Satia Industries Limited (539201) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Satia Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rachit Nagpal, CFO. Thank you, and over to you, sir.

Yes. Good afternoon, and welcome to all the participants, and thank you for your time and interest in Satia Industries Limited. Hope you had gone through our results, earning updates for quarter 3 and 9 months ended 31st December 2021. We have reported a tremendous growth in EBITDA margin by 122 bps in the current quarter. Let me take through the financial performance of the company for quarter 3. The revenue from operations has increased by 61.68% in Q3 of financial year '22. For quarter 3, our EBITDA margin stood at 18.07%, showing a growth of 122 bps compared to Q3 financial year '21, and our PAT margin stood at 13.38%, showing a rating growth of [ 108 bps ] compared to Q3 financial year '21. On a 9-month basis, our revenue from our operations grew by 42.90% from INR 4,156 million in 9 months financial year '21 to INR 5,939 million in 9 months financial year '22. Our EBITDA margins were reported at 11.97%, showing an extraordinary growth of 507 bps. The volume grew by -- grew from INR 4,849 metric ton in 9 months financial year '21 to 1 lakh 1,367 metric ton in 9 months financial year '22 as due to rise in demand of our premium products. We're pleased to announce that our company has successfully commissioned its Paper Machine-3 and 4 [indiscernible] 2022 with an installed capacity of 1 lakh tonne per annum. With commissioning of [indiscernible], the total capacity of our company will be 700 tonnes per annum, [ so in target and within target ]. Commencement of -- we have always -- we have also started commercial production from cutlery machine, having an installed capacity of 5 metric tons per day. However, some clearance is a [ requisite ] from food safety tests to start the -- to start placing the product in the market. We have a strong order book of over 25,000 tonnes for 2 months for its existing capacity, and production from this is also fully booked for the month of February. That's it from my side. Thank you. I request everyone to please come up with their question if they have any. Thank you.

[Operator Instructions] The first question is from the line of [ Natin ], an individual investor.

Just to understand, is Chirag or any other member of the management also on the call?

Yes, yes. Mr. Bhandari, our JMD. Mr. Chirag [ General ] Director is on call.

Okay. Mr. Bhandari, since the company is somewhat new to many participants here on this call, could you please share some quick background and history of the company? How was the capacity ramped up over the last decade or so, which led to the sales growing from INR 230 crores in FY '12 to this INR 500 crores in FY '21? How has been the capacity realization over the last decade or so? How has it moved? Who are the suppliers of pulp to us? And who are our customers in these geographies?

Does that answer your question, Mr [ Natin ]?

I didn't hear any response actually.

[indiscernible] I think your voice is not coming. [Technical Difficulty]

Ladies and gentlemen, thank you for patiently holding. Mr. Rachit Nagpal, please go ahead. Sir, we have a participant in the queue, Mr. [ Natin ], an individual investor.

Just give us a moment [indiscernible] we will answer the question.

In the meanwhile, Mr. [ Natin ], if you have any other questions, you may please go ahead.

Yes. So just to understand, Rachit, our EBITDA margin has improved sizably over the last 5 years or so, growing from around 12.3% in FY '16 to 23% in FY '21. I'm trying to understand, is this on account of operating leverage in general in terms of higher utilization of capacity? Or is it a better product mix or better rates?

Yes, there are a few reasons for that. Firstly, the realization has increased over the last 5 years. Secondly, we have immediately gone for cost reduction measures like we have our own power plant. We have a total installed capacity of 41 megawatts. We have all capital connection. So this total capacity has risen in the last 5 years. Initially, we have [ 5 ] capacity to our plant. Then we installed 12.5-megawatt plant in 2013, then another 11-megawatt plant installed in '17. So yes, this helped us in improving the margins. This -- the [ food board ], electricity from PSPCL, the -- so that debt is around INR 7 per unit. Now we are using it at INR 2 per unit. So this is the main contribution.

All right. But yes, I mean your gross margins have improved only slightly. So you -- what you're saying definitely makes sense. The rates have been controlled, which led to the expansion of the EBITDA margin. Rachit, could you tell us about income from renewable energy credits, RECs?

Yes, yes. We have -- in this quarter, we have paid INR 8 crores from renewable energy sources.

[ Natin ], I'm on the line. Sorry, my line got disconnected. Yes, actually, we had inventory of 80,000-plus REC, which got [ deducted ] with us because there wasn't any trading on the exchange for almost more than a year. So once it opens, so we sold the total inventory. So that major figure of INR 8 crore and some [ sale part ], we are also INR 1.5 crore because we had some [ VR ] inventory, which is also available with us. So these are the 2 income, which is the -- they're reflecting in other income and growth, yes.

Okay. Bhandari, just to reiterate -- recapture my question that I asked initially, could you please give us some quick background and history of the company? How was the capacity ramp-up for the last decade or so?

Yes. Yes, company actually was started in '84 with almost 10, 15 tonne per day of waste paper. Then 1986, '87, we went to virgin pulp, agro-based. And in 1989, we did put up second machine of similar capacity, 10, 15 tonne per day. And then third machine in 1998 was put out with a capacity of 60 tonne. But all these machines of 15 tonne, 15 tonne and 60 tonne, with the development and with the latest addition in technology, all machines were technologically upgraded, and the speed was increased from initial speed of 150 meter per minute to almost 600, 700 meter per minute, which resulted into PM-1, which was just 15 tonne per day, now making more than 120, 130 tonne per day, PM-2, again, making 120 tonne per day and PM-3, on heavy GSM papers, making almost 200 tonne plus paper. So we have almost, average finished production of 370, 380 tonnes and machine production of 400 tonne plus as on date. And the fourth machine, as we announced recently, that was started in February only with a capacity of 300 tonne. And in the last almost 7, 8 days that we have spent, we have already made more than 1,200 tonne paper on that. We have reached almost 60% capacity on that machine to some -- whatever hiccups are coming in between, we are rectifying those also. But definitely, as we announced earlier, we may be giving additional number of 10,000 tonne from the new capacity in this year also. So this is -- as far as paper machine capacity is concerned, 400 old capacity, 300 tonnes plus new capacity, which will be 100% capacity utilization for the new expansion will also come in the next year. So all year, old capacity number 1 lakh 30,000 plus we expect in the next year and 1 lakh from the new machine. So total tonnage would -- should be anywhere around 2.3 lakh plus, which should give us, at present price realization, almost a top line of INR 1,500 crore plus. And to feed all to these 4 machines, we are backwardly integrated. We have 200 tonne agro-based pulping capacity at the moment where we are using wheat straw only mainly. And we have 120 to 130 tonne wood-based in-house pulping capacity. And third is we have now put up in the new expansion plan 150-tonne deinking plant also. So in -- while these are the operational capacities, which we are -- where we are making pulp in-house only, we are buying hardwood and softwood from abroad also, from Chile and Canada or U.S. or wherever we can source economically and as per our quality requirements. So that 50-, 60-tonne pulp is also bought from the outside. So -- and going into the expansion part of it, we are now planning to increase the pulping capacity of agro from 200 to 250 tonne plus within next 3 to 5 months with in-house modifications only. And agro pulp, we are -- sorry, wood pulp, we are taking that capacity to 300 tonne plus within next 6 months. So once that upgradation is done, we may not need much of waste paper pulp, which we are using presently. So our dependence on waste paper and imported pulp may reduce because that capacity of 550 tonne is good enough to make 600 tonne plus paper per day. So that is how the pulping is planned. And then power, he has already told you, we have presently, almost 100% cogen power. We don't buy anything from outside against board rate of INR 8 per unit. We produce at INR 2, INR 2.5 a unit. And then soda recovery, whatever caustic that we are using presently, almost 150 tonnes. So we recovered 95% caustic from the effluent itself, which is a very big quantity. If we look at the present-day caustic, it is over INR 50,000 a tonne. And once we are able to recover almost 120, 130 tonne per day, the cost, you can see that the total value of the caustic that we recover is very, very high. It is almost INR 68 lakhs per day, so you can imagine the almost INR 20 crore every year. Earlier, the caustic price was just INR 30,000. And the mills which do not have soda recovery especially in agro, so they are suffering a lot because of this only, but Satia, luckily, has acted right in time, and we are saving a lot on that. So that is how the journey has been. And as far as our sales are concerned, we had a very strong base for the last 20, 25 years in the government education sector. We are the regular supplier for the last 20 years to major education boards in India in northern, western and some southern region also. And we have a very strong dealer network also all over India, almost 80-plus dealers. And now we have, with the start of new machine, we have entered into exports also, which we anticipate next year. We will be exporting direct through merchant export almost 10% to 15% of our total productions, which we need in -- otherwise also to fulfill our import commitments that we have imported machinery duty-free. So this is the overall basic module. And one change that we are doing in our product mix is from conventional writing and printing paper, we are now switching more and more to value-added papers, like copier paper will be the major product on the new machine. And simultaneously on the existing machines, we are now in a big way in wedding card base and paper cup stock base, and then we are even going for carry bag also. So all these varieties we are adding, which will be directly replacing the single-use plastic items. And the cutlery business, we have already announced many times that we had put up 2 machines. Rachit has already told you. The commercial production has already begun, but we are awaiting the test results for food safety. And there are almost 16, 17 tests, which have to be cleared before the product is placed in the market. Once we get that, which will be by this month end only, so we shall be starting our commercial production. And once we test these waters in this segment and we are able to achieve 70%, 80% of capacity on these 2 machines, the management has planned that we put up another 6 machines of 2 tonne per day capacity. So the next major area would be into cutlery segment, which could be -- which could mature within the next financial year or maybe another 6 months, yes. So that is more or less the overall picture.

The next question is from the line of Prashant Rishi from Cascade Capital.

My question is to Mr. Rachit Nagpal. So Rachit, I just want to know, what is the cash interest that we are paying every quarter to the lenders?

Yes, it is somewhere around 6.5% by average both of our debtors.

6.5%. In absolute terms, how much would it be? So we have -- for example, we are booking -- every quarter, we are booking a cost of around INR 4 crores on financials. But in cash basis, how much would we be paying approximately?

It is somewhere around INR 8 crores in quarterly.

INR 8 crores, every quarter, INR 8 crores. So even if we are paying somewhere around INR 32 crores, you're saying?

Yes, yes.

Okay. Because you're booking a cost of around INR 17 crores in the financials. So the rest must be getting capitalized on account of the new machine and the debt you've taken on account of that, right?

Right, right.

Okay. So can you tell me -- the CWIP figure that we have on our books is around INR 450 crores. How much would be capitalized cost in that figure, interest costs, capitalized and the CWIP figure, roughly?

Approximately INR 400 crores. INR 400 crores will be capitalized in this February month that [indiscernible] has started, so [ requiring ] modification cost on some A4 cutters. So the major cost will be capitalized in the month of Feb only.

Yes, I understand that. That I understand. But currently, how much would be the capitalized interest in the CWIP is I wanted to know.

[indiscernible]

Yes.

It is somewhere around INR 25 crores to INR 27 crores.

INR 25 crores to INR 27 crores. Okay. All right. Okay. All right. One last question. See, Mr. Bhandari said that potential revenue with full utilization of PM-4 would be about INR 1,500 crores at present realizations. So just wanted to ask the -- this is after you are -- after you're including higher revenues from value-added paper when you're estimating INR 1,500 crores, like you said, you're going into copier paper, wedding cards, paper cups, et cetera, [indiscernible] the realizations?

Yes. This is just a [ translating ] figure because presently, there is lot of disturbance in the raw material supply side, the pulp prices are exorbitantly increasing, and waste paper prices, too, are scary, and even availability is a question. Fuel prices, again, they are increasing exorbitantly. So paper mill [indiscernible] the price, if it is today at anywhere around INR 63,000 a tonne, it should go up to INR 70,000 a tonne for the normal average product mix that we have. So -- but we are taking the presumption based on the selling price of INR 65,000 a tonne on average.

Okay. All right. Sir, what is the approximately or currently pulp and waste paper prices right now? You said that it's shooting quite a bit.

Yes. Actually, for the hardwood pulp is anywhere around $790 to $800 C&F. And the softwood pulp is $860 to $870 per tonne. And waste paper, SOP, which used to be almost $350, $360 tonne a month back, it's now anywhere around $450 a tonne. Yes, which is the major CBS and SOP office waste. So both are in this range, $450 per tonne plus side. And you hardly get any costs also.

Okay. I understand. Okay. And sir, you said that we are planning to expand the capacity of agro pulping and hardwood pulping. And after that -- and this is over the period of next 6, 7 months, right, for the occasion of PM-4 would be much smoother if you expand this capacity. So just wanted to know, after this, would you be buying any more pulp from outside like you purchase right now, if this is completely self-sufficient for operating PM-4 at optimal capacity?

No, we will be buying definitely softwood pulp because whatever pulp we make -- agro pulp we make, it is a good pulp, but it is not equal to the hardwood pulp. So even agro pulp, say, hardwood better and hardwoods and softwoods better. The softwood India [indiscernible]. So that softwood pulp 10%, 15%, whatever we need to add to give strength to the paper, that will be important, number one. And for copier paper, we use BCTMP pulp, bleached semi-mechanical pulp. So [indiscernible] continuously [indiscernible] quantity may [indiscernible]. So your waste paper key requirement that, that will be just to meet the emergency needs for either break down adjustments only then we'll need that -- needing that. Yes.

Okay. Understood. Understood. Last question on PM-4, sir. This machine will -- is already operational, and you guys have started commercial production, I suppose. So right now, are you guys -- what kind of paper are you guys producing? This is producing writing and printing paper only right now? Or is it producing copier paper, et cetera?

No, no, no. Presently, we are making only and upgrade, which we have been making on our existing machine. So once we are ready with the full wood pulp furnace, which could be another 3 to 4, 5 months as I explained earlier, so the final plan is [ okay ]. Once we are ready with the upgradation of our existing wood pulp mills to 300 tonne per day, only then we'll be able to give 200 tonne of wood pulp from our in-house pulping capacity to that machine and add 20%, 30% agro pulp and add 10% imported pulp. So after 4, 5 months, we will be going in farther premium quality products on this machine, yes.

Okay, okay. Understood. So currently, you're producing existing writing and printing paper. So the only concern was schools and colleges are still just opening up. So will we be able to absorb the demand -- sorry, absorb the entire capacity, the demand in there?

Yes. Actually, as Rachit already told you, we have almost 25,000 tonne order in hand. And we have only today got another order of 9,000 tonnes from Rajasthan school textbook corporation. And other team, we may existing [indiscernible]. I mean we do not need any single tonne or other part of the existing capacity. So whatever new requirement is coming even now, we are fulfilling from the new machine only. And the response to that is very encouraging. At the moment, the market made paper key shortage, as I explained earlier, right? We saw prices have gone up exorbitantly, number one. Waste paper prices have gone so high that for small mills, they have already shut down. And the -- even newsprint prices, you might have heard, they have crossed almost INR 55,000 a tonne, which used to be anywhere around INR 40,000 a tonne. And imported paper is not coming because of the logistic issue, so shortage of paper is there in the market even now. So whatever capacity we are having, so we are definitely -- we are 100% confident that there will not be any issue in placing this product in the market. Yes.

The next question is from the line of [ Manish ] from [ Airwater ] Capital.

Yes. My question is I want to understand the -- what is a plan for selling the cutlery? Will you be the existing dealer seller -- selling or there will be [ business ] or network? And the production you are planning, what is the size of the market? And what will be -- become a breakup of it over the period or [indiscernible]?

Yes. Please don't mind if I could not get your question, but I understand that you want to know a little about the market size. Already, the plastic market in India is almost same, similar to paper market, which is almost 18 million to 20 million tonnes. And out of that, 60% is recycled. That means 40% is single-use plastic. So 40% means we have almost 7 million to 8 million tonne in single-use plastic, which government intends to ban from 1st July 2022. So if we gain value terms, this market is anywhere around INR 60,000 to INR 80,000 crores. So already -- so whatever plastic is used, let's say, in carry bag or let's say [indiscernible] glass, plastic case, so we do not get those on the airports or even at the [ key stall ] anywhere. So that has already been replaced by the existing paper machines, so [ Hamari ] paper machine, normal writing printing, [indiscernible] they can make some of the mills, and we are also making base for those paper cups. And similarly, to carry bag [ head ] or straw [ head ], [indiscernible], coffee cups or lid [ head ] or then food packaging [ head ]. So that we are going to fulfill from the -- we have to -- other government ban [indiscernible], but there is no alternative available in sufficient quantity, sufficient number. So successful [indiscernible] any year. So that is where this role of our association with Zume may come. So they are into this business. We already have installed 2 machines, which are having a capacity of 2-tonne yields and total capacity is 4 tonne per day. So other [indiscernible] because this is a new line for us, already Zume has a contact with us that they will be lifting 100% of our produce. So marketing is no issue, number one. And if we have -- but we are open, so we can also sell on -- through our own resources, and we are also exploring the market. The agreement is such -- if we are able to sell on the higher price, so then we can do that at our own also. But at the moment, we intend to sell through Zume contacts only. So once we -- once we run these machines for another 1 month or so, and after that, management has already signed an MOU with them, to put out 6 new machines of 2-tonne capacity each, so which could be in the next financial year.

So how does this price of this product compare to the single-use plastics, which was [indiscernible] sort of very expensive? Or can you share with us?

No, I'm not getting you clearly. The price [Foreign Language]. So normal product [Foreign Language]. We can -- Zume, is planning to introduce certain new products [Foreign Language]. So all [Foreign Language] price both high. So though they are selling almost at INR 500 to INR 600 [ occasionally ]. So that is why we have given in our previous projection. For us, except for the capital cost, pulp, but we have almost 60%, 70% in-house. Power is almost 1/4 of the cost that any producer is having. Infrastructure other than machinery, we were already having. So our EBITDA margin on this price, [Foreign Language]. So our beta is going to be on the higher side, 40% to 50%. That is what we foresee. Yes.

And out of INR 1,500 crores revenue next year [indiscernible]?

We manage [indiscernible] INR 1,500 crores key projection we have [Foreign Language]. So other new [Foreign Language] home capacity use [Foreign Language], almost INR 30 crore revenue [Foreign Language] almost INR 100 crores.

The next question is from the line of [indiscernible] from CAO Capital.

You have answered all my questions already.

[Operator Instructions] The next question is from the line of [ Natin ], an individual investor.

So Bhandari, we had planned and machinery of around INR 838 crores, including capital working progress of INR 449 crores as of September 30. So what is the status of CapEx? Are we done with the expansion program? Or is it -- is there any still CapEx -- CapEx still pending?

Yes, we have already announced almost I think 2, 3 months back, and as I mentioned in my -- this call also, we are upgrading our wood pulping capacity from existing 120 tonne to 300 tonnes, where we are putting up the -- converting the present batch digester to continues pulping, which increases the capacity of the existing machinery and saves a lot on steam consumption also because in this continuous process, whatever water of -- whatever temperature it is, it is used backwardly. The total energy is utilized. That is the basic [indiscernible] base [indiscernible]. Automation [Foreign Language], so that project is going on that schedule. Cost was INR 65 crores [Foreign Language] INR 380 crore [Foreign Language]. And pacific [Foreign Language] that is one project. [Foreign Language] equipment, which is only with JK or maybe 1 or 2 other mills in India. I would [Foreign Language] existing wood line to bleaching or washing [Foreign Language]. So we are using that line to produce additional 50 to 100 tonne additional agro pulp. [Foreign Language] because as I explained earlier also, [Foreign Language] price to have no [Foreign Language] average range, INR 4,000 to INR 5,000 a tonne LTP throughout the year, making [indiscernible] last year bigger coal prices, which had gone up to almost INR 9,000 or INR 10,000 a tonne. And this season also, the price is not coming down. It is -- we have peak season [Foreign Language]. We use the price [Foreign Language] INR 10,000 a tonne. As we have told the market already, we have one biomass-based boiler where we are using rice straw [indiscernible]. So we every year burn almost like 20,000 tonne rice straw in that boiler or [Foreign Language] 1 lakh tonne has. So that is a big saving. So we as management is planning [indiscernible] sufficient boiler as part of existing requirement. [indiscernible] totally on the price [indiscernible] or other biomass, [indiscernible], but that expenditure of INR 50 crores, INR 60 crores may come in the next 2 financial years. [Foreign Language] pay back here, as we have seen from our existing rice straw waste boiler [Foreign Language] INR 6,000 a tonne [Foreign Language]. So these are the 2 plans. Third is the cutlery. Our cutlery experience is good with the management. [indiscernible], we may go in for that also. So these are the 3 things which are in line in a major way.

Okay. So a couple of questions about our ratio. So [ 600 ] tonne, which is the sale delivered by plant and machinery. As in on the lower side, so even considering your projection of INR 1,500 crore top line, next year, we would still be less than maybe 1.7, 1.8x. Has it put the industry and in line with your positions, what is the best possible ratio that can be achieved for our company?

Rachit?

Could you please repeat your question?

Yes, sure, Rachit. My question is [indiscernible] ratio, which is sales delivered by plant and machinery, has been on the lower side. So even considering top line of INR 1,500 crore as projected by the management, the ratio would still be less than 2x. So what is the best possible ratio that we could achieve, maybe a time span of 2, 3 years, next 2, 3 years?

[Foreign Language] So this is IT -- I think this is a load ratio as of now we are having. It's almost [ 0 ]. We have a INR 850 crores gross look, and sales is also this year, we have achieved. We will be achieving the sale of around INR 800 crores to INR 900 crores. So 1:1 is the ratio right now. So if I talk about the next year, as we are projecting 1,500 sales. So it comes to beta around -- so 1.25 is the ratio.

And any guidance for FY '24 and '25?

0.75. Yes, 0.75.

And with regards to your receivables, which part just takes higher to collect? Is it the state board deals or the direct trade deals?

Yes. I think we are more or less both the chain, some textbook boards, they pay very quickly within 15, 20 days, but certain textbook boards and eastern -- sorry, northeast, some side, these people, they take some kind of 2 to 3 months, 3 to 4 months also. So average other market may you pay a little cost for this, so you get money immediately, I would say. So depends perfectly how do we want the money if we are ready to pay some cash discount, 1%, 1.5%. So we can get immediately also. Otherwise, normal period remains 45 to 60 days.

Okay. This is a correction on my side. Item called biological assets other than their plants under the spending. So what are these exactly?

This is basically the eucalyptus plants, which are valued at fair value. So as per Ind AS 41, we have to value them at the market price. So these are the listed plants.

And what are they used for?

Presently, we are selling in the open market as we are getting a good rate. Plus we have a back standby arrangement if there is a short -- any time there is a shortage of what we can use and use the same also.

So is this item being disclosed under sales separately? Or is it part of the overall sales itself?

It comes in the agriculture income, yes. Whatever we sell comes in the agriculture income. And whatever value increases, I think fair valuation [indiscernible]. Normally, we use this plantation part our water-treated effluent and discharge also because the eucalyptus tree, they have a tendency to take water quickly from the ground and through their stem and through their leaf. They reported that quarter into that [indiscernible]. So it's clearly, how many [Foreign Language] plantation [Foreign Language] we have. So [Foreign Language]. That is how it works. [Foreign Language] either they use it for [ 1 year ] making, plywood making [Foreign Language]. So that is how this is used.

[Operator Instructions] The next question is from the line of [ Ankit ] from [indiscernible] Capital.

Sir, general industry question. When China has banned import of waste paper, why are we seeing such increase in waste paper prices worldwide globally?

Actually, when China stopped the import at that time, prices had dropped significantly. [Foreign Language] lowest quality grade [Foreign Language]. Taking over a period of time, [indiscernible] China [indiscernible] they have set up their own manufacturing facility outside China. Part processing that waste paper, which was being imported into China and now could not be imported because of the strict government regulation and surveillance. [Foreign Language], there was a lot of export of brown paper to China -- finished paper. [Foreign Language] that wasn't being used at, say, finished product only. That was again being reprocessed and added with the imported pulps and then converted into the finished product. The same thing now, the big Chinese player, they have started doing outside China. This mean Indonesia and even in the U.S., they are acquiring certain mills [Foreign Language]. Fuel prices have increased worldwide only. So just the pulp may power [Foreign Language] mechanical pulp, BCTMP pulp, to go, the [Foreign Language] Europe or U.S. may indigenously waste paper [Foreign Language]. So all these factors, plus the logistic [Foreign Language], number one. Availability and with the increased uses of the waste paper by Chinese people in and outside China [Foreign Language]. Then taking to China. [Foreign Language]

[Foreign Language]. These are much higher than that price also.

Yes, that's what I'm saying because number one, generation on the lower side because of the COVID [Foreign Language]. Number two, [Foreign Language]. Third, [Foreign Language] waste paper head that is being more and more used into making the end product. [Foreign Language] worldwide shortage, actually pulp be available any year. So most of them are now using waste paper to make [ tissues ] build over. So [Foreign Language] because they do not have integrated deinking plants as we have in India. While the other deinking [Foreign Language]. But they are not that too many. [Foreign Language] due to these factor in the last 2 years.

Okay. [Foreign Language] Where we are not -- let's say we are not importing pulp or waste paper on some mills [indiscernible] are we.

Definitely because [Foreign Language]. Whatever comes, you have to accept that. [Foreign Language] had to sell at 60-plus [Foreign Language]. So that is the one reason [Foreign Language], and you are right [indiscernible] whatever quantity anybody has, the lesser dependence you have on imported pulp for imported waste paper. Those are the people who stand to gain. That there is no second thought to that, yes.

[Foreign Language]

[Foreign Language] We were having almost 200-plus agro pulp and 120-tonne wood pulp. They'll be sufficient [Foreign Language]. As I explained earlier also, [Foreign Language], which could be anywhere around 100 tonne. And that percent [Foreign Language] for next 4 to 5, 6 months.

Okay. So 25% plus 10%?

Yes.

35% is imported, and 65% we are integrated. [Foreign Language] This impact has not been shown in December quarter.

Because it wasn't there till 7 or 9 of February, when we started the new machine. [Foreign Language]. Last quarter, maybe it will come only for 1.5 months.

Okay. So 1.5 months on the impact of waste paper prices [Foreign Language] 18%?

[Foreign Language] So by increased production, maybe part and fixed cost come on [indiscernible]. So that will offset [Foreign Language], making more or less, it should balance out the increased cost of my [indiscernible], my raw material maybe to fixed cost as a full production pay account, or it is going to decrease by almost INR 3,000 to INR 4,000 a tonne.

[Operator Instructions] The next question is from the line of Prashant Rishi from Cascade Capital.

Sir, just one question. we are waiting for FSSAI approval before our partnership with Zume takes off. [Foreign Language]

[Foreign Language]. So I think our [indiscernible]. Maybe in this, we have some inventory with our [ sales ]. So we are making [indiscernible], which we are storing inside only. So the moment that result comes for [indiscernible] Zume and we also, both of us, we do not want to place the product till we get the clearance of different tests. This may have heavy metals [indiscernible], compostability [indiscernible], material [indiscernible] certain Food and Drug Administration [indiscernible], food packaging. [Foreign Language]

[Foreign Language]

[Foreign Language] we do not have much experience with operating these machines. [Foreign Language] So this should give me a revenue of almost INR 25 crores to INR 30 crores on annuals basis.

Okay. Understood. Next question is for Mr. Rachit. [Foreign Language] CWIP around INR 450 crores [indiscernible] INR 400 crores, one set goes into fixed assets and start depreciating. [indiscernible] quarterly depreciation experience estimated [indiscernible] strictly starting from the first quarter of next financial year, just like [indiscernible] one quarter the impact [indiscernible] of depreciation cost.

[Foreign Language] That is somewhere around INR 50 crores. So [indiscernible] that is somewhere around [ INR 8 crores ].

Sorry, [indiscernible] I didn't get your voice.

If the addition [indiscernible] distribution, additionally INR 60 crores [indiscernible], so there are no total depreciation like INR 50 crore, INR 85 crores.

Every quarter.

Yearly, yearly.

Sorry, yearly. Are we yearly -- [indiscernible] depreciation is somewhere around INR 58 crores for last financial year.

[Foreign Language] INR 50 crores, INR 55 crores [indiscernible] that's average is INR 85 crores for financial year.

INR 85 crores [indiscernible]. I mean it should be somewhere around INR 100 crores [indiscernible], right?

[Foreign Language] almost 1 year back. So total good [indiscernible] machines [Foreign Language].

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Yes. Thank you. Thank you, everybody, for your interest and for your support. Thank you very much. Any time, anybody is welcome with an inquiry. Thank you, once again. Bye.

On behalf of Satia Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.