Uflex Limited (500148) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 FY '21 Earnings Conference Call of Uflex Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Sharma from Quantum Securities. Thank you. And over to you, Mr. Sharma.

Thank you, Nirav. On behalf of Quantum Securities, we welcome you all to Quarter 4 FY '21 Results Conference Call of Uflex Limited. We thank the management for giving us the opportunity to host this call. The management is represented by Mr. Rajesh Bhatia, Group CFO; and Mr. Yusuf Nasrulla, Investor Relation. I now hand over the call to Mr. Yusuf Nasrulla. Over to you, Yusuf.

Thank you, Mr. Sharma, for hosting the call. Good afternoon, everyone, and a very warm welcome to all of you who have joined us today for quarter 4 earnings call of FY 2021 for Uflex Limited. On the call today, we have our Group CFO, Mr. Rajesh Bhatia, who will be sharing his assessment of the performance we posted yesterday. Please note that today's discussions may include predictions, estimates or other information that might be considered forward-looking. While these statements represent [ our current judgment ] on what the future holds, they are subject to risks and uncertainties. Thus, you're cautioned not to place undue reliance on these forward-looking statements, which reflect our opinion only on the date of this presentation. I would also like to emphasize that the call should not be broadcasted or reproduced in any form or manner. We will open the floor to question and answers towards the end. Let me briefly take you through the key highlights. Uflex rose above the challenges of the pandemic to post an exemplary performance in Q4 FY '21. The [ numbers ] posted yesterday marked the best performance for us, as our PAT EBITDA for the quarter grew by about [ 60% ] and 87% year-on-year, while the FY '21 ends at 128% year-on-year.

Sorry to interrupt you. Sir, we are losing your audio a little bit. [Operator Instructions] Thank you for your patience. We have Yusuf back to the call. Sir, you may go ahead.

Total production volume and total sales volume for quarter 4 increased by 33.7% and 43.5%, respectively, on year-on-year basis. For the full year 2020/'21, total production volume stood at 4,63,065 metric tonnes and total sales volume at 4,62,418 metric tonnes, both growing at roughly 21% on a year-on-year basis. I would now like to invite Mr. Bhatia to address the participants. Over to you, sir.

Okay. Thank you, Yusuf. Thank you, Quantum people, for organizing this call. I think the numbers are before you. Yusuf also reiterated that for your easy remembrance or easy reference, I would say. So the quarter has been stupendous. The few facts which I would like to highlight other than what is already known to you in terms of the performance numbers, whether it is the sales or production or the revenues or the EBITDA. I think Q4 was challenging in the sense that the raw material prices and availability, both particularly the PP, which is used for manufacturing BOPP films, was a bit of a challenge. The prices also went steeply very high after the first 3 quarters, which were -- when we saw the raw material prices in a particular range. So Q4, we had a 30% price increase for the BOPET raw materials and about 17% for the BOPP raw materials. And despite that, we've achieved these numbers where our EBITDA is up about 163% on a Y-o-Y basis and EBITDA is up, sorry, 87% and the PAT is up 163%. So our total installed capacity of the packaging films after the expansions in Poland, Nigeria, Hungary and Egypt will be about 510,000. So next year, the -- another expansion which we have announced at our new location in Dharwad and at Dubai adds up to about 81,000. So by FY '23-end, we will have a total production capacity in the films business of about 600,000 tonnes, which is an increase of about 75% over what we had at the end of FY '20. So I think important is to how do we quickly utilize to ramp up the production to reach near the optimum capacity utilization levels. And that's where we feel that in the next 3 years, even if we look at a reasonable volume growth, and we should be looking at about 60% growth in the packaging volumes from here on. We will also, next 3 years, look at about doubling our aseptic packaging business, which is -- wherefore which, we are already going ahead with the expansion of the line to double the capacity. So everything is sort of -- the business is good. The margins are pretty decent. I think the challenge is as to how do we maintain these margins. Yes, the raw material prices went up in Q4, but so did the final product prices. But the more capacity coming up in the subsequent years. At least in India, we'll check these prices to an extent. But overseas markets are pretty decent at this stage, and we don't see much of issues there in terms of any demand-supply mismatches. Even after -- we had expansions in terms of the Poland, Nigeria, Hungary and Egypt plants, which added to our debt, but still, if I take it as on FY '21, the long-term net debt to EBITDA is still very healthy at 1.4. And if I take total debt on a net debt basis, including the working capital, that is still under 1.8. So overall, sort of very healthy financials. And we are looking to grow on volumes now that the capacities are available, and that will set the tone for the next 3 years to come. And we have, as of now, no plans to expand our packaging business, where we are looking for more value-added and products, but there are no capacity expansion which is currently planned in that business. And the packaging films and the aseptic packaging, the other 2 businesses, are already before you. The other ancillary businesses which are -- like for us, we do make chemicals and adhesives which are used in the packaging industry, which -- we make cylinders for the packaging, all of them are doing -- which are not in the mainstream, but as a support to the main businesses. But they have also grown big, not only in terms of serving the internal customer, but also serving the external customers. And they are also doing good volumes as well as the top line, and they're adding to the profitability of the overall packaging business. The packaging industry per se still is -- remains to -- remains under the consolidation phase. And this -- and whenever the packaging film prices are up, the packaging industry always have challenges in terms of maintaining their healthy margins, because the price is going up, that there's always a lag effects from the customer. But I -- as I've been advising earlier, the packaging business is still -- the margins still continue to be below our expectations. And the consolidation continues over there. And we will -- we expect that in the next couple of years, that business will also start contributing healthy margins, which today are clearly letting in that business. And on the other hand, the packaging film businesses, the margins are much better, not only for us, but across the industry as a whole. And that's basically the summary of -- so we have no other new CapEx plans to announce this quarter other than just INR 120 crore expansion of the aseptic packaging business. And others are all sustainable -- sustaining and some normal CapEx which we keep on incurring in such a huge business, but otherwise, other than that, there are no other major CapEx plans at this stage and over in the next 2 years is to utilize the capacities which we've set up. Thank you. I think that was a bit of a summary of the performance for FY '21 and Q4 FY '21 from my end. I'll like to summarize it by saying that on each one of the parameters, whether we take it as the volumes, the production volumes, the sales volume, the packaging films volume or the packaging volumes or the aseptic packaging volumes or the business performances of each of the overseas locations, the profitability, the EBITDA, the PBT, the PAT, they are the best in the history of Uflex till date. And quarter 4 revenue gives us the guidance to touch 5-figure mark top line in the current financial year and a 4-figure PAT mark in the current financial year, which means that we're looking at our top line of over INR 10,000 crores and the bottom line of over INR 1,000 crores based on the run rate achieved in Q4 of FY '21. So that's it from me. And I would love to answer any of the questions that you may have to give you further explanations or information about whatever I can -- I'm best capable of. Thank you.

[Operator Instructions] The first question is from the line of Mr. Jiten Parmar from Aurum Capital.

Yes. Congratulations to the Uflex team for a superb set of numbers for Q4 as well as for the full year despite the COVID challenges. I have a few questions. Can you tell me what are the spreads for Q4 in BOPET and BOPP? And also, what are the current spreads?

So the spreads in the packaging films business, we -- if we look at that business, I think we -- normally, we don't give those spreads. So an overall basis that we have top line, with a spread of about 20% EBITDA margins. The EBITDA margins in the current quarter, I think there'll be some adjustment between the BOPET films and the BOPP films. We're seeing some spreads coming down in the BOPET films business, but the BOPP films business, the spreads are much higher even as compared to the Q4 of FY '21, while in the package in the BOPET film business, they are marginally lower as compared to Q4 of the last year.

Q4. Okay. Okay. Great. In previous con calls, you have given the split, but that's okay. This EBITDA margin number is good enough. And I must congratulate you that despite all the raw material increase, you have been able to achieve good EBITDA margin.

But you can look at the pure-play EBITDA margins from our consolidated numbers versus India numbers. So you will find that India number is only about 15% EBITDA margin, which is largely a packaging play, and -- but overall basis, the EBITDA margins are much healthier at above 20%.

The spreads overall are much higher than...

Yes. Yes. So that's what I'm saying that the packaging films business spread today -- and that's not only for us, this is for -- if you see SRF, if you see Jindal Poly. Jindal Poly had a spread of about 21.5% in Q4. We see SRF spread being 29% in the packaging films business. That's a stand-alone number. Polyplex as well as some of the other players also, everybody has maintained a good spread on the packaging film side. None of them are in the packaging business. The only comparable we find in packaging business is Huhtamaki, where the spreads -- EBITDA margins were down 2% during Q4 versus Q4 of FY '20. So that's a bit -- and Q3 also, they had about -- close to about 7%. This quarter, it is slightly better. But none of those numbers are anywhere near to the margins today you have in the packaging films business.

Right. Right. So what was the capacity utilization of aseptic division in Q4? And what is your...

Q4, we had about a little over 80% and current quarter is above 90%, 92% or so.

Okay. Okay. And for full year, what is your guidance? Would you be able to...

Full year, I think still very early because there are setbacks. And this is the only business where the setbacks in terms of the lockdowns and all that are -- cannot be predicted. But yes, we were -- for an overall year basis, we were looking at about 80% to 85% utilization.

And sir, would you be find enough to share what is the EBITDA or I mean -- in this division? Is it positive or -- just a brief.

So this business today has about 20% EBITDA margins.

Okay. Okay. So I think that's what we started out with, that we want to do 20% EBITDA margins in this business. So I think we are there [ today ]. And really happy that finally, I think we are in the capacity expansion in this division.

In the aseptic packaging, there's a lot of stuff happening on the export front also. So we're looking at about 30% capacity catering to the export market as we grow that business.

Great. Great. Okay. So what would be our peak that -- I mean -- so you mentioned that INR 120 crores CapEx will be towards aseptic. And you also mentioned that -- I think you are increasing the capacity by 81,000 tonnes.

At Dharwad as well as at Dubai CPP, yes.

So the CapEx for that, is that -- I mean that's not mentioned. So what...

So that should be about -- so we guided that last quarter. I think the total put together will be about INR 1,000 crores.

Okay. INR 1,000 crores or 81,000. Okay. So what would be our peak debt?

So I think as we stand today, if we add this debt over the next 2 years period, let's say, this INR 1,000 crores, maybe add, let's say, INR 700 crores of debt to fund this. By this, during the next 2 years, we would have also repaid about -- I think about INR 600 crores of debt also. So not much of a difference will be there in terms of the peaking a little bit, 10% from here on if you see at the end of FY '23.

Okay. Okay. So -- okay. Sir, and what is the plan for -- is there a plan to bring the debt equity below 1? The plan for deleveraging, when do we see that happening?

See, I think in today's market, and as I said that when I look at the numbers, just purely on a long-term debt basis, the net debt-to-EBITDA is about 1.4, which is very, very healthy. So I don't see that there is any need to look at deleveraging yourself. So in a natural way that -- the one that is happening will happen. We look for opportunities though to look at lowering the interest cost and all that. So we'll keep on finding those opportunities, whether in India or overseas, but there's nothing that we're looking to deleverage in terms of any prepayments or anything of that sort.

Okay. Sir, what is the current interest cost [ there ] on this debt?

Sorry?

What is the current interest rate?

So in India, we are looking at -- India, that is about -- close to at about 9% or so. And the offshore debt should be at about overall [ held ] at 3%.

Okay. Okay. And what is the breakup of the debt? And how much of it is India debt and how much is it also?

So India long-term debt is about INR 850 crores. And overseas, it is about INR 2,400 crores. But there's cash on the sheet of about INR 650 crores. So the net debt is about INR 2,500-odd crores.

Okay. Okay. And my final question is, on the film packaging division, we are not doing any CapEx. Now what is the capacity utilization at the film packaging division?

Film packaging division, this year, we have actually, quarter 4, the packaging volumes are up by about 26% on a year-on-year basis. And overall, for the year, I think they are about 14%, which is very, very healthy.

Right. So I mean, I want to know. I mean when would we require -- when will it come to a percentage where we will want to do a CapEx for the film packaging division? Or we still have some...

I -- so there, what we are -- so the package -- sorry, I stand corrected. The packaging volume for the whole year is up 17%. And for the quarter, it is up 26%. I think there, in the packaging business, what we are looking at is more value-added product. And the moment that happens, the will leave -- we can let go some of the low margin business in that and concentrate on the value added. So that's the strategy as of now because there is no point in adding capacity for something which is not so profitable. So let the consolidation happen in a natural way. And we can still do about 10% to 15% more on our existing capacities in that business, but we will look to substitute the low-value business with the high value-added products in that category.

[Operator Instructions] The next question is from the line of Mr. Prashant Sharma.

Congratulations on good set of numbers. Sir, I want to know what is the breakup of your CapEx? Because in the last con call, you said INR 850 crores of CapEx you are going to do over the next 2 years less the aseptic package capacity that you are going to add INR 120 crores in there.

INR 850 crores, when we said was Dharwad expansion. Then there is a Dubai expansion, that should be about INR 150 crore. And then there is expansion of aseptic, which is about INR 120 crore, and that's what this end will at present.

Okay. And sir, when this capacity is going to come online?

This will happen by March '23. It could happen earlier, but I think, let's look at March '23 as -- if we achieve it earlier, that will always be better, but that's the safer target to achieve.

Okay. And sir, how much is the revenue that we can expect to generate from this CapEx?

So I think we can look to generate from each of these -- so in nutshell, we can look to generate about -- total, all these put -- everything put together, you can say about INR 1,500 crores.

INR 1,500 crores. Okay. And my next question is, sir, if you look at the history of the company, the operating profit margin is something around 12%, 13%, 14%. But right now, it's going to 20%, 21%. Sir, is it because of the COVID-19 that is happening? And do you think this kind of numbers are sustainable in future?

Okay. See, the margin improvement has largely been in the packaging film business, which has gone through its own cycle after 2010/ '11 boom and then it was languishing for a larger part of -- for many years. And only after 2016, when the capacity utilization started increasing as the new capacities were not -- people were not adding new capacities. So the capacity utilization across the industry improved to about 80%, 85%. And that's where the margins sort of improved. We saw what happened in 2010/'11, was the euphoria where a lot of capacity got added and the margins got affected a bit. But I think -- but still to be at conservative side, I think about 2% margin shave off can happen on the packaging film business in the medium run, but we will make up on those numbers by the extra volumes that we will generate as well as on the cost part of numbers that will go down because of the higher production levels.

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

Great set of numbers, sir. Sir, my question is that, due to raw material price increase mainly crude oil derivatives, what is the pass-back? Means how you're passing the costs to the customers?

So as -- this question has come up many times in this industry. So in this industry, the price increase -- because of the raw material link, crude price link is almost either instant or with the lag in the packaging business. But it does happen on either side when the prices go up or when the prices go down. Yes, in FY '21, because of the pandemic, when -- initially, in the Q1, there was a huge spurt in demand led by people holding the food products because of fear of lockdowns and all that, that led to a temporary spurt in the demand for the packaging. And while the raw material prices fell, the finished goods prices were higher due to a huge increase in demand. But in the next 3 quarters, that got adjusted. And as I said, that in Q4, we saw a 30% increase in the raw material prices for the films, about a 17% raw material prices for the BOPP films. But despite that, the EBITDA margins for the quarter are still better than the previous quarter margins, which means that you've been able to pass on that price benefit -- that price cost impact to your customers.

Okay. My last question is, sir, what is the optimum high-level EBIT margin? Is it sustainable, like 20% plus...

So that's -- I already answered that by saying that, as we stand today, I think we'll strive to achieve that, driven by additional volumes coming from our aseptic packaging business and the additional capacities in the overseas markets coming into play. We should also expect, in the next couple of years, better margins coming from our core packaging business as such, which is, today, operating at suboptimal EBITDA margin numbers. So overall, one product yielding a few basis point and the other products catching up on that, I think, that generally should still give us about 20% EBITDA margin. But even if we -- that's what I said, even if we shave off a couple of percentage points on the margins and make up through the higher volumes coming our way, which also brings down our cost of production, we'll be glad to accept that kind of a situation as well.

The next question is from the line of Saurav Sharma, an individual investor. Saurav Sharma, sorry we're unable to hear you properly. [Operator Instructions]

Hold on a second. Am I audible now, sir?

Yes. Much better.

All right. Great, sir. So congratulations, first foremost, on the numbers that have been delivered this quarter. After the little bit of a disappointment in the last quarter, I believe these numbers, of course, speak volumes of better performance that the team has put in, so congratulations. And hopefully, the team has -- the company has done well throughout the second wave that [ affected ] the country. And I hope for the best health for everyone at the company at large. So my question is regarding the Q4 numbers, the other expenses I saw are on the lower side. So could you detail why that might be?

So I think in the last quarters, we had probably an over provisioning of some of the costs which were at the final set of numbers, audited numbers. So that got adjusted a bit, and that's why you see some adjustment in the other expenses.

So is that -- I mean, are you speaking of the sequential last quarter or the year -- the last -- Q4 of last year?

No, no, no. I'm talking about the sequential quarter.

Okay. But also compared to Q3 of -- Q4 of '20, the other expenses have been controlled quite appreciably.

Yes. So then on top of that, there are expenses which are not happening today. Mostly, on account of certain travel costs, certain costs to participate in some of the exhibitions and shows. And all of that in our kind of a business where we are in about 140 countries is playing a very, very substantial role in taking down costs.

All right. And sir, the second question is regarding the brownfield expansion in Egypt. That was completed this quarter, right?

Yes.

Yes. So could you just -- just for my recollection, mention when was this brownfield expansion started?

I'll have to get back separately for that as to when did it started. Probably, this was -- the first one we took when later we had Poland, we had Nigeria, and we had some of the other things that came out.

Right. So this Egypt expansion that was operationalized in Q4 2021, this is around 42,000 BOPP, right?

This is 42,000 BOPP, yes.

Right. And the status of Hungary and Nigeria, sir?

Hungary and Nigeria, due any moment now. We've done enough trial runs over there and all that. So that is like any movement in this quarter. We delayed there by at least, I think, 1.5 quarters, but that's coming on stream now.

Right. And the new expansion that has been announced in the last 2 quarters, you just mentioned that -- in an answer to a previous question, that the expected turnover for that is going to be around INR 1,500 crores. So does that mean an asset turnover of around -- or less than 1.5?

So in our business, we have an asset turnover in the packaging films of a little over 1. So that's what it...

The next question is from the line of Mr. Sagar Shah from SA Analytics Limited.

Actually, I had this one question actually. First of all, congratulations for a very excellent set of numbers, actually, for the Q4 and also for the entire year, actually. Now my question is that, in spite of such a good performance, the dividend payout ratio seems to be on the lower side, actually. So do you have any plans to increase your dividend payout? And secondly, if this performance continues for FY '22 and your CapEx is hardly INR 120 crores in your new aseptic packaging plant, so do you have at least some decent plans to reduce your debt so that you go -- finance cost gets serious and maybe your ROE would actually get a boost and maybe further contribute to shareholder value?

So I answered that already by saying that we have no plans to accelerate any payments of the debts due. And we continue to make those payments as and when they are due. Having said that, the dividend we've increased this year from 20% to 25%, I know from a shareholders' perspective, it's a marginal increase. But any such increase further will only increase the debt to be taken for completing these projects. And if we give a higher payout, the accruals to be reploughed back into the businesses would be lesser available, which means that you're adding on only further debt, which is counterproductive to what you said, that -- whatever your plans to reduce debt. So this is also one of the ways that you keep your debt in the check. No plans to prepay any debt, but CapEx plans are also, as of now, frozen. But that's a very evolving thing. And maybe 1 quarter, 2 quarters, 4 quarters down the line, once you are -- once you've consolidated your numbers, the management and the Board could consider anything further, but nothing as of now.

Yes. But actually, your dividend payout ratio is on a very -- is part of such a brilliant quarter. The dividend payout ratio seems to be on a very lower side...

I understand, the payout ratio is lower, but that was done only keeping in mind the CapEx that we've planned in the next couple of years for the Dharwad as well as for the aseptic packaging business.

The next question is from the line of Mr. Chirag Singhal from First Water Capital.

Congratulations on a great set of numbers, sir. Sir, my first question is like what is the CapEx for this recycling plants which are setting up at Mexico and Poland? And also please quantify what is it going to contribute to the bottom line.

Okay. So these CapEx are not much. Then there are a couple of million dollars only. Maybe $2 million to $3 million, so not much here and there. But in terms of our readiness to embrace a circular economy in the packaging, I think these are important as a showcase. We eventually don't want to invest in some of those things because they're not the way that -- we are actually not the right fit for some of these products. These are more of a showcasing for us, for us to take up with the governments, for us to take up with the other stakeholders that how the plastics [ manage ] , which has been given a very bad word, how that is to be tackled? There are ways to tackle that. So this is more from that respect rather than any investments to show that as your mainstream businesses. But yes, the biodegradable part of the things will be part of our mainstream business, but that's a little while away. And these are more of showcasing opportunities to the government, to the environmentalists, to our customers that what are we capable of in terms of recycling the plastic waste, and hence, to handle the plastic waste. Having said that, there are extra realizations when you make a BOPET film from an old PET recycling -- recycling the old PET bottles. There are additional margins. Available margins for selling those films are a bit higher. But the volumes have still to catch up to the extent that you will -- that the total volumes of that films. But having said that, we don't want to go out and collect those bottles from [ directicals ] or others and all that. Let somebody else do that business. We'll only guide others as to how to do that business and how to make a plastic circular economy.

Right, sir. Understood. Understood. That's a great initiative. Yes. And now coming on the aseptic expansion. So sir, if I recollect, the number which you have given just now and the number which you guided for in the past, there is a big deviation. So why is that so?

I didn't get your -- this thing, number in the past...

So this time, for the aseptic expansion, you have guided for -- like we have announced a CapEx of INR 120 crores. Is this -- in one of your early con calls, the number was around INR 50 crores. So are we adding something more than what we thought...

No. We are not adding some of the other bottlenecking equipment and some of -- when you do a project, then there are -- apart from the hard costs, there are soft costs also, like interest during construction, upfront fees that you pay to the lenders for that -- their loans, the manpower costs which goes into setting up those projects and all that. So all put together, it is the maximum of INR 120 crores. But if you talk printing line as such only, I think we gave a guidance earlier that it's about INR 60 crores or so, and that remains so.

Okay. Okay. Understood. Okay. Sir, one last question. What was the capacity utilization for the Poland facility in Q4?

Poland facility in Q4, I don't have that number right now. But it's not fully utilized. The new plant that has come up is not fully utilized. I think we need to ramp up the numbers there to -- which we'll do in the current financial year.

Okay. So like we are expecting to ramp it up to 100% by the end of the current financial year?

That's the -- and we're to do it much earlier, but let's see. We're doing our best on that. And the pandemic is only helping that because, today, if you see the freight rates from India to Europe or elsewhere, they are minimum 3x of what they used to be pre-COVID. So obviously, which means that the manufacturers who are supplying those films from India have to pay -- incur additional costs, which means that their landed cost there is costlier, which means that there's more opportunities for us to penetrate into some of those customers, given that we'll be able to derive better margins for those films, what we manufacture in Poland, as well as convince these guys that, look, if you want to be 100% sure that your factories keep on running, I think might as well pay a bit of an extra cost by buying a, "Made in Europe," material. And the -- no fluctuations of the prices. Because the crude is today x, by the time 3 months later, you get the material, it is 20% more or 20% less. So no -- and you can manage your inventory at optimized those -- your stock -- inventory optimization -- inventory holding costs. So I think all that will play out over the next couple of years. In fact, in [indiscernible] because we were always -- we were already sold out fully in those jurisdictions, so there was no opportunities like this to convert more customers to buy locally, which is, of course, happening now.

The next question is from the line of Mr. Ayush, an individual investor.

Congratulations on a great set of numbers, sir. I actually had a question about the aseptic packaging line that you are setting up. You said that you are having demand from exports now. So are you also thinking of setting up anything in the others?

If that would have been real, we would have announced that now. As I said, as of now, whatever the CapEx we've announced, other than that, there are no plans. But obviously, some of these successes always propel you to think as to what are the new business opportunities. And so maybe tomorrow, at some stage, we may think of doing packaging, aseptic packaging business. Globally, yes, we do the film business today globally.

The next question is from the line of Mr. Jiten Parmar from Aurum Capital.

Yes. I wanted to ask about what are the -- now what is happening on the recyclability and what are -- the government keeps on talking about introducing use of plastic in on that? So what are our thoughts on that? Have we made any progress?

So I think whatever governments are doing in terms of asking people to lower the use of the plastic or single-use plastic, especially the bags, we've seen a very, very poor implementation of that, and this is not happening today. This is happening for the last 15 years or so. What -- despite the fact that you see that -- if I see the packaging film business, India, for the last so many years, is recording a double-digit growth in that. I just shared the packaging business growth with you also. This fiscal, it's about 17%. So where is -- while we talk about all this, but are we actually in a position to find an alternate to a packaging other than the flexible packaging, which is primarily using polymers? I think the answer is no. Yes, there'll be some product developments which will be plant-based and things like that. But the cost effectiveness of that and the scalability, availability all remains as a best guess. And that is where we say that our product, which is a biodegradable film, that we add certain enzymes when we make the films. So whether I throw a piece of the Lay's chips pack after eating it by the side of the road or by the side of the beach, if they become compost after their assigned life cycle, that's going to be the fundamental change the way the plastics will be perceived. So all of us, whether we are human, animals or anything else, have end of life cycle, but plastic hasn't got it. So we have found a solution where we have been able to assign an end-of-life solution to the plastic. The product is at a very advanced stage. We are looking at the government support in terms of making this. Do you have to enact this? Because otherwise, when there's a cost involved and the brands may not want to use it or not use it to that extent, they just -- sometimes, what happens is we just do a bit of this to show our care towards the environment and to reduce the noise around. But when we look at the full scale use of that and the costs associated therewith, obviously, we think that, that cannot be passed on to the consumer, and that will take a hit on our own margins. So all those decisions are taken in that respect. But what I've been telling you is that the cyclability, coupled with biodegradable films is the only solution going forward for giving an end-of-life to the plastic, and Uflex is in a ready situation for that. The governments are currently overwhelmed by the pandemic. So some of the other things which they were planning on this environment side probably would have taken a backseat. That's giving us more time to still perfect our product offerings, but that's going to be a huge winner for the Uflex and for the plastic industry as a whole. Recycling stuff, I already said that we will only showcase it. We're not intending to get into that business, but biodegradable product films and all, we'll be the pioneers in this.

Great. That's so good to hear. So cost-wise, would it be a significant higher cost to...

More about -- that's 100% for extra [ overheat ].

That 100%, it's fine. It's great actually, to be honest, I think that's a great.

But don't hold on to me those numbers because I'm not a technical guy. So initial period, there could be demand and supply mismatches, so the costs may be a bit different then. We all know the electronics, the same electronics 10 years before, what was the cost? And today, what is the cost, including some of the appliances we use it at our home, including the LCD, LED TVs and all that. So I think those cycles will take their own course. And -- but yes, there will be a cost impact of that. But much less cost impact than today when we look at how do we manage the environmental associated cost with this or the recycling costs with -- associated with the same. So if we throw away a plastic or like we throw away a cloth and that becomes a biomass at the end of its life cycle, then you don't need to collect -- put a mechanism to collect those waste, to recycle that, and then to again send to -- so the overall costs, if you see, I think they'll be still lower than the overall environment management costs.

Absolutely. And very happy that the company is always a pioneer in technology and advancements.

No, I'm saying that take my words today. This is going to differentiate Uflex from the rest of the industry in the packaging business. That's why you will see the kind of impact this one product will have. I have no idea that as to how the others are, what other competitors are doing on this aspect. But I suppose that everybody is seize up this challenge and taking this as an opportunity and will have their offerings as well. But Uflex is certainly a frontrunner in all of this.

The next question is from the line of [indiscernible] from [ Invest Research ]. [Operator Instructions] Due to no response, we move over to the next participant. The next question is from the line of Mr. Prasad Kumar from [ Invest Research ].

Thanks. Congrats, Rajesh, for the great set of numbers. We are impressed with the kind of earnings growth that we can see as part of your organization. I have one quick question, where you have partly answered this before. Again, on the debt levels, right? So when are you seeing your debt levels may be coming to a lower level from what you have currently? Right? So we -- I understand that you don't have any intention to prepay any debt, but do you see the debt getting softening in the next 12 to 24 months?

It's not a debt reduction actually which matters to me as a CFO. I think what matters to me is healthy metrics to debt to earnings. And as I said that even as of now, as on 31st of March 2021, when I look at those numbers, and I see that my long-term net debt to EBITDA is only 1.4. And I haven't realized even a 10%, 15% potential of the investments that I made over the last 2 years in terms of setting these capacities, which added us a debt of about $300 million. So I feel very comfortable. And because when I see also the tenure of that debt, it's a long-term debt, between a 7- to 10-year kind of a period. So there are no pressures on the cash flows of any sort for any sort of that debt servicing. If the ratios remain healthy in the absolute number, debt additions won't be much of an issue for us. We are only looking to maintain a healthy number in terms of our leverage ratio via vis-a-vis our earnings. And so long as we are able to serve that, which means that you are able to do -- create a much larger value creation for the shareholders, then what 8% or 9%, or even in the foreign entity, 4% or 5% debt cost would have been. So I don't -- we have no intention to look at any of the prepayment. It will happen in the natural course. We will only keep an eye that our earnings with the sufficient margins are good enough to take care of our debt servicing requirement, with a huge comfort, with a huge margin. That's what the whole end of it is.

Okay. And one other quick question. Maybe I don't know whether you have covered this. With your plans, some of your plans outside India, which has finished the trial run. And you also said that there was a delay of a quarter and a half and stuff. So with all those capacities coming on, so what's the growth that you are looking at for next 2, 3 years?

I already said that in terms of our capacities that we have created or we're going to create, minus the -- and the production, which we achieved for FY '21, there has to be at least 60% growth from here on over the next 2 to 3 years.

Okay. Great. Great to hear. And one last, maybe it's a humble request from an investor point of view. I saw somebody else who are raising that in terms of ...

Dividend?

Payout ratio, if you can -- yes, exactly.

We'll do that once we decide that there is no further CapEx cycle. We'll do that, but as I said that the higher the payout, higher is the debt to be taken for funding those expansions. So it eventually sort of evens out in that respect from a shareholder perspective. So what I'm saying is your money with me, I'm trying to create more value for you than probably you can create with that by me giving that money back to you. So long as I'm able to do that, you are all happy with me. If I'm unable to do that, then we look at returning excess money through the -- through dividends, et cetera.

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

Sir, I had a follow-up to the previous -- a few of the previous participants' questions. You mentioned -- just to confirm, you mentioned that you'd like for the company will be looking at biodegradability instead of recyclability. Did I get that right?

No. So I think you complete your question, and then I'll answer because it will be a repetition for me.

So my question was regarding the materials that you use for your films. Is it that you use PTA and MEG to make your own resin and to make your own chips? Or do you buy out chips from the market and process that into cellulose?

So we buy out the chips from the market.

Great. All right. Okay. So -- and with respect to the biodegradability versus recyclability, if you can expand.

So you will buy -- you can -- we can do a backward integration in terms of buying PT and MEG from the refineries and set up your own resin plants. I think, the larger you are, your dependence on the outside world for the raw materials should actually be will -- should be a well-balanced approach. But as of now, there are no availability issues, and we're not applying ourselves to that. What we are saying is, after we buy the resin and then we process that to make films, in that process, certain enzymes get added while making that film, which makes them biodegradable.

Okay. So the resin remains the same. Then will you think that is different as enzyme?

No, no. Enzyme is just an add-on.

Addition. All right. But -- all right...

So the resins are melted. They are hard chips, so they are melted through the process, and then it is casted into a film. So when you melt them, along that, you will add some enzymes to ensure that the films are biodegradable. Then there'll be -- I think, subsequently, there will be development of coatings on the films, on the top layer, on the bottom layer, which will add to the biodegradability of those films.

Okay. Okay. All right. And the second question was about the CapEx on a stand-alone entity level. I see there has been some CapEx, a significant amount of CapEx for that matter for the stand-alone entity. So could you just tell us what was that for?

So that was on setting up some of the recycling facilities last year on doing some modernization at our films plant in India because they are now about 25 years old plants. And then in any of this size of facility, there's about normal CapEx of about -- then there were opportunities on the packaging because, all of a sudden, there was huge requirements for the sanitizers, packaging as well as for the liquid soaps packaging. So those pouches making machines had to be added on an urgent basis. So all that, which you either call it a sustaining CapEx or you call it incremental CapEx, which is to -- just to add to the balancing equipment, like, today, I may have a higher capacity for the printing. But in terms of making pouches, if I print, say, 100 tonnes, my pouching capacity may be limited to 20 tonnes only. But with the sanitizers and with the liquid soaps demand coming in, so we had to increase that capacity of the pouching films to an extent. So all these CapEx is to...

So the maintenance CapEx per year is going to be around what range, sir?

You can say about -- across the company, about INR 150 crores to INR 200 crores.

On a consolidated basis?

Yes, on a consolidated basis.

Great. All right. And sir, my last question is about the promoter thinking in terms of shareholder returns. I understand your reasoning about the dividends. But I wanted to sort of get a bird's eye view of what the committers are thinking in terms of in making their stake, either or -- because there has been -- of course, you would be aware of the [ NRI ] position increasing in the company's outstanding share capital. So is that a friendly takeover? Is the management aware of that? What is the nature -- is that an independent transaction by the management and the committers have no concern with? If you could just ...

See, it is some investors like you who have faith in us, in our business model. And I understand that, but the similar investors, you had -- if you see their track record, they were earlier in some of the competitor companies. Then they exited those companies because of -- because they would have found us more interesting or they would have challenges in some of those businesses. So I don't know the reason for that. But this is purely an investment perspective. And there are people -- today, still at this price, if you see the players in our business and in the developed markets, I think they are at a much higher valuation multiples than where the Indian films or packaging companies are trading at. I see one of our competitors who's looking to divest its business. And we see the share price going up substantially over the last 6 months or so, because the exit valuations on these businesses have to fall in line with what's the global things for this. And we've seen the transactions happening in the global markets in this segment, which is at anywhere between 12 to 14 EBITDA multiples. In the packaging business, we've seen Bemis is being acquired by Amcor at that kind of a numbers valuation. So I think it's eventually, somebody believing in a company that, yes, I'm buying it cheap. But what I'm buying is an industry leader, what I'm buying into, the largest global manufacturer of the BOPET films in the world outside China. And the track record of the management growth, how they've handled their CapEx projects, how they've ramped up their capacity utilization faster? How they are aware of the issues that are cropping up these industries, and how they plan to tackle it? So I think it's all that they would have considered and -- before investing, continue to invest in our company. So that's the only thing I can say, but there is no way that there is any other link to that investment.

All right. And to get an answer to my -- the Egypt CapEx initialization date, if -- where can e-mail, sir, to get an answer on that?

Yes, I'll get it for you.

I mean, should I e-mail someone, sir, for that?

Yes, yes. You can be in touch with Yusuf on that.

The next question is from the line of Mr. [indiscernible], individual investor.

Yes. Congrats on a set of good numbers.

Thank you.

Actually, like last year, June was a complete lockdown. And this year also, a partial lockdown was there in across country and across the globe. So what do you think about the overall current financial year and the current quarter?

I think I already answered that. I can't be so specific about the immediate quarter or this thing. I think I can do a general guidance as of now based on the capacities that we've created. But overall, I can say that the current -- and as I have said, that a month or a quarter and all that does not make a huge impact in the life of the organization. But an overall guidance from our side is FY '22 and beyond. While this may be the best ever achievement in terms of the production sales and the top line and the profitability performance, but we are looking to surpass this in FY '22 and even beyond that.

[Operator Instructions] The next question is from the line of Mr. Rahul Sony from SMIFS Limited.

Can I request that we want to sort of close this in the next 10 minutes or so because I have another meeting at 5? So I'll request all of you to sort of -- because I know that there are a lot of questions which are being repetitive in nature. So the answers are already there. But still, in case anybody of you wants a specific query, I think they can be in touch with Yusuf to sort of -- and we will try to address that.

We'll take the last question from the line of Rahul Sony.

And congratulation for the good set of numbers. Sir, as you said, the prices for BOPET and BOPP increased by 30% and 17% year-on-year during the quarter.

Raw material pricing.

Yes.

The raw materials for BOPET and BOPP films.

Okay. So are you able to pass on this price fully?

I already answered that by saying that despite this price rise in this quarter, my overall EBITDA margin is still better than what was there in the previous quarter, which means that, yes, we've been able to get a better value from our customers for this price increase as well.

Okay. And just one quick clarification from you. The year-over-year export revenue are included in the India business?

Yes, yes, yes.

Thank you very much. I will now hand the conference over to Mr. Yusuf Nasrulla for closing comments.

Thank you, everyone, for joining us today, and we look forward to staying in touch in future quarters. You may also contact me for further queries. Have a nice day.

Thank you. Thanks, everybody, on the call and showing such exuberance in asking questions, in being proactive and all that. That always sort of helps us in terms of being more on the toe and be prepared next time for better answers to some of the questions you may have. And we'll be -- we are absolutely transparent with you in terms of what we plan to do. Currently, what are our plans, how do we see our business in the immediate future and the industry challenges and the opportunities. So we look forward to continued interactions with all of you. And we're happy that -- if our shareholders are happy.

Thank you very much. On behalf of Uflex Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.