Uflex Limited (500148) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the UFlex Limited Q3 and 9 Months FY '25 Results Conference Call hosted by Dolat Capital. [Operator instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sachin Bobade from Dolat Capital. Thank you, and over to you.

Thank you, Yashashri, and good evening, everyone. On behalf of Dolat Capital, I welcome you all to the Q3 FY '25 Earnings Conference Call of UFlex Limited. Hope you all and your family members are staying safe and healthy. From the management side, we have with us Mr. Rajesh Bhatia, Group President and Chief Financial Officer; and Mr. Surajit Pal, Vice Chairman, Investor Relations. Now I hand the floor to Mr. Surajit Pal for his opening remarks, and then we'll have management remarks. Thank you. Over to you, sir.

Thank you, Sachin. Good afternoon, everyone. Thank you for joining us today for the Q3, 9 months FY '25 Earnings Conference Call of UFlex Limited. Let me draw your attention to the fact that our discussion on this call will include certain forward-looking statements, which are predictions, projections, or other estimates about future events. These estimates reflect management's current expectations about the future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. I would now request Mr. Rajesh Bhatia, our Group President and CFO, for his opening remarks, following which we will open the forum for an interactive questions-and-answer session. Over to you, sir.

Thank you. Hello. Thanks a lot for introducing me on this call, Surajit. Hi, everybody. I think I'll start with saying that this has been a very decent quarter as you would have all seen from the quarterly reports, financials as well as the investors deck. The key highlights being the revenue is up 12.8% on a year-on-year basis and to about INR 3,774 crores. And while we've also seen a volume growth of 6.3%. So, the differential between the revenue growth of 12.8% backed by the volume growth of 6.3%, very well explains the margin improvement in the business in the current quarter. So, we had a 13.8% EBITDA margin for the quarter versus 11.4% in Q2. So, they're clearly are evident that the margin expansion has happened. And even when we look at the 9-month performance also, the EBITDA margin is at 12.6%, which gives a Y-o-Y growth of 1.1%. The other notable things are that aseptic packaging capacity utilization in the leanest period of the year, which is Q3 from October, November, and December is also above 100%. It's actually at 104%, while in the same period of last year, the capacity utilization was 84%. So clearly, you see 20% higher in this Q3 versus FY '24 Q3. Similarly, in certain other jurisdictions, where were having a lower capacity utilization because of various issues and all that, Nigeria being one where the currency devaluation had played havoc in the past couple of years. So, we saw the plant utilization for that improving to 90% in this quarter, which is the highest ever we've achieved so far. In Q2, we had achieved 64%, but we expect that going forward, Nigeria plant, we'll be able to operate at 100% capacity utilization. Even the Mexico plant capacity utilization reached 98% in this quarter, which was 85% in Q2. The Poland plant continues to have a lower capacity utilization, less than 70%. So, that remains -- still there's a room for improvement in that. And this quarter, after many -- 4 quarters, at least, we had a positive PAT of INR 111 crores as we didn't witness any negative currency devaluation. Rather in this quarter, there has been a positive currency devaluation of Nigeria, so the devaluation impact in this quarter is positive by about INR 26-odd crores. So that gives us a PAT of about INR 111 crores. The other things that we announced along with the highlights for the quarter was that the government of India with effect from 1st April 2025 have mandated the norms for use of the recycled materials in the rigid plastics as well as in the flexibles. So, in the rigid plastics, the country is starting with the 30% recycled material to be used along with 70% virgin material. So, in the flexible side, the stipulation is 10% to begin with from 1st April '25. And given our previous experience into recycling, where we mastered the art of recycling with smaller facilities over many plants over the last few years, starting way back from mid-'90s. This is time now to look at expanding your recycling facilities because the customer will need a blended material, not only a virgin material, which we've been making so far, but a blended material with the recycled content changing as per the government directives. This apart, we're going to set up a PET bottle recycling facility at a new facility in Noida. There will be polyethylene recycling also and multilayered plastic recycling also for which we are going to spend about INR 317 crores for setting up this facility. I know that there will be a delay in the way that the market needs it. But we expect that even the implementation of this new facility will also have its own hiccups and all that, and the present requirements, maybe we can -- customer requirements, we can meet with our existing capacities to the extent we can. But I think if we invest in -- we need to invest in this because ultimately, our customer will need a blended material, and we need to be prepared ourselves today for achieving that. Other than that, we've also announced the WPP bags investment of about $50 million in Mexico, which will take care of the North America and South America markets. So, this is not flexible packaging. This is the WPP bags, which are used in the PET food industry, very specific product. We've set up a separate company in Mexico, which will implement this project, and we're spending about $50 million in terms of making -- investing in this plant. Other than that, our existing expansion of our aseptic facility in India from 7 billion packs to 12 billion packs has already achieved the mechanical completion. We have proceeded towards commercializing commercial operations. And similarly, for our 216,000 MTPA PET chips facility at Egypt also, that has also achieved mechanical completion, and we are taking steps to make that operational as well. We had also announced in the last quarter, our aseptic packaging expansion even at Egypt also. So that's also underway. And during the quarter, we've spent about $19 million on that facility. And we look to complete that -- try to complete that within FY '26. But let's see as to -- we'll be closer to that event, we'll give you more updates about that. The debt has increased with all the expansions and all that. So, while in a 9 months period, we've spent close to about INR 1,100 crores on the CapEx. The net debt increase is about INR 550-odd crores, which means that we've spent -- we've liquidated. Even with this expansion, we've lowered our debt and the existing amortization is happening in a natural process. So, as we get into FY '26, I think we will get the advantage -- start getting the advantage of our chips plant, of our aseptic facility in Sanand. And just by these 2, we expect that these should add about -- on a full utilization basis, this should add to anywhere between INR 2,200 crores to INR 2,400 crores annual -- plus the CPP in Mexico, which is already more or less completed. So, these 3 will give us anywhere between INR 2,200 crores to INR 2,500 crores of the top line at a full capacity utilization basis. So, I think we can -- maybe FY '26, we'll achieve partial, but FY '27, we will achieve its full potential. And then we will have these 3 new facilities of recycling WPP bags and 12 billion Asepto capacity coming into play from FY '27 and onwards, which will give us additional revenues as well as the profitability. The net debt to EBITDA ratio is reasonable at about 3.24x. And we expect that the earning momentum in the packaging and the packaging films, we've seen the EBITDA expansion. So that trend will continue in the current quarter as well in FY '26. And this will come from the higher margins as well as from the higher utilization of our various facilities. And for the year as a whole, we expect that the Mexico as well as the plant in Nigeria, we'll achieve 100% capacity utilization for the whole of the FY '26, which will give us the margin expansion in these 2. Currency stabilization in Nigeria also gives a lot of boost in terms of planning in a much better way, and that is what we saw in this quarter when we had an 8% currency appreciation vis-a-vis as on 30th of September. And that led to higher demand, more balanced planning for your cash flows, for your receivables. So, I think that is sort of very positive for the business as such. In India also, the demand continues to be strong and the expansion in the export markets continue to be the main focus of the Indian players. And we've seen in the last 2 years that there is a 52% increase in the exports from India for the BOPET and much lower export expansion in the BOPP side. But the real test of that will come later in this year when we will -- the new capacities from the new facilities getting commissioned on the BOPP side comes into play maybe in Q1 -- towards the end of Q1 in the fiscal FY '26. So that in a nutshell is our take on the Q3 performance and the operations and the proposed investments in the recycling and WPP bags. That is happening in Mexico, but the recycling investment is happening at our Noida facility. The new facility, it's not in the existing premises. It's a new land and building what we are building for this project. Thank you, gentlemen. And I would open the house to the questions, and we'll be happy to address all your queries to the best of my knowledge and abilities. And if there's anything that we can't answer, I think our teams can always be in touch and get back. Thank you.

[Operator Instructions] We'll take our first question from the line of Chirag Singhal from First Water Fund.

Just a couple of questions. Firstly, on the performance of overseas plants. So, in Egypt and Poland, we saw a dip in the utilization. So, is this due to some lack of demand or let's say some temporary issues such as technical issues at the plant? And if you can provide capacity utilization guidance for these 2 plants for FY '26?

No. Which one are you referring to?

Egypt and Poland. If you look at sequentially, there was a dip in the capacity utilization. So, what are the reasons for that? And if you can provide guidance for FY '26?

So, as I said that the Europe still continues to be affected. Demand continues to be affected because of the specific things to the Europe, which we've already told many times on the call. And the other; reason is that India has increased its exports to European countries, and that's the reason why you see that though in the Q3 of FY '24, Poland plant capacity utilization was 61.5%, in Q2 of last year -- this year, we achieved about 68%, but we are back to 61% in the current quarter. And we'll try to achieve about 80% levels in the FY '26 for this. Egypt will come up fast. I think Egypt had some technical issues at the plant and there may be their routine maintenance and all that. So that's a one-off. So, Egypt will remain at about 90-plus percent utilization level.

Okay. And this is for FY '26?

Yes, FY '26.

Understood. My next question is on Asepto. So, we are very close to the commissioning of the debottlenecking. So how much time will it take to ramp up this expansion? And if you can also provide guidance in terms of sales volume for Asepto for FY '26.

So, FY '26, if I think out of 12 billion packs, if we can achieve anywhere around between 10.5 billion to 11 billion packs a year, I think we target that as of now for FY '26.

Got it. Regarding this WPP bags, so can you like provide some data points? What is the optimum capacity utilization, how much time it will take and the kind of top line and EBITDA margin that we can expect from this expansion?

So, we spent $50 million in this and the top line that we will -- we are looking to generate from this will almost be the same number. The margins would be -- margins in this are higher because U.S. imports about 80% of its PET food bags, packaging from all over the world. But there is no nearshoring. So, there is nothing which is being supplied by Mexico, which is next door to this. So that is where we spotted this opportunity. So the same product we make in India also and -- but that plant had a limited capacity and the larger players of the world, which are brands, which is PURINA of Nestle and the 2 brands of Mars, which are Pedigree and Royal Canin. I think we are -- we'll be looking at selling them largely. So overall, this business should generate anywhere between 22% to 25% EBITDA margin. The ramp-up will take a bit of a time here because like in Asepto, in anything wherever you pack food, it takes time for you to get the customer validation of the product and all. So, the ramp-up here might take about a couple of years' time.

Okay. So, this is more like, maybe initially, it will take time to ramp-up until we have a base. And then I think just like in Asepto, we saw the expansions coming in and ramping up very fast. Are we also looking at this line of business?

Asepto, this is a very small capacity plant that we are going ahead with. And as you rightly said, when the product is accepted and America has a huge deficit. They import as much as 80% of their PET food requirement -- packaging requirements from outside of USA. So, the opportunity here could be big.

Right. So, actually, my next question was on the exports from Mexico to U.S. So, you mentioned that we have strategically put this plant in Mexico because there is a good demand from the U.S. Now with this new scenario of 25% tariffs, if they get imposed and whenever they get imposed, so what are the alternatives available for us? I mean, our existing Mexico plant, we have one line that is dedicated to the U.S. So, if the tariffs are imposed, then what are the alternatives available?

So, I think there are multiple options here. The first scenario is that this does not get implemented. And as we saw, this was levied, but then withdrawn the next day and postponed for a month's period. And in the meanwhile, there have been positive statements from Mexican side also in terms of the increasing the border security and all that and infiltration. So hopefully, if that gets taken care of, there will be no duty. Other aspects are that if there are duty on Mexican products, if not 25, maybe 10, maybe 15, maybe 5, we don't know as yet. So, in all likelihood, all the other countries exporting to U.S. will also have some sort of duties or the other, which will put us on a level playing field vis-a-vis others who are exporting to America. But let's see. There are a couple of other options as well, maybe job work, things also. But I think those are very, very premature as of now. But once there is something final, which is to be done by -- which is done by U.S., then only we'll take a final call as to what needs to be done on this.

We'll take our next question from the line of Prashant Rishi from Cascade Capital.

My question was slightly related to the industry situation right now. If you could give us some color on the current overcapacity in the BOPP and BOPET segments, and some clue on the upcoming capacities in both the segments?

So BOPET is, yes, overcapacity is there. And that is where we are seeing that after the Q1 around 15th of June around, there was -- everybody started to look at exports in a big way, and that is where we are seeing that the exports from India have increased. There is a natural demand increase also in India by about 10% or so. So, over the last 1.5 years, we've seen also that coming into play. And the higher exports from India means that there is a lesser domestic availability. So, to that extent, as of now, there is a near balance in the capacity. With the result that, the capacity utilization levels across -- if we see Q3 of FY '24 in India, we had a capacity utilization level of 73%, which is now 77%. It will gradually increase in FY '26 as well. So more or less, the pain on the PET side seems to be over. On the BOPP side, it's quite balanced as of now. There is not much overcapacity, but there are 4 new capacities which are coming on stream in FY '26, June onwards. I think there will be some impact of that on the BOPP prices. And it will take maybe a couple of quarters the way PET industry behaved during this, while there was a price war that got started, but everybody realized that it does not help anybody. And so there has been an overall discipline and there has been export orientation by all the players, which has helped stabilize the prices on the PET side. So maybe if similar things happen on the BOPP side also, I think we'll see the much lesser pain than what was seen at the BOPET times.

What is the extent of capacity that is coming? You said 4 different capacities are coming in the BOPP line in FY '26, if you have any idea?

Each plant, if you take about 4,000 tonnes also, per month, so about 15% and 80% capacity utilization levels. So, every month, there will be an excess product of about 12,000 to 13,000 tonnes given presently it is balanced.

12,000 to 13,000 tonnes per month of capacity will be there by FY '26 in BOPP?

Yes, yes.

And sir, in PET segment, is there any new capacity in the offering in next 1 or 2 years?

I think next 1 year or so, there will be one plant more, which will be coming. That will be maybe in FY '27 or maybe later part of FY '26.

And the extent of capacity there, which is coming?

4,000 tonnes a month.

We'll take our next question from the line of [ Darshil Jhaveri ] from [ Crown Capital ].

Firstly, congratulations on a great set of results, sir. So, sir, just wanted to know on a broad basis like how do we see the industry currently? And like the performance that we did in Q3 will it be similar in Q4? And how do we see FY '26 panning out for us?

So, I think Q4 should be better for us given that this is the peak period for aseptic, and the new capacity will give us some extra volumes for sure. The Q4 will also have some impact of Egypt PET facility coming into play and giving us additional volumes. So, these 2 are the incremental ones. And if we are able to maintain our base in the way we've done in the Q3 with the base being there, these 2 add-ons should give us a better numbers in the Q4. And obviously, FY '26, when we have a full year working of these 3 investments available, I think, as I said already, we are looking to add from there about INR 2,000 to INR 2,400 crores kind of the revenue. And taking an EBITDA -- average EBITDA margin of about 15% odd or so. So that should be able to give you additional EBITDA for FY '26 over and above your baseline for FY '25. And there might be some impact of the BOPP extra capacity coming into play. I'll not be able to foresee that. But given that as UFlex, we are a very small player in BOPP in India, and we are a much larger player on the BOPET side in India, I think that impact can be easily absorbed quite comfortably.

Correct, sir. But I think the 3 new capacities, you are saying INR 2,000 crores, but that's at optimum level, right? What kind of utilization do we expect for like the next year, sir?

So I think the first year because PET chips will not add to the revenues much. Why I'm saying so is because ultimately, if we are using that in our own plants and all that, so that sales will get negated. That will ultimately add to the margin profile. But aseptic, if first year we are able to utilize from the new plant 80% capacity, I think we are good to go in the next year.

Okay. Fair enough, sir. So, any broad like revenue guidance on a consolidated or EBITDA consolidated basis that we could look for, sir?

I think we should look at about 15% -- 12% to 15% over FY '25.

Okay. And with margins getting better?

Margins better [Foreign Language]. So, FY '25 looks like we'll be able to achieve about INR 2,000 crores of EBITDA, as I had said at the beginning of the year. So, we have already achieved INR 1,425 crores in the first 3 quarters. And if we replicate the same number as what we achieved in Q3 and Q4, then we are about INR 1,950-odd crores. And the additional volumes from the PET chips and Asepto expansion should take us to about INR 2,000-odd crores of numbers for sure.

We'll take our next question from the line of Kaushik Poddar from KB Capital Markets.

This debt -- you have given the debt to EBITDA at around 3.25x. How do you see that panning out for '26 and '27?

'26, we have to add on the debt because the 2 projects that we've announced, we are looking at about INR 750 crores of expansion, the money to be spent on these 2 expansions. And then there is $126 million of Asepto packaging expansion announced in Egypt, of which about 19 million, 20 million is already spent. So, I see about -- just give me a second. I think we will spend about INR 1,700 crores more in the new expansion, what is happening in the next couple of years. And so that will increase the debt. But as I said that if you see FY '25, 9 months, we've spent INR 1,100 crores and the net debt increase is about INR 550-odd crores. So, the natural amortization, which is already into play, which is about INR 1,000 crores a year, will take care of the debt. Not much of the debt will get added to the overall numbers as of now. But still, I think we will have to see as to how much -- given that there is a INR 1,700 crores of the new expansions, which are announced, which have to sort of get concluded over the next couple of years. So, there will be some debt which will get added and about INR 2,000 crores is the normal amortization during this period as well.

Okay. But you don't have a ready-made number at hand?

I don't have that number as of now.

Okay. And see, in Egypt for the aseptic packaging, has the first phase come into operation? When will it come in operation?

No, no. Egypt, we just announced in the last quarter. So, we are expecting completion in FY '26 that we had given to the team, which means that even if it happens on time. So only FY '27 onwards, the operations will come into play.

And it is -- so this is a new 7 billion units, right?

This is new 12 billion units.

It's straight away 12 billion?

Yes, yes.

Okay. So initially, it was 7 billion, you have hiked it to 12 billion, and it will be 12 billion whenever it gets the commission?

For Egypt, we planned directly for 12 billion. 7 billion is the India existing capacity, which has been upgraded to 12 billion packs now.

Okay. But this 3.25x, whatever you have shown right now, can this be a ballpark figure at least for the next 2, 3 years or maybe...

[Foreign Language] But then as the operations will -- because when you complete the project, the debt gets added, but the revenue and profitability does not. So, it might go up a little bit when the project is under implementation.

And as to the recycling of used polymers, so for example, likes of the Hindustan Unilever or Nestle, they will obviously be using you for that percentage, right? I mean, so you'll be supplying them the combined recycled as well as virgin plastic. Is that the way it works?

To their converters.

Yes. So, they will push their thing to the converters, right? So, you're giving a certificate that this packaging is, say, 30% recycled and 70% virgin. Will it work that way as a converter?

Yes.

You said yes, is it?

Yes.

Okay. So, have you been talking to the likes of Nestle and Hindustan Unilever on this issue?

We're talking to all our clients that this is -- they need this support very, very -- on an urgent basis because the law comes into force from 1st of April and industry as a whole is not ready with this capacity.

Industry as a whole. So, because of this industry not being ready and you people are ahead of others probably in this industry, some amount of...

It's a yearly commitment [Foreign Language] first year, everybody feels that the government will not be as rigid as it will be. But I think we'll have to see that, how does this pan out.

But do you see any scope for increase in margin because of this new regime?

Yes, 100%. There will be definitely a scope to increase your margin because not many people will be able to sort of do that.

And do you expect the margin to be around 15% next year?

Margin, I think let's keep 14% as of now.

That's the bottom, is it? I mean, 14% to 16%, can we take it? Or it's around 14%?

Around 14% is more comfortable. Let's see one more quarter. This quarter has been 13.8%. But let's see the next one quarter and then probably for FY '26, then we can make a better guidance.

So plus/minus 14% is what we can take it, is it?

You're right. If you see for the year FY '25, 9 months is 12.6%. So, while for this quarter, it is 12.8% -- sorry, it is 13.8%, but for 9 months, it is 12.6%. So, a guidance of 14% for the whole year FY '26, I think, will be decent numbers. Not very aggressive and not very unduly lower also.

And which hopefully will get ramped up with the commissioning of the other plants in '27. Full year of functioning of some of the plants, right?

Recycling will definitely give you more margins to begin with as the industry will settle and all that. Obviously, the margin profile will get [Foreign Language].

And this PET packaging plant will be coming up in Mexico and when? The PET food packaging rather, sorry? The PET food packaging, the...

Food packaging, also, we are targeting completion towards the end of '26.

We'll take our next question from the line of Mehul Savla from RW Equity.

Sir, just on the packaging business, while we are seeing growth, it's mainly coming from the liquid side. So flexible packaging outlook, if you can give will be great?

Flexible packaging [Foreign Language] we are doing -- we've not done any capacity expansion there. The only thing we are trying to do is we are trying to improve our profile in that moving on to the more retort pouches and all that and leaving the roll form business, the lower margins roll form business. So there, that trend has been -- we're doing that trend. I saw Huhtamaki posted only about 5%, 5-odd percent operating margins, EBITDA margin in that business. So, I think that business, clearly, nobody is expanding the capacity. And even we are also not expanding any capacity over there. So that, that in a way, the focus remains to do more value-added products rather than look to expand capacity because the margins still are very, very low in that business. So, it's a business which is there for us, but clearly not focus of any growth or any new initiatives other than that you move up the value chain in terms of what you are doing.

And sir, I think this whole shift to this mono-polymer, that also, I think it seems to be more regulation driven rather than voluntary adoption. So, does that impact us in any way?

Monomer -- so, with the new guidelines, which do not differentiate between a monomer or a multiple multilayered from a recycling perspective, I think India has settled the things. Europe also, the recycling is coming into play in a big way in the next few years. They are also starting now. But I think India has said that irrespective of whatever you use, whether you use monomer or X or Y, you have to have so much of recycled content in your material. Now BOPP clearly cannot be recycled mechanically. While PET and PE, polyethylene can be mechanically recycled. So, if the guideline is 10% [Foreign Language] to begin with and BOPP is not recyclable, so PET [Foreign Language]. So I think those adjustments have to be made because the concept is on a mass balance basis and not, if you have a structure where you use BOPP and PE, and the regulation is overall 10% should be recycle content. [Foreign Language].

But from a technology point of view, that is not like a big challenge?

No, no, that's not a challenge.

We'll take our next question from the line of [ Aman Kumar Sonthalia from AK Securities ].

Sir, my question is related to Asepto. Sir, there is a two-part of this question. Number one is that, sir, recently, Uttarakhand and UP government has announced that they have make it mandatory to use aseptic packaging in local liquor. So how much market will it create for UP and Uttarakhand? And if it rollovers to other states also, then how big capacity requirement will be there? This is number one. And number two, sir, our total capacity of Asepto, 60% we sell in the domestic market and 40% in the overseas market. Sir, when we start this Egypt facility, so that 40%, which we used to export in the international market, Egypt will take care of that market. But that 40% will be increased in the domestic market. So, 40% plus this 5 billion extra capacity. So, whether we will be able to sell the entire capacity in the Indian market?

So [Foreign Language] it's a very large opportunity. Unfortunately [Foreign Language]. But government themselves are realizing to prevent any counterfeiting and any death due to spurious liquor and all that. This is the packaging they need to go to. [Foreign Language].

[Foreign Language] So right now, our plant is running at 65% and we are again in [Foreign Language]. Whether we will achieve around 100% utilization?

[Foreign Language] you can import that also. So raw material side [Foreign Language] the existing capacity utilization for this recycling facility is low because nobody wants to pay extra money for the recycled material given that there is no legal requirement to do so. So, all the big brands will do this under the compulsion of the law. Voluntarily [Foreign Language] the self-discipline, the self-things that we say probably are only seen in the media reports and all that. But when it comes to actually putting the money on the table and spending a bit extra in terms of the recycled content, the companies don't do that. But with the regulation coming in, so [Foreign Language] we have not done any large investments in this line because there was no regulation. But we were just keeping ourselves. We knew that this is going to happen one day or the other. So, we were just keeping ourselves up to date with the smaller pilot plants or smaller investments to test the waters, to test the efficiencies, to test the technology so that as and when it comes, we have the head start that we have got, gives us an advantage over the rest of the competition. That's what the whole endeavor was.

[Foreign Language]

[Foreign Language] government has not given any relaxation so far. So, assumingly [Foreign Language], but the testing will be done for the year as a whole only. So, for the initial months, probably because the material is not going to be available so widely. So, it will take time for things to mature, like battery charging stations versus the EV cars.

[Foreign Language]

I think I'll have to address this offline.

Okay. And sir, one last question, sir, regarding this debt. [Foreign Language] I think this is little bit [Foreign Language] whether company is planning to tame this leverage, high leverage [Foreign Language].

I think as of now, I have no sort of guidance on this as to -- so, whatever we are planning as of now, we are planning through a mix of debt and internal accruals. And as I said that [Foreign Language] gets repaid. So it's not added on to your ultimate debt level. And overall debt-to-EBITDA, [Foreign Language] we've done investment but debt-to-EBITDA ratio is around the same only.

[Foreign Language] instead of putting new BOPET and BOPP plant, if we considered more on value-added films which will give us more margin.

We had planned value-added films only in Hungary and Egypt. But when COVID came there was a huge shortage of the raw material. So that time, everything was selling because the material was in short supply. So, we didn't get the opportunity to sort of start working on that value-added films. And sir, value-added films, so we made good money during that period. Our plants and our investments got implemented at the right time by the grace of God. Those were the good times to implement and start producing. But eventually, I think you are right because we'll have to do that. But for value-added films [Foreign Language]. But I think we're now realizing '23, '24 [Foreign Language] so that is where we started putting emphasis on the value-added products.

We'll take our next question from the line of [ Saket Kapoor from Kapoor Company ].

[Foreign Language]

[Foreign Language]

[Foreign Language]

So [Foreign Language]

[Foreign Language] net debt level.

[Foreign Language].

Engineering activities [Foreign Language]

So, net debt [Foreign Language].

[Foreign Language] within long term and working capital.

So long term [Foreign Language].

[Foreign Language]

[Foreign Language]

[Foreign Language] engineering activities [Foreign Language].

So engineering activities [Foreign Language] where we make printing machines and packaging machines including aseptic packaging machines also, okay. So those facilities -- that facility is used for making printing machines for the converting industry, and also for the packaging machines at the customer end. [Foreign Language]. Other subset of that business is cylinders which are required in the printing. So those cylinders because they form part of the engineering activity, they also get clubbed under the engineering activities.

[Foreign Language] and we do the finishing work as a job work, [Foreign Language] total engineering, everything in-house [Foreign Language]?

Everything is in-house totally. We buy the raw materials. [Foreign Language], we buy all that. We have a full workshop of our own where we make these machines. We don't do any trading as such. We make at our plant and give it to the customers.

Sir, I joined a bit late [Foreign Language]?

Same level [Foreign Language].

[Foreign Language]

[Foreign Language] Endeavor is there clearly. But timeliness of the final decision-making and all that is clearly I'm unable to give you any guidance on that.

[Foreign Language]

[Foreign Language]

[Foreign Language] EBITDA numbers definitely important [Foreign Language]?

As a business, we see at EBITDA margin basis. [Foreign Language] Our capital may today be more financed from the debt level and all that. And that is why at the PAT level, we have a higher interest. And the depreciation, we use that money to pay our loans. But eventually, when these get knocked off from the balance sheet, then only [Foreign Language]. Because that charge is what is used to pay your debt repayment back. [Foreign Language].

[Foreign Language]

[Foreign Language] whatever is the new trending in the business and all that. [Foreign Language], unless the management says we will fund our growth subsequent from the IPO market or from raising the equity and all that and very nominal amount from the debt financing levels and all that, then it's a different story, sir. But at present today, with the kind of projects we have and the debt financing we take for that, I think I feel that these 2 liabilities, expenses on the balance sheet, interest as well as principal will remain.

And last two points to conclude. [Foreign Language] other operating income and other income [Foreign Language]?

I think we can get back to you offline on this.

[Foreign Language]. I think so this has been the best quarter in terms of the profitability also and also the operational performance. So [Foreign Language]?

[Foreign Language]. Other than that all other aspects of the business seems manageable.

[Foreign Language]

[Foreign Language]

[Foreign Language] because of the commissioning of the new capacity that are going?

Yes.

Power and fuel line item [Foreign Language]?

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Lastly sir, 10 number line item [Foreign Language] items that will be reclassified to profit and loss account. [Foreign Language]?

[Foreign Language]

[Foreign Language]

Yes.

So [Foreign Language]?

[Foreign Language]

It's a translation loss only?

Yes.

We'll take our next question from the line of [ Aman Kumar Sonthalia from AK Securities ].

Sir, how is the energy prices in Europe because in the past it was very high so whether it has come down?

Yes, yes. Energy prices are now normal, double of what they were pre-COVID, but it's manageable now.

And sir, there will be overcapacity of BOPP. So, whether it is confined to India or it is applicable to Hungary and Egypt also.

We'll have some one plant coming in Turkey also. But it is more of a India problem.

It's more of a India problem. And sir there is a comment from Trump that [Foreign Language]. Do you think that this plastic [Foreign Language].

I think that's a very valid point, sir, what you have raised that he has endorsed plastic in a big way through his statement of this [Foreign Language] and all that but let's see its long-term implication. I think it's good for the industry aspect because he realized there is no life without plastic. And he said that I don't want to even manage this plastic like everybody else is saying. It's a good beginning, but sir, I don't have a clear visibility on this as to whether it will remain or it goes when he has to leave the office after 4 years because he's not coming back again after that ever.

But in the short-term, there is no problem for the next 4 years?

But in the short-term, there is no problem.

And sir, flexible packaging [Foreign Language]?

[Foreign Language]. Because we are more of integrated play. [Foreign Language]. We definitely have a better margin profile than the competition at present. But again, the fact that we've not grown in that business in capacity, that itself clearly shows that the margin profile in the industry is not up to the desired level, and that is why we are not investing in that business. In fact, in the last 7 years I've been with this company, I think we would have invested only in some balancing equipment here and there, but never added any capacity in that business.

[Foreign Language]

I think there are multiple reasons. One, you rightly said that this is a business in India where MNCs also look to buy at the cheapest cost rather than look to buy from the quality suppliers. And they use those players to bring the quality suppliers value also down. So if you compare me with a person who is father and son who are operating the plant at a full shop level basis and all that. Do not comply to labor guidelines, do not comply to any directives or when I do all that, and I'm subjected to audit also from these setups vis-à-vis. So they show me that this person is able to give them at a lower cost than me and I should match its price. [Foreign Language]. I don't know. This sector is only there in India, not in other mature jurisdictions. [Foreign Language] As I said that because the margin profiling because of these small outlets is not so good. So that is why we are not expanding capacity.

[Foreign Language]

[Foreign Language]

And the margins are quite good?

Yes.

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

Thank you, ladies and gentlemen, for your engaging questions and active participation. We will soon have the transcript of this call on our website, www.uflexltd.com. We look forward to connecting with you again in the next quarter. Thank you, and have a great day.

Thank you. We thank the management for this call. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.