Cupid Limited (CUPID) Q4 FY23 Earnings Concall Transcript

Cupid Limited (NSE:CUPID) Q4 FY23 Earnings Concall dated May. 29, 2023

Corporate Participants:

Omprakash Garg — Managing Director and Chairman

Analysts:

Yash Savla — Analyst

Onkar Ghugardare — Shree Investments — Analyst

Keshav Garg — Counter Cyclical PMS — Analyst

Yashwanti Kerkar — Kojin Finvest — Analyst

Ranu Parwal — Acura Solutions — Analyst

Zaki Nasir — Private Investor — Analyst

Shivam Parakh — ValueWise Wealth Management Services — Analyst

Saket Kapoor — Kapoor Company — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Q4 FY ’23 Results Conference Call of Cupid Limited hosted by Kirin Advisors. [Operator Instructions] Please note this conference call is being recorded.

I now hand the conference over to Mr. Yash Savla from Kirin Advisors. Thank you, and over to you, sir.

Yash Savla — Analyst

Okay. Thank you. Good afternoon, everyone. Thanks for joining the conference call of Cupid Limited. I would like to welcome, Mr. Omprakash Garg, Managing Director and Chairman. Omprakash, sir, over to you.

Omprakash Garg — Managing Director and Chairman

Thank you, Yash. Good afternoon, ladies and gentlemen. On behalf of Cupid Limited, I would like to welcome you all for attending the fourth quarter FY ’23 and the full year FY ’23 earnings conference call for Cupid Limited today. By now, I hope you had a chance to review the financial results we had circulated yesterday after the Board meeting.

And I am pleased to report that the financial performance has improved significantly, not only in the fourth quarter, but also for the entire FY ’23. For example, in the fourth quarter, our top line improved by 34%, as compared to a year ago quarter and also the bottom line actually improved by 99%, as compared to a year ago quarter.

And now talking about the full year performance, our top line at INR164.1 crore improved by about 19%, as compared to a year ago. However, the profit after tax improved by about 82%. Now these significant improvements have been achieved by better operating efficiency, as well as because of the stable input costs, and we are expecting more tender orders from Brazil, as well as Tanzania.

Right now, our order book stands at INR177 crore, as of April 1. And as we had mentioned in the press release, the Cupid Board has declared a final dividend of INR3 per share, making it a total of INR5 per share for the entire financial year. This is the best ever dividend your company has declared so far in its 30-year history.

Now going over to some of the highlights from the operations. First of all, like I have mentioned, the — this is the second best year for both the top line, as well as bottom line during its entire 30-year history. Number two, the export business revenue was 94% of the total revenue. And as you are aware, there are some export incentives from Government of India, which, of course, contributes to the improved performance. Number three, again, the profits have been achieved mainly due to stable lower cost, as well as better operating efficiency. And order book, as I mentioned, stands at INR177 crore, as of April 1. And finally, the dividend payment total during the year would be INR5 per share.

Now coming to the outlook because of the — because of excellent order book, and also because of the growing demand for our products, mainly male and female condom, we are expecting another good year, almost 10% to 12% improvement in the current financial year ending on March 31st, 2024, as compared to this year.

In general, we have had many stable customers with whom we have been doing business for many years. For example, our top ranking customer is United Nations Population Fund to whom we had sold about INR57 crore worth of [ goods ] during FY ’23. And similarly, we have six or seven other customers, who have been ordering for our product for the last many years. By the way, we have sold our products to over 104 countries worldwide since we started the operations.

So with these initial remarks, I’m pleased to open the meeting for Q&A session.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We will take our first question from the line of Onkar Ghugardare from Shree Investments. Please go ahead.

Onkar Ghugardare — Shree Investments — Analyst

Yes. My question was regarding the INR177 crore orders, which are there with you. So how much you intend to complete entire order since you said around 10%, 12% revenue growth, which implements to around INR180 crores of the revenue. And what would be the contribution from male and female impact? First question is that.

Omprakash Garg — Managing Director and Chairman

Okay. So we expect a minimum top line of 175 crore and out of which 75% would be male condoms, 23% would be female condom sales and 2% others.

Onkar Ghugardare — Shree Investments — Analyst

Okay. The next question is regarding — there were some talks about you have been approached by two other players for sale of the business. Any update on that front?

Omprakash Garg — Managing Director and Chairman

Basically, the negotiations are still going on, and there is no final decision, as yet on that.

Onkar Ghugardare — Shree Investments — Analyst

But what would be the time line, if any, you can give?

Omprakash Garg — Managing Director and Chairman

I would say in the next six months. So are the talks still going on? I mean, is there anything we can expect qualitatively? Or like what kind of talks are going on? No. We have provided all the information the investors were looking for, and now they are in the process of organizing their strategy and funding for this deal. So the ball is in their court and very difficult for us to be more precise on what their thinking is.

Onkar Ghugardare — Shree Investments — Analyst

Okay. These are other condom manufacturer players? Or these are the private equity players you are talking to?

Omprakash Garg — Managing Director and Chairman

No. They are an independent investor.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So they are not related to this condom business, right?

Omprakash Garg — Managing Director and Chairman

Sorry.

Onkar Ghugardare — Shree Investments — Analyst

They are not into this condoms manufacturing business.

Omprakash Garg — Managing Director and Chairman

No. Correct.

Onkar Ghugardare — Shree Investments — Analyst

Okay. Another question is regarding today only you released a press release stating that cancellation of order. So I mean can you state the reason for that?

Omprakash Garg — Managing Director and Chairman

Well, we have been supplying all the three products, male condoms, female condoms and lubricant jelly to UNFPA for many years. And this year, we had supplied about INR25 crores worth of jelly to you UNFPA. But what happened in March and April that they had tested some of our batches and they have established that during transit and during the storage period at the destination, a parameter — quality parameter has deteriorated. And based on their risk analysis, they have decided to stop the orders already given to Cupid.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So this is with the quality of condoms, which Cupid is supplying? Or is it regarding exactly what?

Omprakash Garg — Managing Director and Chairman

This is not related to either male or female condoms. This is only related to the water-based lubricant jelly.

Onkar Ghugardare — Shree Investments — Analyst

Okay. All right. Another question is regarding, I mean there hasn’t been any significant capital expansion or capacity expansion from the Cupid. I mean, what is the thinking on that front? And is there anything you are trying to — I mean, are you trying to bring in some fresh management change to bring this business to the new level of growth or fresh space [Indecipherable]? Or since the talks are going on for the sale of the business, there is no intent for that?

Omprakash Garg — Managing Director and Chairman

No. Right now, our thinking is to look at a possible expansion of business. So that is one part of the investment consideration we have been discussing. But other than that, there are no plans to bring in any fresh management personnel.

Onkar Ghugardare — Shree Investments — Analyst

Okay. And what kind of expansion you are talking about? Can you elaborate that?

Omprakash Garg — Managing Director and Chairman

We could add — yes, we could add male condom and female condom production capacity, that is our primary issue right now.

Onkar Ghugardare — Shree Investments — Analyst

By how much? And what is the current capacity? Like any idea on that?

Omprakash Garg — Managing Director and Chairman

Yes. We have about a total of 560 million pieces of male and female condoms per year.

Onkar Ghugardare — Shree Investments — Analyst

Yes. So what’s the current capacity utilization? And how — what’s the capex you are looking at? How much addition that would be to the existing?

Omprakash Garg — Managing Director and Chairman

Capacity utilization is 94%, and we are looking to add about 12% to 15% capacity expansion.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So around — from 560, you will be looking at around how much around 7 lakh [Phonetic] or like how much?

Omprakash Garg — Managing Director and Chairman

About 700 million [Phonetic] approximately.

Onkar Ghugardare — Shree Investments — Analyst

Okay. And how much time that would take? Or is there any concrete plan regarding this? When can we expect this? And how much capital that would need?

Omprakash Garg — Managing Director and Chairman

Okay. It would need from INR12 crore to INR15 crore, and it will take from about 12 months to 15 months.

Onkar Ghugardare — Shree Investments — Analyst

But has that already been decided by the management? Or like how is it?

Omprakash Garg — Managing Director and Chairman

We are closely examining the market size and market order situation and the current capacity worldwide. And we want to make sure that when we do decide to expand the capacity that we are likely to get the orders continuously for many years to come.

Onkar Ghugardare — Shree Investments — Analyst

Okay. Just a final question on the raw material prices, how is the current trend going on in this quarter?

Omprakash Garg — Managing Director and Chairman

Okay. Most of the input cost in terms of the packing material, silicon oil, chemicals, the prices are either stable or they are down 5% to 7%. Only the natural rubber latex, the price trend seems to be up about 6% this year, as compared to last year.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So 6% up from the Q4 or Q1 of the last year?

Omprakash Garg — Managing Director and Chairman

No, from Q1 of last year.

Onkar Ghugardare — Shree Investments — Analyst

Okay. As compared to the current quarter, which is currently going that is Q1?

Omprakash Garg — Managing Director and Chairman

Yes. Okay. All right. Thank you. I’ll get back in the queue. Thank you. Thank you.

Operator

Thank you. We will take the next question from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, what happened to Tanzania, male condom tender of INR75 crores, which is expected to open in March ’22, and also the Brazil tender. So have these tenders already been opened or they are still awaited?

Omprakash Garg — Managing Director and Chairman

No. The March tender from South Africa has been postponed and now it is supposed to be next week, i.e., 1st week of June. And another order female condom tender from Brazil is expected to be announced also during the later part of June. Some of the tenders have been delayed due to the budgetary control from their respective national governments.

Keshav Garg — Counter Cyclical PMS — Analyst

Okay. Sir, so now we are anyway capacity constrained, sir so — and on the other hand, sir, this IVD division, it is year-on-year, actually, the sales have gone down from INR3.7 crores to INR40 lakhs in the whole of last year, whereas the loss has shot up dramatically to INR1.4 crores, sir and last quarter, you had mentioned that for last financial year, INR10 crore revenue was expected, but instead, we were INR40 lakhs. And last quarter, you had told us that in for the FY ’24 to expect INR50 crores to INR100 crores revenue. And sir three years back, while starting this division, you had said back in FY ’21 itself, INR30 crore to INR40 crore revenue was expected, which none of this came. Sir so now what is the outlook for FY ’24 for IVD division? What kind of losses shareholders can expect, which we were expecting anywhere from day one and yes, sir.

Omprakash Garg — Managing Director and Chairman

Okay. The IVD project, as I had mentioned earlier was delayed by 2.5 years due to COVID. And when we started production in late ’22, we have achieved INR40 lakhs worth of sales in the current FY ’23 situation up to March 31st, ’23. Now we are forecasting a sale of INR2.5 crores for FY ’24 and a minimum sale of INR5 crores in FY ’25.

There are two main reasons that the sales are not growing, as fast as we had projected two years back. One is that most of the big tenders, including the Government of India tenders and many other international tenders, they require manufacturers to have three years of operating experience because before they are eligible to participate in the tender, so that has prevented us from participating in some of the bigger tenders.

The other issue is the requirements of WHO. Now Cupid has applied for the WHO and it’s likely to take about 12 months to 15 more months. And if we receive the WHO approval, that will open big doors for all the United Nations orders, world bank-funded orders like from global funds and so on. So once we start to meet those two major conditions, the entire market would open for Cupid. So that is the situation.

We are fully equipped now. We have the staff. We have through about 75 local distributors in India, we have sent our samples, and we have asked these potential customers to review the quality of our products packing, as well as how we compete in our pricing, as compared to the competition.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, so what kind of losses can we expect for this year and next year? And when will this division breakeven if at all?

Omprakash Garg — Managing Director and Chairman

I would say that it would start to breakeven once we have the sales over INR5 crores in FY ’24.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, realistically speaking, sir, now there is no demand and there is huge overcapacity in global industry, sir, so the established players are working on breakeven level. Sir, so realistically speaking, things look really weak. Sir, So is it not wiser to just scrap this project and whatever space we will get available, we can at least start producing more condoms, which is making money for us.

Omprakash Garg — Managing Director and Chairman

Well, both operations are independent. There are separate machinery equipment, as well as personnel and their background and training. So I will be, in our view, would stand as a standalone operation. And the reason that some of the bigger players may be breaking even, our view on that is that the product that we have, five products we have identified, which is HIV, Dengue, Malaria, Syphilis and pregnancy test kits. There is not as much competition in the top four I have mentioned, and our margins would be better, plus 20%.

And plus, we would — we are expecting more and more business from export sales, as opposed to the domestic sales. And as you know, the export sales will carry 4% to 5% of additional Indian government incentive. So we are convinced that this is a good business to be in, although we have been slow in achieving our target, but it’s part of the — you can call it a learning process for us. But we are confident that in next year and a half, we would be more than breaking even.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, best of luck with the learning process. And sir, just wanted to understand that what is the INR100 crore cash lying on our balance sheet. Sir before we start another third venture and start making losses, sir, it is better to return the money to the shareholders in the form of our share buyback?

Omprakash Garg — Managing Director and Chairman

Okay. We have seriously considered the issue of share buyback, which was discussed also in the last call, and we have two other possible expenditures coming up. One is the high — higher need for capital expenditure due to this possible expansion; and the other one is a larger working capital requirements for IVD operations. So we would continue to look at the buyback option. And once the situation is clear on about two situations, we would certainly look at it again.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, I mean, you just told us that INR12 crores, INR15 crores will be the capex that you are looking at condom expansion. And sir, for INR5 crores of IVD sales, how much working capital can possibly, I mean, INR5 crore revenue take. Sir and plus, we have internal accruals [Phonetic] also, this year also, you are expecting all-time high revenues. Sir so I mean, I think we can easily do a share buyback of over INR50 crores. Sir, so kindly you think about it? Thank you very much.

Omprakash Garg — Managing Director and Chairman

Okay. Thank you.

Operator

Thank you. We will take the next question from the line of Yashwanti Kerkar [Phonetic] from Kojin Finvest [Phonetic]. Please go ahead.

Yashwanti Kerkar — Kojin Finvest — Analyst

Yeah. Good evening, sir. Sir, I just wanted to understand like how is the Indian market, as well as the contraceptive industry is concerned?

Omprakash Garg — Managing Director and Chairman

The Indian market for condoms, particularly for male condoms is growing. And the only issue is that there are four or five low-capacity manufacturers, who are offering their products at a much lower price. So the bottom line for the sale of male condoms in India is lower than what we achieved in our export sales. So market itself is good, but profits are much lower.

Yashwanti Kerkar — Kojin Finvest — Analyst

And what is the difference in the margins in the international market and in the Indian market?

Omprakash Garg — Managing Director and Chairman

So in Indian market, you can expect 5% to 7%, and in the export market, minimum 15%, more like 20%.

Yashwanti Kerkar — Kojin Finvest — Analyst

Okay. Sir [Indecipherable] opening we thought that [Phonetic], we kept the cost in the consol. So what raw material cost into the consol? So what is the raw material used for the manufacturing?

Omprakash Garg — Managing Director and Chairman

I’m sorry, please say it again.

Yashwanti Kerkar — Kojin Finvest — Analyst

So I just wanted to understand what is the raw material used in the manufacturing?

Omprakash Garg — Managing Director and Chairman

Yes. Natural rubber latex.

Yashwanti Kerkar — Kojin Finvest — Analyst

Okay. And how is female condom segment is growing in India?

Omprakash Garg — Managing Director and Chairman

Yes. The demand is increasing. And it’s — the projection is also likely to increase, including the Ministry of Health, Government of India is also contemplating additional tender to — for the manufacturer to supply additional condoms.

Yashwanti Kerkar — Kojin Finvest — Analyst

Okay, sir. That’s is all from my side [Indecipherable]. I will join back in the queue.

Omprakash Garg — Managing Director and Chairman

Thank you.

Operator

Thank you. We take the next question from the line of Ranu Parwal from Acura Solutions. Please go ahead.

Ranu Parwal — Acura Solutions — Analyst

Nothing. I think my questions were answered. Most of the questions were already included here, so thanks from my side.

Omprakash Garg — Managing Director and Chairman

Thank you.

Operator

Thank you. We take the next question from the line of Zaki Nasir [Phonetic], from — an Investor. Please go ahead.

Zaki Nasir — Private Investor — Analyst

Sir, congratulations on a decent set of numbers and best of luck for the next year. Sir, my two questions are about the IVD segment, sir. The capacities we have set up, what kind of peak turnover are possible in that segment? And do you expect to achieve it in the next three years to five years, sir?

Omprakash Garg — Managing Director and Chairman

Okay. We expect to do, like I mentioned, INR5 crores worth of IVD sales in FY ’25, and INR50 crores to INR100 crores starting from FY ’20 — FY 2000 — I mean 2026 because of the two qualifications I mentioned earlier, i.e., a WHO approval; and second is the qualification that we have been in the manufacturing business for three years. So based on those two factors and based on our current capacity, we can easily achieve a sale of about INR100 crores after FY ’26 [Phonetic].

Zaki Nasir — Private Investor — Analyst

And sir, I would also want to ask you whether — see, any product extension you are looking at because making these latex gloves is, I think, a part of the process to making condoms kind of stuff. So are you looking at any kind of convenient product extension because these latex gloves are also used a lot in nowadays, sir?

Omprakash Garg — Managing Director and Chairman

Okay. We have looked at other products, but after COVID, the demand for the gloves, hand gloves has gone down. And many of the existing plants, say, in Malaysia have stopped the operation and some of them — them even have gone bankrupt. So the best product right now from market demand point of view and for future prospects are these male condoms and female condoms. So — and we are constantly reviewing the installed capacity worldwide, as compared to the demand. So that is why earlier I mentioned that we are contemplating a possible extension program.

Zaki Nasir — Private Investor — Analyst

Sir, also, do we — do we market any of our products under our own brand, sir, because female condoms, do we market in our own brands or it’s just kind of a third-party manufacturer will [Phonetic] do?

Omprakash Garg — Managing Director and Chairman

No. We — our products are all under Cupid, Cupid male condoms and Cupid female condoms. So that’s what we…

Zaki Nasir — Private Investor — Analyst

No, sir. Do we sell directly to the customer, sir?

Omprakash Garg — Managing Director and Chairman

Some of them, yes. Female condoms, we are doing directly to the customers both online, as well as through physical distribution. And…

Zaki Nasir — Private Investor — Analyst

But how’s the response been sir, for that?

Omprakash Garg — Managing Director and Chairman

The response from female condom is moderate. It’s not picking up as fast as we had envisioned. But the sale of male condoms also through website, as well as through some of the local distributors, but mostly through a tender business, this demand has been increasing very much.

Zaki Nasir — Private Investor — Analyst

And sir, see, Cupid is a valuable company, which throws up a lot of cash every year. For some reason, maybe the market cap doesn’t indicate that it’s just a suggestion for you, sir, that buyback would be a good option to correct the abnormality and also take some cash off the balance sheet, sir? Thanks a lot, sir.

Omprakash Garg — Managing Director and Chairman

Yes. Same question was asked earlier, and we are constantly evaluating the buyback option. And hopefully, next few months, we would be able to take a final call on that.

Zaki Nasir — Private Investor — Analyst

Thank you, sir and best of luck, sir.

Omprakash Garg — Managing Director and Chairman

Okay.

Operator

Thank you. [Operator Instructions] We will take the next question from the line of Onkar Ghugardare from Shree Investments. Please go ahead.

Onkar Ghugardare — Shree Investments — Analyst

Yes. Last call, you have mentioned — you had mentioned that the U.S. FDA is telling you to conduct studies in U.S. for the approval of female cons [Phonetic]. So what’s the status on that front?

Omprakash Garg — Managing Director and Chairman

Okay. U.S. FDA has suggested some modifications, and they have recommended that the population base we had used in South Africa was almost 100% black and U.S. FDA has suggested a supplementary study including about 60% white people in South Africa, 30% black population and 10%, Asian Indian population. So we are gearing for that new study. But in general, we had a positive response from U.S. FDA that at least one other manufacturers like Cupid is trying to get into this field. As you know, currently, there is only one product, which has had monopoly since 2009. So FDA would also like to see a competitive product.

Onkar Ghugardare — Shree Investments — Analyst

Yes. But this issue is going on from, say, last three years to four years? And when can we finally see you entering U.S. and sales starting and any time line?

Omprakash Garg — Managing Director and Chairman

Okay. The reason it has taken us three years to four years is that we started the study in South Africa in 2020, and then, it was stopped during the COVID period for 2.5 years. And finally, when we had submitted our report late last year, the U.S. FDA came up with their evaluation. So it is a kind of time-consuming process, but the business outlook is very lucrative. So we are trying to expedite. And my hope is that by this time next year, we would have the U.S. FDA permission.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So within a year, you expect to conduct the study and get approvals from U.S. FDA?

Omprakash Garg — Managing Director and Chairman

Yes. That is our plan currently.

Onkar Ghugardare — Shree Investments — Analyst

And is there any application you have to submit to U.S. FDA? And after that, how much time it takes to get the approval?

Omprakash Garg — Managing Director and Chairman

They have mentioned three months to six months.

Onkar Ghugardare — Shree Investments — Analyst

Three months to six months once you send them the application, right?

Omprakash Garg — Managing Director and Chairman

Yes.

Onkar Ghugardare — Shree Investments — Analyst

And when can we expect this application to be sent after the — once the feasibility study is done after that only, right?

Omprakash Garg — Managing Director and Chairman

Yes. So I would say nine months from now, we should be able to submit the new application.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So do you expect the study to take around nine months from June?

Omprakash Garg — Managing Director and Chairman

Correct.

Onkar Ghugardare — Shree Investments — Analyst

And after that six months to eight months for the approval?

Omprakash Garg — Managing Director and Chairman

No, three months to six months.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So even if we take maximum of six months and around nine months here and six months there, so around 1.5 years from now?

Omprakash Garg — Managing Director and Chairman

15 months, we are hoping.

Onkar Ghugardare — Shree Investments — Analyst

Okay. And say, if we get this approval in, say, next 15 months, what kind of sales we are looking at?

Omprakash Garg — Managing Director and Chairman

We are looking at about $1 million sale or about INR8 crores in the first year with a 50% profit margin. So INR4 crores worth of profit in the first year.

Onkar Ghugardare — Shree Investments — Analyst

Also — that wouldn’t be INR4 crores, right, around INR8 crores sales, that would be 50% profit margin.

Omprakash Garg — Managing Director and Chairman

Yes. And this is after taking care of all the marketing expenses. The overall market is actually 100%, but we are adjusting it for the marketing expense. That is why I mentioned net 50% bottom line on a sale of INR8 crores in the first year, net profit of INR4 crores.

Onkar Ghugardare — Shree Investments — Analyst

Okay. But that would be 50% of profit margin right? Earlier, you mentioned 30% profit margin. So it is 50% or 30% net?

Omprakash Garg — Managing Director and Chairman

It’s 5-0% [Phonetic].

Onkar Ghugardare — Shree Investments — Analyst

That is 50% margin you are talking about, net margin.

Omprakash Garg — Managing Director and Chairman

Yes. Yes.

Onkar Ghugardare — Shree Investments — Analyst

Not 30%.

Omprakash Garg — Managing Director and Chairman

No, no, not 30%. It’s 50%.

Onkar Ghugardare — Shree Investments — Analyst

Okay. And another thing is that many participants have asked this several times, just wanted to know why don’t Cupid get in touch with some consultancy, financial consultancy, who can guide Cupid very well in terms of how to use the cash properly and how to utilize it properly, so that we can clearly have a road map regarding this?

Omprakash Garg — Managing Director and Chairman

Yes. No, we have been discussing what is the best use of these funds, and we had looked at investing more in equity, as well as in debt funds, but we decided last year that it was too risky. And that is why we went into a safer option, which was to invest it in fixed deposits, which are now carrying about 7% interest. So your — your suggestion is welcome, and we’ll certainly engage with a financial consultant to see how we can improve our return on this investment, which is close to INR100 crores.

Onkar Ghugardare — Shree Investments — Analyst

Yes. Because your expertise lies in manufacturing of condoms — based — basically condom business, right, not investing in equity mutual funds or debt mutual funds. So you should keep — give that job to someone, who is from that industry, right?

Omprakash Garg — Managing Director and Chairman

Definitely, yes. Definitely. And we would welcome any suggestions that you might have or any other investors might have.

Onkar Ghugardare — Shree Investments — Analyst

Okay. Is that the thing, which the potential investors are also looking at?

Omprakash Garg — Managing Director and Chairman

We don’t know that. But certainly, they are looking at our positive cash situation and no debt in the company and good performance over last many years, stable operations. So a combination of all these factors must be in their view in their discussions, internal discussions.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So how serious is this — how serious are this to investors? And like what’s the on-ground situation? When have you talked to them last?

Omprakash Garg — Managing Director and Chairman

No. We talked to them last month. And as I mentioned in the earlier answer, they are looking at the — their final decision, and they are having internal discussions. And I’m estimating that within six months, this should be settled.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So these are the foreign individual investors or like from Indian mutual investor like?

Omprakash Garg — Managing Director and Chairman

No, they are India [Phonetic].

Onkar Ghugardare — Shree Investments — Analyst

Both of them, right?

Omprakash Garg — Managing Director and Chairman

Right.

Onkar Ghugardare — Shree Investments — Analyst

Okay. And what is the status on the South Africa order front?

Omprakash Garg — Managing Director and Chairman

South Africa order is expected to come in 1st week of June. This is the order they have postponed from last March.

Onkar Ghugardare — Shree Investments — Analyst

Okay. Another question is that you have partially addressed that, but last year, your dividend was around INR4.5, this year, your dividend is INR5 and your profit has almost increased by around 80%. So at least the dividend should have been equivalent to that of the increase in the net profit, right? And on top of that, you have INR100 crore cash. So why you are being so conservative in giving dividends, even though this is your highest dividend. But if you compare it with your profit growth and the cash you have, it’s nothing, right, INR5 this year and earlier — last year, it was INR4.5.

Omprakash Garg — Managing Director and Chairman

No, we have been increasing in — the dividends in last four years, five years, there was a good amount of discussion at the Board meeting. And certainly, the point you have made was discussed as well. And we hope that with the time this amount of dividend would go — will improve more and more dividends.

Onkar Ghugardare — Shree Investments — Analyst

So I mean, you have been increasing dividends, but the pace of dividend is like very small and very negligible, as compared to the profits you are making and the cash flow, which you are generating? That’s the whole question.

Omprakash Garg — Managing Director and Chairman

No, I understand. And we are trying to make the best use of these savings we have had. Like I mentioned to earlier callers, after looking at the cash flow requirements for the operations in the next year, 1.5 year, we are considering the issue of share buyback.

Onkar Ghugardare — Shree Investments — Analyst

So when can you hear exactly like concretely on this front from you?

Omprakash Garg — Managing Director and Chairman

I would say in the next six months, we should know the cash flow requirements, including capital expenditure.

Onkar Ghugardare — Shree Investments — Analyst

Okay. Thank you.

Omprakash Garg — Managing Director and Chairman

Thank you.

Operator

Thank you. We take the next question from the line of Shivam Parakh from ValueWise Wealth Management Services. Please go ahead.

Shivam Parakh — ValueWise Wealth Management Services — Analyst

Good evening, sir. Congratulations on a good set of numbers. Sir, in a previous question, you had told that there was a price increase of 6% in natural rubber latex. But in last conference call, you had told that you had an inventory hold up of at least 6 months. Then why is there a sudden spurt in raw material cost this quarter?

Omprakash Garg — Managing Director and Chairman

No. The — like I mentioned, all the raw material costs have been stable or downward. The only exception is that starting January this year, there have been a slight increase, 2% to 3%, which has moved up to 6% in this month, during month of May. And this is a seasonal variation depending on the rainfall timing related to the monsoons in Kerala. So we believe this is a temporary phenomenon. And after the rain starts in early June, the prices should go back to its normal direction.

Shivam Parakh — ValueWise Wealth Management Services — Analyst

Okay. So sir, can you brief us about the current inventory hold up, which you are having?

Omprakash Garg — Managing Director and Chairman

No. And the latex — particular latex, we only hold inventories for two weeks production. And as we will issue one truckload, which is 175 drums, so inventory is for about two weeks.

Shivam Parakh — ValueWise Wealth Management Services — Analyst

And sir, one more question. We have seen improvement in EPS of around 80%. So do we see this improvement sustainable over the next two years also?

Omprakash Garg — Managing Director and Chairman

We hope so. We are working to improve our performance on many fronts, mainly the operating efficiency and lower rejection rate in the manufacturing process. And besides that, we should have more export incentives and also the benefit of dollar rupee exchange rate. So with all these factors, and in addition, we are trying to increase our selling price talking to our major customers. So if that happens, certainly, we could maintain this year’s performance going over next two years.

Shivam Parakh — ValueWise Wealth Management Services — Analyst

Okay. Thank you so much, sir. Thanks for giving me an opportunity.

Omprakash Garg — Managing Director and Chairman

Thank you.

Operator

Thank you. [Operator Instructions] We will take the next question from the line of Onkar Ghugardare from Shree Investments. Please go ahead.

Onkar Ghugardare — Shree Investments — Analyst

Yes. My question was regarding the second level management, and why only we see only Mr. Omprakash Garg on the call every time? Why the second level management doesn’t come? And what’s your plan on succession?

Omprakash Garg — Managing Director and Chairman

Well, we had — in the last three calls, we had the Chief Operating Officer also joining me in the con call. And in terms of succession, we have a completely second and third line of management, including 10 senior managers, who are with us for more than 12 years to 15 years. So the only change would be a new CEO. And depending on the possible deals, we are discussing, there is no other succession planned.

Onkar Ghugardare — Shree Investments — Analyst

Yes. But the CEO thing has been going on for last three years, four years, right, and you haven’t found any one?

Omprakash Garg — Managing Director and Chairman

Yes. The reason is that there is nobody qualified for this particular manufacturing job, including international marketing. We have looked around. We have talked to many people. We have discussed it with our major customers. There are not many people available in this field in general. Condom manufacturing is much different than any other manufacturing. There is a serious quality issue and only an experienced person can fill the requirements, and there are only five or six factories in India.

Onkar Ghugardare — Shree Investments — Analyst

Okay. So — but after you who would be leading this company, I mean, I just wanted to know that. If this investor deal, it doesn’t go through sale of business, then what in case something happens to you, then who would be leading this company? I mean there are managers, I can understand that, but the managers can’t lead or give away of [Phonetic] growth to the company, right, since you have been doing it for so many years. There has to be some plan on this.

Omprakash Garg — Managing Director and Chairman

No. The plan is that each of these potential investors in Cupid, they have their own plans. They will bring their own CEO, and they will bring maybe their top Chief Financial Officer. So naturally, if they decide to invest in Cupid, they must have their own management plan. So that will be the succession plan.

Onkar Ghugardare — Shree Investments — Analyst

Correct. But if this deal of selling the business doesn’t go through, then what is the succession plan? And if you are saying it so confidently, then yes…

Omprakash Garg — Managing Director and Chairman

No, that — if we don’t find a buyer, we will continue the business, and we’ll continue the improvements we have shown. You look at our last three years or four years record, we are one of the most profitable condom manufacturer in the world. So our productivity, our profitability is one of the best in the business. So…

Onkar Ghugardare — Shree Investments — Analyst

Sir, I am not questioning your profitability or performance, but I’m just looking, who will be the — who will be heading this company if this doesn’t go through after you since your age is…

Omprakash Garg — Managing Director and Chairman

I will touch [Phonetic] — my plan is to continue, as long as I can.

Onkar Ghugardare — Shree Investments — Analyst

Correct. That is good to hear, sir, but I hope you are getting my question from where I’m coming through.

Omprakash Garg — Managing Director and Chairman

Yes. Please tell me again.

Onkar Ghugardare — Shree Investments — Analyst

So I just wanted to know, yes, it is good, if you are continuing for — even if you continue for, let’s say, next 5 years, 10 years, but there has to be some strategy in place, right, god forbid something happens to you, there must be someone, who should be leading this company. And if this investors deal go through then there is no issue only. I mean, this is just in case if this doesn’t go through?

Omprakash Garg — Managing Director and Chairman

Yes. But we — first of all, you have to appreciate that we have been trying to locate a CEO, but no qualified person has come through. Second of all, god forbid, if something happens to me tomorrow, there is a Chief Operating Officer, and there is a full team of top managers in each branch, including finance, maintenance, export, marketing, labor relations and Company Secretary and Compliance Officer. So the entire structure is in place. The only missing person will be CEO, with the existing top manager can fulfill on a temporary basis. But we’ll continue to look for a senior management person, who can be — who can easily excel [Phonetic] in the position of CEO.

Onkar Ghugardare — Shree Investments — Analyst

Okay. One question on the sale of the business you are talking about within the next six months, you can hear some concrete news on that. So even if that goes through, what kind of sale of business you are looking at, like giving them a part equity or like fully selling the business?

Omprakash Garg — Managing Director and Chairman

No, they are interested to buy our 45% share, which we hold.

Onkar Ghugardare — Shree Investments — Analyst

You mean that would be a management change, right? You would be going out and someone else would be coming in, right?

Omprakash Garg — Managing Director and Chairman

Yes. That is true. However, both the potential investors, they have requested me to continue with the new management also to help them go through the initial period of two years to three years.

Onkar Ghugardare — Shree Investments — Analyst

Correct. Correct. But you would be staying as the main pillar of the company or the Chairman of the company for the next two years, three years, as a guiding force to them, but whatever shares you are holding, you would be selling them to the potential investors, and they will be acquiring the full stake of your shares, right?

Omprakash Garg — Managing Director and Chairman

Yes. There will be a full management changeover, and they will be fully controlling the management. If I do decide to join them, it will be only in an advisory capacity.

Onkar Ghugardare — Shree Investments — Analyst

Correct. So you won’t be holding any stake in the company once there is sale of business or maybe a partial stake here and there, right?

Omprakash Garg — Managing Director and Chairman

Sorry.

Onkar Ghugardare — Shree Investments — Analyst

So once you decide to sell that, you won’t be holding a major chunk of the equity, right. There would be some here and there a 2%, 3% kind of stake or you would be exiting fully?

Omprakash Garg — Managing Director and Chairman

No. Right now, the plan is to exit fully.

Onkar Ghugardare — Shree Investments — Analyst

Okay. And approximately what percentage is this, sir, if I can get that figure?

Omprakash Garg — Managing Director and Chairman

Say that again, please?

Onkar Ghugardare — Shree Investments — Analyst

I mean, how much percentage of equity currently you are holding?

Omprakash Garg — Managing Director and Chairman

Either [Phonetic] 45%.

Onkar Ghugardare — Shree Investments — Analyst

On individual capacity or the entire management or the entire promoter you are talking about?

Omprakash Garg — Managing Director and Chairman

No, just me and my wife. We are the main promoters.

Onkar Ghugardare — Shree Investments — Analyst

Okay. Are there any other promoters apart from you two?

Omprakash Garg — Managing Director and Chairman

Yes. My brother has a minor stake and his wife. So — but…

Onkar Ghugardare — Shree Investments — Analyst

That would be how much?

Omprakash Garg — Managing Director and Chairman

That is like something like only 30,000 shares only out of…

Onkar Ghugardare — Shree Investments — Analyst

So that would be around less than 1% might be right? 1% or 2%?

Omprakash Garg — Managing Director and Chairman

Correct.

Onkar Ghugardare — Shree Investments — Analyst

Okay. And you and your wife, both of you are holding 45% stake, correct?

Omprakash Garg — Managing Director and Chairman

Yes, 45%.

Onkar Ghugardare — Shree Investments — Analyst

Okay. And you both would be selling it to the potential investor?

Omprakash Garg — Managing Director and Chairman

Yes.

Onkar Ghugardare — Shree Investments — Analyst

Okay. Got it. Thank you very much. Hope, we hear that something from that front very soon.

Omprakash Garg — Managing Director and Chairman

Okay.

Operator

Thank you. We will take the next question from the line of Saket Kapoor from Kapoor Company. Please go ahead.

Saket Kapoor — Kapoor Company — Analyst

Sir, just to continue with what the other participant was mentioning. So when you have a — when you had discussion with the two gentlemen or the two people, sir, they have been zeroed in, as we come across the valuation part or — and how will you value your company in terms of the type of sales growth that we have seen is only being observed for the last — last two years, if I take your net sale number from INR143 crore to INR133 crore and now that leap jumps in from INR132 crore to INR160 crore. So what factors are you keeping in mind in — when you come on across the table to decide the valuation?

Omprakash Garg — Managing Director and Chairman

Well, we are concentrating on improving the performance at the company. Now in terms of valuation, everybody has their own method and their own priorities and their own thinking. So you may be evaluating it a P/E of 15 [Phonetic] and somebody has maybe thinking of P/E of 18 [Phonetic]. So it’s difficult to put a final number on the evaluation.

Saket Kapoor — Kapoor Company — Analyst

But for the deal to go through sir, there has to be implementation [Phonetic] or there has to be a zero in point, where both the buyer and the seller thought has to submerge to control the transaction. So taking that into account since we have got the pillars from them, how has — how are you evaluating your stake in the company. Given the amount of time, energy, you have spent, and as per your the thoughts [Phonetic] and also the implementation that you are working more on the efficiency part. But when it comes to selling of the stake, then it all works out to how do you value your company, whether in terms of number times of sales or on the profitability? Or if you could give us some understanding how are other companies, who are concentrating only to this business of condom making are being valued globally, so that could give us some idea of what kind of valuation you can command going ahead.

Omprakash Garg — Managing Director and Chairman

Okay. Our expectation is that it should be a minimum of INR300 per share.

Saket Kapoor — Kapoor Company — Analyst

Okay, sir. So if the candidate — if they offer you INR300 per share, you are eager to sell your stake.

Omprakash Garg — Managing Director and Chairman

Yes. That is what our expectation is. You asked me about how do we value — yes. So…

Saket Kapoor — Kapoor Company — Analyst

Correct.

Omprakash Garg — Managing Director and Chairman

Correct.

Saket Kapoor — Kapoor Company — Analyst

Okay. And in terms of the people, who are interested to buy your stake, they have any pedigree of this business or they are financial investors only?

Omprakash Garg — Managing Director and Chairman

No, we are actually looking for ideas how to get a better return on our INR100 crore savings, which are mostly in fixed deposits right now. So since we are not experts in the financial area, we are looking for suggestions and ideas from every investor, and we would welcome their comments how we can — how Cupid can improve the return. Last year, we made only 6% on our savings. And people tell me that there must be a way to improve the earnings to more than that, certainly more than maybe 3%, 4%, maybe up to 10%. We would be happy to get some suggestions and improve the profit that way also for Cupid’s earnings.

Saket Kapoor — Kapoor Company — Analyst

Correct, sir. And sir, what is the second generation of the company? Do you have people from your family taking the second generation at the helm? You mentioned about you and your wife being the co-promoters?

Omprakash Garg — Managing Director and Chairman

No. There is no second generation in line for the management. So either I continue for whatever period I can or some other investor takes over the management or we are lucky to get a suitable candidate, who can be the new CEO. So these are all the possibilities, and we are open on each of them.

Saket Kapoor — Kapoor Company — Analyst

[Speech Overlap] a small point — yes, sir, one small point, sir. Since we — if we take the red markings [Phonetic], we are a small vertical, I mean, other — there should be other pharma companies also, who would like to add this as — in their portfolio. So as we looked for value from other small companies, who would like to diversify your segment and get a set business in terms of Cupid being a brand, so — and they’re having two separate verticals, suppose the company is doing into formulations and into other drugs can have a vertical of condom, which is a profit-making organization. Okay. Have we looked into that aspect also selling into a — selling into a pharma — pharma based — pharma company instead rather than going for separate — looking for a separate investor?

Omprakash Garg — Managing Director and Chairman

Yes. Definitely. We would be interesting in hearing from any interested party, pharma company or any other operating entity or even some kind of funds. So please do let us know and write to us, we will be very eager to sit down with them and discuss the entire issue.

Saket Kapoor — Kapoor Company — Analyst

Sir, I think that we should engage the people, who are there in the profession, who will arrange you buyers [Indecipherable], people in the con call, I don’t think would have the pedigree because we — I don’t know, who are the missing or joining [Phonetic] there in the call, but I think sir, you should be hiring the consultant, who have an expertise and for the lookout for buyer and seller for the transition to culminate. So that should be the understanding going back. And sir, two questions, sir, definitely. The type of growth, which we have seen sir, for this year, what factors have led to it? It is — is it any one-off — one-off orders that got executed for this year that we have seen this incremental revenue or how convinced are you that this growth we can look forward for the coming year also?

Omprakash Garg — Managing Director and Chairman

Yes. Like I said earlier, we are open for any suggestions, and we would like to welcome you or anybody, who can help us to guide in this matter.

Saket Kapoor — Kapoor Company — Analyst

Correct, sir. I was looking for an understanding of this year revenue growth, what factors have led to it? Or is it a one-off event that has led to this growth in the increased revenue? Or can we look at a continuity of the same on a top line of INR159 crores for FY ’23. Can we look at growth for this year also? If you could give some color on this, sir?

Omprakash Garg — Managing Director and Chairman

Yes. We are forecasting about 8% to 10% improvement in the top line and bottom line for FY ’24 assuming that the demand situation remains the same, the world economy stays stable, and there is no major increase in production cost. So you may [Technical Issues] kind of operating environment, that is our target right now.

Saket Kapoor — Kapoor Company — Analyst

Okay. And when we look at your segmental revenue, sir, it is divided into 3 parts, I think so the other unallocated is the interest income that you are earning. But in the — in the vitro devices, the IVD segment, if you could explain the lower revenue and also the losses that we have posted. So what kind of utilization capacity, utilization level do we have for the IVD segment and the outlook for the same going ahead?

Omprakash Garg — Managing Director and Chairman

Well, like I mentioned, if we have the two requirements, which are WHO approval and to complete three years in operations in our IVD section, then we would qualify for many worldwide tenders. And I see FY ’26 target could be as high as INR100 crores from IVD alone.

Saket Kapoor — Kapoor Company — Analyst

Okay, sir. Sir for future — for future to execute INR100 crore revenue from the IVD segment?

Omprakash Garg — Managing Director and Chairman

Yes. That is our optimistic assessment provided we achieve the two conditions, which I mentioned earlier, WHO approval and having completed three years of operating experience, which are the requirements for major international tenders.

Saket Kapoor — Kapoor Company — Analyst

So where are we in midst of these two conditions getting fulfilled?

Omprakash Garg — Managing Director and Chairman

Sorry.

Saket Kapoor — Kapoor Company — Analyst

Sir, where are we in midst of what factors are still left that we are unable to continue it. How many years are left for three years continuity to happen, three years of being in business, what is the pending period as of now?

Omprakash Garg — Managing Director and Chairman

Yes. It’s November of 2024. We would complete three years.

Saket Kapoor — Kapoor Company — Analyst

Okay. And for the WHO part, what are — what is pending for them to get the approval?

Omprakash Garg — Managing Director and Chairman

About the same time, ’24 year end December approximately.

Saket Kapoor — Kapoor Company — Analyst

So we completing three years is the precursor for WHO to give the signal, that is what you are trying to explain?

Omprakash Garg — Managing Director and Chairman

No, no. Both the issues are unrelated. Three years is an actual manufacturing experience requirement, which will — we will complete it in November ’24. The approval from WHO, that is an independent requirement for which we are in the process of submitting all our documentation, qualification, our trial sample, all the specifications on our 11 product. So WHO requirement gives us recognition worldwide and then many of the major tenders, they require a WHO pre-qualification in order to allow the leaders to compete for the business.

Saket Kapoor — Kapoor Company — Analyst

Correct. And this IVD is for the blood glucose monitoring and the self-explored [Phonetic] pregnancy, these are the only two segments, which that constitutes IVD or is it the space bigger?

Omprakash Garg — Managing Director and Chairman

No. The four major products, we are concentrating on, and we have the highest demands worldwide are number one Dengue fever, number two malaria; number three HIV infection; and number four, Syphilis, which is the sexually transmitted infection. So there is a high demand and relatively less competition for these four products.

Saket Kapoor — Kapoor Company — Analyst

Thank you, sir. Just, I’ll try to connect offline also, as I speak to your Advisor — Kirin Advisors in getting such the management team with more suggestion, which I may have [Indecipherable].

Omprakash Garg — Managing Director and Chairman

Yes, we would welcome that.

Operator

Thank you, sir. We take the next question from the line of Shivam Parakh from ValueWise Wealth Management Service. Please go ahead.

Shivam Parakh — ValueWise Wealth Management Services — Analyst

Sir, there is a decrease in sales of lubricant water-based jelly. So what are the plans for the current year? Will it be same? Or will we see some growth coming ahead?

Omprakash Garg — Managing Director and Chairman

No. Like I mentioned, the lubricant sales this year will be less than last year because of the — this quality issue, which we are having discussions with the UNFPA, but that should be fixed in three months to four months. So I would say FY ’24 will be a maximum of INR10 crore sales and FY ’25 will be major expansion about INR30 crore sales of lube [Phonetic], we are expecting. Okay. Thank you so much, sir.

Operator

Thank you very much, sir. Ladies and gentlemen, that was the last question. And I would now like to hand the conference back over to Mr. Yash Savla from Kirin Advisors for closing comments. Over to you, sir.

Yash Savla — Analyst

Thanks, everyone, for joining the conference call of Cupid Limited. If you have any queries, you can type to us at research@kirinadvisors.com and vastupal@kirinadvisors.com. And once more, thank you, everyone, for joining the conference.

Operator

[Operator Closing Remarks]

Omprakash Garg — Managing Director and Chairman

Right. Thank you.