Satia Industries Limited (539201) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I am Momita, moderator for the conference call. Welcome to Q2 and H1 FY '22 Earnings Conference Call of Satia Industries Limited. We have with us today Mr. Rajinder Kumar Bhandari, joint managing director; and Mr. Rachit Nagpal, CFO of Satia Industries Limited. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Mr. Rajinder Kumar Bhandari, joint managing director of Satia Industries Limited, for opening remarks. Thank you. And over to you, sir.

Dear friends, welcome, and thank you all participating your valuable time for joining Satia's earnings call for second quarter 2021. Results for this quarter are already with you. And I shall not be repeating the same, except to comment on the reason for decrease in EBITDA in this margin quarter, which was mainly due to the [ cost of inputs ] by almost 10% to 12%. And regarding our expansions plan, I would just like to give you a small brief that we have completed implementation of all the different segments of these expansion plans. And mechanical trials for the new paper machine 4 with a capacity of almost 300 tonne per day are already [ on ], and production trial should begin in the first week of December 2021. And if everything goes well, we are expecting that we shall end this financial year with additional number -- additional production coming from this new machine by almost 15,000 tonne minimum in the total numbers and which may take our top line to almost 900 crore plus, minus. As far as cutlery plant erection is concerned, even that erection is complete. Trials have already been taken. Commissioning has been delayed because of certain travel restrictions from U.S.A. and China. Now -- their engineers now from U.S. and China are reaching India on 17th November, and they will commission both machines with capacity of total 4 tonne per day. And once we start this production regularly, which we hope will be in -- from December onwards, management has plans to add capacity in this segment immediately thereafter because there are certain additional machines lying with Zume, our MNC [ partners ]. And we may go in for additional capacity immediately. Maybe we place order in this current year only. And for -- as far as markets is concerned, [ front ] writing and printing paper market scenario is much better. And this may turn bullish also in the coming months because season starts in December, January. And prices may go up further by another 5% to 7% by the end of the year, as we expect. Our order book, like always, is good for another 45 to 60 days. With this, I shall end and request [indiscernible] to proceed further with the [ question-and-answer ]. Thank you.

[Operator Instructions] So our first question, from [ Mr. Vineet ]. He's an individual investor.

Sir, my question to you is, first of all -- so for our industry, the caustic soda is one of the main raw materials. I know we have a utility where we recycle 90% of the caustic soda, but since there is a 4x increase in the price of [ caustic soda ], how you -- how is revenue or margin hit? Because this quarter, there was some margin pressure.

Caustic prices, of course, they have almost doubled from INR 30,000 a tonne to INR 60,000, but since we are recovering almost 95% [ casting ], the effect of this increase is very minimal on our costing. So the cost increase that has affected us is definitely coming from raw materials. Some costing increase is coming from caustic and other chemicals also, but major increase is coming from raw material and the fuel side, which is total to the tune of almost 10% to 12%, yes.

Okay. So you are saying it's other raw materials, but since we source the wood pulping and there are so many different cost-saving measures we took in the last financial year -- so when you see that [ kicking in, in India ] -- and we've seen the margin improvements.

Pardon. I could not get you. Please...

Sorry. So sir, my question is, during the course of 4 or 5 quarters, we have taken so many things, like we have gone with the rice straw boiler. And then we have increased utility of the steam [ and everything ], which we have mentioned in the PPT [ or ] the Q2 update. So when we can see the margin improvements.

Yes, right, yes. As you rightly pointed out, the cost [indiscernible] because of use of [ rice straw ] and rice husk as fuel is much lesser than the same -- the fuel cost that has affected the other players, right? If I look at my fuel cost, it has just gone up to -- from 3,000 to -- 3,000 then last quarter of financial year '21 to this second quarter has gone up by almost 30% only, while for those who are -- who have been using only rice husk or coal, the cost has gone up by almost 3 to 4x. So that is a major reason that, while other players the costs may have gone up by almost 15%, in our case the total cost increase is almost 10%, yes.

Okay, sir. And sir, the final question is since we asked already. So if I -- this is more about the stock price performance. Since we are very confident that we will be doing a very good -- the cash flow from the business will be very good in the coming years, can't we plan a buyback instead of dividend? Because if we see, Satia Industries is not getting a very good [ theme ], if we reduce some free floats via more of buybacks, we can increase the share price and do have some return to the shareholders also.

That decision, at the appropriate time, can be taken by the management. Definitely, they may or they may not consider that. I'll -- I can say that only as of the moment, yes.

No, but can you present this position to the Board? Because Chirag, in one of the interview last quarter to the [ CNBC ], was -- he mentioned that we are trying to return something more value to the shareholders.

Yes. That was mainly, yes, in terms of increased dividend, definitely, but again that has to be decided by the Board. And management do -- is conscious about that, yes. [ They'll cater to that ], yes.

Okay, sir. And sir, last question. So currently our ROCE and ROE number is trending around 11.55 and 11.74. So since now we have all the CapEx which is coming online, so -- how do we see this ROCE and ROE numbers trending now?

Yes. I think Rachit will come to you on that. Rachit, please. Rachit?

Yes, definitely, with the increase in the EBITDA margin, the ROCE and return on capital employed will definitely improve.

So can you give us some guidance or color of how do we see going forward?

Yes. Like [ Bhandari Kumar ] pointed out, with the use of rice straw, the margins will improve. And with the cutlery segment, it will improve our EBITDA, so definitely the margins will improve [ in ] the ROCE and the return on investment side.

I think 15% is a good number, and definitely it will go further up from here only still. [indiscernible], yes, yes. I think that's all we can say.

Okay, so 15% is a good number, sir, and because we are, anyway, doubling that base also. So it's a very good number.

The next question, from [ Mr. Parvis Bharia ]. He's an individual investor.

Okay, first of all, Mr. Bhandari, congratulations. I'm very proud of the way the company is running. And I'm really -- I really appreciate the fact that you have come full circle in the sense you have the effluent discharge handling, pulping, chemical recovery [indiscernible] and also your raw material. So it's really a full circle and it really shows the vision of you and your company of where you're headed, so compliments to you, sir.

Thank you, sir. [ Thank you ]...

The other thing is I think it's a visionary [ step ] to take on the CapEx for especially the cutlery, et cetera. So that is also a very good move. I just wanted to ask you a few questions, sir. One is about the CapEx utilization. Most of your business is with school, paper and government, et cetera, so how is that going to affect your top line, bottom line? And what kind of a market is that for you? And other than that demand that you already have a few orders, what else do you have in the pipeline, sir?

Actually our business in the textbook boards is almost 35% to 40% of our total production. And that tonnage, if you look at, if we look at our past numbers for the last 15, 20 years, is more or less consistent. And this tonnage, we have restricted to this level. We could have increased it on any day, if we had additional capacity to supply to the textbook boards, because their demand is anywhere around 8 to 10 lakhs tonne every year. So we are just supplying almost 50,000 to 60,000 tonne every year, [ 60,000, 70,000 ] tonnes, so [ margin there ] to increase this share is always there, number one. And number two and with the new education policy coming and government stress on bringing more and more kids to the school, which are in the number of such children is in crores which are dropping their studies in between or they are not going at all to the schools and under the new education policy -- and with our low literacy rate of almost 75%, 76%. So the future of writing and printing paper in India for another 5 to 10 years looks very, very optimistic. And there isn't much capacity coming in this segment, no new projects. The most of the project that is announced in paper and paperboard is mostly in packaging section only. We have hardly any new capacity coming in writing and printing paper. So we expect that -- in the current scenario, once our new machine comes with additional 100,000 tonne production, as we stand today, we hope that, in the coming months as the demand is looking very bullish -- so there should not be any problem in absorbing this production.

Very good, sir, very good. Sir, when you're talking about this, I mean, we see a lot of paper companies that have done massive CapEx during this time along with you. What would that do to the paper industry? And I know that the government policy is there where there is a prohibition of import of paper, stock paper, but will the -- and will all of this CapEx be utilized? Or will it be killing the market when all of these companies are doing CapEx at the same time?

So since we are presently in [ this demand ] scenario where the present demand is almost 21 million tonnes -- and by another 5 years, they expect it to go to almost 27 million tonnes, 6 million tonne addition, 60 lakh tonnes. So [ per ] 1 tonne of additional production, the investment required is almost INR 1 lakh 50,000, [ per tonne ] of additional capacity. The kind of investment required to meet this additional demand is much more than whatever investment is being done presently. So that gap, already industry is thinking, can be either it has to be fulfilled by the [ due ] demand [ annually in ] both packaging and in writing and printing or in the new line of cup stock paper. So the paper [ k-cups ] [indiscernible] plastic [indiscernible]. So all those segment demand is so huge; and the investment that is being done and what is required is almost 10%, 20% of that only. It's not that big investment. It will create problem for the industry.

Sir, then what is the -- what is your inside news of the government policy? I know they have prohibited the import of stock paper; and also the second government policy, where from June 1 of next year, 2022, that they are prohibiting the use of single-use plastics. Are those still going to continue? Or do you find the government trying to backtrack on any of these 2 policies?

Because single-use plastic is an international issue, so question of backing out on that. Maybe earlier, they have already deferred it by more than 2 years. Because this was announced much earlier by our prime mister. I don't think now the government has given enough time to the industry on this. And the only thing is the alternative that is going to be available to replace the single-use plastic, so for which this molded cutlery business is now being promoted by we are also contributing in this segment to some extent and by Zume and by many other players. So we have to provide an alternative to single-use plastic products. So that could be [indiscernible], yes.

And how about the import of paper, sir, which was prohibited by the government....

Yes. [ Photo paper ], as you already know, that for photocopier paper, the government has extended the ban till 28th February next year, till the final decision comes. And the industry is trying for ban on that for another 3 years. And otherwise, also in the current logistics scenario, the landed cost of any import of papers from outside is very difficult. So that has already been evident from the export, import figures for the financial year 2021, where our exports were net positive over imports by almost 1.5 lakh tonne, yes.

So are you saying, sir, that the imports are going to cost more than the domestic prices of our products?

Yes. Currently even the current price of all the imported products is almost, even for writing and printing -- I would say, for writing and printing only is almost INR 64,000 a tonne landed to anybody, while Indian price at the moment is anywhere around INR 60,000 a tonne plus. So already gap is there. So I think the imports in the coming at least 2 to 3 years are not going to be [ the trend ] the way they used to be earlier.

Okay. Sir, on the cutlery business, I know you're making cups and the forks and the spoons, et cetera, but one very interesting thing with Zume that you are doing is the containers which are leakproof. And are those already in place? Are you making them? Are they really leakproof? Because I also saw on your website somewhere you had mentioned that you are trying to get a hold of a market from [ Swiggy and Zomato ] and people like that. And are they really leakproof? And are they really accepted in the market by these big vendors, et cetera?

Actually [ we have -- as we have mentioned in our earlier business release ], that we have completed the erection of [indiscernible]. We have done the mechanical trials. We have done the production trials also, but production trials at the moment are with different recipes only. Like we have [indiscernible] in house, so we are doing trials with the bleached [indiscernible] 50%, imported softwood 50%; un-bleached [indiscernible] 50%, imported softwood 50%; imported softwood 100%. All those different combos, we are trying at the moment, and then testing the product for the quality. Requirement of the market [indiscernible] that quality is more suitable and most economical to the company, number one. And the engineers [indiscernible], as I told earlier, they are coming on 17th November this year, one Zume engineer from U.S. who have already commissioned their machines and one process expert from China. They are coming to our plants in the last week of November. So once they are here, the product is definitely going to be leakproof, number one; and oilproof also. And it could be -- it should be good enough to heat even in the micro oven also. So that is the type of product they are planning to offer. So we are going for products development as per the advice of Zume, our partner, because they already have experience in this line. And the products that we are making, they are -- also they're customized patent design only, yes.

Perfect, sir. And they are also sourcing majority of these products that -- for them to market and sell abroad, is it? And what is the percentage margins that you're getting on this, sir?

Yes. They have their production facility already in the U.S. They are sourcing from Taiwan also, China also, Indonesia also, so many other countries they already have. In India, they have announced, so far, 2 associations. Our 2 machines are already installed. And we are planning to go for almost -- we are planning to increase this capacity by 3 to 4x immediately after we start the commercial production on these 2 machines in December this year. So that is...

What are the margins, sir? Margins on this product.

Margins, we have already told, [ today, the normal product, we sell ] that INR 200 plus, minus per kg. There's a margin. EBITDA margin in that is almost anywhere around 35% to 40% because of low cost of in-house pulp, which should be almost 50% of the products, number one; and number two, low cost of the power that we already have surplus in our plants which should cost us anywhere around INR 2 to INR 2.5 per unit, while any outside player who makes cutlery will be using power at the rate of INR 8 a unit. So that synergy is going to play for giving us higher margin in this product, but of course, for the new capacity, we are negotiating with them to give us here certain high-priced items which they are selling which they are negotiating with many, many food industry and pharmaceutical industry to make their products, which are even in the range of much higher prices even INR 800 to INR 900 a kg also. So let's see [ today ] how the things turn out and what kind of arrangement we shall be making in the interest of the company and the shareholders in the coming times [ really ]. We have yet to conclude that, yes.

Okay, sir. So my last question, sir, if there was a huge increase in the remuneration for promoters and other key employees. So at this juncture when we are doing CapEx, et cetera, I would have thought that this should have been contained. Is -- do you feel this is in line with the market prices that are going on? Or why -- do you think this was such a huge increase?

I don't know. I could not understand the question.

So there was a remuneration increase for promoters and also key employees.

Yes, yes, yes...

Yes. And I was just wondering. Is it in line with the market? And why was it necessary at this juncture?

Yes. That decision has already been well considered in the Board. And of course, the promoters, they also deserve. They have been working very hard the last almost 35 years, and I think they deserve to get that. I think that. So that's the decision has been taken by the Board, yes, and approved by the shareholders. And we are increasing the remuneration of employees also. Even if you look at the employee costs -- so our -- in the last quarter only, it has increased by almost 10% to 12%. So remuneration, overall, we have to increase.

No, no. I understand, sir, but it was pretty significant increase. And either way, the promoters would benefit from the company doing well, et cetera. I was wondering why was it that such a significant increase was necessary at this time, when it will benefit to get the shareholders the money, which of course the promoters also will be a part of shareholders, anyway...

Yes. I think I already replied to that.

The next question, from [ Mr. Vineet ]. He's an individual investor.

My question is, since last 2 quarters, you mentioned you are engaging [ an ESG firm ] to present the case for the...

We are engaging...

ESG, sir.

Yes.

So what's then update?

Yes. We are talking to 2 MNCs, 2 [indiscernible] consultants, Deloitte and [indiscernible]. So I think in -- by the end of December, we shall be finalizing with one of those, yes.

Okay, sir. And sir, since, yes, November, December is a crop season in Punjab and Haryana and the rice paddy, farm paddy has already been dispatched to the market -- so I think we would have a significant saving in the rice straw and rice husk raw material costs in this quarter. And I have follow-up because I believe we should be doing a bulk purchase during these 2 quarters, right? Is my expectation correct, sir?

Yes, yes, that's true.

So if we take Q2 as a reference, how much savings we can assume in the raw materials for the Q2 and -- Q3 and Q4, sir.

Actually, rice straw, we have been using throughout the year, number one, because we buy rice in these 2, 2.5 months for the full year. So that benefit of using rice straw is spread over 12 months always, number one. And number two, the major gains this year that we are having is [indiscernible] in the last 2 months, rice prices, they have grown up to almost INR 9,000 to INR 10,000 a tonne. It used to be, earlier, in the range of maximum INR 4,000 to INR 5,000 a tonne. They have almost doubled, but we had stock of rice husk, so we did not buy rice husk much during these 2, 3 months when the prices were in the range of INR 10,000 a tonne. And we have been using only the stock that we had with us, number one. And number two, currently we are again purchasing rice straw at a cost of less than INR 2,000 a tonne and again storing it for the whole year. Last year, we purchased almost 1.25 lakh tonne of rice straw and stored it for us to use throughout the year. This year, the target is to store 1.5 lakh tonnes. So that benefit of use of lower-cost fuel comes throughout the year, not only in a particular quarter, but definitely the increase in fuel cost is not that substantial due to this very reason, as comparison with players who are using only rice husk, number one; or using [ rice husks for coal ]; or only using coal.

Okay, sir. And second [ question, sir, is ] since we are using so much rice husk and we get the REC credit, right? So since our CapEx has increased -- so will there be a similar increase in the credit also?

REC credits...

Yes, sir.

Yes. REC, already [ 2 projects are already registered, yes. We ] -- it is our good luck that, on 11th November only, the appellate tribunal -- this sale of REC was banned since 2020. And now they have opened. They have done away with the order of the [indiscernible]...

[indiscernible].

And that sale is now being opened from 11th November, so definitely there will be increase in the REC availability. And the revenue that we have been holding back -- we had almost 1 lakhs REC in store with us, inventory we had. So now the floor price of INR 1,000 per REC has been restored, so that revenue in the coming years, in the coming period should be -- should start coming now. So it could be anywhere around -- some revenue coming in this year only. And that's in the next year, yes.

Right. So sir, you are storing 1 lakh REC points credit for the last financial year, right, but since then, we have increased our boiler capacities. And we have doubled our entire processes, right, so we would -- so my expectation is going forward, for the next financial year, we would be having around -- REC credit only for the last -- this -- or you can say next calendar year. We should have a 2 lakh, around, RECs produced, credit which we'll get, because our capacity is doubled. Is this right?

[indiscernible] -- yes. Actually government [indiscernible] registration [indiscernible]. [ We due now ] [indiscernible], which basically we are applying for the voluntary emission reduction program or, [ yes ], international renewable energy credit, I-REC, [indiscernible] but definitely, in one form or the other, whatever projects are already registered, they will be earning the REC credits. With increased capacity, to that extent, the REC will increase, but definitely we will be having other credits which could be we get [indiscernible] or I-REC also. So we are doing that exercise regularly, yes.

So basically it would be like 20 crores of free credits to our [ EBIT, yes ], because...

Yes. I would not like to comment exactly on the numbers at the moment because I do not have the number exact with me, but definitely it is going to increase, definitely, yes.

Perfect, sir. And the final question is that since we are -- so there was an update that we are now moving towards a copier version also, so -- because that is the premium paper. So how do we see -- because all the CapEx are online, so -- how do we see our paper mix going forward from -- towards the premiumization?

Actually, with the commissioning of the new machine, whatever production from next financial year -- because this year we may stick ourselves to normal papers in this machine because this will be [ in the ] earlier commissioning period only this financial year, but from next year onwards, definitely, out of that 100,000 tonne new capacity, we shall be making minimum 30,000 to 40,000 tonne of copier paper only; and a similar quantity of 30,000 to 40,000 of cup stock papers, which is presently selling at -- almost in the range of INR 70,000 a tonne. [ They have ] been even presently selling from our existing machines that -- for that cup stock based paper. So that, we have been selling at almost INR 65,000 to INR 70,000 a tonne. So on the new machine, 1/3 the capacity will go to copier, 1/3 to [ wedding-based card ] or cup stock based paper. And rest 30,000 to 40,000 will go to high-end multicolor surface-size printing paper, maplitho paper. So that is the combination that we are planning for the new machine. And it will be almost as good as any A-grade mill; and should give us much higher realization almost equal to the A-grade mills, yes, from [ next year onwards ].

Okay, sir. And just 2 more questions. So sir, currently the borrowing at our balance sheet is around 316 crores, okay? Since we are going into the upgrade cycle, we are getting the benefit out of the CapEx, so how -- so at the end of next financial year, this 316 crores borrowing should come down to what number. What's the management targeting?

Next financial year or this financial year...

Sir, both. I'm fine with that. I just want to see what will be the trend going forward.

Yes. I think term loan should remain in the range of maximum 300 crores to 350 crores [indiscernible].

Right, sir. The repayments are due. Approximately 30 crores will be repaid in another 6 months. So currently we are having a term loan of 290 crores outstanding in the balance sheet of half year FY '22. So approximately 280 crores, 290 crores will be outstanding of the existing loans. And 22 crores, 25 crores will be added of the new loan, so 310 crores will be the outstanding approximate.

But that is the current number, right, sir?

Yes....

No, no. [ 306 ] is like total -- it's not the total term loan. [ 295 ] is current outstanding, so...

Okay...

[indiscernible] includes working capital loan also, yes.

No, no, no. It's the term loan only.

Term loan only. Okay.

Yes, yes.

60 crores will be payment [indiscernible], you are saying. [ Maybe it ] should be...

Yes, sir, including the repayment, the total outstanding will be approximately around 310 crores.

So -- but the balance sheet, what I've seen currently is, the March '21, the last [indiscernible], that we had 345 crores of the loan on the balance sheet. The borrowing, I'm just -- right. And now the borrowing is 316 crores, but what has happened is the current working capital has increased from [ 318 to 450 ].

Yes. The current borrowing -- I mean working capital, from 67 crores, it increased to 74 crores in the balance sheet...

Capital -- okay...

So you are -- we are talking about working capital loans...

So yes. So there is a -- [ I might do that ]. So there is a number of 450 crores. So I was just checking when this number would come down because now all the CapEx is online. So this number should reduce drastically. That's what -- and it should help us to pay off some loans. That's working capital loan or what you say, the borrowing, but...

For the new CapEx, the repayment will start by this December. So from this December, the term loan will -- the repayment will start -- or the repayment will start, and we expect 310 crores by this financial year '22.

And what will be the guidance for '23, sir, barring the new 4x, 5x capacity which we are adding for [ Zume one ]?

Yes, yes. In financial year '23, the repayment will be approximately 70 crores and by taking the [indiscernible] [ and available 20 crores ] term loan. So it will be somewhere around 270 crores.

270 crores, okay.

Yes, sir, only in term loans.

And sir -- okay. And there will be similar reduction in the working capital also, right, capital [ matching ] progress also, because CapEx are online. So I would see a similar increase in the [ fixed side ], right, sir?

[ No ]. Working capital [indiscernible] capacity [indiscernible] which working capital increase will be approximately 20 crores, so it will be somewhere around 95 crores.

Okay. So we -- okay. So I guess, since, Bhandari, you mentioned, so it will be buying the rice husks for the entire year in the next quarter. So our working capital would be higher. That, I understand, but -- so what's the payment clause we have for the different [indiscernible]? I thought they'd give us some advance when we win the tender, like 10% to 20%. So that should help us in the working capital.

No. State textbook, the government department, they do not give any advance. They give us 90% payment once raw material is delivered after inspection and testing, which is almost 30 to 40 days minimum. And the rest of the 10%, 20% payment comes once the printer actually use if -- and consumes that paper after the printing. So that cycle is almost 45 to 60 days, including the logistics period. So definitely working capital is going to increase if our turnover is going to increase by -- will be almost doubling. So increase of 20 crore in working capital is nothing, yes.

Right, sir. So as a percentage, it is improvement, but if I see the cash conversion cycle: So March 2020, it was 77 days. In the last March '21, it was 153 days. So going forward, what would be our ideal cash conversion cycle? Because March '21 was a [ poor year ], so I understand there would be some delays in the payments, but what could be the number we are targeting internally?

It will be somewhere around 50 to 55 days.

50 -- so from -- for this year, you are saying 50 to 55 days or...

Yes, yes, yes, for this year.

Our next question, from [ Mr. Kartik Natraj ]. He's an individual investor.

Am I audible?

Yes. [ Please ]...

Yes. Sir, for -- my first question is about the 60 crore wood pulp digester automation project that was mentioned in the presentation. So could you elaborate on what this is about?

Presently, the wood pulping is done in the vertical digester in that system. So you first will -- wood digester with the [ wood piece ] then you add caustic at certain temperature. You cook for certain specific time. And then once it is cooked up, say 2, 3 hours -- so then you will blow that cooked pulp into the blow tank. So which is [ all in that ] process. So we have contact with a [ West-based ] company presently having office in [ Singapore city ]. And we are doing automation of the 4 wood pulp digesters that we are having. So with that, the processing time, number one, is reduced by making the process continuous, number one. And number two, wherever we could save on heat energy -- like if we put the steam for [ flashing ] of our pulp -- pushing the pulp from digester to the blow tank. So that steam energy and then consistency of that pulp in the blow tank we use for cold water and then certain energy [ we cannot ] -- and certain energy is lost. So all those energy losses are [ studied ] by this company. They have already -- they have been doing it since long, not -- this is not a new project for them but for us. And in India, this is their second project only. The first, they are doing in JK Paper. So they will do a lot of automation with whatever energy or hot water. Or steam at low pressures could be used for the next coming sequence of pulping. So that gives saving of steam. Now the steam consumption is 1.6 to 2 tonnes per tonne of pulp. So with the implementation of this project, the steam consumption will be reduced to 0.6 tonne per tonne of pulp, as has been granted by the company. So 1 tonne of steam consumption, in today's scenario, the steam cost is almost INR 2,000 a tonne. So if we make -- in coming times, almost the target is to make 300 tonne of wood pulp, so that means we use -- we save almost [ INR 300 into INR 2,000 ], almost 6 lakhs [ pulp day ] on this only. And you can see the total gain that we make, number one, and since processing time is also reduced. In that digester, you have to wait till you discharge the total pulp into the blow tanks. And this process will make the cooking almost continuous, so it reduces the processing time. So due to that, we can take higher capacity of pulp from the same equipment. So this is the main story behind this project. So from our [indiscernible] digester [indiscernible] we can see a capacity of 200 tonne only, but with this automation system, we will be having a capacity of 280 to 300 tonne per day. So that additional 100 tonne will allow us to replace imported hardwood pulp that we may need to fulfill our pulp requirements. Or we may have to go in for [ deinked pulp ], which could again be [ costing on casting ] much higher, looking to the high imported waste paper prices. And the quality too is not as good as the hardwood pulp. So that is the main idea behind this project. And we are expecting we should get the payback within 1.5 year or 2 year at the most. So that project is already [ on ]. And this will be commissioned, I think, next -- within next 6 months, yes.

Okay. And was this part of that 400 crore PM 4 expansion? Or over and above that.

Yes. We are starting that in production [ on PM ]. Some of the segments, they are already operator -- operating, but the full use of the total equipment, total segment in this expansion plan will come once the new machine production starts, which should happen in December already.

Yes. Sir, my question is this 60 crore automation project, right? Is this part of the 400 crore expansion? Or over and above that.

No, it is over and above that. Earlier, we had plans to convert our wood pulp from present 120 tonne to 300 tonne. That is what we had planned earlier. And accordingly, from 2 wood pulping digesters, we had increased wood pulping to 4 digesters, but this idea was already there in the mind of the management. We have already closed the 400 crore project at almost 428 crores, 429 crores cost. So this additional cost, as we have been earlier saying today, this may lead to -- instead of 429 crores, to almost 500 crores. So that was the idea [ today, do additional ] 100 tonne production wood pulp [indiscernible]. That was to come from this automation project only, yes. So it is separate from the 400 crores but definitely within the same figure as we have been saying earlier today. This may go up to anywhere around 500 crore plus, minus, yes.

Okay, so this is what that is [indiscernible]. Next question is about the cutlery expansion, right? So once we do make the decision -- I think in the past also you had mentioned, even if we could produce 25 tonnes a day, Zume is willing to [ lift ] the product, right, yes. So once we do make the decision, how long it will -- it's likely to take for it to be commissioned.

The new cutlery [ project ], yes. Actually they have done machines lying with them already. So they have recently visited and discussed with the management. We are just waiting for these machines to be commissioned. Once these are commissioned -- we have already identified the place where we are going to place the new machines, so machines will be delivered immediately. The stock preparation per 1 machine of 2 tonnes is already installed. So that could start maybe by the end of this financial year only, number one. And the additional machines that we intend to put out are another 5 to 6 machines, so that could take another 6 to 1 year, yes -- 6 months to 1 year.

Okay. And if we substantially increase the cutlery capacity, do we also need to go for -- increase the power capacity and pulp capacity or no?

So because the [ major ] pulp in this is -- 50% to 60% is imported pulp only. And we are -- as I said earlier, we are experimenting today with -- we have 50% un-bleached [indiscernible]. So if we give them [indiscernible] additional and as we plan today to go in for 8 machines -- so which should be anywhere around 16 tonne per day. So for 16 tonnes per day, if we see we need this 8 tonne of additional [indiscernible] -- so when we are making almost 200 tonne, plus [indiscernible], per day and do 40 tonne of un-bleached [indiscernible] -- so giving 8 tonne. 6-tonne additional is no issue.

Okay. And yes, as of now, the plan is Zume will [ lift ] all the products, right? We have no distribution plan outside.

Yes, since we are making their customized patent products only presently and since they are assuring -- they have assured us [ today ] they will do the 100% [ lifting ]. So -- but we can do -- we can go into this on our own also. There is no -- but since their -- I would say the scale of operation is much bigger, number one. And number two, they are looking for new items also every day, where they are talking to many big players, as I said earlier, in medicine sector, the [ scoops ] that you have in [indiscernible] or certain other products. So even that [ scoop ] coming with this pulp mold. So the designing and work they are doing on this sector. So that benefit is going to come to Satia by way of association with them, yes. So that's why we have -- yes.

Okay. Sir, my last question is about this 500-plus acre of plantation that we have, right? So how much of that we own and how much of that leased.

Yes...

Am I audible?

Yes, yes, yes. Please go ahead.

Yes. My question was about this 530-odd acres of eucalyptus plantation that we have, right? Do we own that? Or most of it is leased.

So part of that, we own. And rest of the land is on almost 10-year lease which is continuously renewed after the expiry of the lease, yes.

Okay. And are we already getting wood from there for our own pulp or...

Yes, we are getting already wood from this segment. And simultaneously, we are promoting wood plantation, eucalyptus plantation. And that program for eucalyptus plantation, we are simultaneously taking up separately also and encouraging farmers to go in for this plantation because, if [ they plant ] today, that cycle is going to [indiscernible] within 4 to 5 years. So we have to do work on that continuously.

The next question, from [ Ms. Sidhard Kithani ].

Congratulations, sir, on the stellar performance for this quarter. My question to you would be about price hike. We have recently seen, due to the increase in the raw material and the input costs, many industries -- like recently Tamil Nadu paper has increased their prices. So are we expecting to take a price hike? Or we expect the prices to remain firm.

[indiscernible] in the B-grade mills in that category in which they placed our mill earlier. So we have been most aggressive in increasing the price. So if we look at the last financial year price, the price is already -- we have already increased the price by almost 11% by this time. So [ in November, the trends month ], the price -- if we calculate as on 31st March, the total price is -- increases almost by 20%. And by December end, we hope [ today ] this will further increase to -- increase by another 5% to 7%.

Okay, I understood. Sir, my second question is that -- your product mixed. While 40% to 50% of it goes to the state, call it, textbook operations, you have another 50% to 60% that goes to your distributors. Sir, what are the steps that we are taking to strengthen our distributor network across the nation?

Already we are -- our marketing team is working on this [ today, the ] players who are into high-end multicolor printing, maplitho-selling segment, A-grade dealers. So we are already increasing and throughout the country and exploring export markets. So export markets are not that lucrative at the moment. So side by side, we are -- we have already increases -- increased our base among these cup stock producers, dealers who sell base paper for cup stock, number one; then [ wedding-based ]. So this segment, we have already [indiscernible]. And in Northern India, we are now one of the major players. And the price that we have been commanding is much better than -- even the price that A-grade mills are commanding in this segment, number one. And simultaneously, we are entering into the, yes [Technical Difficulty]

Ladies and gentlemen, please stay connected while we connect [ Rajinder, sir ], back on the call.

We are already going for oilproof. We have already started working on developing new products like oilproof paper, which goes into wrapping burger and all these things with [ burger, yes, [indiscernible]. So copier paper, cup stock paper, then this oilproof paper, [ wedding-based ] paper. So all these varieties are being added. And already -- dealer network for distribution of these products, we have -- already have in place. We are -- well, we have already developed all these products on our existing machines, so only the work that we have to do is to scale up the production and give additional production to them, for which we are already in talks with the dealers, yes.

Understood, sir. So it's fair to say that, while say the industries is exploring new fronts and going into cutlery and -- but we will still be concentrating on our regular, our -- the focus will still remain on our state textbook segment also as well as our retail segment also.

Yes. State textbook, definitely once production is increased from existing 40% to 45%, it will come down to 30%. Additional 20% could be the [ wedding-based ] and base for cup stock paper. And another 30% could go to the copier paper; and rest, for the [ SS ] maplitho and other ordinary varieties [indiscernible] paper. So that could be the final [ combo ] for the new product mix, yes.

Thank you, sir. Ladies and gentlemen, that would be last question for this call. I would now like to hand over the floor to Mr. Rajinder Kumar Bhandari, joint managing director of Satia Industries Limited, for closing comments.

Thank you. Thank you, everybody. And thank you for your wishes. And let's hope that the company does good and -- with our new expansion plans and we are able to fulfill the wishes [indiscernible].

Thank you, sir. Ladies and gentlemen, with this, we conclude our conference call for today. Thank you for your participation and for using [ Door Sabha's ] conference call service. You may all disconnect your lines now. Thank you and have a good day, everyone.