Cosmo First Ltd (NSE: COSMOFIRST) Q2 2025 Earnings Call dated Nov. 14, 2024
Corporate Participants:
Neeraj Jain — Group CFO
Pankaj Poddar — Group CEO
Analysts:
Nirav Jimudia — Analyst
Aditya Vora — Analyst
Ayush jhunjhunwala — Analyst
Arya — Analyst
Rajkumar Vaidyanathan — Analyst
Bhavesh Chowhan — Analyst
Saransh Gupta — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Investor Call of Cosmo First Limited to discuss the Q2 and H1 FY’25 Results. Today, we have with us from the management, Group CEO, Mr. Pankaj Poddar; and Group CFO, Mr. Neeraj Jain.
Starting off with the statutory declaration. Certain statements in the conference call may be forward-looking. These statements are based on the management’s current expectation and are subject to uncertainties and charges and changes in circumstance. These statements are not the guarantees of future results. As a reminder, all participants’ lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the opening remarks concludes. [Operator Instructions] Please note that this conference is being recorded.
Now may I request Mr. Neeraj Jain to take us through his opening remarks, subsequent to which we can open the floor for the Q&A. Thank you, and over to you, Neeraj sir.
Neeraj Jain — Group CFO
Thank you. Very good afternoon, ladies and gentlemen. I am Neeraj Jain, Group CFO at Cosmo First, along with my colleague, Mr. Pankaj Poddar, Group CEO at Cosmo First. Our financial results for September ’24 quarter and investors presentation both are available on the company’s website. We are first going to discuss a brief on the performance of the company for the September ’24 quarter, which may be followed by the questions.
So consolidated sales for the September ’24 quarter is INR759 crores, which is higher by 14% from September ’23 quarter. Primarily this increase is due to higher specialty sales, which has grown for us by about 12%, higher volumes and better margins. The EBITDA for the quarter is INR107 crores compared to INR72 crores in September ’23 quarter. The improvement in EBITDA is backed by higher specialty sales, enhanced volumes and better BOPP films margin. The specialty has increased by 12% in September ’24 quarter compared to September ’23 quarter. On YTD basis as well, the specialty sales is running higher by about 13% compared to last year.
The company has reached specialty sales of 70% of total volume in quarter two FY’25 as against 64% in FY’24. The quarter two EBITDA would have been even higher, but was impacted by non-repetitive inventory loss due to drop in the raw material prices during the quarter. BOPP film margin has been running at INR25 per kg in September ’24 quarter as against INR19 per kg in June ’24 quarter and INR18 per kg in September ’23 quarter. The BOPP film margin has improved in quarter two due to better demand, partially due to pre-Diwali season.
Coming to BOPET vertical, BOPET vertical, which is about 9% of company sales during quarter two FY’25, has also witnessed better margins and posted double-digit EBITDA in quarter two FY’25 for the first time since its commissioning in FY ’22-’23. This is largely due to better demand.
I’ll move to outlook. The company is expecting improved sales of specialty as well as domestic BOPP film margins are expected to remain broadly range-bound in FY’25. The first rationalization on renewable power for Maharashtra plant has started from mid quarter one FY’25 and is seeking to achieve estimated annual impact of INR22 crores to INR25 crores from the same. The company is working on some more power course rationalization projects, impact of which should be visible from FY’26 onwards.
Moving to specialty chemicals subsidiary. The subsidiary has commercialized multiple chemistries including for the adhesives, coatings and master batches and is facilitating improvement in EBITDA and return on capital employed for FY’25. The specialty chemical subsidiary is advancing well to achieve high-teens EBITDA and 30% plus return on capital employed in FY’25.
I’ll move to growth projects related to packaging. We started rigid packaging vertical under brand name Plastech in second half of FY’24, which is related to, of course, packaging industry. The business vertical is growing well with addition of injection molding from quarter one of FY’25. The vertical is moving in line with plan and is expected to achieve profitability as well as 90% plus capacity utilization from FY’26 onwards. Work on CPP and BOPP lines is progressing well. We are expecting CPP line to start commercial production either from quarter three or quarter four of FY’25. The BOPP line is estimated to start commercial production from first half of FY’26. As indicated in past, both the lines will be world’s largest production capacity lines and will increase company’s production capacity by close to 50% in a phased manner. With high-speed large width line, it will rationalize cost of production between 3% to 4% depending on the product.
We’ll move to pet care division, Zigly. In Zigly, we have launched multiple private labels and enhanced our pet care services to improve gross margin as well as optimize certain costs, thereby reducing losses.
Growth and net debt status. The company is looking for about INR300 crores to INR350 crores of capex in FY’25, mainly related to BOPP line and some projects to enhance the specialty sales. The financials remain strong. The company’s net debt at September ’24 is INR698 crores, which is 2.2 times to EBITDA and 0.5 times to equity.
So with this, I will take a pause and would like to open the call for questions, please.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Nirav Jimudia from Anvil Corporation. Please go ahead.
Nirav Jimudia
Yes, sir. Good morning and thanks for the opportunity. So I have few questions. So first is when we look at our BOPP volumes, our share of specialty volumes have been consistently going up. And you mentioned that that number should further look up as we progress towards the subsequent quarters. So just wanted to understand from you like in the annual report also we have mentioned that we have launched 10 new innovative products in FY’24. So out of our total BOPP sales, how much is the share of specialty volumes in the export market? And if you can help us understand which of the geographies we are majorly exporting to? Hello?
Operator
Ladies and gentlemen, we have lost the management line connection. Please stay connected while we reconnect them. Thank you. Ladies and gentlemen, thank you for patiently holding. We have the management line back on the call.
Nirav Jimudia
Hello.
Operator
Yes, Nirav, please go ahead with your question.
Nirav Jimudia
Yeah, sir. So sir, my question is predominantly on the specialty volumes for BOPP, like when we see our annual report, it mentioned that we have launched close to 10 new innovative products in FY’24. So if you can help us understand like out of our total volumes for exports of the BOPP, which of the major geographies are we currently exporting to?
Pankaj Poddar
So we are actually exporting to multiple places, but a large part of the specialty goes to U.S. and Europe. And of course, as you know, we have subsidiary operations in U.S., Japan, Korea. So all these places we sell specialty. If I have to sum-up broadly more than 80% of whatever we export is specialty today. So I hope I addressed your question.
Nirav Jimudia
So out of the 70% of the specialty volumes, close to 80% is in the exports, correct?
Pankaj Poddar
Yes. So I said whatever we are exporting, more than 80% is specialty.
Nirav Jimudia
Got it, got it. And sir, when we compare ourselves with the local competition there in Europe and USA, how we are placed in terms of our products. So just wanted to understand when we say specialty, what sort of product differentiation we offer to the customers there so that we can have an edge over the local competition.
Pankaj Poddar
So you will notice the large part of our specialty, we are one of the top four, five players across the globe. So if we have to indicate large product basket, let us say, thermal lamination where we are the market-leader globally. We have highest production capability as well as the market share in the world for thermal lamination. Similarly, for the coated label as well, we are one of the top three players in the world. So all major product categories where we operate in specialty, we are one of the top player.
Nirav Jimudia
Right. And sir, is it possible to quantify the market size for the specialty grade BOPP in India or let’s say, in the export markets where we operate?
Pankaj Poddar
Our market size versus the competition? Correct.
Nirav Jimudia
So no, even if you can share the total market size of the specialty grade BOPP in India and in the export markets where we are currently operating on.
Pankaj Poddar
You see, in India, we practically dominate the BOPP-based specialty products. So we would be more than two-third of the specialty product which is getting sold in India is from Cosmo. In overseas places, it depends on the geography. But for the large product basket, as I said, we’ll be having a reasonably good market share in large product categories in which we operate in specialties.
Nirav Jimudia
Got it. And sir, generally, when we introduce a new product, how much time it takes for the customer to approve our product and volumes to be at a reasonable levels?
Pankaj Poddar
It depends actually. So we at times develop particular product for a customer or the end-user of the FMCG company. So in that case, generally, we take some kind of a softer commitment for the volume for the one year, two year, three years period. Otherwise also the — it depends on the product, how you develop, but you know generally in our experience, we have seen the — if the product is good, you easily get the good ramp-up.
Nirav Jimudia
Got it, got it. Sir, second question is on the specialty chemicals. So I think we have close to around 17,500 metric tons of capacity spread between master batches, adhesives and coating chemicals. So if you can help us understand based on the current capacity what we have at what level of utilization rates we have operated in Q2 and when can we see the full utilization of these capacities and what sort of turnover we are expecting once we are fully utilizing this?
Pankaj Poddar
So you see, in quarter two, we did close to INR48 crore of top line is specialty chemicals. And as you know, one part of the growth is expected to come with the BOPP and CPP lines getting commissioned, which we said CPP line is expected to get commissioned by the end of the year — current financial year. And from next financial year, the BOPP line is expected. So with both, of course, the volume will increase for the specialty chemical division. Besides this also third-party sales is also ramping-up in specialty chemical division. Our current capacity should be able to generate close to INR300 crores of the top line at full capacity utilization, depending on the product — I mean the vertical because within specialty chemical, we operate in master batches, coating chemicals and adhesives. Right. We may be running for master batches close to 70%, 75% of the capacity utilization. And for adhesives and coating chemicals, maybe between 50% to 60% of the capacity utilization, which we expect to increase from the next year.
Neeraj Jain
On a very broad level, we are running at a run-rate of INR200 crores. And with the current capacity, we can touch anywhere between INR325 crores to INR350 crores.
Nirav Jimudia
Got it, got it, sir. And sir, this quarter we have seen the jump in the profitability. So was it because of a product mix change or because the numbers looks very, very superb in terms of when we see last quarter versus this quarter. So if you can help us understand the improvement in the margins for specialty chemicals.
Pankaj Poddar
Yeah. So it has two-parts. One is the operational EBITDA of the company, which in any case is ramping up compared to last quarter, there is an uptick in the quarter two operational EBITDA in specialty chemicals. Besides this, during quarter two, there is one-time income also related to government incentive in the specialty chemical, which is non-repetitive in nature.
Neeraj Jain
Yeah. I mean, for the prior periods, it’s non-repetitive, otherwise the incentive will be accruing on a yearly basis.
Nirav Jimudia
Got it. Is it possible to quantify that, sir?
Neeraj Jain
Close to INR7.5 crore, nonrepetitive in nature.
Nirav Jimudia
Got it, got it. And sir, last bit from my side, if you can walk us through the current market size of BOPP in India, what are the imports coming to India and how many new lines are scheduled to come up over next two years? Thank you.
Pankaj Poddar
Yes. So there’s not much import coming into the country unless there are certain cells that do not get manufactured in the country. Overall local demand is close to 50,000 tonnes a month and India is exporting another 15,000 to 20,000 tonnes of film and this largely matches with the supply situation. Over the next two years, some five to six new lines will come up. And we expect that on a monthly basis, they should add close to 15,000 to 20,000 tons of new capacity. And India is growing at roughly 10% to 15% on its demand in terms of BOPP. So we have to really monitor the situation once these new lines are added up.
Nirav Jimudia
Got it. So just to add here, sir, this five to six line is including our line also, which is coming up next year, right?
Pankaj Poddar
Yes.
Nirav Jimudia
So if you can split between CY’25 and CY’26 out of the six lines, how the scheduled commissioning of the lines would come up, that would be helpful.
Pankaj Poddar
Yeah, most of these lines will start from, I would say majority of them are happening in next year barring one or two lines. So majority of the additions will happen between April ’25 till December ’25.
Nirav Jimudia
Got it, got it. Thank you so much, sir and wish you all the best.
Operator
Thank you. [Operator Instructions] The next question is from the line of Aditya Vora from Share India Securities. Please go ahead.
Aditya Vora
Thank you so much for the opportunity and congratulations on a great set of numbers. Sir, I had a couple of questions. One is in terms of your packaging — your rigid plastics, you highlighted the fact that you are going to start — I mean, you’re going to achieve 90% utilization in FY’26 with profitability. Could you break up for me in FY’25, ’26 and in ’27, what could be the revenue and EBITDA potential?
Pankaj Poddar
Yeah. Next year we should be close to INR125 crores to INR150 crores in revenue if we do not do any expansions. However, we are looking to add some more injection molding, given that we will be fully utilizing our injection molding capacities. So — but yeah, right now, it’s looking between INR125 crores to INR150 crores.
Aditya Vora
Right. And what EBITDA would you be doing? What EBITDA margins would you be doing on that, a ballpark number?
Pankaj Poddar
Given that we will still be small in size, we expect to generate between 8% to 10% EBITDA. But as we continue to scale this vertical, the EBITDA margin should improve.
Aditya Vora
Right, right. And in the packaging space, I mean sorry in the rigid packaging space, FY’25, is it fair to assume that would be a loss?
Pankaj Poddar
This year, yes, we will be making a loss.
Aditya Vora
Okay. Okay. Sir, and secondly, I wanted to know about the sun control films. How is that shaping up? And again revenue and EBITDA potential for the next couple of years? And how is — I mean how is our product being received in the market?
Pankaj Poddar
So right now we are doing sampling across different parts of the country and different parts of the world. We are getting very good responses on our samples. We continue to introduce new products because in this business, we need to have at least 80 to 100 SKUs. It could be even more. So we continue to launch these new products, do research and launch these products. So we are hoping within this year, we’ll be able to commercialize the line. And once we commercialize the line, we should be having a good chunk of channel within India and globally. Obviously, the work will start from there. But yes, we will be launching close to 80 to 100 products by the end of this year and also ensure that right from beginning, at least we have at least 50, 60 distributors in India and at least 15 distributors globally.
Aditya Vora
Right, sir, so on the sun control films, how are we competitively placed as in? I wanted to know the positioning we are. There is Garware and then there are imports from China and Korea. So where is Cosmo placed in that entire value chain in terms of pricing and strategy?
Pankaj Poddar
So see, what we have smartly done is we have come out with a product which competes with Chinese product quite well. And we have some very-high range products also. So we have come out with products at different price points to take care of local competition and international competition, including Korean competition. And obviously, it’s not just about Indian market. We are going to — at least in the initial years, we’ll be focusing a lot on scaling up our exports. And the good thing about us is that we have presence — our own presence in Europe, America, Canada, Japan, Korea, and we are also looking to have some small sales presence in Mexico in the times to come. So we will have a lot of local presence, which should help us scaling up this business faster.
In the Indian market, nobody has educated the Indian customer about the benefits of putting this on their residential or official windows because the payback period is simply awesome. And the way the global warming is going up, it is going to become a need for every household or every office to have these films. So this education will obviously require more efforts and energy from us, which will happen in the second phase.
Aditya Vora
Right, right. So you’re talking about the architectural film, which will happen in the second phase, but the first phase will not be that.
Pankaj Poddar
Yeah, first phase is to acquire market share both in India and globally. And the second phase, we will educate the local market, which would require a lot of marketing efforts. That is going to happen in the second phase as where we’ll have to spend on the marketing side.
Aditya Vora
Okay. And lastly, just a bookkeeping question. You mentioned about the spreads for the September quarter. I think it was INR25, if I’m not wrong. What would be the current spreads or the average spreads in October and November? Has it gone down or how is the situation in the BOPP space?
Pankaj Poddar
They have become a bit subdued because of Diwali. It always happens you because 10 days before Diwali and five days thereafter the demand really takes a dip every year. So the prices had come down, but we have also seen a revival. So some price improvements have happened post-Diwali and I feel another 15 days, 20 days, it should further improve. Having said that, we continue to focus very nicely on the specialty, which is tracking well for us. And we are not seeing any significant impact to Cosmo because of these swings into the commodity market.
Aditya Vora
Okay, sir. Thank you so much. I have more questions, but I’ll come back in the queue.
Operator
Thank you. [Operator Instructions] The next question is from the line of Ayush jhunjhunwala [Phonetic], an Individual Investor. Please go ahead.
Ayush jhunjhunwala
Hi, great set of numbers and thank you for the opportunity. My first question is around our target for specialty that we had set for 80% in FY’26. Could you maybe talk about are we on track on that target? And also with 80% of our volumes, how should the revenue mix be? That would be my first question.
Pankaj Poddar
See, average selling price for specialty is higher compared to commodity part of business. So with 80% volume in specialty, more than 90% will be in terms of the value. We expect this year to be close to 70% of our volume coming from the specialty. I’m wrapping FY’25. So — and as we indicated, our target exit rate for FY’26 is 80% of the existing volume. So I think things are moving very well in that direction.
Ayush jhunjhunwala
Okay, great. Sir, my second question is around the cyclicality of margins once we have the specialty coming in. So in commodity, we see the margin fluctuate quite a bit, right, from 25 mean to 10 at the lowest. How should we think about the fluctuation in terms of margins when it comes to specialty? Some broad range in terms of movement. Yeah, sorry.
Pankaj Poddar
Sure. So specialty has two parts as you will see from our investors presentation. One is specialty and semi-specialty. For specialty, it’s largely insulated from industry ups and downs. Semi-specialty part of it will have a delta over the commodity margin. That delta always remains, but it is a little — it has some impact coming from the industry ups and down, but the impact is much lower compared to the commodity part of business.
Ayush jhunjhunwala
Okay, okay. Sir, my third question is, you know, with 35% increase in BOPP capacity next year, what — how should we think about the specialty percentage for the new line over the coming years? If you could give some indication.
Pankaj Poddar
So see, right now, we often feel restrained because of capacities. So the new capacities will help to scale-up specialties even faster. We are also adding assets to do more value addition in the coming months. So obviously, we will add lot of capacity, which is going to be very, very cost efficient because it will be one of the most cost-efficient lines in the world. So we will add lot of capacity. It definitely takes some time to scale-up the specialty. But the good thing is in BOPP, we have a very strong pipeline and that pipeline will help us scale these numbers much faster than a normal player can do that.
Ayush jhunjhunwala
Okay, okay. So Pankajji, this is a bit of a broad question. I mean in terms of the industry and Cosmo in particular, any secular trend that you are seeing this year or maybe since last year, which makes you feel a lot more positive or excited about couple of years of our future in terms of cosmic. So any — some insights if you could provide overall would be very helpful.
Pankaj Poddar
Yes. So, sir, lot of things actually. First thing is that, you know, many brands are moving towards recyclable structures, which are possible with polyolefin, which basically means polypropylene and polyethylene. That is one thing. So market is shifting more and more towards BOPP globally, not just India. Second thing is that our U.S., which had become subdued for a year, year and a half, actually our local leader left, he joined us and the market was also very subdued. That is picking-up and we feel that the political changes happening in America will also make that market much more robust. And third thing is one of the local players have shut down the capacities over there. So all those three factors are giving us lot of robustness in U.S. sales and that is the second thing. Third thing is that specialty chemical vertical is coming out very well for us. So all the efforts that we have made in R&D are shaping up the chemical vertical and we are able to make quite a decent profitability.
In Zigly, we have done many improvements in last few months, whether improving our intake margins, whether launching private labels, focusing on vet care in a very substantial way, cutting down cost. So Zigly is also showing a very positive trend where month-on-month, we are seeing a sales growth and also improved margins and reduced losses. So Zigly again is very positive. We feel that we will be able to make profitability in this business much faster than anybody would have done this, you know. And now we are opening up many new centers. So we were consolidating in last eight, nine months to do all these improvements. And now we are at a stage where we’ll open many new centers over next six to 12 months.
Sun control is another business which will help us improve our EBITDA margins. It’s generally a very profitable and technology-oriented business and we have done a very decent job in terms of making the right set of products in the first go. Obviously, this business will take couple of years to be properly profitable. But once it starts turning profitability, it will give very good results.
So we are in general, quite optimistic with all the things that we have done in the business. Even in the polyester, we are coming out with a couple of product lines where we feel very confident where there are hardly one or two players in the world and there also we will start tracking our specialty business in the years to come. So whether it is a film business, whether it is window films, we are also about to launch paint protection film in the market. That’s a beautiful addition to our window film or chemical or Zigly, all these businesses are doing very well. And even the Plastech business will have far more stable profitability, unlike film, which in the past used to see a lot of up and down. Our Plastech also is a business which goes directly to brands. It’s a cost-plus business and should have much more stable things. So we feel very optimistic about our future.
Ayush jhunjhunwala
Excellent. That’s great to know. Just a word of appreciation before I hand over the call to the next participant. I have some industry friends who are a buyer of Cosmo films and they always have very good things to say about the — especially the quality of Cosmo, which is far superior compared to any which is available in the market. So a great job on that. So thank you so much for your positive once again.
Pankaj Poddar
Thank you. Just to add there, any customer which wants to do export, I’ve seen seven on 10 customers are more comfortable with buying Cosmo and using film for their export operations. So thank you for that appreciation.
Ayush jhunjhunwala
Thank you.
Operator
Thank you. The next question is from the line of Arya [Phonetic] from Maximal Capital. Please go-ahead.
Arya
Thank you for the opportunity, sir. My first question is regarding there is an inventory write-off in the current quarter. Could you please quantify the amount if possible?
Neeraj Jain
Inventory you asked?
Arya
Yes.
Neeraj Jain
Which inventory? Inventory loss you are asking?
Arya
Yes, this inventory loss, one-off loss which has happened —
Neeraj Jain
Yeah, yeah, INR7 crores.
Arya
Okay. Thank you. My second question is, as we can see the net debt is increasing quarter-on-quarter. So could you please specify the exact [Technical Issue] that it has been used and for the guidance for net-debt in the quarters?
Pankaj Poddar
Yeah. So see we feel that we will peak our debt this year because the next year we have not planned any substantial capex. So it will peak this year and from the next year, you should start seeing this coming down.
Neeraj Jain
Even at the March ’25 also, you will notice net debt to EBITDA to be close to two times only. And of course, net debt to equity should be close to 0.4 times or 0.5 times.
Pankaj Poddar
Obviously, we have done a lot of capex in the last two years and many of these capex will start delivering results. We expect Plastech to be breakeven slightly profitable by quarter-four. Zigly, we have cut-down losses, film profitability is getting better. Chemical has started showing promising results. So all these things will start playing out where all the capex that we have done in last two years will bring returns on capital employed.
Arya
Sure. Thanks. And sir, lastly, the margins are also improving quarter-on-quarter, which is for both [Technical Issue]. So could you please guide me numbers for the [Technical Issue] H2.
Pankaj Poddar
We normally do not give guidance still. But in general, we are quite positive about the way things are happening in our different businesses.
Neeraj Jain
And on the top of it, the order book for the specialty is running one of the highest actually highest-ever.
Arya
Okay, sure, sir. Thank you. That’s all from my side. All the best.
Operator
Thank you. The next question is from the line of Rajkumar Vaidyanathan, an Individual Investor. Please go-ahead.
Rajkumar Vaidyanathan
Yeah, good afternoon. Thanks for the opportunity and congrats for the good set of numbers. Sir, all my questions have been answered. Just one question. I just want to know what is the U.S. sales that we are getting and out of that, how much is done locally and how much is by way of exports?
Pankaj Poddar
Which sales, sorry.
Rajkumar Vaidyanathan
Our sales in the U.S.
Pankaj Poddar
Yeah, yeah, sales in U.S. is all, you know. We basically shift from here to U.S. and then our U.S. operations manage the local sales. Right now, this year, we expect close to $40 million of sales, but the monthly run rate is constantly going up. And more than likely, we should end the year with a $60 million run rate, a $55 million to $60 million run rate. And I said earlier that U.S. is looking very promising to us. We are also scaling up our efforts in Japan and Korea because Cosmo is really known as a top-quality player in the world. And Japan is normally the most difficult market, but we have recently now deployed two salespeople in Japan packaging market. Earlier, we were just selling our lamination films and now we intend to also start exporting packaging and label films to begin with. In the times to come, we should be able to start showing some growth in Japan. Japan is normally a bit slow market in the beginning, but once it starts scaling up, it scales up better. And obviously, Japan has one of the highest margins in the world. So that’s the next target after U.S., but U.S. looks very promising to us.
Rajkumar Vaidyanathan
Okay. Thanks for that. Sir, just continuing on the same question. So is there a risk of any potential tariff because of trends Trump is talking about. So will there be any risk for our business?
Pankaj Poddar
See, they are talking about a special tariff for China and a similar tariff for rest of the world. So — and U.S. is a net importer, so that should not impact anything adversely. if at all it can have positive impact given that tariff on China will be exceptional.
Rajkumar Vaidyanathan
Okay. Okay, sir. That’s it. Thank you.
Operator
Thank you. [Operator Instructions] The next follow-up question is from the line of Aditya Vora from Share India Securities. Please go ahead.
Aditya Vora
Yeah, thank you, sir. Thanks again. Sir, my question was on Zigly. Could you just tell me what the first-half GMV and net loss would be?
Neeraj Jain
You are asking first-half GMV?
Aditya Vora
GMV and the net loss, the cash burn which you had.
Neeraj Jain
Just a second. The GMV will be close to INR17 crores, INR18 crores. But as I said earlier that month-on-month we are growing and you know, so next quarter is expected. I mean, every month is better than the last month. And net loss also between quarter one and quarter two, we have reduced our EBITDA losses quite significantly.
Aditya Vora
Right, right. And secondly, from a structural perspective, if I look at your EBITDA margins in FY’21 and ’22, they were obviously highest, but again, that was the COVID effect and we don’t foresee the COVID pricing coming back. But going forward, considering we have new segments in the form of sun control films, rigid plastics and also Zigly pet care losses will go down. Structurally — and also Specialty chemicals is — specialty Chemicals is doing well along with the specialty films at 80%, do we see structurally less dependence on commodity and also structurally margins going way higher to the 16%, 17%?
Pankaj Poddar
See, absolutely. There’s only one caveat to this that once we add new capacity, initially some of these capacities will go into commodity. But if I give a two-year horizon, then yes, structurally, we’ll change the margins of this company forever and we’ll be sitting in a very positive zone where we will be sitting a lot more on specialty films in the film business. Chemical continues to scale up. Zigly in two, three years, we do expect start breaking even. Sun shield also start to make money in a couple of years. So yes, in two, three years, the dynamics for the company will change quite dramatically. Irrespective the short-term, we expect a lot of good things because specialty month-on-month is growing, Plastech will turn profitable within quarter four of this year. So yes, in the short-term also there are a lot of positive things, in two years, we feel that there’ll be quite a dramatic permanent change to the way we have operated in the past.
Aditya Vora
Right, so that is great to hear. And I mean, if you structurally improve your margins with less dependence on commodity, I’m sure your multiple will be re-rated by leaps and bounds. I mean, you’re going towards the packaging — from a packaging company to a more of a consumer B2C company.
Pankaj Poddar
Yeah, yeah. And as I said earlier, we are about to launch paint protection films also and that market is also scaling up very fast in the country as well as globally. So that is another consumer product that we have just launched along with window films, which gels very well with the window films.
Aditya Vora
Right. Thank you so much. Thank you for your time.
Operator
Thank you. The next question is from the line of Bhavesh Chowhan [Phonetic], an Individual Investor. Please go-ahead.
Bhavesh Chowhan
Sir, my question is on Zigly. So sir, as you were saying that it looks like it will be profitable far earlier than many other players. So sir, when can we see profits at EBITDA level in Zigly?
Pankaj Poddar
See, it’s very difficult to put a number at this stage, but I definitely see two to three years, it should start breaking even and make money. Having said that, this is a business is also dependent on how much we are continuously investing because if we keep opening new centers, new centers definitely takes some time to make money. Online is again a very difficult business where churning out money is not that easy. So we will be doing much better than others, but — but it is also dependent on those two factors that online how we can convert that business into profitable. We are much better positioned than what we were earlier in a far better position. But then it is also dependent on how much capex we continue doing it. But two to three years, we feel that we should start doing breakeven and start making some money.
Bhavesh Chowhan
Okay. And in FY’26, since we don’t have any major capex plan, should we expect actually sharp — debt to fall sharply as our management has something in the mind that they are not announcing now, but they want to do some sort of a capex.
Pankaj Poddar
Yeah. So see, one is we are going to have a, I would say, close to INR150 crores to INR200 crores capex next year on the value-added assets, so that is one thing which is going to happen next year. Second is our working capital for BOPP and some of our new businesses will go up. So next year, some rationalization of debt will happen, but we do not see a very significant change next year. But a year thereafter, yes, you would see because we are not ordering any film lines at this stage and you know, so if we do not do that for a couple of years, so yes, FY’27, you will see a significant reduction in the debt. Next year, I would see — I would say that we will reduce somewhere between INR50 crores to INR100 crores.
Bhavesh Chowhan
Okay. Okay, sir. That’s it from me. Thank you.
Operator
Thank you. The next question is from the line of Saransh Gupta from Swan Investments. Please go-ahead.
Saransh Gupta
Good afternoon, sir, and thank you for the opportunity. Sir, just wanted to understand —
Operator
Sorry to interrupt you, sir. I request you to use handset.
Saransh Gupta
Is it audible now?
Operator
Please go-ahead.
Saransh Gupta
Yeah. Sir, just wanted to understand your view on the sun control film as you alluded in the earlier participant question that it will be starting in the next financial year. So have we done the trial production? Have we got any approval from the customers? And how are the process on the SCF?
Pankaj Poddar
Yeah, yeah. So we have done — we are doing trial production. We’ve already got approvals for many SKUs and we want to build close to 80 to 100 SKUs before we commercially launch the business. So yes, the progress is quite satisfactory till now.
Saransh Gupta
When can we expect the commercial production to start from this year or next year.
Pankaj Poddar
Next year. By end of this quarter-four, we should be — either quarter four, we should be — doing commercial launch or early quarter one, we’ll do the commercial launch.
Saransh Gupta
And sir, in terms of capacity, can you explain us how big the capacity will be in SCF? And your view on the paint protection after that, how shall we — one look at the paint protection films?.
Pankaj Poddar
So as far as car is — sorry, window film is concerned is 250 million square feet and as far as the PPF is concerned, we have got this — we have done the designing ourselves and getting it done through an outsourced facility. So there is no capex involved in paint protection. It’s an awesome product. You know, I’ll encourage investors to use paint protection in their car and give feedback to us. But we are just doing trialing for that in the market this month and commercial launch will happen in next one or two months.
Saransh Gupta
PPF will come first and this SCF will come probably in FY ’26. And in terms of the revenue, how big this — both this could be?
Pankaj Poddar
See, in the short-term, it may not yield very quick revenues because it does take time for distributors to build confidence and — but within two years, you should see a very significant movement in this vertical. So I would say first one or two years will go in building customer confidence and taking our pie out of their share. But once it starts scaling up, it will scale-up to very significant numbers.
Saransh Gupta
Sure, sir. And last question on Zigly, can you help us in understand what was the EBITDA loss during the 1H?
Pankaj Poddar
Last quarter I can share I don’t remember H1 numbers. Last quarter it is INR5.5 crores.
Saransh Gupta
INR5.5 crores with INR10 crores of GMV, right?
Pankaj Poddar
Yeah, you are right.
Saransh Gupta
Yeah. Thank you, sir. That’s all from my side.
Pankaj Poddar
[Speech Overlap] higher than revenue and now we have — we have done a lot of rationalizations and now it has come down to close to 50%.
Saransh Gupta
Thank you, sir. That’s all from my side. Thank you. Ladies and gentlemen, that was the last question for today’s conference. I now hand the conference over to the management for closing comments.
Neeraj Jain
So we think company is expecting improved sales of specialty during FY ’25 and is running well about 13% higher specialty sales on a YTD basis compared to last year. In a step-by-step manner, we are decommoditizing the business model in principle. Sun control film, paint protection film, these will be value-added. Among new business verticals, Cosmo specialty chemical is already making high-teens EBITDA. The other new verticals related to packaging, capacitor metalizer or rigid packaging are expected to earn EBITDA from FY’26. While Zigly may take some time to become profitable, however, should be a significant value creator. So many, many thanks for joining and we really look forward.
Operator
[Operator Closing Remarks]