that how does our company plans to sustain and enhance the profit margins in the coming years? Are there any strategies to efficiently maintain and improve this profit margin?

So that's why we are coming up with a new facility, which will be fully automatic. So we will have a less operating cost in that. We will have a more stringent process in place. So we can improve our internal process flow. We can improve -- we can have a more standardized quality fresh in this because it will be mostly fully automatic -- automation having done in the factory. So we are improving internally as well that we won't fall back in the market. We are increasing our capacity as well to increase our profitability, revenue, everything. And same time for backward integration, we have done a direct procurement from the African suppliers as well so that it will help us to reduce our purchasing cost as well. So we are working on all the parameters wherever possible at this stage to focus and to do the correction, which will help us to directly increase our profitability, increase to sustain in the market and probably grow in a rapid pace in the market as well.

Okay. You explained about the cost effect the African Negoce Industries will have, right? So how does the direct procurement strategy with that African Negoce Industries impact our overall supply chain?

Definitely, it will help because -- I can just give the example. The Indian cashew when we are going to procure this cashew, so cost is coming somewhere around INR 120 to INR 125 per kg. So when we go for import in that case, so even landing till our factory, the cost is coming somewhere around INR 105 to INR 110. So we are paying INR 10 to INR 15 per kg. So it is a huge cost when you see overall in numbers.

Yes. And are there any impact on supply chain?

It will have a positive impact because we will have a continuous supply. On a weekly basis, we will have loading from the African nation whenever actually the day we place the order, so they will load on a weekly basis, like suppose we have a monthly requirement somewhere around 100 tons. So they will divide -- we prefer to divide it on a weekly basis. So every week, they will load 25 tons. So our working capital will get blocked for 25 tons for this week that they will load, after that for next week. So probably by the time we receive the first consignment, our total cycle will get divided in 4 parts, working capital cycle. So it will have a very positive impact in our portfolio.

Okay. Okay. And I just also wanted to know that what does the role of a strategic collaboration with retail brands like Amazon, JioMart, ONDC, which will help us with demand and market presence?

See, there are thousands of suppliers on this platform. We want to do that as well. We want to have our market share. We want to develop our product on that channels because the traffic is moving on those channels -- on those platforms at the moment. Slowly, steadily, we will divert. We'll prefer to have more and more customers on our direct website as well. So we are working on both the channels because wherever the crowd is going, definitely we should be there. So that's the first target we have. We should be on these marketplaces where the crowd is coming to buy the product. We are improving our supply chain in that with focusing delivery on the next day, probably rather going forward on the same day. That's what we are targeting. We are working on it. So how we can improve our costing in that, probably what cost effect will come in that place when we go for a next day delivery. So how much cost it will affect us. So we are focusing on the customer experience and the packing while you send the material through courier to anyone, the material should receive in the proper condition to them. It should not be broken. It should be properly packed. It should be the fresh material. And the fastest delivery has been in the e-commerce business. That's what we have come on the conclusion. So we want to focus on our quality and same time we want to increase the customer experience. So this -- collaboration with this platform that will help us to get more and more traffic to us. They will have our product, they will experience this product. So that's where we can expect the further orders from them repeated.

Next question comes from Anand Mittal from [ Mittal Associates ].

My first question is like what are the company long-term goals and vision for becoming an industry leader in both B2B and B2C market?

That's what we are working on right now. So we have increased the capacity because till the time we don't have production capacity, we cannot look to dominate the market or probably to have a bigger share in the market. So the first step we already took it. We have expanded our facility from 1,200 tons to we are going for more than double capacity going forward. Probably in a couple of months, we will have this facility in running condition as well. So that's the first step we have gone for it. Secondly, where the crowd is coming, like the e-commerce platform. So we want to have our presence in those markets as well. So we are tapping with this Amazon, Flipkart, all the platform where we can have more traffic in that. B2B market we have already strong presence in this market. The demand is not a concern. Once we are able to supply the material, then probably we may have more and more share in the market.

Okay. Great. And can you provide more details on like how the new high-tech machinery would be implemented and how it will help to double the production capacity without increasing any of your operational costs?

See, because we are going for a fully automation panel. I have been to the Vietnam because in Vietnam, we have seen the manufacturing facilities for more than 10,000 tons per annum as well. So I have been through those plants as well. I have seen how they are functioning as well. So what are -- what types of machineries they are using, what sort of correction we need to do in our factories as well. So we have gone this -- gone through this exercise for the last 8 to 10 months, and then we reached on the conclusion to have correct sort of machineries in place. So we have increased from 1 line to we are going for 4 different lines where we can have the less damaged cashew actually in place to increase our production capacity, to increase our quality standard as well. We will have a standard processing for the grading and the sorting process actually in place. So this internal -- there are so many things which we have corrected at the moment. This will definitely help us. And it's more about the automatization, like these few machineries which we have increased now. So earlier, we had a machinery, which is having a capacity of 50 kg per hour. Now we are going for 200 kg per hour machines. So which will have more and more production capacity with the same result because the grading that is one of the most critical part once it comes to the cashew industry because there will be 15 to 20 grades coming out. So to have a close look on each and every one, earlier we were used to dependent on human intervention in that. Now we are making it standardized.

Next question comes from Gopal Rathi, an individual investor.

Sir, my question is what are the primary risks faced by the company? And what is the strategy to replace the -- how to manage the risk?

The main concern and the risk factor you can say that is probably in cashew industry is not having the raw material. So to avoid that sort of scenario going forward as well, that's why we went to the Africa. We have done this MOU with Africa Negoce Industries, where for 365 days we can have the raw material, maybe not from the 1 country, but another country is there. Second and third option is also available, fourth option is also available. So we're looking at the geographical position of those countries and the harvesting season of those countries. We are planning to have 365 days incoming raw material from African counties. That is on top of what we are buying from the local Indian market. So we have already gone through this backup as well.

Okay. And sir, how will you manage the fluctuation in raw material prices? Do we pass on consumer or? Sorry.

See, that's what we've done. We've done a contract actually with the Africa Negoce Industries. So we are not worried about the current fluctuation as well. There is a big fluctuation in raw cashew price at the moment. But we have a very, very minor effect due to our contract with the Africa Negoce Industries.

So this contract is for how many years or what the term is like?

Through this financial year till March '25, we have done this agreement with them.

And sir, in future what -- your -- please give your express view on B2B segment and B2C segment, which segment do you think that it will grow faster or better in margin -- perform in margins?

Both important. Both are important. We cannot have only B2C segment just to look at the profit margin because you don't have volume there. So to balance out both the things, we need to have a B2B market to mainly look for the revenue what we are looking for the business and the basic profit margin, what we should have it. And on top of it, it's like icing on the cake. That's where actually we are looking for the retail segment, which will help us to increase our profitability more in that. So we want to have a base like for the B2B market. And whatever extra margin we can generate with our -- in our presence in the market, that's where we are going for the retail B2C segment as well.

We have a follow-up question from Sandeep Singh, an individual investor.

So a quick question for me. So you mentioned about the increase in EBITDA margin by 50 basis points. So what basis have you taken in terms of EBITDA margin?

See we've done backward integration. That will help us actually to reduce our raw material cost as well. Going forward, whatever the production we will have, so we will have additional material to sell in the same margin itself. So 0.50, that's the basic what we have mentioned actually. It should go up more than that. But till the time we have a factory in place, the new capacity coming in place, actually, it will be too early to say anything more on that actually. So this is basic on the current market conditions, what we can see, current procurement, what we have in place. So basis on that, we are able to tell -- we can confirm that. So 0.50 is the basic what we're looking increase in the market.

So [ 50% ] -- the last -- the 13% around that EBITDA you did last year. So are we saying that we can target 13.5% to 14% EBITDA next year?

It should be there. Mostly, it should be there.

It should be there. And can we sustain that margin around 14 level -- 14% next year?

Absolutely. Because it will have more actually after that, the PAT level will also get increased because we will have more production. So right now, our revenues itself is INR 24.69 crores actually, that will also get increased. So definitely, it will help us to sustain and to grow as well.

So this is great news, sir, because 50% growth you guided for next at least couple of years with increase in EBITDA margin. So are we seeing -- beyond '26, can we grow around same percentage more than 50% looking at the demand and looking at the increased capacity?

So if the volume [indiscernible] once we increase the production, it will help us to increase our EBITDA margin and PAT margin as well because we don't have that fixed cost actually we'll divide with the volume. So that's why we are focusing more on to increase our volume at this stage. Definitely, even -- after '26 as well we will actually further looking -- look forward to increase our production capacity. Not that we're going to stop that. Even in India, we have companies who are doing production of more than 10,000 tons per annum. If they are able to do it, why we cannot do it. But if there is no way -- no restriction in there, demand is there, market is there, raw material is there. It's just that we need to tap it. So as fast as we can do it, we'll definitely do it.

Okay. So effectively, what I'm understanding from you is we can sustain this growth for at least next 3 to 5 years, looking at the demand and looking at what capacity we have, we can sustain, right?

Absolutely.

We have a follow-up question from Gopal Rathi, an individual investor.

Sir, what is the revenue breakup of B2B and B2C segment?

We have more than 90% business coming from the B2B segment.

Okay. And sir, in future, where we look at for this same breakup ratio or do we...

Definitely, recently started in the B2C segment. So once we have -- the new facility comes in place, our SKUs are ready, the new SKUs are ready. So we are targeting -- we'll start with the 10% market share in the B2C segment, probably, it will go further to 15%, 20%, 25%. That's what we targeting for maximum.

Now I hand over the floor to Kaushal for the closing remarks.

Thank you, everyone, for joining the conference call of Prospect Commodities Limited. If you have any queries, you can write to us at [email protected]. Once again, thank you, everyone, for joining the conference.

Thank you so much, everyone.

Thank you, members of the management. Ladies and gentlemen, on behalf of Ventura Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.