Shaily Engineering Plastics Limited (501423) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Shaily Engineering Plastics Limited Q1 FY '21 Earnings Conference Call. This conference call may contain certain forward-looking statements about the company which are based on the beliefs, opinion and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Anil Kalra, CEO. Thank you, and over to you, sir.

Good morning, everyone. My name is Anil Kalra. I'm Anil Kalra, the newly appointed CEO at Shaily. And I'm pleased to be here amongst you, and I'm excited about the future projects Shaily is working on. I've been in the past fortunate enough to be part of strategic planning, growth and operational excellence alongst with the transformation projects in my career with Motherson Group. And I hope I would be able to focus very closely on these areas at Shaily as well. At this juncture, when the times are rather unusual, with the world economy in not really good shape, these are really challenging times. And at this time, it is difficult to grow revenue faster than expense. But that's the challenge we have to work on, Shaily has to work on. And to get there, objectives have been clearly laid out to make sure that we are downsizing the expenses, growing the revenues faster with the newer projects that are relevant with us and trying to strengthen the company in terms of financials. So the specific focus areas would be seamless execution of orders from the confirmation stage to delivery and also timely delivery of the newer projects to the newer customers that we have added in our [ kettle ]. Then the production and efficiency standards at the shop floors, in the plants must grow further. These are good, but we have to have it at an excellent level for which work has already started. And we are sure, I'm sure it will show up in terms of financials in the coming quarters. In the past, we have had some labor issues, but some corrective measures have been taken. We have churned the tight workforce. We have increased the percentage of [ single ] workforce and the double shifts also on the injection molding process. So to that effect, the downtime because of manpower unavailability has reduced drastically. And we have more stability in the shop floor with no hindrances in the production. And with these focus areas, I hope to release the bandwidth of Mr. Amit Sanghvi and enable him to focus more on business development, capital expansion and also the new projects. Now the projects that I have undertaken as a direct work for me will surely reflect in terms of tangible numbers and quantified accounts in terms of growth and continue to the bottom line. And that is also the need of ours because the needs of our clients are also changing with the changing environment. So please allow me now to hand over to Mr. Sanjay Shah, our Chief Strategy Officer, who will take you further on the financial highlights.

Good morning. [Technical Difficulty] Janice, what's happening? Why are we getting this?

Sir, I'm just checking on this. Please continue.

Good morning, and a warm welcome to all the participants to the quarter 1 earnings call of Shaily Engineering Plastics Limited. I hope you all are keeping safe and healthy. Unfortunately, Amit has a medical emergency, so he is on the call, but I'll read his part of the speech. And he will be available during the Q&A. This year, it started off as a standstill, and everyone had experience of walking on uncharted waters. As Maya Angelou said, nothing can dim the light which shines from within. We have invested this time in building a strong management team and created a strong base to grow. We have been in continuous discussions with many customers across segments, old and new. I'm happy to share that we have built a good traction with some of these meaningfully in their respective industries. This can be further evidenced from the new business confirmations that we have received. Our new business confirmations are spread across toys, home furnishing, pharma devices, pharma packaging, steel furniture and automotive. We added the following to our order book. Let me qualify that most of these orders are expected to be in development stage for the next 2 quarters and will be commercialized between Q4 of FY '21 and Q1 of FY '22. We have been awarded 3 projects with a leading toy manufacturer. This is a new customer account which we have added in the current quarter. The total business value is about $6 million a year. We have secured additional business of INR 60 crores from our home furnishing customer. This will add 9 new SKUs to our [ kettle ]. We have finalized development and supply contract with a global pharma customer for supply of pens for the U.S. market. These are pens which Shaily has IP on. We concluded large supplies of CRC caps to a large domestic pharma company. And we'll be, again, making supplies in the current quarter also. During the quarter, we received confirmation for 2 new SKUs in the steel furniture segment from our home furnishing customer. We are also awarded 3 new project by Garrett, which was previously known as Honeywell. One key point is that I'm happy to share that we have commenced trial production. We expect commercial supplies to start within this quarter and gradually ramp up in Q3 of FY '21. Health care has been a strong focus area for us at Shaily. We are happy to have pursued our efforts in this segment as we have not only increased the pace of production but also adding new orders. Accordingly, we are expecting healthy growth for our pharma segment in the near future. We value our customer's brand and aim to be the pillar of their products. The timely execution of quality products has enabled us to exponentially increase investment with existing clients. I will now go through the financial and operational performance during Q1 FY '21, following which we will be happy to respond to your queries. The pandemic and related lockdown restrictions affected our manufacturing activities in April. We were able to restart the non-healthcare manufacturing facilities end of April 2020. Thereafter, we have witnessed gradual ramp-up in utilization and revenues. Happy to share that we achieved INR 27 crores of revenue in June '20, and the positive momentum continues in July '20 as well. We are almost at pre-COVID levels now. During the quarter, we processed 1,815 tons of polymer, which was at 50% level as compared to the same period last year. Machine utilization rate gradually increased month-on-month during this quarter. With easing lockdown restrictions, manufacturing operations picked up pace in May '20 with strict safety and hygiene protocols. We ended the quarter with an average utilization rate of 34% as compared to 59% in Q1 FY '20. Exports during the quarter stood at 68% of total revenue as compared to 69% in the same period last year. For Q1 FY '21, our revenue stood at INR 46.6 crores as compared to INR 80.6 crores for the same period last year, dip of 42%. Loss of revenue was majorly contributed by nationwide lockdown. EBITDA for Q1 FY '21 is at INR 3.5 crores for Q1 FY '21 on account of lower revenues due to lockdown, which resulted in lower [ resumption ] of exports, leading to subdued EBITDA. EBITDA margin stood at 7.4% in Q1 FY '21. Company reported a net loss of INR 3 crores for Q1 FY '21, while cashback for Q1 FY '21 was reported at INR 1.5 crores. As revenues scale up, we are confident to normalize EBITDA margin profile of the company. We expect recovery in H2 FY '21 on the back of commercialization of new projects that we've added and won last year. This is all from our side. Now we can open the floor for Q&A. Thank you.

[Operator Instructions] We take the first question from the line of Kaushal Shah from Dhanki Securities.

Sir, I have 2 questions. Sir, I have 2 questions on your key customer, the home furnishings major. If you could share maybe some more color on how the ramp-up is likely to happen over the course of this year in the old products as well the new line that you started for them. My second question would be on the pharma side, where we've done a lot of work over the last 2 years. So what is the kind of trajectory that we are looking at in terms of that hard work getting translated into revenues again over the next, let's say, 24 months or so. These are my 2 questions, sir.

Sanjay?

Yes, I'll take it up. So although.

Sanjay?

Amit, do you want to answer that? Or -- I'll take that. No problem. So with our home furnishing customer, we are close to pre-COVID levels by July and I think gradual ramp-up happening as we move forward. So there are stores in Europe and U.S. which were shut, have now been opened, and we are seeing improved revenues coming in. So as we move during the year, we are seeing ramp-up happening. On the new business that we've added with them, as I mentioned in the speech, we expect to commercialize this in Q1 of FY '22. So we do not expect substantial revenue from the new projects which we have been awarded recently to come in, in the current year. On pharma, we have commercialized some of the devices, and the balanced devices will be commercialized during this year and early next year. So on a quarter-on-quarter basis, we should be commercializing some of these devices. And we constantly go on adding new projects. So as we have said on the -- in Anil's presentation also, we have added a customer in the U.S. for Devices. And this will be more of a development right now, where commercial supply would then start once the development is completed. I hope that replied to your questions, Kaushal.

Yes. Sir, if I can just squeeze in one more question. And sir, an obvious focus on domestic manufacturing, [indiscernible], et cetera. So any silver lining for us in that area where we can probably get some more orders or any areas where we can kind of pitch in for -- hitherto being imported from China or from other countries?

So some of the things which we're doing on toys is essentially substituting China with India as a supply base for global supplies. And that's what we are focusing on. We see a lot of traction there. We see a lot of traction on our health care front. We see a lot of traction with our home furnishings customers. So that continues to be our focus areas.

We take the next question from the line of [ Ankit Gupta ] from [ Bamboo Capital ].

Sir, can you tell us how have been -- how does the business on the steel furniture look like for the current year and next year? Are you still sticking to your earlier guidance of some ramp-up in the current year and then like 50% plus more ramp-up in the utilization level next year?

[ Ankit ], can you repeat the question, please? Your voice was not very clear.

Sure. Sir, I'm talking about the steel -- the outlook on steel furniture business for this year and next year. How does the ramp-up look like for this segment?

So what we said in the last call was we expect a gradual ramp-up to happen in the current year. We have started trial production, and we will be making commercial shipments in quarter 2 of FY '21. And a gradual ramp-up will happen between Q3 and Q4, where we will go on adding other products which we have added. We expect substantial ramp-up to happen in FY '22. I don't want to put in numbers here, but yes, we expect substantial ramp-up to happen during FY '22.

Sure. And apart from our home furnishing major customers having also added some new customers or any discussions in pipeline for the home -- for the steel furniture segment?

Currently, no. So on the steel furniture, we got into commercializing shipments to our existing customers and demonstrate that we have commercialized it right and set up the operations, and then we will look at other customers. Right now, we are not posting any customer inquiries.

Sure, sure. And sir, on the toy business, we do understand that China is a major hub for manufacturing of toys. I think the large portion of the global toy manufacturing happens in China. So if you can tell us how has -- how are the European, American companies looking to diversify out of China and how does it benefit to a company like yours. I think last few quarters, we have been winning new projects on the toy manufacturing side, and we have also won a new customer. If you can briefly highlight about this segment.

So what we've talked about in the past also, consider that toys is a segment we see great opportunities there, reason being for -- or reason being toys means a lot of -- have a lot of compliance requirements in terms of chemical compliance as well as in terms of [ safety ] compliance, where we feel Shaily helps them. Today, if you were to look at our global numbers, majority of the toy manufacturing happens in China, and everybody is looking at diversifying their supply chain, where we see companies like us who have experience of working with global majors and have established systems of supply chain and everything, understanding of logistics in addition to technology and manufacturing, would be able to take advantage of it. And that's what we are trying to work on. So we added one customer last year. We've added one more customer this year and are looking at adding projects with these customers and then adding more customers if we move ahead on this.

Sure. So the total business value that you have mentioned of $6 million per year, is this for the combined all the projects for the 3 customers that we have?

This is for one customer, where we have taken 3 projects. That's what we mentioned on the presentation also.

Sure. So I think we have 2, 3 customers in this segment.

Yes. We have 2 customers in this segment.

Two customers. And how do you see this business now in terms of revenue for FY '22 and '23?

I wouldn't want to give a number right now but we see substantial growth between FY '22 and FY '23. So if you were to look at FY '20, we did very negligible sales. We have added $6 million revenue which will probably come in, in FY '22. And the order, once we deliver, we expect to grow on this business also.

[Operator Instructions] The next question is from the line of [ Ritesh Shah ] from [ Lucky Investment ].

Yes, sir, congratulations for these new order wins. Sir, just wanted to know the 5 orders which we have put out, which is the furnishing major plus toys manufacturer, pens, 2 new SKU for steel and the projects with Honeywell. The combined revenue potential for this, if you could, if you could give a certain number. And will that number totally fructify in FY '22 or it will be split in '22 and '23?

We have already given revenue on the first 2, the $6 million on toys and INR 60 crores for the home furnishing major. The global pharma device business which we have taken on will be commercialized in FY '22. And then we will make -- execute that supplies and everything in FY '22. Post that, we will start commercial supply to them. Steel furniture, we would be commercializing this project also in FY '22, so you'll see revenue coming in, in FY '22. Garrett, these are prototype businesses which will get commercialized in FY '22. Post that, we will basically be looking at doing production batches and everything. CRC supplies, which we have talked about, have been made in the current year and continues to be made in this quarter also.

So on a best educated guess, would you be able to grow in FY '21 or FY '20 despite missing the first quarter?

We will.

Possible?

We will grow over -- in FY '22 over FY '21, yes.

No. No, I'm saying FY '21 over FY '20.

Yes, we will grow in FY '21 over FY '20, yes. Very clear.

Do you want to peg a revenue -- some ballpark revenue number for '21 and '22 based on the execution plan that we have?

[ Ritesh ], we would not want to give a number right now, reason being is these are uncertain times. What -- based on what we see in terms of pipeline and orders on hand and everything, we are very clear that we will see growth in FY '21 over FY '20.

Okay. And lastly, sir...

And we'll see growth in FY '22 over FY '21.

Okay. Lastly, with the operations management which we are trying to figure out and -- is there a case where the margin expansion can come in even at the INR 300 crores, INR 330 crores of revenue that we were doing, as I heard from -- initially from the opening remarks from the operating officer about certain projects, so some idea on the margin side, if you could share?

So if you look at last year, if you look at FY '20, in spite of revenues being flat and some of our fixed costs going up, we have been able to improve margins. And we expect margins on an overall basis, and we move forward on a quarter-on-quarter basis with revenues going up, we expect margins to go up. Two reasons for it: one, what Anil talked about in terms of improvement in operational efficiency; and two, in terms of product mix. Both of these together should lead to improvement in margins.

So for a similar revenue, you would have a better margin. And for expanded revenue, you obviously should have a better margin. That's how I should build the case?

Yes.

Okay. Any thought on the extent of margin expansion possibility?

I would not want to put in a number there. We would have internal targets, but I don't want to put a number there on the call.

Next question is from the line of [ Ankit Agarwal ] from [ Up Capital ].

So I have a couple of questions on the financial. Sir, for the new orders that have been announced, what is the CapEx that we expect to incur on those?

So with working on the CapEx, our sense is that we would probably do a CapEx of about INR 20 crores to INR 22 crores for the new orders which we have talked about.

Okay. And how do you plan to then fund this CapEx?

We already have term loans which have been tied up. So limits are available. We need to just draw on those limits.

Okay. And just another question is, how much the debt will we have on the books there now for the June quarter?

Total debt on the book as of June quarter is about INR 154 crores.

Okay. Fine. And sir, one more question. So sir, given the current situation, do you have any sort of a guidance for this year's sales for FY '21.

Again, I would not want to give any guidance. We have already said that we see growth as compared to FY '20. With the uncertainty around COVID and everything, we would probably not want to give a guidance right now.

[Operator Instructions] We take the next question from the line of [ Atul Kothari ] from [ Progwell Securities ].

Sir, I would like to know as to what has been the revenue momentum in July, if you can quantify this here.

July revenue, we have close to pre-COVID levels or higher than pre-COVID levels.

Okay. And so what has been the company's utilization of our CRC caps division?

We don't report individual utilization level. At the same time, as we have mentioned on the call earlier also, the CRC facility is used for multiple businesses, so a lot of our device manufacturing also happens in the same facility. So whatever manufacturing we do at the devices, we have not added facility there, and we basically do it within the same facility.

Okay. Sir, and if you can also let us know as to what is the status of our steel furniture project. Sir, will you be doing some kind of book -- revenue booking in Q2 FY '21?

So as we have mentioned in the speech, we have started trial production, and we will be making commercial shipments in Q2 of FY '21.

Okay. Okay. And sir, during our last call in Q4 FY '20, you had mentioned that the steel furniture revenue of about INR 40 crores to INR 50 crores. So do you think you'll be able to achieve this?

It will be a little lower, but yes, we will still be looking at a fairly good ramp-up as we move forward in Q3 and Q4.

Okay. And sir, how is the -- how has been the labor situation on ground? So are you seeing any challenges in this respect?

I didn't understand your question. Could you repeat a little bit, challenges in what?

Yes. Sir, basically, I mean how is the labor situation on ground? So are you seeing any challenges with respect to execution?

I will let Anil to answer that.

So I will explain on that like this, that the situation currently is well in control. And as I mentioned in my speech earlier, we have also increased the percentage of the [ single ] workforce, also in the injection molding process, which was not there earlier. So some stability has set in there, and the numbers are constant, there we don't see shortfall in production because of no manpower availability. Now in terms of the [indiscernible], it is stable now. We are regularizing the people here. And we see some challenge in terms of the availability of manpower during the monsoons here because we have the festivities in this season. But we will overcome that. We had made some arrangements and I'm sure this will not be a problem for us in the coming quarter's manpower, okay?

Okay. Okay. Sir, coming on -- just a few more questions on our new segment of toys. So basically, we have gained some decent order book in the segment. So what kind of margin profile does this segment is likely to have?

It will be too soon to talk about individual margins. So it will not be correct for me to talk about it.

Okay. Fair enough, sir. And sir, will the toy segment will be for majorly export or it will be concentrating majorly on a domestic market? So would it be export oriented or domestic market?

Exports.

Majorly exports.

Yes.

Okay. And sir, have Swedish home furniture started taking supplies at normalized levels like in pre-COVID period?

Yes. So we are close to pre-COVID levels on here.

So sir, can you just give a ballpark figure in terms of at what level, like is it 55%, 50%, 75%, how much?

It's higher than that. I don't want to put in a number, but yes, it's higher than that. As I mentioned, if you're to look at July revenues, July revenues are close to or higher than pre-COVID levels on an overall basis.

[Operator Instructions] Next question is from the line of [ Chirag Jain ], individual investor.

There was a -- first with my question is on -- have we seen any cancellation of orders due to delay or any cancellation from the business partner on the other side?

[ Chirag ], we -- if you look at the last call which we had, we had said there have been orders which have been canceled, due to which our March revenues were down. And April also, our forecast were down with some of our customers because their ports were down or their facilities were closed and everything. So except for automotive, where we have not seen demand going back to pre-COVID levels, I think in most of the other cases, we are seeing demand going back to pre-COVID levels.

Okay. Sure. My next question is that has there been the -- have you seen any growth in the capacity utilization of the pharma division or if you can define any growth which we have had over the past quarter or the past year-on-year, if we see.

So I'll probably not get into the capacity utilization. But what we have said earlier, and again, I'd restate the same thing, pharma as a percentage of revenue during FY '20, was higher than FY '19, and we expect that growth to continue in FY '21.

No. Am I saying that if you earned 100 last year, have you seen 120 this year in total revenue from the pharma division? If you could give any ballpark number.

Yes. So that's what we had said -- I'm not giving any number, but what we -- what I have said is that revenue which we did in FY '19 from the pharma part of the business, and if I were to compare FY '20 revenue, FY '20 revenue is higher. And FY '21 will be higher than what we did in FY '20. We don't want to give a number here in terms of breakout, but yes, there has been an increase in turnover.

Sure, sure. Also that you mentioned in your investor presentation that you see a 2 to 3x growth in pharma division. So do we have a time line in which we expect to achieve it 2 years, 3 years, 5 years? Do you have any time line?

Sorry, what do you mean? Can you repeat, sir?

In the investor presentation, you have said that you expect a 2 to 3x revenue, 2 to 3x revenue increase from the pharma division.

Which is over a period of 3 to 5 years.

Okay. For 3 to 5 years. Also, if I could squeeze another one, there was an issue with the coffee mug with one of our major customers in the past. Do we have seen any of this or recall or penalty on that? Or we -- what is the status, if you can update?

That's a closed issue for us.

I couldn't hear you. Can you please repeat it?

That's a closed issue for us. It's an issue which is closed for us.

[Operator Instructions] We take the next question from the line of Aman Dwivedi from Alpha Alternatives.

My question was on the steel furniture segment. What is the likely revenue run rate that you can take in FY '23? And in that revenue, what is your likely operating margins? I have a further question. The second question in respect of dumping duties on steel because of which domestic steel prices are higher than international steel prices. How does that impact your steel furniture business?

Could you please repeat the question, please?

Sir, what are your expectations from the steel furniture business in FY '23? And what are the likely operating margins in the segment?

Well, if you were to look at FY '23, we have said that the steel furniture business from the current plant which we have set up can deliver revenues of about INR 130 crores, INR 135 crores. And we are working towards increasing that also. So if I were to look at FY '23, that's the level of revenue at the bare minimum we should be able to achieve. In terms of margin, as I've said earlier, we would not be able to talk about individual businesses and individual margins.

But are they likely to be on par with the company's overall margins on a blended basis? Are they likely to be at the similar levels to the company's current operating margins?

It will be similar or better.

Okay. My second question was on steel duties, particularly anti-dumping duties that have been -- that are imposed. How does the higher steel prices in the Indian market -- in the domestic market impact this business?

Foreign exchange for us is neutral in most of our businesses. So to that extent, it will not impact us.

Sir, not foreign exchange, I was talking about import duties on steel.

So the steel furniture which we make is for exports. So if I'm doing it for exports, I'm basically able to import material duty-free.

[Operator Instructions] The next question is from the line of Pritesh Vora from Mission Holdings.

Congratulations for the improved numbers month-over-month in the last quarter. So my question is, sir, what is our focus now because you entered into steel work -- carbon steel production plant also, as per the presentation. Up until now, I understood it was a plastic molded company and other molded product you are doing. So is this expansion is a natural extension of what you are doing considering your client may require this? Or it is a totally different market and different client?

I think we have answered this in the past. I'll probably let Amit answer that. Janice, can you unmute Amit and let Amit answer this?

Sure, sir, I'll do that. You may please go ahead, sir.

Thank you. Yes. So first, it is an expansion of our relationship with one of our key customers. Second and more importantly, as we go forward in multiple segments across multiple industries, products will become multi-material. So you will come across more and more combination products than just plastic or just steel. Even in our plastic -- even in our steel furnishing, steel furniture products, we are using plastic components today. So it was about marrying the 2. You would be aware that we've also started electronics. So in the future, it will be about marrying all 3 of them into individual products. There's a combination. One is the expansion on the existing relationship with our customer where they have a need and have a lot of confidence in us to deliver. And second is moving into high-value combination products going forward.

So it is mostly a furniture and furnishing product, that's the line of business we are in?

See, the plant is a steel fabrication plant. So there's stamping, punching, bending, welding, powder coating. Using this plant, you can make any -- multiple types of steel products. It's not necessarily only furniture.

Right. And what is our asset turnover on the steel plant? And the previous question was about the EBITDA margin. So more or less, can we consider that margin -- EBITDA margin will be more or less in line with your present business?

On the steel business, the margins should be slightly improved because there is a higher value-add content. So raw material content is slightly lower than the plastic business.

Okay. So EBITDA margin will be higher in the steel business, right?

Slightly higher, yes.

And what do you think -- so your CapEx over the next 2, 3 years, what kind of CapEx we will be spending? It will be through internal generation, through debt or something, what kind of expansion plan we have over the next 2 to 3 years?

Sanjay?

Yes, here, Amit. So Pritesh, I think over the next 3 years, we'll probably be looking at investing about -- anything between INR 30 crores to INR 40 crores on a yearly basis in the next 3 years as well. We would basically be looking at funding this with a combination of debt and internal accruals. So if we were to look at last 4 years, majority of our expansions had been funded by a mix of 50% debt, 50% internal accruals. And I think we will continue on making it in the same way and fashion.

[Operator Instructions] We take the next question from the line of [ Avinash Gupta ], individual investor.

You see, in the past, we had a target of $100 million turnover by -- I think it was 2020 or 2019, I don't recall exactly. Have we abandoned that target or still it remains on our -- there? That is one. And second thing I wanted to understand, the steel business. Can you hear me?

Yes, we can hear you.

Yes.

We are in the business of having precision manufacturing. And I understand steel business is relatively not -- does not have some -- that kind of precision. I mean if you could enlighten me as to what kind of products are that such precision where [ our facility will be of use ].

So we have not abandoned the target, answer to your first question. We have merely delayed it. Second, on your second question, I disagree that steel furniture does not require that kind of precision. The precision is not -- on the steel furniture side, it's not measured in microns of accuracy. However, there is a very, very high level of precision required because it has to do with safety of the consumer. You can't -- so both on the -- from the steel fabrication side of it and second, the chemical compliance on account of using powder coating operations. So you go through degrease, and we've installed a line which uses an organic compound to pretreat the components and not post-treating. So there is a level -- there is a high level of compliance and accuracy needed even in the steel furnishings business.

Not that -- sorry, I didn't want to say that they're not there. But we -- obviously, we are doing it. I just wanted to understand.

Those steel furnitures, we're not a fabrication shop that makes that hand bends and makes these one-off steel furnitures. We're -- it's an automated production line, so the accuracy is very high.

We take the next question from the line of Viraj Mehta from Equirus PMS.

Yes. Sir, just one question. When you talked about that you have a reasonable possibility of growing this year FY '21 over FY '20, does this -- first of all, that would mean more than 20% growth for the rest of the 3 quarters. So do we have confirmed orders in hand for the 3 quarters? Or is it more of an educated guess from our side based on our conversations? And the second question I had is does this include -- does this growth include the top line coming from the steel furniture business?

Okay. So yes, this includes some part of the revenue from the steel furniture which we will gradually ramp up between Q3 and Q4 after making commercial supplies in Q2. And coming back to your first part of the question, we get forecasts from customers, which are dynamic. But when we are saying we're looking at growth, it's a combination of forecasts which we have from customers today and in some cases, all fixed orders which we have today. And based on that, we are very confident that we would basically be able to have growth over FY '20 in the current year.

And sir, the $100 million that in the last question you alluded that we have delayed. In your best educated guess, by what year do you think we can reach there, including the new businesses that we have started? Will it be FY '22, FY '23, FY '24? I mean just your educated guess.

Viraj, I don't want to put in a date there. Let's post 2 quarters go, let this year go, and we will talk about it. Amit, do you want to add anything to that?

No. At the end of the year, I will -- we will, however, talk about it. We will see that one with quarter-on-quarter.

[Operator Instructions] We take the next question from the line of Ashish Kacholia from Lucky Investment.

Yes. Congratulations on a good set of numbers. Actually, even though the numbers are -- have ended in a loss, but the fact that we were able to do a positive EBITDA margin, I thought it was pretty encouraging. And with our decision and our action in getting our new CEO on board, I think we have kind of taken the first steps towards professionalizing our company for a bigger play. So my only question would be what is the next step from here in terms of beefing up our management team. Do we feel the need to bring in more people from outside? And so what scale is our current management team capable of handling there? Because we don't seem to have a shortage of business. We have only stumbled on execution in terms of being able to deliver. So can you just elaborate on this aspect as we are thinking from here, Amit? And even I would like -- love to hear from our new CEO as well, what is the kind of thought that he has in terms of scaling up our operations from here.

Sure. So I will just say a few words before I hand it over to Anil to maybe elaborate on the topic. Two sides, actually. So I think we've had lots of challenges in execution in the past. We haven't identified and built enough capabilities in a time where -- when we had to execute the projects. So having said that, we are certainly looking for more people. That doesn't mean we're adding to the current strength, but we're probably looking at upscaling in -- within the numbers that we have. So we will be looking for -- we are looking for an engineering head, a head of our engineering services. And I will hand it over to Anil. And we're also hiring in business development both in India and outside of India. So I will let Anil take over from here.

So I think with the challenges that's come to the company with the toy business and also growth of the furniture business in carbon steel, we have to enhance the capability of the team here. And as Amit has just mentioned, head of engineering, business development are open. And we are doing this very seriously, and we hope to fill these positions soon. Also, we need to improve the operational team in the plant. To that extent, we are hiring young, qualified engineers from CIPET and other places for the plastic resource and trying to train them in-house so that they spend longer tenure here rather than getting a totally experienced from outside with a baggage of problems. So that is the strategy that we are now working on. And we will also [ strengthen ] in terms of what manufacturing excellence would be is being brought about with the teams here. And to that extent, we have improved the OEE, the overall equipment efficiency, in July by 7% to 10% over the previous months. So that is what we are working on. So as I said earlier, it is important to strengthen the bottom line while we grow on revenues and also add business. So that will bring in the acquisitions. And I think management team has to be strong enough. So that is how I sum it up.

Anil. Since you come from the Samvardhana Motherson Group, where the concept of 30% ROCE was pretty much ingrained into every person who work there, do you think that is possible to be done in Shaily also?

See, the plan is that we are working towards that, but it was not 30% at Motherson, which was [ stagnant ] for 10 years as we go on further to 40%.

Sorry, sir. I mean I am just saying the [Foreign Language] it should be a great thing for us. So...

[ That is the expectation that ] Amit and Mike also have. That's how they caught me in here.

Sir, I mean I would think that a person like you, with your kind of experience, you'd probably -- I'm sure you are thinking of doing it also, kind of thinking about where do we get to $200 million, $300 million with a first planning horizon. Eventual ambitions can be higher, but first planning, goal, if we can take it toward $200 million, $300 million kind of a size from where we are, I think it can be an interesting play.

Yes. Actually, they are through it, step by step. I think we have started the right way with the business development team, headed by Amit and Sanjay, bringing in the newer segment of [ healthcare ] vertical addition, which has huge potential. Let us first stabilize on that and gain some numbers, top line and bottom line. And basically, I think over the years, it should grow, the company should grow. That's what is required also, and that is the need of the investors and also all stakeholders, right?

[Operator Instructions] The next question is from the line of Pritesh Vora from Mission Holdings.

Sir, what is our -- as you mentioned, ROCE target is 30%. When can you achieve that target?

Pritesh, we have not said our ROCE target is 30%.

Okay. So what are the product extension? And what are the inventory of the products which can improve the return ratio?

So we are working on 2 things. One is product mix. And as we are moving up the value chain with looking at increased business coming in from pharma, which will basically help us improve the margin profile.

All right. So pharma is what percent of revenue as of now?

We don't get into individual numbers, I'm sorry, Pritesh.

Okay. So what are the major sectors of the business we are in? One is the pharma. Other is the molded furnishing. What are the other business -- I mean, products do you have?

Currently, we are present across 5 verticals: one is called consumer, which basically includes home furnishing, toys, everything; second is FMCG; third is automotive; fourth is pharma, which includes devices and packaging; and fourth is -- the fifth is [ precision ] engineering. So these are broad areas which [ we have ].

And you also mentioned previously that you will be doing INR 30 crores, INR 35 crores from internal accrual. But I see your debt to EBITDA is already at 3. So do you have the space to take more debt?

So when you're looking at debt to EBITDA, you're looking at the June quarter number or the March quarter numbers?

The previous year number.

So if we look at previous year number, I don't think our debt to EBITDA is 3. It's lower than that.

No, I think it's a TTM number I'm looking at.

Yes. So June is an exceptional quarter, and I don't think June can become a benchmark for that. So if you will look at March numbers, it's much lower. And we would have...

No, I just want to understand what is the debt provider comfortable with, what debt to EBITDA they are comfortable with. Is there any [ cover ]?

We will not want to go beyond 3 at any point of time. That's what we are very, very clear. We have...

Sorry, you don't want to move beyond?

Yes. So we will not go beyond 3. We will be cautious on debt and take on that much of debt which we think we can shoulder.

[Operator Instructions] Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.

Thank you, everyone, for joining on the call. We hope we have been able to answer your questions. For further information request, you can get in touch with SGA, our Investor Relations Advisors. Thank you, and stay safe. Thank you again.

Thank you.

Thank you. On behalf of Shaily Engineering Plastics Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.