Borosil Ltd (BORORENEW) Q3 FY23 Earnings Concall Transcript

Borosil Ltd (NSE:BORORENEW) Q3 FY23 Earnings Concall dated Feb. 08, 2023.

Corporate Participants:

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Analysts:

Rahul Dani — Mona Capital — Analyst

Pratik Dharmshi — Safe Enterprises — Analyst

Rahul Picha — Multi-Act — Analyst

Manav Vijay — The Financial Consultants — Analyst

Gugadi — Ashmore Group — Analyst

Aditi Bittar — Mivisa — Analyst

Jim Modi — EIMM — Analyst

Priya Chira — Vallum Capital — Analyst

Amish Kacker — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY ’20 Earnings Conference Call of Borosil Limited, hosted by Monarch Network Capital. [Operator Instructions] [Operator Instructions].

I now hand the conference over to Mr. Rahul Dani from Monarch Network Capital. Thank you, and over to you, Mr. Dan.

Rahul Dani — Mona Capital — Analyst

Thank you, Michelle. On behalf of Mona Network Capital, we welcome you to the Q3 FY ’20 Results Conference Call of Borosil Limited. We have with us the senior management represented by Mr. Shiva Kheruka, Managing Director and CEO; Mr. Anand Sultania, CFO; and Mr. Sagan Para, Snorton. I will hand the call over to your senior management for the opening remarks.

Thank you, and over to you, Shreevar.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

So thanks, Rahul and Michelle for hosting this call. Good afternoon, everyone. Borosil Limited Board approved the company’s financial results for Q3 FY ’23 on February 3, 2023. Our results and an updated presentation have set of the stock exchanges and have also been uploaded on the company’s website. Boson’s consolidated revenue from operations for the nine months ended December 22 was INR768.3 crores, which is a growth of 24% over the corresponding period of the previous year.

During the nine month period, there’s under consolidated EBITDA before exceptional and onetime items of INR92.7 crores, which translated to an EBITDA margin of 12.1% as compared to 20% in the corresponding period of the previous year. Profit before tax during the three quarters ended December ’22 was INR9.2 crores. The company received an insurance gain net of non-value of INR9.3 crores as full settlement of the claim in respect of loss of property due to pie at the company’s bayous in Borouge.

During the corresponding period of the previous year, we have made a provision of INR6.5 crores for a loss of property at a company’s warehouse due to fire and flood — during the third quarter, the company has also disposed one of its noncore assets, which was held for disposal, and the gain on the same is an INR13.5 crores, and the same is right the head of other income. Taking all this into consideration, the — during the nine month period ended December 22, Borosil recorded a consolidated PAT of INR67.9 crores as compared to a PAT of INR506 crores during the same period in the previous year.

Average operating capital employed in the business that is capital employed without CWIP investments was IRRR525.1 crores. During the nine month ended December 22, the company earned an operating profit before exceptional items as before in coupon investment of INR67.9 crores that translates into an annualized operating ROE of 17.2%. Coming to our business-wise performance. Both consumer business comprising glassware products and non-glassware products under the brand Borosil and its operated brand Larah recorded sales of INR565.3 crores.

That is a growth of 29.8% over the same period last year. Sales of glassware products were IRR INR178 crores, which is a growth of 26.7% and non-branch products grew by 49.2%. Non-glassware reached a total of INR235 crores during the nine month period. Glassware leased a turnover of INR17.8 crores and Opal ware brand on Larah receives chief sales of INR192.4 crores, which is a growth of 14% over the same period in the previous year. The EBITDA margin during the nine months ended December 22 for Consumer Products was 10.5% as compared to 17.1% during the corresponding previous year.

The decline in EBITDA margin was due to a number of factors, including a change in our product mix. And as you can see, our non-glass products have been expanding a sales and comprise about 63% of sales of our Borosil brand that is excluding Larah. The hydro range of steel bottles, steel wares products as well as domestic appliances have all been achieving very healthy growth. These ranges have a lower gross margin than the traditional glass or agent business resulting in some decline in the overall EBITDA margin.

However, as I mentioned before, our focus around return on capital — return on capital, while the gross and EBITDA margins on the non-glass lined range is lower, we have not invested in manufacturing facilities for this range. We can, therefore, earn an acceptable receive from the non-glass range as well. The company’s spend on marketing expenses for the brand Borosil has been higher during the nine months ended December 22, as compared to the same period last year. The company has invested in major marketing costs to increase the consumer mind share and go the brand digitally. The brand has been actively promoted through the marketing programs and add celebrity chefs to improve customer engagement across categories.

The company is a partner to the Olapic Association and the Ariana telers and both of these have given significant bad upliftment in the hydro category for modern than plus. I heard — so these are some reasons for the reduction in margins. So the first, as I already mentioned, was changing the product mix. Second is higher marketing expenses. And the third is the EBITDA margin on Larah, which is our Opal range of products was much lower than normal. As you are aware, the company is expanding capacity from 42 to 84 tons per day by putting up an additional furnace.

This furnace is gone on stream on, I think, 2nd January of 2023 from a commercial production point of view. This was delayed onto some implementation challenges to global supply chain issues. Consequently, the filing of the furnace and its commercial production took place only in the beginning of this quarter. At the same time, the older products had to go in for its regular schedule rebuild in October 22. With this bank to the company continue to incur fixed costs during the rebuilding period and also had no production during the same period, which contributed to lower EBITDA.

The — the net result of this was the company could not service most of Larah’s requirements during Q3 FY ’23 and a part of H1 FY ’23 through internal production. However, in order to ensure continued availability of brand Larah on the market, the company took a decision to procure whiteware and introduce these into the market with our design and branding and the company earned on 0 margin, in fact, slightly negative margin of this activity. However, it was important that Larah did not lose any potential customers on account of availability.

This was a short-term strategic decision, and both our ponies will be in production during quarter four FY ’23, we should see normalized margins restored during this period. So these three reasons, higher the procurement of large volumes of whiteware from outside the change in product mix of the Borosil consumer sales as well as the higher marketing expenses have contributed to a decline in the EBITDA. Of these three reasons, the production of Larah already solved at Q4, we should go back to normalized margins. Marketing expenses have been slightly higher, but we expect them also to — as a percentage of sales, rationalize as revenues are growing higher than expected and with auto production, the base will be higher.

And as far as change in product mix is concerned, that is something likely to continue for some period of time. But the higher volume should end of day, give us better margins because of our ability to negotiate on purchases on these accounts. Moving on to the Scitec products division. The net sales during the nine months ended December 22, INR203 crores, which was a growth of 10.2% over the corresponding period in the previous year. Our scientific product business comprises three product ranges, lab Glassware, lab instrumentation and brand LabWest, and primary glass packaging for pharma customers under the brand Transpac.

During YTD Q3 FY ’23, Labglassware recorded a sale of INR132 crores, which is a very nice growth of 27% over the same period last year. We continue to enjoy about 70% of the Labglass organized market and expect to get a fair share of any growth in demand from the pharma and the integration and institutional sectors. The company continues to get repeat business for logistic products from EUC customers is also introduced new products such as filter papers, QR-coded glassware and multi-board caps, which have got good traction.

Apart from new customers with the existing and new radio products, we’re also developing an OEM business life for supplier critical items to our customers. The instrumentation business under LabWest, achieved a sale of INR16.5 crores, that is a growth of 24% over the same period. We are still in the early stages of development of a range of operations in this business vertical, and we expect addressable serviceable market to give out INR225 crores and growing at the to 12 a year.

Recent products well be introduced by the Board of technologies team include pilot lab reactors, bottle-top dispensers for hazardous assets as well as products in the nutrition and environment categories. In the context of Klass Pack due to COVID two very strong years in FY ’21 and ’22, registering growth of 28% and 56%, respectively. During FY ’24, therefore, we are like a high-base. During the nine month period ended December 22, Clastic achieved sales of INR54.7 crores, which is a decline of 18.7% compared to the corresponding period in the previous year.

This decline in sales during the current period should be read in the context of a high base effect. In fact, last year, almost 18% of the sales were related to COVID drugs sales or via for COVID drugs. And exports of wires were also impacted this year owing to various reasons going to challenges in Europe. This was, however, more than made up by other geography and export sales have otherwise turned a very good performance comprising about 19% of revenue compared to 30% last year. Our aspect has also said that input price have increased over 25% and this necessitated price increases, which has also had a negative impact on sales.

In the past, I mentioned that we are focusing on development deeper relationships with high-quality customers, and this process is ongoing, and we expect to add new what we call as pharma class customers, the highest customers with the highest quality requirements in the next few months. EBITDA margin for scientific products during the period be December over 16.3% as compared to 20.4% during the corresponding period in the previous year. Margins in a topical have shown improvement in line with the growth of business.

However, the drop in the division’s EBITDA is on account of lower margins in the Klass Pack business that is going to lower sales and higher cost of inputs as well as in Lab Quest as we have decided to invest disproportionately higher in our R&D team, which is a higher staff cost. And while the guy for the current productivity and output from LabWest, is lagging behind the cost input that we’re putting in there. Borosil Technologies is still a decent business and subsidiaries in the investment phase and depos currently occurring reasonable losses.

As this business scales, these costs will get normalized and the products may take 1, 2, three years to stabilize. In Caspex EBITDA margin was below single digits. The drop in margin is attributable to the lower sales and gross profit are ultimately lower to higher production cost of material and power. There has been an increase in the cost of tubing input, which has only been passed on to the customers towards the end of the period. We also took a decision at Klass Pack to go for camera inspections for all our products, which led to higher process rejections as we continue to raise the bar specifications and the automated camera-based quality control will help us improve our customer outreach in the future.

These initiatives are expected to improve productivity after these costs — initial cost and learning period is through and after which the company should have a better set of customers to address with the higher throughput. The company has also initiated and highlight conversations to take price increase in order to pass on some of the input cost inflation at distal — as of December 31, ’22, the company had net cash of about INR171.6 crores, the surplus cash will be less primarily for the ongoing expansion projects for the consummate business.

The expansion in Larah capacity as an estimated project cost of INR195 crores was commissioned in December and the commercial production has started in January 23. The new Borosil of 25 tonnes per day at an estimated investment of an INR115 crores is estimated to be commissioned sometime in the second half of Q2 FY ’24 — sorry, in Q2 FY ’24. In the Scientific Products division. The capital outlay is continuing as per plan, and we expect these outlays also to be through by March of 24.

The expansion projects indicate our optimism about the long-term growth prospects of both our consumer and site businesses. Some of the margin pressures that we have experienced over the first nine months of the year are temporary in nature. And for example, I mentioned on the furthest challenge or the further rebuild as well as the delay in the starting of T2 furnace. And these sites are to be restored in the coming months. Our focus remains on expanding our consumer franchise in the Consumer division and growing the size of our opportunity set in the scientific business while expanding our current relationships with customers.

The consumer business is supported by tailwinds and remain underpenetrated, and we expect Borosil a long runway of growth. Scientific businesses respectively to see steady growth in Lab blast glassware and faster growth in large limitation as well as in lab pack. Moreover, there are other new categories that we are planning to enter of the center, including process systems. As we scale boose business, we expect to achieve healthier margins in both these business units.

Borosil undertaken a structured program for planting ESG. Last year, we had identified material issues at to stakeholder feedback. We have half to journey to address the ESG opportunities and identified priorities towards the Greener plant, social equity and robust governance. — high-priority areas for Borosil include management of waste, water, greenhouse gas emissions and energy, recyclable materials for packaging and data and customer privacy.

Over the next few quarters, we expect to disclose quantifiable targets and transparency report performance against them. We had earlier announced plans to restructure the business of our company into two separate listed entities via composite scheme arrangement post receipt of observation letter from stock exchanges and directions received from NCLT wide its order dated 25th November 22. — separate meetings of equity shareholders and unsecured creditors of the company have it come on 6th February for seeking the approval of the scheme.

We anticipate that the entire process can be completed by 2023. However, the time lines for some of the steps involved in not control, and we will keep you informed of the progress in this regard. So thank you. With that, that concludes our opening remarks — sorry, is a little bit lengthier, but I can now open the floor for questions. Before that, I’d just like to add one broader point that while the operating results for Q3 and even YTD have not been very attractive.

The real picture lie elsewhere. Our revenue growth has been extremely interesting, and I would say, industry-leading revenue growth in both consumer and scientific businesses. And that has given me a lot of, let’s say, confidence that whatever processes or whatever products we have established in the market are being appreciated by end customers. And the margins have definitely been under pressure this year, but many of those reasons are specific to Borosil and not macro in nature, which also means that we are able to reverse or change the inputs and therefore, have a better margin in the coming months. So we remain extremely confident about the growth of the business in terms of revenue, and we expect the margins to also flow through in the next few periods.

So with that, thank you, and I open the floor for questions…

Questions and Answers:

Operator

Thank you very much, sir. We will now question-and-session. [Operator Instructions] Ladies and gentlemen, we have the first question from the line of Rahul Dani from Mona Capital. Please go-ahead.

Rahul Dani — Mona Capital — Analyst

Yeah, yeah. Thanks you, Just on the outlook on the consumer division, we are seeing some division ports slow down. So how do you see with the new builder capacity coming up? So do you think it where you believe that vote compared is also increasing capacity? And also in the scientific division, how do you see the new product category like filter performing? And what’s your outlook on Klass Pack…

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Okay. As far as consumer is concerned, we have quite a few categories, right? And there are — we do see some slowdown in some categories for a number of appliances. COVID had a very big positive impact on appliances. While we do see continued healthy growth in that area, that is — it’s not as good as it was during COVID. But on the flip side, the specific question you asked on Opal, I think Opalglass continues to see a very healthy demand. And we so far believe that we should be reasonably well placed to sell the production from both our furnaces, even though, as you mentioned, there are there’s competition, increasing capacity in this area.

But we also see exports as an opportunity for us given the macroeconomic shocks in the world from an energy point of view, Indian production costs as well as Indian geopolitical, let’s say, relationships are very strong. And therefore, India is being looked amount as a preferred supplier of — and a safe supplier of products across the board, it’s not just specific to consumer. And this is giving us tremendous scope of growth in all export geographies for both consumer and scientific. So I’m particularly — I’m not — I don’t feel that there is any broader story of demand slowdown.

Yes, there may be one or two categories where the margin a bit slower. We are quite confident of the growth and even exceeding the growth that we had that we went forecasting or that we’ve been kind of guiding for a while. On the scientific side, while Klass Pack has been a bit of a challenge, this year, I think Klass Pack the focus on COVID for the last couple of years has gone away. And therefore, we have to get back to, let’s say, the basics of adding customers in other product categories, which we have been doing.

And I think we will go back to a growth path in the next few quarters. And the guidance, which we have always given for Klass Pack that 15% to 20%, I think revenue growth should be there. I think we should be able to match that guidance in that particular division. But broader scientific — I’m seeing really tremendous opportunities in new products, including filtrate Sofitel, we had very good traction. Our next step will be to set up some degree of manufacturing of filter paper once we get a certain volume that should further improve margins in that area.

And under Make in India today, we can’t play in many of the tenders which we will then be able to play in once we have the production in India, which will further improve the market size, let’s say, for us or the market opportunity for us. There are other areas like exports I already spoke about in scientific as well as new other new product developments in Las Quest, we’ve seen a lot of traction in specifically process systems.

The orders are good, and there’s a new category with a complete import substitution over there. Even we see opportunities in health and, let’s say, environment for testing for protein testing, track testing, fiber testing. So frankly, we are very bullish and we’re very excited about both our companies and both our product portfolios. And while the great thing was being diversified is when you do see the Mason, typically, you are able to make up somewhere else. So overall, it’s — we have a good franchise, I believe.

Rahul Dani — Mona Capital — Analyst

Thank you so much — thank you and all the best. Thanks.

Operator

Thank you. The next question is from the line of Pratik Dharmshi from Safe Enterprises. Please go ahead.

Pratik Dharmshi — Safe Enterprises — Analyst

Yeah, hi, thanks a lot for giving me the opportunity to ask questions. A few from my side. On the margins for the consumer business. So you highlighted a tail points for us, and one was the mix of the all outsourcing and the third was higher marketing spend. If I recollect correctly in the past, I think past two quarters, you have been highlighting about the raw materials, pressures, state costs, etc. So have you seen the worst of it and you [Indecipherable] terms of those sort of costs and they are not getting as much go-power. One second few of the things which you mentioned, outsourcing, which is generating 3% margins. The second was as the new volumes come through from the expanded capacity, the marketing spend will rationalize, — should we expect you guys to revert back to your EBITDA margin, which was like 17%, 18% last year, nine months that would be the target on a side.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Okay. So thanks for that. The first question, yes, I think the cost pressures, I think we’ve seen the worst of it behind us. I think it’s not having corrected they’re not moving anymore in the upper direction. So while they have not yet come back down to, let’s say, repower levels, things like soda ash as an example, or even packing material. But the price increases have stopped the stable, which is great. And we have seen some downward momentum as well on prices, but like I said, they are not anywhere close back to being corporate levels.

Energy continues to be a challenge because the energy costs are kind of determined over the last six months of fuel surcharges and all our averages of six months. And if you see the last — every time the last six months average are still going up, they’ll probably start coming out six months later when you energy guys have corrected just recently. So this — in general, I see no further cost increases, substantial cost increases in the future and maybe slight cost decreases.

The next point is on the overall margin. Frankly, I would be disappointed if we just achieved the 17%, 18% margin before. We — with the economic of scale, we should definitely surpass that. There will be some period of — I think this year is a period of high capex — and once the utilization comes through, once the capacity utilization comes through, then I think the operating leverage will be substantial.

Until that happens, there may be some quarters of a little bit of a depressed margin because more stuff is going into inventory, for example. And when you go into inventory, there’s also cost of holding that inventory warehousing and so on and so on. But the key question is how quickly with our large capex that we are doing, we are able to achieve 18%, 90% capacity utilization. If this happens, which we expect to happen in a shorter period, then margins should bounce back much more than what they were before.

Pratik Dharmshi — Safe Enterprises — Analyst

No. The second one, you mentioned outsourcing because the new capacity is not there and furnace was than there existed financial to outcome. What area technically.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Yes.

Pratik Dharmshi — Safe Enterprises — Analyst

So how much did you see for outsourcing? Can you quantify the number? Like out of the INR70-odd crores of sales, was it like…

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I would not like to say the exact number that we bought and get into that. But what I can tell you is that our owing to these two reasons, the for is being short and the fixed cost being there and as well as the higher cost of outsourcing compared to our own production. I think our EBITDA loss would have been in the range of between INR16 crores and INR20 crores in this — in the nine month period. I can’t put it every quarter because each quarter, there will be some impact of it on at least Q2 and Q3. So if we put together would somewhere be closer to the two crore.

Pratik Dharmshi — Safe Enterprises — Analyst

Sure. And just the last one. Let me try to results. So now the business mix is with appliances really going fast. — the non-asset is like 40% of the business. Borosil another play to four and the rest is your glasses sort of question. In terms of — I understand you won’t be able to put the numbers in terms of gross margin. But in terms of actually the differential, is it like possible to quantify penitential, let in terms of gross margins…

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I think frankly, the gross — it doesn’t happen, of course, we quantify it on a regular basis. But that’s not something I would like to share. But the — what I can tell you is you are looking at it just from a gross margin point of view, is probably, in my view, not — I mean it’s not to look at it, but that’s not the only thing, okay? — because when you have higher gross margin, as we do say in the case of Opal Larah, and we will have this in glassware also when our new production line starts up in June, July of this year. The gross margin comes at a cost of capital employed, okay?

So one must look at a return on capital employed metric, which, in my view, will be much — it’s a more risk-adjusted way of looking at the business versus looking at only gross margin because we give up gross margins on one side, but we — what we get is much lower capital employed on the other side. So if you look at it from both perspectives, I would say both businesses would be comparable. They’re not the same. They are comparable within plus/minus a few percent percentage points of each other on a rookie basis. So that’s what I can share with you. And that’s how we look at the business, not simply from a gross funding perspective.

Pratik Dharmshi — Safe Enterprises — Analyst

Sure. Thanks a lot.

Operator

Thank you. The next question is from the line of Sourav Savla from Multi-Act. Please go ahead.

Rahul Picha — Multi-Act — Analyst

Yeah, This is Rahul Picha from Multi-Act. So wanted to understand, firstly, on the Opal were trading side. So you said that the traded portion, you call them as is. So are they comparable in quality to the Opal that you manufacture or it’s some other materials?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Just in traded, we bought raw material, which is whiteware. — and we decorated, we temper it, and we do all the quality checks on it. And the decorations are our again we are — this is full production. The only thing we don’t — we are buying the plate, the white place, which aren’t tempered white plates or the goals, whatever it is. So the quality is goal quality. There is no difference in the quality metrics between what we have sold this quarter from that versus what we make ourselves. It’s 100% goes through the same quality control processes. So it’s — like I said, it’s not traded, it’s fully produced…

Rahul Picha — Multi-Act — Analyst

Okay.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Manufacturers.

Rahul Picha — Multi-Act — Analyst

Okay. And after the capacity expansion that you are doing in that segment, the current capacity plus the new capacity, both combined — on a combined basis, what kind of annual revenues could that support?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

If we are achieving 100% capacity utilization, then I think the number would be closer to INR400 crores INR40 crores or INR20 crores.

Rahul Picha — Multi-Act — Analyst

Okay. Okay. Got it. And on the marketing spend, so for the Consumer division, what was the marketing spend for this quarter and the nine months in percentage terms?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

This quarter… Roughly 7%.

Rahul Picha — Multi-Act — Analyst

7% for the quarter.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Yes, that’s right.

Rahul Picha — Multi-Act — Analyst

And for the nine month period?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

More is develop.

Rahul Picha — Multi-Act — Analyst

Okay, okay. Thank you.

Operator

Thank you. The next question is from the line of Manav Vijay from the Financial Consultants. Please go-ahead.

Manav Vijay — The Financial Consultants — Analyst

Yes, thank you very much sir for the opportunity, sir. My first question is regarding the expansion that the company is doing. So first is the Larah, which you said is done. Second, you mentioned is the Borosilicate which will complete by quarter 2. So if you can also enumerate what — what is left, which will be operational in the next two more quarters that was really helpful, sir.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Yes. So as far as the consumer, I guess your question is for consumer, right?

Manav Vijay — The Financial Consultants — Analyst

Sir, I’m looking at — I would say the entire expansion that the company is doing.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Okay. So look, there’s the borosilicate the press production, we are — we’ve already — we’re investing roughly INR115 crores. This will be concluded by June, July, August in this time frame. Again, the reason I’m not able to give a very specific date is because of supply chain challenges from some machines on planes that we have, but broadly in that phase. We have an injection molding unit, which is supposed to make plastic lids for these products, that should also — that should start somewhere in April of this year. And so these are two capex both in therefore that we’re doing.

On the scientific side, we have capex done in Klass Pack, which is to increase our production of vials as well as app fuels. And this was, I think, broadly put INR65 crores, which we had discussed about two years ago. And I think all of this should be through by July, August as well of this particular — maybe by September, again, some delays on machine supplies. And as far as we had announced a tubing project as well. The tubing project has been on hold for a certain period of time. But probably in this quarter, we will take a — we’ll finally go ahead with that as well.

And that would take — depending on the way it works, it would take anywhere from 12 months to 18 months for it to rectify. For that, the land is already available and all the infrastructure and broadly available. So it’s will be a faster one to implement. So these are the main capexes. On the front end, we have done a bunch of capex on the IT side, for example, we’re upgrading to SAP to S/4 HANA.

We are upgrading our front-end data, the data management systems. So all of that is in process. That also will be through. So the entire capex, which we have, I think, highlighted many times in the calls, let’s say, in the previous quarter’s calls would be through by December of this period, this year or later say, by March of ’24.

Manav Vijay — The Financial Consultants — Analyst

And the total capex amount stands at what, sir?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I think it was roughly INR600 crores. Including income… Including the two plants, INR60 crores, INR20 crores, something in that range.

Manav Vijay — The Financial Consultants — Analyst

Okay. Sir, my next question is on the PPT that you have issued. So on page number eight, slide number eight of the PPT, when you provide the consol numbers. So you provide one number of EBITDA at INR39.1 crores and the exceptional items. So I was EBITDA-contem of 21.3%. So this is around INR18 crores of business as the exceptional item. Now is this the exception item which you called out in the consumer, whereas three items of the Larah buying from outside the A&P and the higher — and also the product mix.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

No, no, that’s very much a part of normal business. So that’s margin exceptional item. The exceptional item is on to sale of land at Tarapur, which was about INR13 crores profit in INR13.5 crores of profit booked in that and some insurance refunds we got of roughly INR four crores, which were — so these are the exceptional items, which are one-off in nature. The — those three things which I mentioned on Larah, that’s a part of normal business and is accounted as such.

Manav Vijay — The Financial Consultants — Analyst

But sir, INR13 crores of profit that you have booked by selling the land in Tarapur is actually form part of the other income, right?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Yes, that’s right.

Manav Vijay — The Financial Consultants — Analyst

So I’m talking about — so what you disclosed is an EBITDA of INR21.3 crores. And then and then in the PPT, you mentioned EBITDA before exceptional items of INR39 crores. I was trying to understand this — I would say, this INR18 crores of exceptional, so what this number is all about? This INR30 crores of profit that you have made on sale of land forms part of other income?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

That’s right. So we are trying to explain what is the EBITDA for operations, okay? So the EBITDA from operations is INR21.3 crores…

Manav Vijay — The Financial Consultants — Analyst

Correct.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

It exceptional items. EBITDA goes up to INR39.1 crores, okay? Those exceptional items are the sale of land which is the Tarapur property, which is roughly INR13 crores of profit booked there and another INR4-odd crores from insurance. So that’s a difference is INR17.8 crores, which you see between 21.3% and 39.1%. The difference is coming from there. So this EBITDA, which you see is the reported EBITDA. This includes those exceptional items. We are trying to call it out last year, and you can see the EBITDA and the EBITDA before structural items on the same slide is the exact same number.

But this year, we try to — in order to show our operating performance because neither the insurance nor the sale of Tarapur a part of operating performance. Our EBITDA was actually INR21.3 crores and not INR391 crores, which is reported because when you do other income, you’re right, coming in other income. When you look at the results, the other income is already coming as a part of the EBITDA. But we are trying to show you that the EBITDA is not actually 31% is lower than that. the EBITDA from operations that I’m saying is go than 39%.

Manav Vijay — The Financial Consultants — Analyst

Okay. Sir, my next question is now on Larah. So a couple of quarters, you had mentioned that in the anticipation of this new furnace becoming operational, you have put up a sales team so that as in this furnace becomes operational, you will start to hit the ground running in terms of sales from very early. Now if you can, let’s say, help us to explain as to — so in terms of efforts that team would have made by when can we expect, let’s say, a 40%, 50%, 60% kind of utilization from the new furnace, including the old one including, I believe the old one would be running at full, but the new one.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

50% should start immediately. How to go to 100%. That’s really the focus.

Manav Vijay — The Financial Consultants — Analyst

Okay. So sir, by bank, I would say — so since that sales team is now there for was the last few quarters with you, how soon can you expect this to this thing to happen?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Look, it’s hard to give an exact time line, but in general, the reason we put up a furnace is we call our sales requirements. And I mean, I’m not sure exactly what we do about sales team because our sales teams have been growing for many years now. But in general, the point here is that we are — we expect 30%, 40%, 50% capacity galization from the starting point is from day one itself. And that should happen in — that should happen immediately. How the key challenge is not that.

The key challenge is how do I get to 100%? How do we get to 100%, which is as our projections will happen next year, and we would like real next year, I mean in ’24, ’25, and we would really like it to happen at 2324. That’s really the difference. — and we are trying to achieve that. We’ve had to achieve our core or to achieve 100% capacity utilization in 2024 itself. That may not be a realistic stretch goal. But by 24, 25, I’ll be confident we can achieve the 100% number. And as far as 30%, 40%, 50%, that should happen straight away from this quarter itself.

Manav Vijay — The Financial Consultants — Analyst

Okay. Last question.

Operator

I would request you to rejoin the queue for follow-up questions. Thank you sir. Any other — we have the next question from the line of Gugadi [Phonetic] from Ashmore Group. Please go-ahead.

Gugadi — Ashmore Group — Analyst

And for the opportunity. I joined the call a bit late. I just wanted to know the reasons that led to a low EBITDA margin this quarter? And how do we look at the margins in the upcoming quarters? What are the key headwinds that you sort of expect will go away…

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

So Bakam, I already explained this in detail during the call. So rather than repeat what I would urge you to do is I’ll send you the — I’ll ask my IR team to send you the call transcript. So because otherwise repeat it, it’s a very long explanation.

Gugadi — Ashmore Group — Analyst

Yes.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I hope that works for you.

Gugadi — Ashmore Group — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Aditi Bittar from Mivisa. Please go-ahead.

Aditi Bittar — Mivisa — Analyst

Hello. Yes, good evening, everyone. So my first question is from the glass tubing capex that was kept on hold. So you just mentioned that you will be carrying it on from this quarter. So to my understanding, this capex, you are not looking for any other alternators now. And till the time it is operational, our requirement will be imported. So what was happening till now? Is it right?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Yes. I mean we are working on what of exact options available to us. We are evaluating our options, but I think we will take a final call on which option to pursue before this the quarter ends.

Aditi Bittar — Mivisa — Analyst

Okay, okay. And the glass tubing cost, which was — which we see an increase in prices since the last quarter, do you see that to normalize in the coming quarters?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Yes. In general, the main reason for the increase in pricing was the freight costs, okay, which has hired. And those trade costs have since gone back down to more or less before COVID. And therefore, our tubing costs have corrected substantially.

Aditi Bittar — Mivisa — Analyst

Okay. Okay. And my next question is on the press split. So when we see the press facility being operational from the quarter one or two. So how much percentage do we see the offset and imports that we are coining from China outsourcing it from China?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

So as far as all the press where we are buying today from China, not just China, we back from Europe also, we will be able to substitute 100% of that with our own production.

Aditi Bittar — Mivisa — Analyst

Okay, okay. And what is the like revenue content revenue that you see from the facility?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Look, here, there’s a big gap between what we currently sell and what press were production we’ll have, okay? So I think we will have somewhere close to 6,000 tonnes per annum, but our sales may only be 2,500 tonnes per annum at the moment. So currently, 40% of — we see 40% capacity utilization. And that’s our biggest challenge going forward is how do we grow again from 40% to 100% of at utilization. And that’s what we are working on in terms of new product development, in terms of distribution enhancement in terms of export sales.

So I hope — and this will not happen in year one for sure. Like in the case of Opal, we have a chance that our second furnace we can sell within one year, okay, and cheap. But the press was will take at least a couple of years for us to come to 18%, 900% compactization — and even if you achieve that, that will be a very good achievement for us. But the margins are worth because the return on capital will be extremely attractive if you’re able to…

Aditi Bittar — Mivisa — Analyst

Okay. Okay. Thank you. That’s all from my side.

Operator

Thank you. A reminder to all the participants. [Operator Instructions]. The next question is from the line of Jim Modi from EIMM. Please go-ahead.

Jim Modi — EIMM — Analyst

Yeah, Sir, I had a couple of questions around consumer business. So one was when we look at our nine month three year CAGR for this division, but last year as the business has been growing only in mid-single digits. Now is this how we should look at the growth for this category? And incrementally, all the growth will be driven by non-mastered — or for a multiple of other reasons, the glassware currently would be showing subdued growth and this would likely pick up going forward?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

No, frankly, that — we — the whole reason to put up the production here is to grow this business aggressively the glass, and we believe we can. The challenge in the business has been a substantial increase of procurement costs, which we have been passing on to the end customer. And at some point the customer is not wanting to pay for it. So when we have our own production here, we should be able to give the customer a value proposition that makes the everyday use product which why Opal grown so much and why has the non-glass like say, appliances or hyper grown so much is because as a product family, customers are using these product families on a day-to-day basis, whereas the glassware people are using only on occasions. And that is because of the pricing. So we would have to give an attractive offering to the end customer and say, okay, [Foreign Speech] even replace it.

So that is really the key driver for us to give an attractive price offering to the end customer and make them more accustomed to choosing to serving eating, storing in glassware. If that happens, then we are through. And unfortunately, in the last three years, because of the tremendous price pressure of imports from both Europe and China, both in terms of material costs, energy costs as well as the freight costs, we have not — we had to take a lot of price increases, which we can reverse once this is made in India.

Jim Modi — EIMM — Analyst

Understood. And this — so the Borosil selected press line is predominantly to backward integrate for base the glasses wrote that we are currently selling.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Exactly right. Exactly…

Jim Modi — EIMM — Analyst

Okay. And earlier, you mentioned that 40% of the capacity will be utilized for captive consumption. So this 40% essentially substitute are…

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

That’s right.

Jim Modi — EIMM — Analyst

And what would be the cost savings that we would have on this backward integration?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I think it’s more than 32%.

Jim Modi — EIMM — Analyst

Okay. Sir, secondly, it was around the marketing expenses. You mentioned one of the reasons being higher marketing spends for subdued EBITDA margin in Consumer business. But when we look at your historical grain, it has been in the range of 7% to 8%, right? The spend in consumer business?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I think last two years, over years have been lower than that. But yes, before COVID, it was higher again… you’re right.

Jim Modi — EIMM — Analyst

Okay. So 7% to 8% has been a normalized range please for it as well?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Yes, pre-COVID was. Then during COVID, of course, we reduced the spend. But now they’ve gone back to three governs.

Jim Modi — EIMM — Analyst

Got it. And do you say last advertisement spend or even promotional activities would form balances?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

No, this is — I mean, there’s many ways of — the definition of promotional activity needs to be clearly understood. But effectively, this is mostly advertising spends promotions. So any kind of price promotion is added in sales only. So meaning that’s not a part of this. But sometimes, there are promotions which are linked to, let’s say, a price strip for a distributor, which is an achievement of a certain, let’s say, or even for a retailer for that matter, for achievement able certain volume of sales at the end of the year, that would classify as a sales promotion expense, and that is a part of this stantiate promotion. But any price discounts or customer offers, which are anything related to pricing is coming — that’s netted off from the sales.

Jim Modi — EIMM — Analyst

Got it. Got you. And then I had a question on the margin. So earlier you alluded to the question that you would likely reach back or exceed your 17%, 18% margin that you’ve historically done. But until we have our utilization on press line and 100% utilization in Opal were. So for FY ’24, these margins would likely be tending towards the lower rate? And it is only by FY ’25 as we see a pickup?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

FY ’24 also, I think we should come back at least to this range because the — I mean if you — I gave a number earlier in the call about the difference of this quarter and lastly, last four, five months on the difference of whether if you manufacture the same product which we acquired as well as shutdown costs. So my sense is that we should be able to come back to the original margin level in the coming period or periods themselves and higher, yes, to get a higher margin than before, I think we would probably look at the period where our utilization is better. In this case, I think it is safe to say that it will happen post April 24.

Jim Modi — EIMM — Analyst

Got it. And sir, how was the demand scenario being for the month of January? And also, have you seen any competitive pressure with respect to pricing or import products when it comes to Opal specifics?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I don’t want to talk about quarter-on-quarter in general, a paste January specifically, but I would say that in general, and this question was asked in a different way earlier also that different categories, we see some months higher demand and other much lower demand. But overall, I don’t see much challenge from market demand idle. And pricing pressure, I think all the players are quite mature in the market. There’s enough demand, whether in domestic or export markets, and I don’t see that high level of pricing pressure in the market. Frankly.

Jim Modi — EIMM — Analyst

And sir, just last question from my side was on the capex. So you said around INR600 crores of capex is what we are doing.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

That’s right.

Jim Modi — EIMM — Analyst

Okay. So this is — can you rate so we have the breakup for consumer business? And what is the amount which is going in scientific business and between classic and other segments?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I can just come back to you on this. This number was shared before, but I don’t have it right now, exact numbers. I can come back to you on this.

Jim Modi — EIMM — Analyst

That’s it from my side, sir. Thank you.

Operator

Thank you. The next question is from the line of Priya Chira from Vallum Capital. Please go-ahead.

Priya Chira — Vallum Capital — Analyst

Hi, thanks for the opportunity. Sir, I just wanted — I heard you that there are — you said that there are chances of a new capacity in the Opal were getting sold within a year. So just wanted to understand what are the demand drivers for this category, while the other kitchen appliances are witnessing a slowdown from the cover pent-ups that you have been seeing. So specifically looking for the steps that the players like you or the market leaders are undertaking to convert this category to a strong demand.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I think there’s a lot of replacement happening here. Look, there’s no formal research. So anything is basis, just ideas we get from the market and we need — they are not validated by third parties. But my sense is [Indecipherable] that there is a lot of replacement demand, which has happening change from steel and plastic to melamine. — people in general want to upgrade their lifestyles and Opal is very, very price attractive from my end usage point of view, it’s very attractive from a design perspective, even microwave and so on.

So even if the market overall may be having a slower growth, but because of the replacement from one product at to the other, I think Opal is a little bit insulated. Plus, like I said, Horeca hotel resorts catering is opening up again after forward, and that is also a demand driver. And finally, exports, our competitors plier in Europe are in severe financial distress. And therefore, they have shut down some production, and therefore, export opportunities are also open for all the players here. So these are the three probably reasons why we see that Opal glass is to grow.

Priya Chira — Vallum Capital — Analyst

Sure. So time I look once again. I know you do not disclose the margins with the categories within the consumer. Just wanted to have a sense around the indicative margins on the stealstate level, what would be the margins for the Opal ware and in case post capacity additions, would the margin profile change significantly? Or would it remain change?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Sorry, I’m sorry I share that with you. But I can tell you that operating leverage, which is the second part of the question, yes, there will be some level of operating leverage and that could increase our margin by 3%, 4% compared to what it were before. So I think the Larah EBITDA margins we have shared, EBITDA not gross margins in the past and they were around 27%, 28%. So yes, so in that range. And the EBITDA margins could improve once we have the full capacity in utilization by 3% to 4% basis operating leverage.

Priya Chira — Vallum Capital — Analyst

Thank you.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Amish Kacker of Individual Investor. Please go-ahead.

Amish Kacker — Individual Investor — Analyst

Thank you for the opportunity and congratulations on a very good set of revenue numbers. same as your INR1,000 crore mark a little bit over 12 months. So two questions. First one on operating capital. Is there something we should read into the decline we’re having quarter-on-quarter? Or are there too many moving parts in this quarter to really think about that seriously?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

No, at it’s all business as usual. There’s nothing to report. There’s a lot of moving…

Amish Kacker — Individual Investor — Analyst

Lower inventory because we didn’t have on production, etc?

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

I mean there was slight lower inventory, no doubt about that, but it was made up from other areas where we have more inventory. So I don’t think there is — I mean we are not controlling for that number, frankly. We are controlling for sales and profitability. The operating — the capital employed, whether inventory, obviously, we try and optimize it. But that’s not a straight, let’s say, that’s not the inventories on the goods to sell more.

Amish Kacker — Individual Investor — Analyst

Right. Sure. Sure, sure. The second question is on the scheme of arrangement restructuring. Is there anything you can share at this stage on where you see your role? And as a request, would it be possible also to introduce us to the presidents of the two divisions, perhaps from the next call, just so we can get more familiar with them.

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Yes. So that’s the idea is that from the next — as the arrangement team of arrangement has done, the heads of the business units will start taking these calls. As far as my role is concerned, frankly, the businesses are anyway operated as separate units. And that’s — so frankly, the scheme of arrangement only captures in a legal format, what has been happening in the last many years.

So I don’t anticipate any change per se in the — in my role, obviously, because of legal reasons, I have to be MB1 company, I don’t think I can do both. So I have to star that bugged it out. But in principle, the business operations will be business user from our perspective because that’s how the business has been run and will continue to be run…

Amish Kacker — Individual Investor — Analyst

Thank you sir.

Operator

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

Shreevar Kheruka — Vice Chairman, Managing Director and Chief Executive Officer

Thanks, Michelle. Well, thank you all for last questions, really appreciate it. Like I said before, we are very bullish and excited about not just the — what’s happened in the past, but what’s going to happen in the future. The margins definitely have been under pressure in this period. But again, the good thing is that most of these problems are — all these challenges are specifically to Borosil and therefore, in our control and not macro challenges. And therefore, we feel reasonably confident that we should be able to get back to levels before and even exceed them.

Our main challenge here is really capacity utilization of the borosilicate furnace and how quickly we can achieve that. Of course, operas for is, we have more reasons to believe that we should be able to achieve a higher level faster than we had fully anticipated. But the borosilicate furnace, we need to spend a lot of thought on how do we make that product category everyday use. And if we are able to successfully do that, I think we will solve that capacity utilization problem also.

On the scientific side, the things are broadly on track. Klass Pack and Bosil technology has been a drag on margins and cash back on revenue growth also, at least for this year. But if we look at the larger themes, there are many, many green shoots in worse technologies, which we are seeing develop and Klass Pack should come up back to a level of growth and therefore, better operating margins. So both of these, say, divisions will do well, I think, in the periods ahead, and we should be able to be market-leading in terms of growth and profitability in both of these areas. So with that, I thank you all and look forward to interacting in the next quarter.

Operator

[Operator Closing Remarks]