Apcotex Industries Limited (APCOTEXIND) Q4 FY23 Earnings Concall Transcript

Apcotex Industries Limited (NSE:APCOTEXIND) Q4 FY23 Earnings Concall dated Apr. 28, 2023.

Corporate Participants:

Sachin Karwa — Chief Financial Officer

Abhiraj Choksey — Managing Director

Analysts:

Anuj Sonpal — Valorem Advisors — Analyst

Ankit Kanodia — Smart Sync Services — Analyst

Aditya Khandelwal — Securities Investment Management — Analyst

Karan Bhatelia — Asian Market Securities — Analyst

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Unidentified Participant — — Analyst

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Savi Jain — 2Point2 Capital Advisors LLP — Analyst

Aditya Khetan — SMIFS Limited — Analyst

Ishmohit Arora — SOIC Ventures LLP — Analyst

Bhavya Sonawala — Samaasa Capital Private Limited — Analyst

Omprakash Dhoot — Individual Investor — Analyst

Chandpal Singh — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Apcotex Industries Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you. And over to you, sir.

Anuj Sonpal — Valorem Advisors — Analyst

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Apcotex Industries Limited. On behalf of the company, I’d like to thank you all for participating in the company’s earnings call for the fourth quarter and financial year ended 2023.

Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review.

Let me now introduce you to the management participating with us and hand it over to them for opening remarks. We have with us Mr. Abhiraj Choksey, Managing Director; and Mr. Sachin Karwa, Chief Financial Officer. Without any delay — any further delay, I request Mr. Karwa to start with his opening remarks. Thank you. And over to you, sir.

Sachin Karwa — Chief Financial Officer

Thank you, Anuj. Good afternoon, and welcome everyone to today’s earnings conference call for the fourth quarter and financial year ended 2023. I hope you had an opportunity to review the financial statements and earnings presentation, which have been circulated and uploaded on the website and the stock exchanges.

Let me first brief you on the financial performance for the fourth quarter of financial year 2023. The revenue from operations were reported at INR256 crores, which declined to about 8% on year-on-year basis and increased by about 9% on quarter-on-quarter basis. Operating EBITDA stood at INR34 crores, which declined by about 25% on year-on-year basis and increased by about 11% on quarter-on-quarter basis with EBITDA margins reported at 13.32%. The net profit stood at INR23 crores, which declined by about 25% on year-on-year basis and increased by about 14% on quarter-on-quarter basis and PAT margins stood at 9.06%.

For the financial year, we reported highest annual revenue at around INR1,080 crores, which grew by around 13% year-on-year. Operating EBITDA stood at INR159 crores, growing by around 13% year-on-year with EBITDA margins standing at 14.68%. The net profit was around INR108 crores, which crossed INR100 crores mark for the first time with a growth of approximately 9% on year-on-year basis. PAT margins stood at 10%.

Q4 FY ’23 margins were impacted due to overall pressure on-demand in light Nitrile latex, while NBR margins returned to normalcy due to fall in import freight. On the capex front, both the projects in Taloja and Valia were commissioned during the quarter with capacity of 35,000 metric tons per annum for multi-purpose latex plant at Taloja and 50,000 metric tons per annum for Nitrile latex plant at Valia. Additionally, I am pleased to announce that we have declared a final dividend of INR3.50 per equity share.

With this, I would like to open the call for question and answer session.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Ankit Kanodia from Smart Sync Services. Please go ahead.

Ankit Kanodia — Smart Sync Services — Analyst

Thank you for taking my question, and congratulations on good set of numbers. Sir, so my first question is in terms of the revenues. How did we…

Operator

Mr. Kanodia, slightly the audience is muffled from your line. Please use the handset mode.

Ankit Kanodia — Smart Sync Services — Analyst

Yeah. Is it better now?

Operator

Yes, sir. Go ahead.

Ankit Kanodia — Smart Sync Services — Analyst

Okay, great. So I just wanted to understand in terms of revenue, how much of this number is volume-led and how much of it is value-led, if you can give some color?

Abhiraj Choksey — Managing Director

Yeah, sure. For the quarter, I think the volumes are flat. So most of it is due to sort of net realization going up or product mix changes. For the year, I think we are up. Sachin, do you have the exact number for volume increase for the year? But I think it’s about…

Sachin Karwa — Chief Financial Officer

Yes. 3%.

Abhiraj Choksey — Managing Director

8%, yeah.

Ankit Kanodia — Smart Sync Services — Analyst

Okay, great. So in the last quarter, we mentioned that basically the EBITDA decline was due to raw material and chemical inventory which were being carried on the books. Are those the same reason this quarter as well?

Abhiraj Choksey — Managing Director

Yeah. I mean, look, that was — no, I mean, for Q3, definitely, that was a big impact. In Q4, there was a slight impact on that. In fact, for one or two, raw material will still carry some of the high cost raw materials that will be exhausted by preliminary, but largely that’s been exhausted.

I think as Sachin mentioned in his opening remarks, we have had two reasons. One is the NBR margins compared to Q3 and Q4 of last year and Q1 of this financial year were fairly strong because of shipping rates being very high. So we obviously being the only manufacturer in India for NBR. That was an advantage to us. And so that is normalized sort of in Q3 and Q4.

And the second is that Nitrile latex margins continue to be extremely weak, mainly the glove market is, as you know, there were lot of extra gloves produced during COVID times. And then post-COVID, over the last year, glove demand has been extremely muted, down by 20%, 30% compared to the previous two, three years. And so margins for Nitrile latex for gloves are even lower than pre-COVID levels. So that’s been a challenge for us frankly. And we have — of course, we’re making small quantity so far or we were making. And now with the new plant coming up, the volumes will go up. So our cost structure over the next three, four months should also go down. That should help the margins. But that’s been — that is a challenge this year.

Ankit Kanodia — Smart Sync Services — Analyst

So you don’t see the demand picking up any time soon or do you see cyclical recovery there in the glove demand I’m talking?

Abhiraj Choksey — Managing Director

Yeah. I mean, look, demand should pick up because it should go back to pre-COVID level. It’s just that there’s a lot of inventory in the pipeline for gloves which is causing pressure for the raw materials as well and additional capacity has also been created over the last couple of years. So I think in terms of volumes, it’s not an issue. We still think we will achieve our targets in terms of volumes for the year. It’s just that margins are obviously lower. And being a new entrant, it’s difficult to get any premium margins at this stage. But over time, we will see how it goes. I think in the long-term, we’re still bullish about the business. We’re one of a handful of manufacturers that can manufacture this product. We’ll be manufacturing quantities over the last three, four years. And now with the 50,000 ton latex plant, obviously, our volumes are going to go up.

Ankit Kanodia — Smart Sync Services — Analyst

Sure. And one last question before I go back in the queue. How has been the performance of Apco Build for this quarter? And how do you see that in FY ’24?

Abhiraj Choksey — Managing Director

Yeah, excellent. We’ve had some fantastic growth because we’ve entered new markets in the year. I mean, I don’t know about specifically you want to talk about the quarter, but for the year, it’s been great. It’s obviously a much smaller part, as I keep saying, of our total business. But we are growing it slowly, but surely. We’ve entered new markets, new states. And yeah, I think we’re quite happy with the growth. I think it should be around 25% to 30% this year, last year.

Ankit Kanodia — Smart Sync Services — Analyst

25% to 30%, that is how much? Growth?

Abhiraj Choksey — Managing Director

Yeah.

Ankit Kanodia — Smart Sync Services — Analyst

And in terms of the total contribution to sales? Would it be still in the single-digits?

Sachin Karwa — Chief Financial Officer

No, it’s smaller. It’s not much.

Abhiraj Choksey — Managing Director

We don’t — we are not revealing those numbers yet, but it’s not much.

Ankit Kanodia — Smart Sync Services — Analyst

Okay, okay. Thank you so much. I’ll get back in queue.

Operator

Thank you. The next question is from the line of Aditya from Securities Investment Management. Please go ahead.

Aditya Khandelwal — Securities Investment Management — Analyst

Yeah, sir. Hi, sir. Thanks for the opportunity. Sir, we have commissioned two plants in this quarter, but there hasn’t been much increase in our opex cost. So will we see an increase in our opex cost from next quarter onwards?

Abhiraj Choksey — Managing Director

Yeah. I mean, there will be a slight increase, but the way the plants have been designed is it’s not a significant opex cost increase. The only opex that will go up is — in terms of fixed cost that will go up is some manpower in both the plants. And I don’t think it’s going to be significant at all.

Aditya Khandelwal — Securities Investment Management — Analyst

Okay, okay.

Abhiraj Choksey — Managing Director

When you say opex, what exactly do you mean? Obviously, raw material, power and utilities that all will go up of course as the volumes build. But both the plants were commissioned in March. So obviously, a large chunk of the growth will come in this year going forward.

Aditya Khandelwal — Securities Investment Management — Analyst

No. So my question was related to the fixed cost because…

Abhiraj Choksey — Managing Director

Yeah, fixed cost. Yeah. So it’s not much of a fixed cost increase in either case, it’s just manpower and maybe some maintenance and all. But we don’t expect much in the first couple of years.

Aditya Khandelwal — Securities Investment Management — Analyst

Okay. And if you can throw some light on the competitive intensity we have seen in the synthetic latex segment. So with reducing freight cost and slowdown in global economy, are we seeing global peers exporting more products in India, because I think similar situation like this has happened with us before? When there is a slowdown in global demand, competitors try to run their products in India. So are we seeing this kind of situation happening over here?

Abhiraj Choksey — Managing Director

Not in latex at all, because latex is more of a regional business. So on the contrary, in fact, I think we’re doing better and exporting in the latex market. But in NBR, for sure, that has been the case with freight rates — shipping freight rates being quite low now, we are seeing higher competitive intensity for NBR.

Aditya Khandelwal — Securities Investment Management — Analyst

Okay. So no — not much competitive intensity on synthetic latex?

Abhiraj Choksey — Managing Director

No. I mean, look, there are local players in India which is mostly often one more company hold about 80% of the market share. So both the companies have recently increased capacity. So I think in the short-term, there is a little bit of excess capacity, I would say, for the next year or two. But it’s not — I mean, margins have been affected a little bit in, for example, styrene butadiene latex. The main place where margins have been affected is nitrile latex for gloves where there is no other manufacturer in India and we are exporting. I think globally, there is a glut of gloves and therefore latex as well. And that’s caused the real slowdown in margins or decrease in margins rather.

Aditya Khandelwal — Securities Investment Management — Analyst

Sure. And in the synthetic latex segment, do some industries say, like, adhesives or paints have higher margins compared to paper or carpet?

Abhiraj Choksey — Managing Director

Yes and no. I mean, in some cases, we do see — within — so for example, we are in construction, carpet, paper, textiles. And I would say — and then there are some specialty as well. So the specialty applications within each of these industries that we are supplying to, there we would see higher margins. So I would say, overall, margins are fairly similar. Paper is sometimes lower — is generally lower than the rest, but not by much. By and large we are very similar if you see an average of, let’s say, four, five years.

Aditya Khandelwal — Securities Investment Management — Analyst

The reason I was asking this question is because Synthomer has been moving out from the paper carpet industry because it is saying that is a commoditized industry and it is focusing more on the adhesives and coatings industry. So is this a similar situation you are seeing in India as well?

Abhiraj Choksey — Managing Director

Not really. No, not really. I think we come from a smaller base. In Europe, it’s a little different. What’s happened — so for example, I’ll give you paper, paper in Europe, mills are shutting down as the demand for paper has gone down due to digital overall — the digital industry has taken over. In India, we came from a very low base, and paper includes packaging as well. So as our population is growing and as our GDP per capita is growing, which is at a very low level right now, as you know, $2,500 or even less than that, therefore, we’re not seeing that in India at all.

Aditya Khandelwal — Securities Investment Management — Analyst

Okay. So there is scope for these industries to grow — that paper and carpet industry to grow in India?

Abhiraj Choksey — Managing Director

Yeah, absolutely. We’re not seeing it in India. And we are largely — I mean, obviously, we export as well to the Middle East, Southeast Asia and we’re not seeing it there either. But I agree, I mean, the company you mentioned is largely in Europe for those paper, carpet. And Europe is going through a tough time even in terms of energy costs and other issues.

Aditya Khandelwal — Securities Investment Management — Analyst

Right. So just a related question. The increase in exports which we are seeing, one of the reasons is because the players over there are shutting down, are not catering to these kind of industries. Could that be one of reasons which is why we are seeing an increase in our exports?

Abhiraj Choksey — Managing Director

No, I don’t think they are not catering. I think they may have been refocusing that may be — I mean, some — at least some information that you have. But of course, they’re still in the market as far as we know. And we do compete with them in some of the export market.

Aditya Khandelwal — Securities Investment Management — Analyst

Okay. Sir, I’ll come back in the queue.

Abhiraj Choksey — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Karan Bhatelia from Asian Market Securities. Please go ahead.

Karan Bhatelia — Asian Market Securities — Analyst

Yes. Am I audible?

Abhiraj Choksey — Managing Director

Yes, Karan. Go ahead.

Karan Bhatelia — Asian Market Securities — Analyst

Yes. Congratulations for the INR1,000 crores top-line and the INR100 crores bottom-line.

Abhiraj Choksey — Managing Director

Thank you.

Karan Bhatelia — Asian Market Securities — Analyst

Sir, how has exports done for fourth quarter and for the year FY ’23? And how you see that at least for the next one year to see so?

Abhiraj Choksey — Managing Director

Sachin, do you have the numbers in terms of volume growth for exports?

Sachin Karwa — Chief Financial Officer

Yeah. For the quarter, we have an export growth of in volume terms is 28% and for the year we have grown 16% in volume.

Karan Bhatelia — Asian Market Securities — Analyst

15%?

Sachin Karwa — Chief Financial Officer

16%.

Karan Bhatelia — Asian Market Securities — Analyst

Okay, okay. And any further clarity on the NBR project, doubling of capacity out there? Anything concrete out there?

Abhiraj Choksey — Managing Director

We are going through the detailed engineering, which should be done in the coming quarter. And then we will — once we have the final costing and we also want to just see how the market is in the next few months and then we’ll take a final call, yeah. No, not yet.

Karan Bhatelia — Asian Market Securities — Analyst

Okay, okay. And apart from the 70 user industries that we cater to in latex, which among the two, three might be really doing well and which may be laggard? Any qualitative commentary out there?

Abhiraj Choksey — Managing Director

Yeah. I mean, what I already mentioned, look, I think as far as paper, carpet, construction, textiles, tires, all those are doing really — I mean, frankly well. As I said, for our markets which is mostly India, Southeast Asia, South Asia and the Middle East, North Africa, I think we — nothing to complain at all. The only latex were nitrile latex for gloves which is a new product where we’ve invested 50,000 tons. So as a result of that, we have obviously pivoted and converted our Taloja plant into a multi-purpose latex plant, which includes styrene butadiene latex and styrene acrylic and so on. So we did that. And that should be — it could take maybe a couple of years for us to fill that capacity of 35,000 tons. That is in addition to our current 65,000 tons, which is almost more than a 50% capacity increase.

The other is in Valia, which is our 50,000 tons nitrile latex plant, that is definitely a challenging market in the current context. But in the long-term, we are quite bullish on it. And I think — we think that the margins will turn at some point. Volumes, we are again confident of doing. We have a set of customers that we have developed over the last three, four years. And that will continue to sort of grow in terms of volumes and value. They’re the concurrent margins, yeah.

And on the synthetic rubber front, as I mentioned, by and large, status quo, steady. Of course, there is some volatility in margins from every now and then, but — I mean, if you see a course of a year or two, we’ve had similar margins for the last two, three years, I would say, since 2020 after the first COVID phase, July 2020. So almost three years. But there have been quarters up and down. And there, we are the only manufacturer in India.

Karan Bhatelia — Asian Market Securities — Analyst

Right, right. And still we don’t hear anything on the dumping duties or any protection to…

Abhiraj Choksey — Managing Director

No. Well, there is — I mean, you can follow — it’s public now. We have filed appeals and we’ve had some very good results in sort of our appeal with the High Court and the Supreme Court and we hope to hear some good news soon. I’m not sure how things will play out. But I mean, it’s out in the public domain, you can search for it, what’s going on with those. And it’s not only us by the way that is in boat. There are many different industries and many different companies that have filed appeals and they’re at different stages of the appellate process. A lot of it is public and looking positive for everyone who has filed the appeal of why anti-dumping was not levied even though the GPR of the Ministry of Commerce had recommended it. So we’ll see what happens. I think we should know more in the coming few months, couple of quarters.

Karan Bhatelia — Asian Market Securities — Analyst

Sure, sure. And is it safe to assume INR150 crores, INR200 crores of top-line for the new project, like, I’m talking only about the extent we have gloves?

Abhiraj Choksey — Managing Director

Sorry, what was the question again?

Karan Bhatelia — Asian Market Securities — Analyst

Is it safe to assume INR150 crores, INR200 crores in the first year of operation from the latex gloves part of the business?

Abhiraj Choksey — Managing Director

Yeah, look, we — totally we can with the capacity that we’ve added, we can add up to INR600 crores to INR700 crores in top-line with this capacity. We hope to get to full capacity within — and when I say full capacity, I mean, on a monthly basis. So within two years, nitrile latex maybe little bit faster because we are new in the market and we are able to get good volumes already in the first month of operation, although we are going through some trials because it’s a new process. So we are quite bullish on that. And we think — so Sachin, I don’t know if you have the numbers, but I would say — I mean, I don’t have the number off the top of my head, but I would say about, yeah, INR200 crores to INR250 crores top-line from both these plants, additional top-line in the coming year should be possible.

Operator

Thank you. Mr. Bhatelia, may we request you to return to the…

Karan Bhatelia — Asian Market Securities — Analyst

I’m just clarifying the same. Thank you. I’ll return back to the queue.

Operator

Thank you, sir.

Abhiraj Choksey — Managing Director

Thank you.

Operator

[Operator Instructions] The next question is from the line of Nikhil from SIMPL. Please go ahead.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Yeah, hi. Thanks for the opportunity. One thing — two questions. One is on the margin side. Now if we — and not specifically on the quarter. But if you look at last year, the whole year margin, the first half was very good and second half we had this inventory issues and everything. And on the blended basis, we still did around 13%, 14% when there were push and pulls in the industry. If we have to adjust the one-off costs, would you say that this 14% to 15% is kind of a base margin at which the business will operate over a longer term because of the probably the diversification of the industries and everything?

Abhiraj Choksey — Managing Director

So first of all, for the year, and Sachin, correct me if I’m wrong, but our EBITDA margins are above 15%, right, for FY ’22 as well as FY ’23.

Sachin Karwa — Chief Financial Officer

Yeah. So we are at operating margins — operating EBITDA is at around 14.68% and 14.61% for last year, yeah.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Operating, okay. I was looking at total margins which include our other income, I guess.

Abhiraj Choksey — Managing Director

Yeah. So around 15%. Look, I mean, obviously, we did have in both the years ’22 and ’23, FY ’22 and FY ’23, there were some tailwinds that have helped us obviously like very high margins for nitrile latex because of COVID, at that time when the demand for gloves was high. That is not — that is actually gone the other way around where margins are maybe less than half of pre-COVID level. So I think that will go back to pre-COVID levels.

And therefore, I think in the short-term because of the nitrile latex margins, there might be a margin hit for a few quarters. But other than that, I think we are looking at this 14% 15% as sort of the base. And of course, as we grow in our kind of business, as one of the previous callers asked me, operating expenses are not very high in terms of increase. Increase in operating expenses are in fact very low. So as we grow and achieve economies of scale, in fact, we are aiming at a higher EBITDA margin of 17%, 18% in the long run when things normalize for nitrile latex.

So just to give you an idea, nitrile latex margins are today much, much lower than what they were pre-COVID and they’re much lower than all our other products, which — and typically, historically, pre-COVID, they were higher than other products, other latex products. So we believe it will go back to pre-COVID levels at some point. When that happens is anybody’s guess. It could be six months, nine months, I’m not sure. But in the long-term, it’s a good business to be in. It’s a technology that’s not easy to master.

We’ve done a good job in terms of being the only manufacturer from India and obviously getting approvals and a lot of customers in Southeast Asia and South Asia as well. So we’re quite happy with where we were. Obviously, the circumstances of entering the market with a new plant, with large capacity is obviously not ideal, but that’s something you can’t predict and time.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Sure. I understand that the industry cycle just in support I said at this point in time it should improve. One question. Now in a previous question, you mentioned that among the industries, the specialty would have a higher margin, while there is no one rule for all the industries that some industries are low margin, some industries are high margin?

Abhiraj Choksey — Managing Director

No, because we feel within the industry there are specialty products and sort of what somebody else has commodity products. But what we call large volume, fast-moving products would be at a lower margin. And obviously, larger — big customers would be able to negotiate the better price sometimes. So I think — I don’t think it’s industry-wise in our kind of business, it’s more so — it’s application-wise. So within paper, you could have some applications that are for sort of commoditized people, and yes, margins there would be less, the quality requirements are not that stringent. But then there are some applications that are obviously at a much higher margin, because the specialty application which are made by one or two people in the world and we are one of them for few applications. So similarly, in carpet, construction, textiles, there are — it’s very similar, yeah.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Sir, just my question was that because what we choose to do the business will define the ROCE and our capex investments for future. So as — and because it’s too diverse industries and within industries there is further vertical diversification. As an investor, how should we understand in terms of what’s your — how do you choose upon what we will produce, what we will not produce? Because, if we go by history, our margins were not what we are doing today even in distressed environment. So what all choices in terms of — is it like we’ve exited some of the businesses among industries which were not profitable or ROCE accretive? And even in the future, when we think of capex, as an investor, how should we understand our investments?

Abhiraj Choksey — Managing Director

Yeah. So for example, I’ll give you — it’s a good example. About 10, 15 years — 10, 12 years ago, we had embarked on making emulsions for the paint industry. And we felt that was highly, highly commoditized, margins were much lower and we completely exited that business. So I would say, not completely, we’re still making some specialty emulsions for the paint industry, but largely we exited the business, I would say. Whereas in the other industries that what I just mentioned, paper, carpet, construction, tires, we believe the competitive intensity is not as high. The barriers to entry are quite high.

So when — as a business, we look at barriers to entry, we look at competitive intensity, we look at obviously the industries that we are supplying to, what is their future growth prospects. And we have a checklist of things before deciding what to invest in. So that’s on a higher level. As far as day-to-day operations, obviously, we look depending on customer and industry from time-to-time, like I just mentioned, in the glove industry, they go through their business cycles. And unless it’s a very long term, we believe that in the long term, things don’t change, we would not exit that industry or that customer.

We have done business with customers who at low margins as well for a few months. We have made a commitment, prices have gone up, sometimes — in the past, we have done quarterly pricing. Even today for few customers we may do quarterly pricing. And we lose out on margins when suddenly raw material prices go up, but we don’t — we have our strategic customers in strategic markets and we stick with them. We’re long-term credible supplier. So I hope that answers your question. I’m not sure if that’s what you were asking, but I hope that answers your questions.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Sure. I’ll come back to the queue.

Abhiraj Choksey — Managing Director

Thanks.

Operator

Thank you. The next question is from the line of Raj from [Indecipherable] Partners. Please go ahead.

Abhiraj Choksey — Managing Director

Yeah, go ahead, Raj. Hello.

Operator

Your line is in talk mode. Please go ahead with your question.

Unidentified Participant — — Analyst

Can you hear me now? Hello.

Abhiraj Choksey — Managing Director

Yes, we can.

Unidentified Participant — — Analyst

Yeah. So looking at all the expansions and everything which you have done, so can you give an outlook on FY ’24?

Abhiraj Choksey — Managing Director

I mean, look, we don’t really give guidances and outlook. But as I said, the long-term…

Unidentified Participant — — Analyst

Qualitative outlook, I’m asking for.

Abhiraj Choksey — Managing Director

Yeah. So qualitatively, as I said, I can give some quantitative numbers also. This money that we have invested or these funds that we’ve invested is expected to give us an additional revenue of INR600 crores to INR700 crores at today’s prices. And I would say today prices are — yeah, so today’s prices, let’s say, in the last few months. And so that could even go up if prices go up. Unlikely to go much lower, so this would be conservative. And then we obviously hope to get full capacity or get the full capacity within two years for both our plants. And I mean, that’s the outlook.

Unidentified Participant — — Analyst

So by looking at this, by FY ’26 and FY ’27, you will be doing an incremental sales of approx around INR1,000 crores or so. Am I right?

Abhiraj Choksey — Managing Director

How did you get INR1,000 crores?

Unidentified Participant — — Analyst

I just did a rough estimate and everything.

Abhiraj Choksey — Managing Director

I mean, our current plants will give us another INR600 crores, INR700 crores. So we added about INR1,100 crores today. We should get to about INR1,700 crores, INR1,800 crores maybe in FY ’26, I would say. And obviously, we have other plans to grow as well and invest. So as and when that happens, so that may happen as well over the next year or two.

Unidentified Participant — — Analyst

All right. Understood, understood. And how about EBITDA and everything? In FY ’24, can we expect similar EBITDA range?

Abhiraj Choksey — Managing Director

Look, in the last couple of quarters we’ve had, our EBITDA has been lower in the first couple of quarters. But on average, as Sachin mentioned, we are at about 14.5%. It’s very hard to predict exactly, had the nitrile latex market, for example, been absolutely normal, we would have been very confident in giving that guidance saying, look, this is an EBITDA margin that going forward we should be able to do. But obviously, you’ve seen in Q3 and Q4, for a couple of reasons, the EBITDA margins have been lower. One reason was you got stuck with very high cost raw materials for some of our products. And the second reason was nitrile latex margins kept falling in all through ’22 and into early ’23. And obviously, that on an average if you’re going to have 50,000 tons of nitrile latex coming up at a lower margin, that’s going to pull the EBITDA down. We believe it’s a short-term issue. We’re still going to push through and get our sales numbers. So in the short-term, you could see EBITDA being lower. But in the long-term, as I’ve said, look, we think the way we are building this business and the way we have developed it and with economies of scale as we grow, it should be at 14%, 15% and even higher.

Unidentified Participant — — Analyst

All right, understood. Okay, sir, thanks. Bye. Have a good day.

Abhiraj Choksey — Managing Director

Thank you. Thank you very much.

Operator

Thank you. The next question is from the line of Alisha Mahawla from Envision Capital. Please go ahead.

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Hi, sir. Good afternoon. Thank you for taking my question. Sir, just wanted to understand that our outlook for ’24 — I’m not looking at numbers produced directionally. So on NBR side with fall in freight shipping costs we’re seeing more competitive intensity from imports on the latex side, again because of higher inventory, we are seeing some amount of slowdown. In light of…

Abhiraj Choksey — Managing Director

No, no, we are not seeing any slowdown. Sorry, we’re not seeing any slowdown. That’s not true. The second part is not true. Sorry, go ahead.

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Okay, okay. So my understanding was that we’re still witnessing some amount of pressure in demand on the latex and anything that’s not true anymore?

Abhiraj Choksey — Managing Director

No, no, not overall latex. I said, only nitrile latex margins…

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Nitrile latex.

Abhiraj Choksey — Managing Director

Only nitrile latex margins. Demand is very strong for everything. I mean, we are doing our volumes. We’ve been running at 100% capacity utilization for the last more than two years. And even in the last quarter, we didn’t have — even though we had these two new plants come up, the reason why we didn’t see any volume increase was because we had shutdowns. We had, in fact, — to hook-up the new plants, we had 10 days shutdown in one of our plants and a shorter shutdown in other plant. So we lost a little bit of production, we which were able to make-up in the month of March from the new plants. So overall, the volumes were flat. So yeah, we are not seeing any slowdown in terms of demand. In fact, we are seeing growth in terms of demand. Our only concern for FY ’24 is margins. And that also, main reason is nitrile latex for gloves.

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

It’s possible for you to shed some light on or color on how much lower is it versus pre-COVID levels versus our average company level portfolio?

Abhiraj Choksey — Managing Director

Say that again. Sorry, can you — I didn’t hear your voice.

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

I wanted to understand the margins in nitrile latex. You said that it is lower even compared to pre-COVID levels and at the overall company level margins also. Just wanted some color on how much lower is it at this point in time?

Abhiraj Choksey — Managing Director

At this point, it’s much, much lower than average company level. So for example, if you were to remove them — for the last six months, if you were to remove the nitrile latex, the sales that we did which is only about perhaps about 10% of our overall sales, we would — EBITDA margins would have been higher by about 100 basis — 100 or 200 basis points. So 100, 150 basis points. So, obviously, it’s very low EBITDA margins right now or overall contribution margin for nitrile latex. And as we’re going forward, obviously, that’s going to also have larger chunk of the volumes. So next year, our total sale of nitrile latex may be 15% to 20% of our overall sales.

Sachin, do you have that number as per our projections, what should be the — in terms of revenue?

Sachin Karwa — Chief Financial Officer

You’re right. It will be to that extent.

Abhiraj Choksey — Managing Director

It will be about 20%? 15% to 20%?

Sachin Karwa — Chief Financial Officer

Yes.

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Yeah. The reason for the low margins is because there is an oversupply?

Abhiraj Choksey — Managing Director

Yeah, oversupply of gloves, I guess. Not oversupply — yeah, oversupply as well as reduction in demand because there was so much oversupply during COVID that a lot of extra gloves were ordered and a few new plants have come up. So a few new plants have come up. So I think the supply-demand situation in the glove industry has changed dramatically. And if you can — actually some of it is public information. You can check the top four or five glove manufacturers in the world. And you see their — most of them are public — publicly-listed in other countries. And you can see their results are not very good.

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Any sense on, do we see this normalizing, say, in the next one or two quarters? Is FY ’24 also going to be difficult for this product and probably some amount of balance from the demand-supply cycle is expected only in FY ’25?

Abhiraj Choksey — Managing Director

It’s hard to say when exactly. Obviously, it’s very hard for anyone to predict. Well, some people say that look the gloves’ expiry dates are within two years typically. So even if gloves were made in end of ’21 or early ’22, they would sort of expire end of ’23, early ’24. So it’s hard to say when exactly. Of course, it’s very hard to predict, frankly. And there are different industry views on this, most of them are saying six to 12 months.

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Okay. And just one last question. Last time you were mentioning that the 50,000 tons that’s coming Valia are obviously only for gloves. But the 10,000 in Taloja was more like a swing capacity and we were evaluating for newer products. Have we identified new products? Have we started — is it expected? Any color on that?

Abhiraj Choksey — Managing Director

No. So what we did with the 10,000 tons, because while we were building the plant in the last six to eight months when we realized that this is what’s happening in the nitrile market, we made minor additional investments and we have converted our 10,000 ton nitrile latex capacity in Taloja to a 35,000 ton multi-purpose latex plant, which is able to make nitrile latex and also able to make other current product, which is styrene butadiene, styrene acrylic and that demand is very good, very strong. And in the first two months itself, we are utilizing 20%, 25% of that capacity. So that’s expected to keep going up over the next one to two years and we expect to get to 100% capacity utilization at some point in the following financial year for that plant. So that’s what we have done. And so that’s what I think Sachin mentioned in the opening remarks as well. I hope that’s clear?

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Sure. And this will be relatively better margins?

Abhiraj Choksey — Managing Director

Yes, absolutely.

Alisha Mahawla — Envision Capital Services Private Limited — Analyst

Sure. And just one clarification. This Taloja plant you’re saying will reach full utilization in ’25?

Abhiraj Choksey — Managing Director

Some time in ’25, yes, which does not mean that we will sell 35,000 tons in the whole year. So — I mean, you have to break it up monthly. So for example, with 3,000 tons a month, at some point in ’25, we will reach 3,000 tons a month, yeah, for the new plant.

Operator

Thank you. Ms. Mahawla, may we request that you return to the question queue for follow-up questions. We’ll take the next question from the line of Savi Jain from 2Point2 Capital Advisors. Please go ahead.

Savi Jain — 2Point2 Capital Advisors LLP — Analyst

Hello.

Abhiraj Choksey — Managing Director

Yeah, go ahead, Mr. Jain.

Savi Jain — 2Point2 Capital Advisors LLP — Analyst

Yeah. I just had this question on your treasury operation. I see there is lot of active equity investing in other stock. So I just wanted to understand what is the rationale for that?

Abhiraj Choksey — Managing Director

Actually, it’s not active. Frankly, we have outsourced it to experts who actually manage treasury and wealth. So we don’t manage it in-house. And those — there we have invested about 70% is an equity, a little less than that, sort of like INR88 crores — INR87 crores or INR90 crores NAV, let’s say, INR90 crores NAV, about 70%, right Sachin, is in equity?

Sachin Karwa — Chief Financial Officer

Correct, correct.

Abhiraj Choksey — Managing Director

And that’s also broken up into equity mutual funds and then some PMSs also have been invested in. And that’s why it feels like there is a churn, but there is really not.

Savi Jain — 2Point2 Capital Advisors LLP — Analyst

Well, no, I can understand the funds and the mutual funds, etc. But I see a lot of stocks also being bought and sold. So in just — like there are lot of exits and new entries between two financial year. So that is something extremely highly diversified. There are like hundreds and hundreds of stock. So it seems a little bit non-core for what business is. And it’s not — it does not even look like long-term investing because some of these stocks have been completely sold in a year, new stocks have been bought in a year. So I mean…

Abhiraj Choksey — Managing Director

I don’t think we are holding that bit, it may be true and we’ll look into it. But…

Savi Jain — 2Point2 Capital Advisors LLP — Analyst

FY ’22 annual report 120 direct stocks you own.

Abhiraj Choksey — Managing Director

Yeah. No, it could be because there are — but I’m sure FY ’23 will be lower because we exited one of our wealth managers completely in FY ’23. I think we’re reducing that. And in the FY ’23 annual report, you will see that’s a lower number. But our long-term view is, look, we have this treasury that we have kept for either potential non-organic acquisition growth or partnerships that we may get into or sometimes we also quick expansion decision we want to take, we should have some liquidity. And in terms of — it’s not a very large amount in our view, it’s about INR90 crores, which is less than one-tenth of our total revenue. From a market cap point of view also it’s a small percentage of our market cap. And then we want to maximize — it’s for the long-term, so we want to maximize it and we believe equities generally over the long-term gives you better returns than debt mutual fund.

Savi Jain — 2Point2 Capital Advisors LLP — Analyst

Yeah. But for example…

Abhiraj Choksey — Managing Director

But your point is well taken. Your point is taken and we’ll try and see if we can reduce that. But the idea was not to trade in stock, that’s not the idea at all. It may be because we have given it two different managers in FY ’22 and FY ’23 — part of FY ’23. And then they in turn have given it to a couple of other PMS managers. So therefore, it looks like a lot of stock. But if you see the percentage that are in stock is — I don’t have the exact number. It would not be a lot. Most of it is in mutual — equity mutual funds.

Savi Jain — 2Point2 Capital Advisors LLP — Analyst

Yeah, 10% to 15%. Yeah, that’s it. Rest all are in mutual funds and debt funds. Okay. Got it. In terms of just the three year outlook, you mentioned about the two new plants. But is there anything else that is in the pipeline in terms of new products or new categories that you’re getting into?

Abhiraj Choksey — Managing Director

So one is — for our NBR, it’s all new. But for NBR, we are the only manufacturer in India, we’ve been running at full capacity. Some capacity will be freed up when we move our — right now we’re making nitrile — not right now, sorry. Till March, we were making nitrile latex in our NBR reactors which will move-out and give us some additional capacity there, maybe about 15%, 20% additional capacity. So we want to try and see if we want to double that capacity because the market is there. We’ve done a good job. We are just waiting for a couple of things to see the capex cost — the current capex cost, whether the returns will make sense. Of course, there are new products that we’re looking at as well. No decision has been taken. When the time is right, we will announce that decision, yeah, as far as investment is concerned.

Operator

Thank you. We’ll take the next question from the line of Aditya Khetan from AK Capital. Please go ahead.

Aditya Khetan — SMIFS Limited — Analyst

Yeah. Thank you for the unfortunately. Yeah, it was not AK Capital. It is SMIFS Institutional. So there might be some misconception. Sir, on to the demand side, as you had mentioned earlier that demand has been started to dismantle uptick into the gloves side. I believe sir last quarter when we discussed on this, you had mentioned that there is some pain of six to nine months. Again sir, this quarter we are guiding that there could be some pain for again six to nine months into the gloves segment. So when we see this pain to end, including for nitrile latex segment? And what is our target utilization for FY ’24? When the capacity will start?

Abhiraj Choksey — Managing Director

Good question. So our — so two things. One is the demand is not a big issue. 50,000 tons, the nitrile latex market is very small, it’s not even a couple of percent of the total market even at these little bit lower level. So demand is not an issue. The issue is margins. Margins are very low unfortunately as we’ve entered the market. And what was your second question?

Aditya Khetan — SMIFS Limited — Analyst

Sir, what would be the utilization levels from this new…

Abhiraj Choksey — Managing Director

So we expect utilization levels to be somewhere between 40% and 50% for the year.

Aditya Khetan — SMIFS Limited — Analyst

For the complete 85,000 tons or only for the nitrile latex 50,000 tons?

Abhiraj Choksey — Managing Director

No, nitrile latex 50,000 tons. And for the company — yeah, that also — for the remaining 35,000 tons, there also we would have been at 50% honestly, but we have to wait for some — we have got permission to only manufacture a certain amount, because earlier, as you recall, the Taloja plant was a 10,000 ton latex plant. We had applied for environmental submission for only that amount. Now because SB latex or other latexes we are able to make 35,000 tons, we have applied for additional permission to make more products from the same plant, that also require some environmental permission.

So as and when that comes through, especially in the next six months, we should be able to increase that as well. So that we had a little bit dependent on those environmental permission, but we are hopeful they’ll come through in the next six months because there isn’t — it’s not very complicated. We’re not going to have to put up a new plant or anything of that sort. So hopefully in the next six months that should come through. So I would say — if you look at the entire 85,000 tons, I would say, maybe about 35% of the total.

Aditya Khetan — SMIFS Limited — Analyst

Okay. Sir, also our quarter-on-quarter, so when I was looking at your — so looking when I was looking at the raw material prices and some of the finished product prices, there is a clear contraction in terms of spreads which is seen quarter-on-quarter, but still the numbers have been good. Like, on quarter-on-quarter basis, the margins have been flat. So is there some — have stocked up inventory at lower prices and that benefit we have got in this quarter, that is why the numbers are — which are reflecting on to the spot prices, that has got replaced into the results?

Abhiraj Choksey — Managing Director

I am not sure if I’ve understood the question clearly.

Aditya Khetan — SMIFS Limited — Analyst

Sir, I’m asking that the spreads of these styrene butadiene and acrylonitrile and your some of the finished products, like NBR synthetic metric, so that spread is going quarter-on-quarter on to spot — there is a decline, but our margins have been constant. So I was just wondering, have we stocked inventory at lower prices? Because the raw material prices, they have started to go up, but the finished product prices they were going down, so the spreads are contracted. So I was wondering whether we had kept some inventory at lower…

Abhiraj Choksey — Managing Director

Sorry, I’m little confused. What are you looking at? So how are you following styrene butadiene, acrylonitrile prices?

Aditya Khetan — SMIFS Limited — Analyst

Sir, this styrene prices, we are tracking some of the Chinese prices and Southeast Asia prices.

Abhiraj Choksey — Managing Director

Okay. From the published rates. Okay. So I would say that in the — and that’s not always — what happens in reality is not what is published, right? So for example, as I mentioned in the last quarter that we had some high cost raw material inventory that we were stuck with in the previous quarter. That now in Q4 is somewhat normalized, and therefore, you can’t really compare that. Just because those are published rate, it’s not what Apcotex’s rates. So sometimes published rates maybe lower than Apcotex’s rate, sometimes it could be little higher also. So I would not look at the published rate as — I mean, it’s a benchmark, but it’s not really accurate.

And yes, to answer your question, Q3, in fact, we were — it’s the other way around. Q4 is by and large okay. Q3, we were stuck with higher cost raw materials. So even though published rates may have gone down, our rates were not down in Q3.

Operator

Thank you. The next question is from the line of Mohit Arora from SOIC Ventures LLC. Please go ahead.

Ishmohit Arora — SOIC Ventures LLP — Analyst

Hi. Thank you for taking my questions. So sir, first question is FY ’24, in spite of the increase — slight increase in opex, do we still see absolute growth in EBIT?

Abhiraj Choksey — Managing Director

Of course. Yeah, yeah, we do expect an increase in EBITDA. In fact, what you would see happening in FY ’24 is the profit before tax will go down because we have a large capex which we’ve never done before and all the capex has come on stream in the last quarter. So upwards of INR220 crores, INR230 crores. So that depreciation is going to start hitting in Q1. And the interest which was so far been capitalized because we had taken a loan — term loan to partly fund the capex, that will start hitting the P&L as well.

So from an EBIT point of — EBITDA point of view, you would — we would — obviously on an absolute basis, we would see some growth. We would hope to see some growth. But on a PBT level, because of depreciation and interest being — going to be much higher in FY ’24 going forward, from Q1 of FY ’24 than it was in the past. I hope that’s clear.

Ishmohit Arora — SOIC Ventures LLP — Analyst

Right, right. And sir, second question is in terms of like what is the overall vision of the company over next three to five years? Are we looking to launch any new products or are we like looking to — like, just a broad vision over the next three to five years?

Abhiraj Choksey — Managing Director

Yeah. Look, I think we have a lot of opportunity in the emulsion polymer space that we are in. And even if you see the last five, six years, we have done four things. One is, grown the current business in India. Second is, we have grown the current product range outside of India. Third thing we have done is, acquired a company which was an adjacency for NBR and allied products. As a result of that acquisition, we were able to put up a nitrile latex plant in that facility in Gujarat. So these are the four things that we have done.

Going forward, we want to, as I said, one thing is obviously grow in the emulsion polymer space. We’re looking at other spaces as well. But no — obviously, I think that’s premature to talk about. We will continue to grow our exports. We will continue to grow nitrile latex, NBR. So those four and our current product range where there is a lot of opportunity that we do see. Some specialty products within these emulsion polymers that we’re looking to add. For example, textiles, which is very, very small part of our business five years ago is now becoming a larger part of our business and another strong leg, another industry that has become quite strong for us.

So yeah, various things. And obviously, we’re looking to grow both from a inorganic opportunities, obviously, we are evaluating all the time and looking to grow through a new product pipeline if possible, if it makes sense. But it’s too premature to talk about though.

Operator

Thank you. We’ll take the next question from the line of Ankit Kanodia from Smart Sync Services. Please go ahead.

Ankit Kanodia — Smart Sync Services — Analyst

Thank you for taking my follow-up. I just had one question related to the exports. So can we give some new geographical break-up as to which part of the — we have mentioned that we cater to seven continents. But if you can just quantify that or maybe…

Abhiraj Choksey — Managing Director

I don’t think we are supplying to Antarctica. But yeah, the rest, yeah. But Sachin, do you have the numbers for that? I mean, broad figure of — and as I told you, Ankit, we are mostly in Southeast Asia, Middle East and Middle East, South Africa. And when I say Southeast Asia, I’m covering South Asia like Sri Lanka, Bangladesh and Nepal and those countries as well. If I were to venture a guess, I would say, Sachin, 80%, 85% of our sale is in this region?

Sachin Karwa — Chief Financial Officer

Yes, in these two what you’re talking about, Southeast Asia and Middle East.

Abhiraj Choksey — Managing Director

Southeast Asia, Middle East, right, which includes Sri Lanka, yeah. And then the rest is Europe, China, even America, some of it, North America. I mean, there are some specialty products we export everywhere. But a large chunk is in this region.

Ankit Kanodia — Smart Sync Services — Analyst

Any color of difference in terms of demand between the Southeast Asia and Europe? Do you want to comment on that?

Abhiraj Choksey — Managing Director

What do you mean? Sorry, what’s the question again?

Ankit Kanodia — Smart Sync Services — Analyst

The question is, any color on what is the situation or what is the difference in situation between Europe and Southeast Asia?

Abhiraj Choksey — Managing Director

As I said, Europe is not a very big market for us. Mostly, Southeast Asia and Middle East and we’re finding — we’re growing quite well in these two markets. Europe, North America, Japan, those are — we supply some specialty products to and they’re fairly steady. Yeah, we have had no major issue. But they’re not a — I would not say, they’re strategic markets just because of the distance it takes and the time that it takes, plus on the latex side to ship that much water across continents, it’s not necessarily feasible unless it’s a specialty product.

Operator

Thank you. We’ll take the next question from the line of Bhavya Sonawala from Samaasa Capital. Please go ahead.

Bhavya Sonawala — Samaasa Capital Private Limited — Analyst

Hi, sir. Thank you for the opportunity. I just have two questions. The first question is just wanted to know that glove manufacturing capex and the latex capex. Have they grown in line in the past two years, if that’s possible to answer?

Abhiraj Choksey — Managing Director

Sorry. Again, what’s the question? I didn’t understand.

Bhavya Sonawala — Samaasa Capital Private Limited — Analyst

Basically, wanted to understand that the gloves manufacturing and latex manufacturing, the capex for both. Have they grown in line?

Abhiraj Choksey — Managing Director

I mean, look, I think glove manufacturing because of COVID, I think a lot of people entered the glove manufacturing business because it’s more of a low-tech business in that sense and low capex as well — lower capex as well. So we’ve seen a lot of companies in America, China, Southeast Asia enter the market, and a result, there’s glut of gloves. In nitrile latex, we also have seen extra capacity come on stream, but it’s been from existing players. For example, like us. We have been existing latex player and we have entered — started manufacturing nitrile latex a couple of years ago and then obviously invest in the plants. Similarly, some of our competitors in the industry have added some capacity in their existing plants. And some were announced, but I believe they’ve all been put on hold given the current market scenario.

Bhavya Sonawala — Samaasa Capital Private Limited — Analyst

Okay. Okay, got it. Sir, in the last question, you had mentioned about the high value raw material inventory that we were holding. So is it fair to assume that probably this will be the last quarter we have the high value raw material?

Abhiraj Choksey — Managing Director

Yeah, yeah, absolutely. I mean, Q3 was a big hit, I would say. Q4 was slightly less. And Q5, we’re largely done with it, barring a few specialty raw materials that we keep six months inventory and — for example, we had ordered in September, October and it came in November, December. And then now, we’ll probably be done with it in this quarter. But yeah, I mean, it’s slowly coming down and I would say largely almost done now.

Bhavya Sonawala — Samaasa Capital Private Limited — Analyst

Okay. Thank you so much, sir, and all the best.

Abhiraj Choksey — Managing Director

Yeah. Thank you.

Operator

Thank you. The next question is from the line of Aditya Khetan from SMIFS. Please go ahead.

Aditya Khetan — SMIFS Limited — Analyst

Yeah. Thank you sir for the follow-up. Sir, to one of the participants you had stated that the capacity expansion would give a revenue of INR200 crores. I believe sir we had given a guidance of INR550 crores to INR600 crores. Just wanted to clarify.

Abhiraj Choksey — Managing Director

No, the capacity expansion is INR600 crores to INR700 crores for this year. For FY ’24, it’s INR200 crores to INR250 crores is our best estimate.

Aditya Khetan — SMIFS Limited — Analyst

Okay. And the total would be somewhere around INR600 crores to INR700 crores at peak utilization?

Abhiraj Choksey — Managing Director

Exactly, exactly. At full utilization, correct.

Aditya Khetan — SMIFS Limited — Analyst

Got it. Got it. Thank you, sir.

Abhiraj Choksey — Managing Director

Thank you, Aditya. Thank you.

Operator

Thank you. The next question is from the line of Omprakash Dhoot, an Individual Investor. Please go ahead.

Omprakash Dhoot — Individual Investor — Analyst

[Foreign Speech]

Abhiraj Choksey — Managing Director

[Foreign Speech]

Omprakash Dhoot — Individual Investor — Analyst

[Foreign Speech]

Abhiraj Choksey — Managing Director

Thank you. Thank you.

Omprakash Dhoot — Individual Investor — Analyst

[Foreign Speech]

Abhiraj Choksey — Managing Director

Omprakashji, first of all, [Foreign Speech] we appreciate it. Thank you very much. [Foreign Speech] they’re working hard at increasing sales. So we are quite confident. Thank you.

Omprakash Dhoot — Individual Investor — Analyst

Thank you very much, sir. [Foreign Speech]

Abhiraj Choksey — Managing Director

Thank you, Omprakashji.

Operator

Thank you. The next question is from the line of Chandpal Singh, an Individual Investor. Please go ahead.

Chandpal Singh — Individual Investor — Analyst

Hello.

Abhiraj Choksey — Managing Director

Yeah, go ahead. Go ahead, Mr. Singh.

Chandpal Singh — Individual Investor — Analyst

Congratulations on the good set of numbers.

Operator

Mr. Singh, please use the handset mode, sir. The audio is not clear.

Chandpal Singh — Individual Investor — Analyst

[Foreign Speech]

Abhiraj Choksey — Managing Director

Thank you.

Chandpal Singh — Individual Investor — Analyst

[Foreign Speech]

Abhiraj Choksey — Managing Director

[Foreign Speech]

Now depending on the final capex amount [Foreign Speech] board will take — board and senior management team will take a final decision over the next few months on when — if and when — not if I think, when we want to go ahead with it. So we are — we have not yet decided. [Foreign Speech]

Chandpal Singh — Individual Investor — Analyst

[Foreign Speech]

Abhiraj Choksey — Managing Director

[Foreign Speech]

Chandpal Singh — Individual Investor — Analyst

Thank you. Thanks a lot.

Operator

Thank you. The next question is from the line of Raj from [Indecipherable] Partners. Please go ahead.

Unidentified Participant — — Analyst

Am I audible?

Abhiraj Choksey — Managing Director

Yes. Go ahead, Raj.

Unidentified Participant — — Analyst

[Foreign Speech]

Abhiraj Choksey — Managing Director

[Foreign Speech]

Unidentified Participant — — Analyst

Hello. Am I audible?

Abhiraj Choksey — Managing Director

I’ve answered the question. It’s a margin issue. We are a small [Foreign Speech] So we are confident of doing 50,000 tons of latex. [Foreign Speech] because overall market is quite weak, we have to give very low prices to be able to sell. And generally, the market margins have reduced considerably compared to of course COVID levels, but also during pre-COVID level. So that’s the reality. So we’re confident of doing 50,000 tons because millions of tons are being sold in the market. So 50,000 is not a very big amount.

Unidentified Participant — — Analyst

So then it is a supply issue, we can assume it?

Abhiraj Choksey — Managing Director

Yeah, the industry is not doing well. So there is a lot of pressure on the raw materials of gloves also. Glove industry is not making money. They want to ensure that raw material suppliers also — I mean, they can’t afford beyond a point because glove prices have really fallen.

Unidentified Participant — — Analyst

All right, understood.

Abhiraj Choksey — Managing Director

So we have to support them for some time till things normalize.

Unidentified Participant — — Analyst

Okay, thanks.

Abhiraj Choksey — Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, we’ll take the last question from the line of Nikhil from SIMPL. Please go ahead.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Yeah, hi. Good afternoon. Thanks for the repeat. One question. Abhiraj, when we — because in the call you have mentioned that the demand is pretty strong and we had the ability to switch the capex from NBR — nitrile latex to NBR.

Abhiraj Choksey — Managing Director

No, no, nitrile latex to other latex.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Yeah, other latex products. What I wanted to understand is that when we put the capacity, is it like we have — how good sense of a demand do we have in terms of the market? I’m not specifically talking on the gloves part of it, but overall, as a general rule. Is it like we have commitment from the customers that 40%, 50% of the demand we believe that the capacity can be filled by existing customer orders or is it an assessment of the market based on which the capex plans are organized? And I’m not specifically talking on gloves, I understand it was a one-off scenario. But as a general rule, how do you plan it out?

Abhiraj Choksey — Managing Director

Yeah, absolutely. So look, we — it’s obviously talking to customers. We do not have a contract signed in advance before the plant comes. But if you see the industries that the latex products that we’re supplying to, and it is, as I said, 75%-plus in India, 25% exports. We believe that all the industries; paper, carpet, construction, textiles, tires, all in India is a growth industry. And we have talked to all our customers. We have got their three year projections or five year projections. And we want to try and invest in projects where we at least see 25%, 30% ROCE when we start the project, when we plan the project, return on capital. And we see that we can utilize that capacity within a period of two to three years.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Okay, okay. The reason for asking the question is that — because during the call you mentioned that you are — even whatever is happening on gloves, you are still confident that the capacities will be optimally utilized in a period of two to three years. So just wanted to understand that when we plan for the capacities even in other products, like is it pure assessment or is it like customers are also like giving us good enough design that when we put the capacity at least 40%, 50% utilization, we will be able to reach easily. Is it like that’s kind of an assessment do we have?

Abhiraj Choksey — Managing Director

As I mentioned — I’m not sure if I’ve — I thought I answered your question. Yes, we talk to customers, but we don’t take any written commitment from customers. But yes, customers do tell us, look, we are putting up additional capacity, for example, let’s say, in the paper industry. We are close to many — most of our customers. And they will tell us, look, in the next three years, we are putting up this capacity. So we will need this much more binder or latex over the next three years. So we try and time it with that. And then, of course, part of it is an assessment as well of, for example, construction. The construction and waterproofing market has been growing really well in India, it’s double-digit growth. And the last five, six years it’s been growing at double-digits. In the next five, 10 years also that’s the assessments. So yeah, I mean, it’s a combination of assessments, seeing where new capacities are coming up and overall seeing the growth in Asia. We’ve been predominantly an Asian company and catering — manufacturing in India and catering to India and Asia.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Sure, sure. Thanks a lot.

Abhiraj Choksey — Managing Director

We are quite bullish about it.

Nikhil Upadhyay — Securities Investment Management Private Limited — Analyst

Sure. Thanks a lot, yeah.

Abhiraj Choksey — Managing Director

Thank you.

Operator

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

Abhiraj Choksey — Managing Director

Sachin, do you want to do the closing comments?

Sachin Karwa — Chief Financial Officer

I think, Abhiraj, you should.

Abhiraj Choksey — Managing Director

So thank you everyone for joining for our Q4 conference call. We finished the year at a strong — with a good strong set of numbers. We are quite satisfied and happy. Of course, our projects were delayed by a few months, but we’re also happy to share that the projects are both on stream and going reasonably well and we hope to now utilize this capacity over the next few quarters. We will also come back to you with future growth plans at the right time.

Just one thing to keep in mind is the depreciation and interest will be going up over the next two quarters because of the large capex that we’ve done in the last quarter. So PBT numbers will be affected going forward, but EBITDA numbers is what we are going to focus on. Thank you very much. Look forward to seeing you all next quarter.

Sachin Karwa — Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]