Ester Industries Limited (ESTER) Q3 FY23 Earnings Concall Transcript

Ester Industries Limited (NSE:ESTER) Q3 FY23 Earnings Concall dated Feb. 16, 2023.

Corporate Participants:

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Girish Behal — Business Head – Polyester Films & Specialty Polymer

Analysts:

Gavin Desa — CDR India — Analyst

Pratik Shroff — Dolat Capital — Analyst

Saket Kapoor — Kapoor and Company — Analyst

Gaurav Lohia — Bowhead India — Analyst

Rahil Shah — Individual Investor — Analyst

G. Surendra — Individual Investor — Analyst

K. C. Puana — Individual Investor — Analyst

Pratap Jagwani — Forbes Marshall — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Q3 and Nine M FY ’23 Earnings Conference Call of Ester Industries Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you and over to you sir.

Gavin Desa — CDR India — Analyst

Thank you, again. Good day everyone and a warm welcome to Ester Industries Q3 and nine month FY ’23 analyst and investor conference call. We have with us today Mr. Pradeep Kumar Rustagi, the Executive Director, Corporate Affairs, and Mr. Girish Behal, the Business Head.

We will begin this call with opening remarks from the management, following which we will have the floor open for an interactive Q&A session. Before we begin, I would like to point out that some statements made in today’s discussions may be forward-looking in nature and a note to this effect was sent to you in the invite earlier. We trust you have had a chance to go through the documents on financial performance.

I would now like to invite Mr. Pradeep Rustagi, to make his opening remarks. Over to you, Pradeep.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

All right. Thank you, Gavin, and thank you everyone for joining us today. I’ll begin this call with brief overview of our businesses, followed by a walk-through of financial performance for the quarter and nine months under review. While our results for the quarter had been subdued, our performance during nine months though has been positive, despite the external challenges.

Furthermore, we are happy to report that Ester Filmtech Limited, a wholly-owned subsidiary of the company recently has started commercial operations at its new plant — film plant in Telangana. We expect the same to start contributing to our growth journey in the years to come. Commenting on our performance, film business, as we have been stating as well in our earlier calls is facing near-term headwinds, significant new capacities entering the market has caused excess supply and thereby compression in sales realization and margins.

With regard to Specialty Polymer business, I’m sure that you all must be aware of the recessionary concerns, grappling the global and U.S. economy at present. U.S. being the primary market for our Specialty Polymer products prevalent economic situation that even has affected us.

Let me elaborate on the performance of each segment. Starting with Specialty Polymer business, like we have highlighted in our previous calls, the overall growth for the business is largely dependent on the health of the global and U.S. economy, given that it is primarily an export-oriented business. Amongst the major markets, U.S. is a dominant market for our Specialty Polymer business, and hence prevalent economic concern in that even had adversely affected business performance during the quarter.

Q3 FY ’23 performance is reflective of those economic challenges, we have seen lower offtake of our products during the quarter, lower share of high margin products during the quarter resulted in margin and profitability compression. The actual sales during Q3 FY ’23 has dropped to 405 metric ton with revenues of INR16 crores, due to economic downturn in U.S. as compared to 1,248 metric tons of sales with revenues of INR72 crores during Q2 FY ’23 and actual sales of 953 metric ton, with revenues of INR44 crores during Q3 FY ’23.

We are hopeful of increased exports and again reaching volume of sales that we achieved in H1 FY ’23 as the economic situation in U.S. improves. On a nine months basis though, we have reported a steady performance which is reflective of the inherent strength of the business. Speciality Polymer, as we have been highlighting in the past is an innovative and largely patent protective business, as a result of which the threat emanating from any competitor doesn’t arise.

Furthermore, we have started to see signs of recovery in the business, and are hopeful of increased volumes over next couple of quarters. We have full faith and confidence in its ability to bounce back, once the external environment starts to improve. Our product pipeline as well remains strong which further — this shows us of the long-term growth prospects of the business.

Moving on to film business, Q3 performance as we have been indicating is reflective of the current challenges. Intense and heightened competition coupled with elevated conversion costs have granted the profitability of the quarter. However, similar to Specialty Polymer business, our nine months’ performance though has remained positive. Addition of significant new capacities in India has resulted in an increase in overall supply, which in-turn has resulted in pressure on margins. Though the slowdown — the slowdown in U.S. and Europe, and demand-supply [Technical Issues] see the industry contributing — continuing to see faced challenges during the couple of next quarter.

In addition to the external challenges, there was a breakdown in continuous polymerization plant due to which company suffered loss of production and therefore sales in CP plant and film plant 3 for about a month [Technical Issues] plant 3 runs only on [Technical Issues] This has also impacted our performance during the quarter. Company has already lodged a claim with the insurance company for damage as well as loss of profit. The insurance claim will be accounted for in the books of accounts, as and when it is accepted and approved by the insurance company.

While the outlook remains challenging for the next couple of quarters, we expect the situation to normalize gradually and expect the realization in margins to improve both on account of enhanced volume of value-added and specialty products within the film segment, as well as growth in demand that continues to be robust. Our continuous efforts and focus, coupled with commissioning of new machines in near future will enable us to announce volume of value added and specialty products within the film segment.

We also on a continuous basis review various elements of cost and are working with enhanced focus, to explore possibilities of reduction in the same. Furthermore, as I have highlighted at the beginning of my remarks, I’m happy to announce that we have started commercial operation from our new unit in Telangana, it’s spread over 50 acres, the 48,000 tons per annum BOPET film plant and 10,000 tons metalized BOPET film which has been set up at an approximate cost of INR665 crores, including margin money for working capital and accumulation of input tax credit of GST paid on machines.

This plant is expected to generate revenues of approximately INR600 crores, upon achieving optimal utilization. We also plan to export part of the production from the film unit ranging 25% to 30% of the output. I would just like to reiterate that while outlook for the businesses over next couple of quarters may remain challenging, we remain confident in the ability and prospects of the company to tide over any hurdle and continue on its journey towards achieving of stated objectives.

I’ll now quickly walk you through our financial performance for the quarter and nine months ended December 31st, ’22, post which we can begin the Q&A session. Starting with the top line, revenues from continued operations stood at INR197 crores, as against INR288 crores reported during Q3 FY 22, lower by 32%. As indicated earlier, while film business performance are impacted by intense competition and breakdown in film plant 3 for about a month, recessionary concerns in U.S. affected Specialty Polymer business.

Revenues from Specialty Polymer for the quarter stood at INR16 crores, as against INR44 crores, generated in Q3 FY ’22, while revenues from the film business stood at INR181 crores, as against INR244 crores garnered during Q3 FY ’22. On an [Technical Issues] and this is what broadly steady and steady and stood at INR825 crores, as against EUR807 crores, generated during nine month FY ’22 higher by 2%.

Revenues from Specialty Polymer on a nine month basis stood at INR146 crores, as against INR125 crores, while revenue from film businesses stood at INR679 crores, as against INR682 crores registered during nine month FY ’22. Contribution to the revenue from operation from divested/discontinued business of engineering plastics, revenues during the nine months ended December ’22 was INR [Technical Issues] EBITDA for the quarter from continued operations stood at INR6 crores, as against INR47 crores generated during Q3 FY ’22. On a year-to-date basis, it has stood at INR98 crores, as against INR129 crores generated during nine months FY ’22.

Lower profitability were largely owing to compression in margins in film business, breakdown in film plant 3 for about a month, lower volume in Specialty Polymers and high conversion cost. PAT from continuing operations for the quarter stood at negative of INR9 crores and during nine months ended December ’22 it stood at INR33 crores.

Upward revision in policy rates by RBI continuously since the month of April ’22 has caused increase in rate of interest on our borrowings. As a consequence, finance expenses have increased from INR16 crores during the nine months ended December ’21 to INR22 crores during the nine months ended December ’22.

As of 31st December, ’22, our outstanding interest bearing term debt, net of free-cash and liquid investments of about INR200 crores, stood at INR124.39 crores, which is 0.8 times our annualized EBITDA for the current financial year.

I would like to highlight the interest-bearing debt, net of free cash and liquid investment is 0.2x our annualized EBITDA, strong balance sheet and leveraging, coupled with cash reserves and liquidity ensures that EBITDA is serviced as per schedule without any issue and problem. We remain committed toward maintaining a strong balance sheet, that is supportive of our growth initiatives.

That brings me to the end of my opening remarks. We would like — now like to throw open the floor for questions. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Pratik Shroff from Dolat Capital. Kindly proceed.

Pratik Shroff — Dolat Capital — Analyst

Yeah, hi. Thank you for the opportunity. Sir, just had a couple of quick questions. At what capacity we are presently operating at? And what is the visibility in the BOPET space and where do you see new capacity is coming up? This would to start with that — hello?

Girish Behal — Business Head – Polyester Films & Specialty Polymer

I think the question is not really clear to what — can you just repeat once again?

Pratik Shroff — Dolat Capital — Analyst

Yeah. Sir, currently at what capacity are we operating at? And where do you see new capacity is coming up? And what is your visibility for the BOPET space?

Girish Behal — Business Head – Polyester Films & Specialty Polymer

See, as of now, we are operating at full capacity at our Khatima — Uttarakhand plant. And as mentioned by Mr. Rustagi, we have new [Technical Issues] in this quarter, in January to March quarter. And that particular plant is currently is operating at 70% operating rate.

Pratik Shroff — Dolat Capital — Analyst

Okay. And sir, what is the visibility in the BOPET space?

Girish Behal — Business Head – Polyester Films & Specialty Polymer

See, I think Mr. Rustagi briefly touched about it, the demand continues to be robust. There are external factors which is the discretionary impact, and as well as the demand-supply imbalance, which is expected to surge short to medium term, and keep pressure on margins.

Pratik Shroff — Dolat Capital — Analyst

Okay. Sir, so — I mean this elongating your this thing on that, thesis on that. There is a slowdown seen in the U.S. and it’s expected to continue in the current year. So what gives us the confidence of SP doing better in the near term or in the near or mid term? And what product lines have we seen demand for?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So in the first six months we did a revenue of about INR32 crore, majority of that has come from the exports to U.S. So the December quarter was badly affected because there was a stock in the pipeline also. We are seeing some revival in the March quarter. March quarter is going to be better than December in terms of volume and value of sales in Specialty Polymer. And with that and the forecast that we have received from our customers in U.S., we believe in the next let’s say couple of quarters we should be doing reasonably well in the Specialty Polymer. And as the economic situation in U.S. improves, we should be back to the volumes that we did in H1 FY ’23.

Pratik Shroff — Dolat Capital — Analyst

Okay, okay. Thank you sir. Thank you for your time.

Operator

Thank you. The next question is from the line of Saket Kapoor from Kapoor Company. Kindly…

Saket Kapoor — Kapoor and Company — Analyst

Yeah. Namaskar Rustagiji and thank you, sir, for the opportunity. Sir, you mentioned that we did capacity utilization levels of 70% for our film segment for Q3.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

No, Girish mentioned that A, Telangana plant which got commissioned on 20th January is now running at about 70%.

Saket Kapoor — Kapoor and Company — Analyst

Okay. Sorry, sir. Sir, then what was our utilization level? [Speech Overlap] What was our utilization levels for Q3, sir, the original [Speech Overlap]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So the existing Telangana — Khatima plant, Uttarakhand plant?

Saket Kapoor — Kapoor and Company — Analyst

Yes, sir. Yes.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

We were running at almost full capacity, but for the film plant 3, which was down for about a month because of the breakdown. Otherwise, we were running at almost full capacity.

Saket Kapoor — Kapoor and Company — Analyst

So sir in tonnage terms, what was the percentage loss because of the…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Because we lost 3,000 tons of production from the film plant 3 which is the largest plant in Khatima. In a month we lost about 3,000 tons, so that’s the reason for the low volume.

Saket Kapoor — Kapoor and Company — Analyst

Okay. So what does that translate into the utilization percentage sir, 3,000 per month?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

3,000, our quarterly capacity is close to 15,000, so that then amounts to almost 20% for the quarter capacity.

Saket Kapoor — Kapoor and Company — Analyst

Okay. So on a likewise basis, we were down in volume by 20%. And now coming to the conversion part, how have the margins have — are also lower the per kg realization, if you could give some understanding.

Girish Behal — Business Head – Polyester Films & Specialty Polymer

Just a minute. So in the — in December quarter plain films, we were — we got about INR96, INR97 a kg 12 micron Corona. And the metalized was selling at about INR112 to INR114 a kg in December.

Saket Kapoor — Kapoor and Company — Analyst

Okay. And the comparative number for the September quarter and what are the current prices? I

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

In the September quarter it was INR112 for 12 micron Corona, and metalized was at about INR130, INR130, INR132. So we are seeing a drop of more — almost about INR15 to INR16 on an average basis, as compared to September.

Saket Kapoor — Kapoor and Company — Analyst

Right, sir. And how has been the price trend sir for the month of Jan and if some color also on Feb?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

The December quarter was the worst. Things are marginally better. I would say, January, February, we are at INR97, INR98, INR99, kind of — let’s say INR97 to INR100 a kg.

Saket Kapoor — Kapoor and Company — Analyst

For 12 micron?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

For 12 micron Corona.

Saket Kapoor — Kapoor and Company — Analyst

And…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Metalized at about INR114 to INR115.

Saket Kapoor — Kapoor and Company — Analyst

INR140?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

INR115, the metalized.

Saket Kapoor — Kapoor and Company — Analyst

Okay. Okay, sir. And, sir, for this quarter, we will be operating the shutdown which happened that has recovered and we will be producing at optimum level. What is the update on the same, the third line?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes, yes, we should be operating at optimum level in the existing plant, and the Telangana plant will gradually increase the capacity utilization. Because it’s — that’s the way different plants, many new plants, film plants will operate. It takes time to build up the capacity utilization.

Saket Kapoor — Kapoor and Company — Analyst

Okay. Sir, what are the factors that led to the drop in these realization levels? How much is because of the raw material cost going down, if you could give some color and also then on the demand side. And yes, firstly the color on — the factors that led to lower realization.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So basically if you see the way, demand — there is no issue with the demand, demand continues to grow. It is the compression in margin which has come because of the competition. So Girish can explain you in detail, the domestic market scenario.

Girish Behal — Business Head – Polyester Films & Specialty Polymer

See, as you might be aware that there are many capacities which have started in this — in last 12 months or so, which has resulted in to temporary demand supply imbalance, which has impacted or put pressure on the margin level, we are operating at.

Saket Kapoor — Kapoor and Company — Analyst

So can you give some more color on the domestic capacity addition and also on the global part, sir, just to gauge an understanding how the — what have been the addition in percentage terms.

Girish Behal — Business Head – Polyester Films & Specialty Polymer

Yeah. I think in total about eight lines have started in last 12 months, eight to nine lines have started.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes.

Girish Behal — Business Head – Polyester Films & Specialty Polymer

So which [Speech Overlap] let’s say try to compare to the total capacity level that could be nearly about 50% of the existing capacity.

Saket Kapoor — Kapoor and Company — Analyst

Okay, sir. 50%?

Girish Behal — Business Head – Polyester Films & Specialty Polymer

Yes, yeah.

Saket Kapoor — Kapoor and Company — Analyst

Okay, okay. But all of those lines have not still ramped up to the optimum level, every lines would be ramping up in a phased manner. So the nameplate capacity…

Girish Behal — Business Head – Polyester Films & Specialty Polymer

The line would be ramping up — would be in a phase manner. But I think whatever our best estimates are that all nines put together must be at least operating at 75% operating rate.

Saket Kapoor — Kapoor and Company — Analyst

Okay. So there will be precessor going ahead also because, these — they need to find buyers and the offtake has not risen in commensurate to the capacity additions.

Girish Behal — Business Head – Polyester Films & Specialty Polymer

I think the demand is very strong, and there is additional capacity, that additional capacity is serving demand, but still there is a demand-supply imbalance, which is the main reason for the pressure on pricing and margin.

Saket Kapoor — Kapoor and Company — Analyst

Sir, this you have spoken about the…[Speech Overlap]

Girish Behal — Business Head – Polyester Films & Specialty Polymer

Scenario globally improved, we should be able to park more volume outside of India, the all the Indian manufactures. So that would — that should reduce some pressure on the domestic prices also. So sir, this is the addition, domestically. How have the global space faired in this period over the last 12 months? Yeah I think. Globally, yes, there are certain pressure on the — what was happening earlier. But whatever the countries or the market is getting served from India earlier those market continue the momentum. And is reasonable exports happening from India, and there are strong chances of it to grow in coming future.

Saket Kapoor — Kapoor and Company — Analyst

Okay. So globally, just to conclude on capacity utilization, so globally the capacity that has risen is totally — is on from India only and not the other geographies?

Girish Behal — Business Head – Polyester Films & Specialty Polymer

No. I think the capacity expansion has happened in many countries, including India.

Saket Kapoor — Kapoor and Company — Analyst

Okay, sir.

Girish Behal — Business Head – Polyester Films & Specialty Polymer

In India it is one of the largest.

Saket Kapoor — Kapoor and Company — Analyst

It is one of the largest. Okay, sir. Sir, in your presentation it was mentioned that mitigation strategy is under implementation, so please allude to the factors — what steps are you taking to first of all contain these margins? And also, since the realizations have based that, how have the raw-material — the market is behaving? So our margins per kg, how has the margin per kg being affected for the last quarter, and what should be the likelihood for the current quarter?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So, first of all, I’ll come to the raw material cost. The raw-material cost will be in let’s say in December quarter or January, February has been more or less stable. In December, it was INR79 a kg per kg of film PTA and MEG put together. In February, currently, it is at about INR79 a kg. So in between January, there was some drop, but it has again regained. So we are in the ballpark [Technical Issues] to INR80 in terms of raw material per kg of film, as well as the selling price we have already discussed, what the selling prices for the film are.

What is the next question?

Girish Behal — Business Head – Polyester Films & Specialty Polymer

I think you have to repeat your remaining question.

Saket Kapoor — Kapoor and Company — Analyst

Yes, sir. I was looking at the mitigation strategy, sir, which you have mentioned that is under implementation. So if you could give some more color to it, what are the steps currently being taken? And sir, yeah — yes, sir then I’ll come for the follow-up.

Girish Behal — Business Head – Polyester Films & Specialty Polymer

It is because we are, as Mr. Rustagi mentioned earlier, we have a very strong pipeline on Specialty Polymers, and Specialty Polymer has already seen signs of early revival it’s seen expansion. We are working on a range of specialty films and planning to increase it at a faster pace. There are many new products which are currently under various stages of let’s say commercial volumes. And also apart from these two, we are also looking at other venues to increase profitability, including cost rationalization and all other possible areas.

Saket Kapoor — Kapoor and Company — Analyst

Sir, for value-added films, what was the — out of the total sales, what percentage attributed to value-added, and how is this number going to shape up going ahead?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So in December quarter, we did about 20% of the total volume that we did, about 23% came from the value-added and specialty portfolio. Whereas in terms of value, it contributed 35%. So 25%, 23% of value-added products portfolio contributed 35% in value terms. And going forward our target is to take it up to 30% to 35%.

Saket Kapoor — Kapoor and Company — Analyst

In terms of volume?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Speech Overlap] existing Khatima capacity, I’m not including the Telangana capacity in it.

Saket Kapoor — Kapoor and Company — Analyst

Okay. Sir, when we look at this value-added film part, is it the same capacity where we are doing some after work that goes into value-added or value-added lines are separate than what the general film lines are?

Girish Behal — Business Head – Polyester Films & Specialty Polymer

It is both. Some products are produced on the larger assets and some products are required for the steps to be further converting into a final product. So it’s a mix of both.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So there are new machine — there are extra machines also from the — apart from the main production line, there are other machines also, which are used to make value-added and recycled film.

Saket Kapoor — Kapoor and Company — Analyst

Correct, sir. Sir, was there any impact of foreign exchange losses also for us in this quarter?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

In the — on the exchange fluctuation so far we have had positive impact because we are in — Ester Industries is now a net exporter of — exporter and therefore, we have more receivables in foreign currency than the payables. And the depreciation of rupee against dollar is resulted in to a gain for the company. So we had exchange fluctuation gain in December quarter. For example — I mean for that matter in the current financial year, so far, we have made a deal of about INR5 crore on the exchange fluctuation in Ester Industries.

Saket Kapoor — Kapoor and Company — Analyst

Okay. Sir, and —

Operator

Mr. Kapoor, I’m sorry to interrupt, sir.

Saket Kapoor — Kapoor and Company — Analyst

Okay, sir. I’ll [Speech Overlap] yeah, yeah.

Operator

Thank you. The next question is from the line of Gaurav Lohia from Bowhead India. Please proceed.

Gaurav Lohia — Bowhead India — Analyst

Yeah, hi, sir. Am I audible?

Operator

Yes, sir. You are.

Gaurav Lohia — Bowhead India — Analyst

Can you please — sir, can you please share the June quarter utilization as well? You shared the December and September.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Pardon Gaurav. Can you come again?

Gaurav Lohia — Bowhead India — Analyst

Can you please share the realization for June quarter, 12 micron film and metalized film?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

June quarter — June ’22 quarter we had realization of 12 micron in the range of INR145 rupees. But at that time raw material cost was significantly high. It was about INR95 a kg.

Gaurav Lohia — Bowhead India — Analyst

INR95. Currently, it’s INR80, right?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

It is — currently, it is about INR78, INR79.

Gaurav Lohia — Bowhead India — Analyst

And so INR145 was for 12 micron and metalized would be about INR160 odd?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

INR160.

Gaurav Lohia — Bowhead India — Analyst

Understood. And currently metalized is about, I missed that 97 to 99… [Speech Overlap]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

INR115, INR117.

Gaurav Lohia — Bowhead India — Analyst

Okay. INR117. And do you — considering the situation so that the supply pressure is there in the market, do you think that these prices can drop to INR90 odd levels or, that’s not possible, basis on the EBITDA per kg that we are making or all the industry players that are making in the market, it’s difficult to slide — to price correction from here onwards.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

We don’t think so there is any scope for prices to drop further because the prices are already at lowest level.

Gaurav Lohia — Bowhead India — Analyst

Okay, okay. And is there a significant difference…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Speech Overlap] cannot go any down further.

Gaurav Lohia — Bowhead India — Analyst

Is there any significant difference between export prices and domestic prices?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes, export prices are better.

Gaurav Lohia — Bowhead India — Analyst

They are better. Okay. And sir in this specialty business, how much visibility generally do we have? When these clients when they share the order with you, is it easier for them to retract it, if they see the demand is not going to be good? Or generally they go ahead and take the order from you?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Sorry, I’m not clear. You have to repeat your question.

Gaurav Lohia — Bowhead India — Analyst

I am saying that in the specialty business, how easy it is for your clients to retract the order? Because if I see in September and October, we were quite confident about the specialty business on the volume side, right? But this came as a surprise that because of the pipeline or weak demand in the U.S. we could not meet those expectations.

So I am saying that, how easy it is for a client to retract from the orders that they had given to you?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yeah, I think it’s not about retracting the orders. In case [Technical Issues] perhaps spoken earlier that many of the products what we sell is on the specialty space are patent protected, so there is no competition. So the volume has dropped only because of the demand at our customer end has seen a drop, which was in the last quarter, and now we are already seeing signs of recovery.

Gaurav Lohia — Bowhead India — Analyst

So, generally how much visibility do we have, is it a one month or two month visibility? There must be two months or three months kind of…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Usually, we have… Yeah, go ahead please.

Gaurav Lohia — Bowhead India — Analyst

Yeah, no, please, please go ahead, sir. Please, sir.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So I think usually we have forecast available and the customer keep on revising the forecast, as and — as per their demand consumption schedule.

Gaurav Lohia — Bowhead India — Analyst

Understood, understood, sir. I think helpful. Thanks a lot.

Operator

Thank you.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

But we should be doing much better in the March quarter in terms of Specialty Polymer, both volume and value, as compared to December quarter.

Operator

Thank you. [Operator Instructions] The next question is from the line of Rahil Shah [Phonetic] an individual investor. Can we proceed?

Rahil Shah — Individual Investor — Analyst

Hello. Hi. Am I audible?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yeah.

Rahil Shah — Individual Investor — Analyst

Yes, hi, sir. Sir, just wanted your broader view on the current industry scenario, when is it expected to improve, in how many quarters, you will say, when will the industry and even the company for that matter will produce [Technical Issues] performance. So when is the exact turnaround expected in a strong opinion?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So in film business, as we have stated in our opening remarks, we should be seeing a recovery — the recovery will be gradual, number one. Number two, it should start coming in after one to two quarters, after a couple of quarters. There would be definitely because the December quarter lot of things went negative at the same time. So we had a breakdown, the slowdown in U.S. and many other things. So we should be seeing revival starting from March quarter, and through a gradual process, we should be back to some sort of a positivity in — after one to two quarters.

Rahil Shah — Individual Investor — Analyst

Positivity in the numbers on top line and margins, you’re saying?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes.

Rahil Shah — Individual Investor — Analyst

Okay, okay. So that is — is this like because the company is expecting good demand or is it — are you expecting overall industry scenario to change and become positive.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Sir, the demand will definitely increase. We will find new avenues as the global economic situation is stabilizing, there would be more demand from the outside of India and within India also. We believe, the growth in the market and many other things with many other initiatives that we are taking one, increasing the proportion of [Technical Issues] cost, all that should help us in reducing — in let’s say turning to positive performance in one to two quarters.

Rahil Shah — Individual Investor — Analyst

Okay, okay. Are you in any position to give any guidance or…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Very difficult because there is dynamic and volatile situation as of now. So we know the efforts that we are putting in terms of enhancing volumes of [Technical Issues] and cost reduction and improving efficiencies, etc., all that should result into some improvement. And this is the guidance that at this point in time, we can share this much only.

Rahil Shah — Individual Investor — Analyst

Okay. Okay, sir. No problem. Thank you and all the best.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Thank you.

Operator

Thank you. The next question is from the line of G. Surendra [Phonetic] an Individual Investor. Can we proceed.

G. Surendra — Individual Investor — Analyst

Hello.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes.

G. Surendra — Individual Investor — Analyst

Am I — hats off to Mr. Rustagi you are carrying so much responsibility in finance and secretarial department. You are the back pillar of our company and my — I appreciate your efforts, as you are a strong pillar of this company.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Thank you, sir. Thank you very much.

G. Surendra — Individual Investor — Analyst

Sir, one more, my question is on that, there was a breakdown and it was reported in this current quarter by auditor that the event was happened in September, I think, correct?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes, 28th September.

G. Surendra — Individual Investor — Analyst

Correct. So why it was not reported in Q3 — Q2? Sorry.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Speech Overlap] So what happened that — so what happened, each company has a certain materiality threshold, and the materiality threshold is decided by the Board of Directors generally, anything which has an impact of more than 10% of the net worth is considered material. So in terms of both bottom line and the top line, the impact was much less than 10%, because our net worth is close to INR700 crores, INR750 crores, and the 10% of that would be about INR70 crores, whereas the loss of sales was only INR30 crores, and the impact on bottom line was only INR3 crores, INR3.5 crores.

So it was not considered a material event. And when we [Technical Issues] we were not sure how many days will it take, but it was something which was very unexpected. So…

G. Surendra — Individual Investor — Analyst

Carry on, sir. Hello?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So that’s the reason it was not considered material enough to be informed to the exchange.

G. Surendra — Individual Investor — Analyst

Sir, but, then now why auditor has — I mean to say, why auditor has put the — I mean see it’s not the [Speech Overlap] just the material event, when Board of Directors…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

It is…

G. Surendra — Individual Investor — Analyst

[Speech Overlap] not so.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

It is the — in the accounting, the standard, the listing requirement requires, it is not by the company, because we had to — to the leader of the results to the investors, we had to inform the drop in sales value. One of the reasons was the breakdown in the plant and machinery for about a month in film plant 3, so that’s the reason we had put this not in the results.

G. Surendra — Individual Investor — Analyst

But also that you have not informed in concall Q2.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

We may have missed it. We take note of your observation, and we would be more careful.

G. Surendra — Individual Investor — Analyst

I mean to say that we — some information was missing in this part. And we investor misunderstood.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Pardon?

G. Surendra — Individual Investor — Analyst

We — because of not — this information was not informed in concall, as well as wherever in report, also not informed to me at Stock Exchange. So we miss — we investor are misunderstood. We thought that — means we thought that company will perform better. Those in one or two quarters, the situation of the polymer, this film line situation you have guided us, let’s say there is a competition and prices are softening. But this information really hurt to the company more.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Now we cannot say anything about this sir.

G. Surendra — Individual Investor — Analyst

Sir, [Indecipherable] I need to — you are saying that there is presently new capacities are running around 25% something like that. So one [Speech Overlap]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

No, we did not keep 25%.

G. Surendra — Individual Investor — Analyst

No, the new capacities, I’m talking about 8 to 10 plants that have recently operationalized in ’22, ’23. Okay. New plant, 8 to 10 new plants of film plants, I’m talking about film plants, 8 to 10 film plants are operationalized in ’22, FY ’22, ’23. And they are operating at 25% roughly. Correct?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

No. I think what I mentioned was that eight, nine lines have started in last 12 months. And we don’t have — I mean we can only make a guess that collectively at what operating rate all these plants collectively are performing. And our internal estimate is that, that number could be anywhere between 70% to 75%.

G. Surendra — Individual Investor — Analyst

Okay. So just I mean to say that in the next two to three quarters, if they start performing at 100%, will it be a situation like glut in the market? And also there — presently in January, we are benefited by one fire in the plant of Jindal, right? So it might be because of — this situation should have been improved in January to March. But in future all the plants like this, say operating 100% there will be glut in the market.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yeah, I’ll try to answer your question in a different way. The capacities have added over the last 12 months, those [Technical Issues] operating at let’s say as far our internal estimate 70% to 75%. There could be a very small impact of Jindal, the impact that entails one of our competitors’ plant. But eight or nine lines operating at 70% to 75% of run rate it’s a very, very significant number and that talks about that, what kind of demand growth our end consumers are having.

Demand continues to be very robust. We are growing at about 12% to 13% per annum domestically, and globally also 6% to 6.5%. On export 13% on a very large base is a very good healthy number.

G. Surendra — Individual Investor — Analyst

Sir in Q4, can we estimate we will at least breakeven level?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Pardon sir. Can you come again?

G. Surendra — Individual Investor — Analyst

Yeah, in Q4 however, we will be at least on breakeven level of profit, no — at least minimum, no profit, no loss basis, because in Q3 we have a lost [Speech Overlap] INR11 crore to INR13 crore and you’re saying that there is a small improvement in this quarter in the prices, as well as specialty polymer.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Sir, we’ll definitely see improvement in the top line. There would definitely be some improvement in the bottom line, whether we would be able to — we would strive to achieve net breakeven at least. But this is something which is market dynamics have to play very important role. And therefore, it is difficult to give at this point in time in number. But we are working in the direction of achieving the net breakeven.

G. Surendra — Individual Investor — Analyst

Sir, there is one small question on the [Speech Overlap]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yeah. I am working on that correction.

G. Surendra — Individual Investor — Analyst

Whether we have put on hold our this expansion plan of the Specialty Polymer, or is it going on?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Can you please repeat once again, I think your voice is not… [Speech Overlap]

G. Surendra — Individual Investor — Analyst

There was some Specialty Polymer.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

That was the expansion plan for the debottleneck of certain capacities, where we are going bit slow on that, because of the situation in U.S., etc.

Operator

Thank you. The next question is from the line of K. C. Puana [Phonetic] an individual investor. Kindly proceed.

K. C. Puana — Individual Investor — Analyst

Hello.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes.

K. C. Puana — Individual Investor — Analyst

I have two simple questions regarding our Telangana investment.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Telangana investment, yeah, please.

K. C. Puana — Individual Investor — Analyst

About the Telangana investment. There is…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Can you use your handset instead of speaker phone?

K. C. Puana — Individual Investor — Analyst

Pardon?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

If you’re using a speaker phone, can you use handset?

K. C. Puana — Individual Investor — Analyst

I am using a handset only.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Okay. Your voice was not very clear, so.

K. C. Puana — Individual Investor — Analyst

Okay, okay. Am I clear now?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yeah, better sir.

K. C. Puana — Individual Investor — Analyst

Better. Okay. Regarding this Telangana investment, there appears to be a cost overrun, as well as a time overrun to the extent of about 25%. Originally, your estimation was about INR500 crores for the project. And it was to commence — the production was to commence some time in September of ’22, September, October of ’22. Now — then the project cost was enhanced to INR576 crores, now we would say that ended at plus INR665 crore, and you are gone into production only in January this year. Does it affect the viability of the project, viability of the investment, because the cost… [Speech Overlap]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Let me answer that, sir.

K. C. Puana — Individual Investor — Analyst

Yeah.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Maybe — have you completed your question maybe answer me.

K. C. Puana — Individual Investor — Analyst

Yeah, tell me what…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

The original project cost approved by the Board of Directors was INR586 crore, when the project was finally location-specific was conceived, it was INR586 crore. We started the project in October of ’20, since then there has been massive increase in the building and construction cost. So this was one reason.

Secondly, the project cost — in the project cost we had taken margin money for working capital as part of the project cost because of the increase in the crude oil prices, etc. the margin money for working capital, which is not an investment in the fixed asset, it is more in the current asset, that has increased from INR15 crores to INR30 crores.

Secondly, the GST component on the the machines that we have purchase which is now appearing as a current asset, balance in the current asset side as input tax credit of GST accumulated that is about INR35 crore. So INR586 crore plus INR50 crore, that makes it INR636 and balance INR29 crore is on account of the increase in the construction cost, time overrun cost, resulting into higher pre-operative expenses. So, and the reason for the time overrun was that we did not get power connection from the state government. We were ready to commence commercial production in the month of October but there was delay in getting the power connection from the state government.

So we have kept the cost of the project under control. So INR35 crore plus INR15 crore is appearing as a current asset in the balance sheet, it is not part of the fixed assets. So INR655 crores, minus INR50 crore, INR650 crore and INR586 crores, the balance INR30 odd crores is because of the time overrun and construction cost.

K. C. Puana — Individual Investor — Analyst

So you had not envisaged this escalation in construction cost, is that when you…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

We could not have. We didn’t know what would be the construction cost, we conceived the project in the quarter ended June ’20. What the land allotted to us in the month of October, we started construction and because of post-COVID there was huge increase in the construction cost. Cement and steel prices had gone through the roof. And that is the main reason for the increase in the project cost.

K. C. Puana — Individual Investor — Analyst

What was the reason for the power connection delay?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

See the power connection delay because the industrial area, where we have our plant, the new subscription was being built by the government which got delayed.

K. C. Puana — Individual Investor — Analyst

What’s that, what’s that? Please come again.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

See we have a plant in a newly identified industrial area, newly notified industrial area, therefore, our plant, a new substation was being built, which [Technical Issues]

K. C. Puana — Individual Investor — Analyst

Okay. Got it, got it. After commissioning the plant, is the plant performing to your expectation in efficiency, as well as product…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes. I think, our plant is performing as per our expectation now. So we have started selling commercial sales to our customers. The product is well accepted.

K. C. Puana — Individual Investor — Analyst

Product quality, and plant efficiency is up to your expectations, right?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes.

K. C. Puana — Individual Investor — Analyst

Okay. Thank you all the best.

Operator

Thank you. The next question is from the line of Pratap Jagwani [Phonetic] from Forbes Marshall kindly proceed.

Pratap Jagwani — Forbes Marshall — Analyst

Hello.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes.

Pratap Jagwani — Forbes Marshall — Analyst

My question to Mr. Singhania. Hello?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Mr. Singhania is not able to attend this call. He had some other engagement which could not be avoided. So I am Pradeep Rustagi, Executive Director Corporate Affairs.

Pratap Jagwani — Forbes Marshall — Analyst

Yeah. Mr. Pradeep, I have three questions. Starting with first, in this quarter Q4 ’23 the revenue from Telangana and your Dahej expansion, what you have done last year, what will be the total revenue contributed in top line approximately? That is the first question.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Shall I answer this first?

Pratap Jagwani — Forbes Marshall — Analyst

Yeah.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So, Telangana the commercial production has started only in the month of January. So there is no contribution to the revenue from Telangana operations in the December quarter. I

Pratap Jagwani — Forbes Marshall — Analyst

In Q4, Q4 by March ’23?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

In Q4 if we should be achieving close to, let’s say a revenue of about INR60 crore — INR70 crore to INR75 crores from Telangana operations in Q4.

Pratap Jagwani — Forbes Marshall — Analyst

Okay. And from Dahej.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Sir, Dahej plant was for Indian plastics it — before it could commence production the business has already been sold to Radici Indian plastics business. So, that plant was under construction when the business was transferred from Ester to Radici. So there was — it had not started commercial production till 15 September when we sold the business to them.

Pratap Jagwani — Forbes Marshall — Analyst

Okay. My second question is, once the — this insurance claim is approved and once it is available, when it will be available in top line?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Sir, there are two aspects the insurance play. One is the property damage, and the other is the loss of profit. So the property damage claim is always settled more conveniently and in a timely manner. The loss of profit takes time. We are expecting by end of March or early April to get the insurance claim settled on — for the property portion, which is close to INR3 crores.

For the loss of profit, we may take six months, it may get settled in the June quarter.

Pratap Jagwani — Forbes Marshall — Analyst

Okay. Now my third question is that, your Q2 was the top line and bottom line seen significant increment due to the plastic sale business, which should have been taken apart. And due to that your quarterly performance and Y-o-Y performance is getting compared with that one time benefit what you got. So, now. Q4 is also subdued, and you are seeing some INR70 crore additional revenue from Telangana plant, and 75% is your total capacity from Khatima one. So that is I think, expected to be the good one.

But again the Q1 due to this insurance then will be again but jump on that. So when the investor like us can expect that there will be a steady growth, whether then they finally should have one time adjustment and then the profit and then loss. So what is the plan for management to get this steadily growth to be done?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yeah, from June quarter we should have steady operations, both at Telangana and Ester because we commenced production in Telangana only on 20th January which takes time to stabilize the plant, and it takes time to gradually pick up the production and increase the capacity utilization. And we also are expecting revival in Specialty Polymer business which over the next one to two quarters.

From June quarter onward, we should be starting to reach the steady stage of bring it in terms of top line.

Pratap Jagwani — Forbes Marshall — Analyst

Okay. And so that will significantly improve the bottom line also, correct?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

That is what we are striving to achieve sir.

Pratap Jagwani — Forbes Marshall — Analyst

Okay. Thank you sir.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yeah. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor Company. Kindly proceed.

Saket Kapoor — Kapoor and Company — Analyst

Yes, thank you, Rustagiji. Sir, you mentioned that the volume lost because of the breakdown was 20% of the entire volume.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

20% in volume terms, in value terms it was close to INR30 crores. So my annual — quarterly capacity is 15,000 tons of polyester film. We lost about 3,000 tons, which is 20%, 3,000 tons would translate to INR30 crores of top line.

Saket Kapoor — Kapoor and Company — Analyst

INR30 crores of top line for the month, the loss period?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

For the December quarter, we — had we not be — if the breakdown was no there, our film lines — film top line would have been higher by about INR30 crores.

Saket Kapoor — Kapoor and Company — Analyst

INR30 crores. And what was the impact on the bottom line in that case, because of the… [Speech Overlap]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Going by the margins that were prevailing, I think the impact if we take an average about INR3.5 crore is the impact on the bottom line. And on top of that, we spent some certain amount on the restoration of the damaged asset, that has also been charged to revenue. And when we get the claim settled by the insurance company, it will come in the other income part.

Saket Kapoor — Kapoor and Company — Analyst

What was the other expenses, sir?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

The impact of the breakdown and loss of profit, you can consider it in the ballpark of about INR5 crore to INR6 crore.

Saket Kapoor — Kapoor and Company — Analyst

No sir. Profit’s part is — will be — we will get from insurance, but how much extra money we have spent on restoration?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Sir, restoration, our quality is 100%, so we get the only — the deduction is only INR50 lakhs. So we — on the restoration we lost only INR50 lakh.

Saket Kapoor — Kapoor and Company — Analyst

Okay. So for the next…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Speech Overlap] under the insurance policy.

Saket Kapoor — Kapoor and Company — Analyst

So for the next quarter, this INR3.5 crore impact will not be there. It will be a normal quarter because of…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

If we get the settled in — if we get the claim settled in March, otherwise it will come in the June quarter.

Saket Kapoor — Kapoor and Company — Analyst

No, no, sir, my point is this volume loss and the loss in profit of INR3.5 crores which happened because of the lower volume will not be there for the fourth quarter. We would be operating at the normal levels, and the margins will be similar.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yes, Saket, yeah, your assessment is right.

Saket Kapoor — Kapoor and Company — Analyst

Yes, sir. So and — and, sir, if we take the margins — the blended margins per kg, taking into the commoditized, as well as the value-added films, if you could give us quarterwise, for the June quarter, what was the per kg margin, what was the average for September and how has December faired?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

June the blended margin for — in domestic market was close to INR60 and September it dropped to INR35, in December, it is at about INR25, and we expect this to improve going forward.

Saket Kapoor — Kapoor and Company — Analyst

Okay. So we will be in the midst of 25% to 35% for the March quarter?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

I would tend to agree with you.

Pratap Jagwani — Forbes Marshall — Analyst

Okay. And for Telangana, sir, what will be our — are we breakeven at 75% utilization levels or what should be the number?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

So, sir, there are two aspects to achieving breakeven. One is the capacity utilization, the second is the margin. And the current margin there 75%, the net breakeven would not be possible. But as we improve the capacity utilization, and as we expect the margins to also improve in — after one to two quarters we should be seeing net breakeven in Telangana plant as well.

Saket Kapoor — Kapoor and Company — Analyst

So sir, at INR70 crore top line [Foreign Speech]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Foreign Speech] We should not focus too much on the first quarter, because first quarter is generally a stabilization quarter. From the steady stage of second quarter, we can look at some number. But at this point in time I would shy away from giving any number because the market is a bit volatile and dynamic in nature, and difficult to assign a number, but our endeavor would be to achieve net breakeven in both Ester Filmtech and Ester Industries as early as possible, if not in the first quarter at least in the second quarter, we should be achieving this.

Saket Kapoor — Kapoor and Company — Analyst

[Foreign Speech]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Foreign Speech] So let’s INR4.52 crores to INR4.8 crores per quarter depreciation.

Saket Kapoor — Kapoor and Company — Analyst

INR4.8 crore [Foreign Speech] Correct, sir. And lastly, sir cost of… [Speech Overlap]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

The depreciation should be about INR19 crore a year, and that I am breaking into the quarterly of about INR4.75 crores to INR4.8 crores.

Saket Kapoor — Kapoor and Company — Analyst

[Foreign Speech] Sir, now two more points. Sir, firstly, cost of funds, what is our cost of fund currently, with the working capital and the long-term borrowing?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

In Ester Industries, we don’t have foreign currency debt. We have only rupee debt. So our blended working capital and term loan put together is about 9%, 2.5% has been the increase by the RBI. So our interest cost, one of the reason why the interest cost has gone up from INR15 crore to INR22 crores in the nine months period is because of the increase in the policy rates by Reserve Bank. In Telangana, our interest rate would be lower because we have a foreign country debt which should be at about 7.5% blended.

Saket Kapoor — Kapoor and Company — Analyst

[Foreign Speech] So quarterly what should be the interest part for Telangana unit?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Telangana interest [Technical Issues] in the range of — just a minute I’ll…

Saket Kapoor — Kapoor and Company — Analyst

And when is our rating due sir? [Foreign Speech]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Sir credit rating so we have got the credit rating done for Ester Industries the net new is in August of ’24.

Saket Kapoor — Kapoor and Company — Analyst

Okay. No, with this commissioning of…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Speech Overlap] And the Ester Filmtech is also renewed at the same time. Coming to the interest cost, our interest cost for the quarter should be about INR7 crores.

Saket Kapoor — Kapoor and Company — Analyst

INR7 crores per quarter. Yeah, so INR7 crore and INR5 crore is the number. depreciation is INR4.5 crore and INR7 crore is the interest?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Yeah. Yes, sir.

Saket Kapoor — Kapoor and Company — Analyst

And sir last point is sir, one suggestion…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Speech Overlap] INR13 crore is the EBITDA required to achieve net breakeven.

Saket Kapoor — Kapoor and Company — Analyst

[Foreign Speech] And then on the top line of INR70 crore, this is not a —

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

INR70 crore is in the first quarter when we have — [Foreign Speech] We are now operating at 70%, when we have almost completed one month. So gradually we will increase production and initially, there is a certain amount of B grade production also when the — any plant. It is not like a car on the road — [Foreign Speech] It is a plant, it takes time to come to the optimum level. So my request would be to let go the first quarter of Telangana operation, that should be considered more of a trial period rather than the commercial sort of operation. Because it takes time to stabilize, it takes time to achieve optimum efficiency, everything need to decrease.

Saket Kapoor — Kapoor and Company — Analyst

[Foreign Speech]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Foreign Speech] We don’t have capacity to do more value-added there. We have metalized thing and we have certain in line coated products. So the value-added products in Telangana would be less as compared to — much less as compared to Khatima.

Saket Kapoor — Kapoor and Company — Analyst

[Foreign Speech]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Foreign Speech]

Saket Kapoor — Kapoor and Company — Analyst

And two suggestions, sir, just to conclude. Firstly sir, Singhania sir could not attend today’s call so next time he hope — from him to attend the call, sir. And secondly, sir, this informing to investors which was very well pointed out by one of the investors, we should take sir, extra caution in coming up, whatever is material or immaterial part, whether 10% or not the — we should come up with a clear thought that this breakdown has happened and the assessment will come thereafter. So, God forbid that such kind of…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

[Speech Overlap] We will be more careful.

Saket Kapoor — Kapoor and Company — Analyst

Yeah, sir. And lastly sir, on the website part, sir, if we look at the scale and the size and the work our company is doing, and the type of website we hoist I think so, we need to revamp our website also because that is the interface for us for not only for your investors but for the customers also. So whatever little knowledge I have for the business part, I could not find the website in anyway up to the market. And last updation was also in the year 2014 if I can look at the bottom, if that makes any sense, I could not understand that also, why a mentioned of date of 2014 is mentioned there, sir. So kindly look into the…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Pardon, I couldn’t. Can you repeat your last question?

Saket Kapoor — Kapoor and Company — Analyst

Yes, yes. I’ll just repeat. So when we log into your website Ester Industries and at the bottom of the page we find the @ 2014 the copyright Ester Industries All Rights Reserved. Whenever we look at other websites, the websites are updated till 2022 or 2023, so what does this copyright 2014 stands for? Whether…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

I mean I’ll [Indecipherable] I’m not in a position to answer at this point in time, because I’m not aware of it.

Saket Kapoor — Kapoor and Company — Analyst

Right-hand bottom of the website speak…

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

I’ll see.

Saket Kapoor — Kapoor and Company — Analyst

Yeah, yeah, just look into it and what good can be done for this also. And also, sir, for the Telangana unit, if we can plan a plant which is once this — it gets stabilized, so investor or video being uploaded of how the function — how the unit is performing that would give us some understanding what kind of infrastructure have we created, sir.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Okay. Point well taken, sir. Point — I’ll take up this with my colleagues in the company, sir.

Saket Kapoor — Kapoor and Company — Analyst

Right, sir. And for the capacity expansion at Telangana, sir. [Foreign Speech] I mean we have extra space there?

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Land, we have enough land. We have 50 acres of land. [Foreign Speech] We have 35 acres of land in Khatima, and five acre is occupied by the colony. So in 30 acres we have Specialty Polymer, three steel plants, two metalyzers two offline coaters, etc., etc. In Telangana we have 50 acres, a perfect rectangle plot and it can accommodate many more lines.

Saket Kapoor — Kapoor and Company — Analyst

[Foreign Speech]

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

For Khatima we have 60,000 tons of polyester film, Telangana, we have 48,000 tons of polyester film.

Saket Kapoor — Kapoor and Company — Analyst

Okay.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

And in Khatima, we have 13,200 tons of metalized polyester, in Telangana we have 10,000 tons of polyester. In Specialty Polymer we don’t have in Telangana other products we don’t have. It’s a purely film plant in Telangana, as of now.

Saket Kapoor — Kapoor and Company — Analyst

Thank you, Rustagiji. Thank you the other gentlemen also. I forgot the name. And all the best to the team sir. Thank you. Namashkar.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Thank you, sir. Thank you. We continue to remain committed to the revival, to coming back to the profit, working hard to make sure that we wipe out the losses as early as profitable. Thank you so much. Thank you very much.

Operator

Thank you. That was the last question. I now hand the conference over to the management for any closing comments.

Pradeep Kumar Rustagi — Executive Director Corporate Affairs

Thank you, sir. Thank you, everybody. See you in the next quarter, sometime in the month of May.

Operator

[Operator Closing Remarks]