Mold-Tek Packaging Limited (MOLDTKPAC) Q3 FY23 Earnings Concall Transcript

Mold-Tek Packaging Limited (NSE:MOLDTKPAC) Q3 FY23 Earnings Concall dated Feb. 06, 2023.

Corporate Participants:

Janumahanti Lakshmana Rao — Chairman & Managing Director

Analysts:

Anshul Agarwal — Emkay Global Financial Services — Analyst

Chandrika — Rika Enterprises — Analyst

Darshil Jhaveri — Crown Capital — Analyst

Harsh Shah — Marcellus Investment Manager — Analyst

Amnish Aggarwal — Prabhudas Lilladher — Analyst

Hitesh Taunk — ICICI Direct — Analyst

Hitesh Taunk — ICICI Securities — Analyst

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Venkat Raman — Orient Securities Pvt. Ltd. — Analyst

Prashant Shah — Serum Institute of India Limited — Analyst

Pulkit Singhal — Dalmus Capital Management — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Results Conference Call of Mold-Tek Packaging hosted by Emkay Global Financial Services. We have with us today Mr. J. Lakshmana Rao, Chairman and Managing Director of Mold-Tek Packaging. [Operator Instructions]

I would like to hand the conference over to Mr. Anshul Agrawal [Phonetic], Emkay Global Financial Services. Thank you, and over to you, sir.

Anshul Agarwal — Emkay Global Financial Services — Analyst

Thank you. Good evening. I would like to welcome the management of Mold-Tek Packaging and thank them for the opportunity to host this earnings call on their behalf.

I shall now hand over the call to Mr. Rao for his opening remarks. Over to you, sir.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Good afternoon and thank you very much for being interest in our company’s quarterly review call. As put up in the information, the company has a flattish Q3. Periodically, fiscally, Q3 is a low period for us soon after the principal season, they generally dip in paint and other activities — painting and other activities, which results generally in a flattish Q3. But this year, due to a sharp drop in paint demand by almost 10%, the overall growth in Q3 is happened to be just around 3% in volume terms. And the revenue terms, it’s dipped by 3.4% from INR160 crores to INR154 crores. That’s mainly due to the 10% drop in the paint segment volume and 16% drop in value-wise. So this has contributed towards flattish results for the quarter Q3.

However, the nine-month period, we have good numbers, almost around [Technical Issues] volumes and around 24% increase in PAT compared to the nine months of the previous year. And EBITDA margins in this current quarter is affected, again, due to under-capacity utilization and several new projects being started simultaneously. There are personnel additions to the company, while their output and productivity will only come from — once the project start in the next few quarters, so that is the hints [Phonetic] of the whole thing.

On the positive side, we have one good news to share is Shell has adopted our QR coded IML and introduced their first brand in the last week — in the — in just first week of February. And two more food companies, Cream Stone and Walko are in the final stage of introducing QR-coded IML for their promotions, so that our — QR code concept is slowly getting into the minds of our clients and they are also getting ready with the software support that is required to add up the digital IML in their packaging. So that is one good news I want to share.

And coming on the other front, we have been now given two letters of intent from Aditya Birla Group to set a plant in Panipat — one plant in Panipat and another at Chennai, near Chennai. In both locations, we acquired the land near to their plants within the periphery of — within 3 kilometers to 5 kilometers range and these two plants will come up simultaneously, one by end of this next financial year, that is Jan to March of ’24. And probably in the next quarter, the Chennai plant also should go into production. So these two plants planned has been acquired. Some of the payments are paid and the commitments have received and final payment to the industry’s development that will be done in this month. And soon, construction will start for these two plants.

Our plant at Sultanpur is almost ready for commercial production of food and FMCG. Hopefully, in the next couple of weeks at maximum by end of February, that plant will go into production for food and FMCG, with more than 12 injection molding machines in place along with the robots and molds. So that plant, for the remaining part of the pharma, it may take at least another four to five months to complete the DMF and get the approvals for the pharma production to go on stream.

That is basically the update today and I wish to cover more information on questions and answers. Can I give the word to you to start the questions and answers?

Questions and Answers:

Operator

Sure, sir. Thank you. [Operator Instructions] We have the first question is from the line of Chandrika [Phonetic] from Rika Enterprises. Please go ahead.

Chandrika — Rika Enterprises — Analyst

Hi. My first question pertains to the IBM business, the injection blow molding business. Now I feel that this business is going to be a big failure for us, just like dispenser pumps was. IBM, it’s also a very competitive market, just like dispenser pumps was. Also, we are waiting for the Pharma City to be built up in Hyderabad, when it will come up and whether it will come up, nobody knows. Even assuming that it comes up, why should the pharma companies buy their IBM material from you? They will just use you to negotiate better terms with their existing suppliers, get their existing suppliers to set up plants in Hyderabad and buy from them rather than buying from you. They will just use you to negotiate better terms with their existing suppliers.

So instead of entering this competitive business, why don’t you stick to IML, where you have a competitive advantage. I feel the IBM business is going to be a failure just like the dispenser pump business is, because what, because the pharma companies will not buy from you. That is my first question.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Okay. You have a second question or you want me to answer this? Second question.

Chandrika — Rika Enterprises — Analyst

What about the first question?

Janumahanti Lakshmana Rao — Chairman & Managing Director

They will answer.

Chandrika — Rika Enterprises — Analyst

Okay. My second question is, even assuming the IBM business is a [Indecipherable], within three — in the next three to five years, what kind of revenues and profit can we expect from this business?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Okay. See, I don’t get your name sir, but anyway there is a considerable product. I mean, the competition in the IBM products at the lower end, when it comes to pharmaceutical, there are hardly three or four major players, CG, Pravesha and Gopal Das are known names, [Indecipherable] is an international company. They have set up here in India, they have made an acquisition. So other than these four, there are no major players and this area of pharma is not dependent on just the Pharma City coming up at Hyderabad. Our idea is to supply this across the country and there is a demand for this company — from this company is growing at a pace of more than 10% to 15% per annum. And this increasing demand will be met through additional capacities we are creating and we are also not just limiting ourselves to the bottles, IBM bottles, we also have effervescent tablet packs, we have other products in mind to enter into pharma. For example, even Canister [Phonetic] for the [Indecipherable] we are introducing. So like this, there will be variety of products, other than just the bottles of IBM in our pharma range, that is your first concern.

And the Pharma City in Hyderabad is the added advantage, once that comes up, maybe as you correctly said, it may take two, three years to start, that will be giving us an advantage being of a local player. That is not the complete dependencies on that Pharma City, in order to correct understanding. So coming to other IBM applications, there are many applications of IBM in the OTC sector and already your company has captured the order from Iodex, almost to the tune of INR7 crores to INR8 crores per annum and those molds are now given clearance for the commercial production. So probably in the next two, three months, these Iodex OTC products will start. So in IBM what competitiveness you are looking at is for bottles, which are at the lower end of the spectrum, but even there, there is enough conversion coming from EBM to IBM, which is enabling decent prices and better realization compared to EBM products across the spectrum.

Coming to the next three years revenues, in the IBM alone, we anticipate the numbers to go at least 100% over the next three years, every year starting from maybe INR8 crores to INR10 crores in the year ’23/’24 and doubling within two, three years to a reasonable size of INR50 crores to INR60 crores in IBM alone. Other than this, we will be having other pharma products, which will be start contributing towards the end of this year, because there is a lot of DMF approvals that are required, for even these [Indecipherable] and other areas, we have to have a DMF approval plant, which will be only getting into operational by July — June-July this year.

From them, it will take time for approvals and supplies may commercially start from towards end of this year. So in this current year, we will be looking at OTC products and other IBM products to start contributing to the top line, but better numbers from pharma will be coming more from the next financial year. And together, we are anticipating in three to four years, we should be at least reaching a level of INR60 crores to INR80 crores top line with a decent EBITDA margin.

Chandrika — Rika Enterprises — Analyst

Okay. My last question to you is on the dispenser pump business. That business is an abysmal failure. What are you going to do with it? Are you going to shut it down, sell it or are you going to still going to continue with it despite people are not buying from us?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah. We are explained to you last time, I don’t know whether you were in the meeting, the dispenser bump investment is, let’s say, about INR12 crores, out of which only INR2.5 crores to INR3 crores are particularly mentioned higher market for the molds and the assembly line. Remaining INR9 crore are general-purpose investment in injection molding, including the infrastructure and those are all being used for our food and FMCG products parallelly, without keeping them idle. So, I would say it is an investment which is only partially utilized, those INR3 crores, INR3.5 crores worth of investment on molds and assembly lines are only partially utilized.

Today, we are making about 1 million pumps per month which is giving — keeping the line busy for hardly 25%, 30% of its capacity, that I agree. But the remaining INR9 crores to INR10 crores investment in the plant and machinery, injection molding and the land and building are completely utilized for our food and FMCG. It is completely a tangible — fungible activity where, injection molding machines can be used for other purposes, almost at 75% to 80% capacity utilization in par with our other machinery.

Chandrika — Rika Enterprises — Analyst

Thank you. Thank you very much and wish you all the best for the future.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] We have the next question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead. Mr. Jhaveri, your line has been unmuted. Please proceed.

Darshil Jhaveri — Crown Capital — Analyst

Hello, sorry.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah, yeah.

Darshil Jhaveri — Crown Capital — Analyst

Sorry for the disturbance. So sir, I am bit new to the company, so sorry for my questions if they might be a bit basic in nature. So we were just talking about our new expansion, sir, as I was going through the previous quarter’s presentation, we’ve earmarked nearly INR250 crores for expansion in for — in the next two years. So could you just help me out with the new two expansion that you are talking about, Aditya Birla one, what is the timeline for that and any kind of capex and asset turn that we can expect from that?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah, there are two plants, we have been given a letter of intent by Aditya Birla Group, we set up one at Panipat and another at Cheyyar near Chennai. And these two plants have to come into manufacturing by Q4 of ’24 in Panipat and maximum by the first quarter of next year that is Q1 of ’25 in Cheyyar. So both these two plants land has been earmarked towards by the Industries Department already advance payments have been made for the land acquisition, which are very close to the plants of ABG coming up there.

And these two plants, they have initial commitment of about 2,000 tons per annum initially, but we are going progressively to build up the capacity and those plants are expected to reach 3,000 tons to 4,000 tons of plastic material sale for us in the year three. So that is the commitments or projections given by ABG. And these two plants will be entailing, the Panipat plant might be requiring around INR30 crores to INR35 crores because of the cost of the land being higher in Panipat and about INR25 crores, INR26 crores at Chennai. So together about INR60 crores investment will be made at these two plants in the next 12 months to 15 months.

Darshil Jhaveri — Crown Capital — Analyst

Okay, sir. Sir, and what kind of revenues that we can expect or payback period or something that we could expect from these two plants?

Janumahanti Lakshmana Rao — Chairman & Managing Director

See, the typical payback period we work on is one plus four years, that is one year is for the first year of establishment and then within four years, we look forward. So around 20% ROC is what we look at.

Darshil Jhaveri — Crown Capital — Analyst

Okay, sir. And, sir, and in general, sir what would be our target for the next two to three years, what kind of growth are we expecting? And what kind of margins would it settle? Because right now, as you said, we are getting new employees and everything. So can we go back to our previous 20% margin, what would — what kind of circumstances would we need to reach that? So those are two of my questions.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah. As I have given my previous projections, we are close to achieving 20% volume growth in this year. We are at 19.64% for the first nine months and our — typically the first — fourth quarter and the first quarters are the best quarters. So we are already seeing a decent growth in January and anticipate that fourth quarter will be better than last year fourth quarter and we will be able to come close to the projected 20% volume growth for the full-year.

And going by the next to several projects that are coming into production now, especially the one at Sultanpur which is getting into production as early as February end or March this year and the plants at Panipat should get into the production by the end of the Q4. But the Sultanpur will be contributing to the numbers right from beginning of the year, let’s say, March ’23 onwards. So that plant has already received 14 injection molding machines and IBM machines and other pharma machinery is expected to arrive by June-July ’23.

Though I am not counting much on the pharma numbers, these food and FMCG products at Sultanpur will start production right in Feb, March and this is being the beginning of our busy season till June, July or till the festival season. We anticipate the numbers to grow at a healthy 15% to 18% or maybe 20% if things go well, for the next financial year also.

But the year ’24/’25 is more promising, because by then, our pharma products also will be well-established, Panipat plant and Chennai plant will be going into full stream of production and our plant at Daman for food and FMCG which we are kind of starting construction this year will be ready to take out the Western market by next February-March. So the year ’24/’25 we will have multiple, I can say, engines of growth, Sultanpur, pharma also getting into production, Panipat and Cheyyar starting commercial production, Daman second unit, at Panipat, we are also planning to create small capacities for our food and FMCG.

So they will also get into production by beginning of next calendar year. And so for the next busy season, we’ll be having our food and FMCG, not only going from Sultanpur that is near Hyderabad, not the Sultanpur in UP. This Sultanpur is just next door to our main plant in Annaram, Hyderabad. So these two brands apart from Hyderabad two plants, Daman plant in West and Panipat plant in North will be able to start catering to the regional demands of the food and FMCG products. So thereby we anticipate the year ’24/’25 to be much stronger. And again, we may look at 20% volume growth, like what we are achieving in this year.

Darshil Jhaveri — Crown Capital — Analyst

So, sorry, sir, to summarize FY ’24 we might see 15% to 18% volume growth and from FY ’25, we might see more growth as more capacities comes or is that we might on to the 20%, 25% growth?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah, 20%, you can —

Darshil Jhaveri — Crown Capital — Analyst

20% and these are volume growth and sir what —

Janumahanti Lakshmana Rao — Chairman & Managing Director

[Indecipherable] volume growth because numbers doesn’t matter because of raw material fluctuation, we always [Indecipherable] targets of volume growth.

Darshil Jhaveri — Crown Capital — Analyst

Okay, sir. And at that level our EBITDA could reach 20% or would that be a fair assumption?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah, that’s again, we always talk in per kg, which is our benchmark was INR40 to INR42. This quarter it dipped to INR38 point something due to the underutilization of capacities and some of the overheads what we are bearing due to the various projects which are on the angle but not got into production. But I think it will be INR40 plus from the fourth quarter onwards, that is March quarter onwards and it will remain in the range of INR40, INR42 till the pharma products start contributing, INR40, INR42, INR43 is possible. But once the pharma starts contributing from ’24/’25, we anticipate it to be in the region of INR45.

Darshil Jhaveri — Crown Capital — Analyst

Okay. So that helps a lot. And sir if I may ask a few more questions. Sir, so what would be our current capacity utilization, because we are coming with a lot of new capex, so what would be your current capacity utilization?

Janumahanti Lakshmana Rao — Chairman & Managing Director

The current capacity utilization in majority of the plants is above 70%, but our plant at Satara, which is meant for Asian Paints as there’s a small setback because Asian Paints is going for expansion at Satara, for the last three months. They are planning to continue so till February, only in March, they are planning to restart fully the operations along with the expanded capacity. So that is one of the reasons for a setback in our paint business in this quarter.

Satara plant of Asian Paints has gone in for expansion — is going on for expansion. And there are some disturbances or kind of deviation from their planned capacity utilization, which impacted our capacity utilization in this Q3 and the indications are from February end or beginning March they will go in for a full operations along with the expanded capacity, that may help improving our business also from March onwards. So otherwise the plant capacity utilizations are in the region of 75% to 80% for Satara which is around 63%.

Operator

This is the operator. Sir, we move to the next question from the line of Harsh from Marcellus. Please go ahead.

Harsh Shah — Marcellus Investment Manager — Analyst

Yeah. Hello sir. A few questions from my side. So the first question was regarding volume degrowth in the paint segment. So we have seen 10% volume degrowth in the paint segment. However, we couldn’t change such sort of a volume degrowth in Asian or project paints as a business. So are we seeing some market share loss in this business?

Janumahanti Lakshmana Rao — Chairman & Managing Director

No, no, you might be looking at Asian Paints and other numbers in the revenue terms. But in the tonnage trends, there is a dip or at least stagnation in their numbers. And in the case of Asian Paints, the volume drop is 6%. And in the case of Akzo Nobel, it is 14% in terms of volume. So they are one of our both top clients, Asian Paint is our number one client, followed by Akzo Nobel and then comes KNP and others.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay.

Janumahanti Lakshmana Rao — Chairman & Managing Director

These numbers have dipped. In terms of revenue rupees they have made several price rises in the last 12 months. So in terms of rupees, you might not have seen any drop, but in terms of volume, there is a drop.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay, okay. And sir, second question was on —

Janumahanti Lakshmana Rao — Chairman & Managing Director

— also there is a drop, so these three are the major volume reduction reducers for us.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay. So, third reason you mentioned, sir, if I couldn’t get that.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Mandali [Phonetic] that’s a Cadbury.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay, okay, okay, got it. Second question was on Berger Paints, in our annual report, we had mentioned that we are setting up a plant for Berger Paints in North of India, but any update on this?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes. Berger Paint is coming up with Sandila, where we also acquired land and we have set up a small plant near to Kanpur in a leases and premises which will be shifted to Sandila or maybe towards end of this year or beginning of next financial year. Until then our small plant will be catering to KNP and a small portion to Berger. I think Berger is also planning to go into stream this year, sometimes middle of this financial year. And once their numbers start going up, our capacity utilization also will improve in that small unit at Kanpur.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay, but we have started work on this small unit right?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes. Small unit is already up and running for last six months and eight months, mainly to KNP, Berger numbers are yet to start.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay, okay. And thirdly, so Asian Paints have recently-announced the capex expansion. The new greenfield facility in their MP, in Madhya Pradesh. So, any updates, have we received letter of intent or something like that?

Janumahanti Lakshmana Rao — Chairman & Managing Director

See they’re able to decide about the location and other things. We are also in touch with them. We definitely have a chance, but at this stage, I can’t comment on that opportunity.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay, okay, And lastly if you could update the cash on books by the end of 31st December 2022?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Cash on book means you are looking at our —

Harsh Shah — Marcellus Investment Manager — Analyst

The cash balance.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Debt limits have come down from cash on equivalent to INR2.2 crores. But long-term debt has come down, overall debt has come down from INR44 crores to INR33.5 crores.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay, because all these expansion are we looking to take on more debt for paint expansion project that we had?

Janumahanti Lakshmana Rao — Chairman & Managing Director

See companies generating enough revenues to sustain and actually our short-term debt that is on working capital is hardly INR4.6 crores, which used to be three, four years ago to the tune of around INR90 crores is now come down to just INR4.5 crores in spite of investing almost INR85 crores so far in this current financial year and we have another commitments at INR40 crores investment in the next three to four months. So as anticipated in the next two, three years our investment of INR250 crores would be mostly funded by internal generation. And if any need be we will be using our working capital funds, which the tune of more than INR100 crores we can actually borrow based on the limits that are available on our stock, but current utilization is hardly INR4.6 crores.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay.

Janumahanti Lakshmana Rao — Chairman & Managing Director

All the expansion projects will be funded through internal generation and need be some increase in the short-term debt or long-term debt whatever the case may be.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay, thank you.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Our debt-to-equity is 0.06% as of today.

Harsh Shah — Marcellus Investment Manager — Analyst

Okay. Thank you for this. Thank you. [Operator Instructions] We have the next question from the line of Amnish Aggarwal from Prabhudas Lilladher. Please go-ahead.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

Yes. A few normal questions, one being what is the ratio of IML and non-IML for us in Q3.

Janumahanti Lakshmana Rao — Chairman & Managing Director

IML and non- IML, I think it’s more or less payable. Total IML is 67.36% as against 65.46% last year, so about 2% improvement in the overall IML. In terms of volume. In terms of value from 68.3% it becomes 71%.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

Okay. And like you said, paint has declined by 10%, so what has been the growth for your lubes and food?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Lubes 17%, food is around 25%. So because the main constitute more than 50% of four top line, there was a 10% dip as brought down the entire overall growth to only 3%. So lubes has a healthy growth of 17%; food and FMCG, we are close to 25% growth.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

25% okay. And what could be the — your sales proportion of how much would be the sales from paints.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Paint is 50%, lube is around 28% in terms of volume I’m talking and the remaining 32% is from food and FMCG, which was around 18% last year. So from 18%, the food and FMCG business has become 22%.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

Okay, in terms of value?

Janumahanti Lakshmana Rao — Chairman & Managing Director

In terms of value, it was 22.8% last year has become 27.7%.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

Food and FMCG?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Food and FMCG.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

And paints? Paint 54% as dipped to 46.5%. 16.7% drop in the value terms. Understood. And lubes would have been the balance.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Lubes is up by around 8% in value.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

Okay. And sir, what is driving the growth of lubes because used as such is not that high-growth segment?

Janumahanti Lakshmana Rao — Chairman & Managing Director

In the lubes, the growth is coming through D of which is a low-end lubricant. That’s why if you notice while the sales growth is 8% in revenue terms, the volume growth looks 17% because this is a low-end lube called DF [Phonetics] introduced for several lube companies with low-end utilization. For mainly for add lubes — it’s called add lube brands, for which we have giving majorly to Gulf and Valvoline, so there the even the use of ordinary paint is more than adequate. So there the value addition is little less, but that is what is driving the growth in lube industry.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

Okay and sir, what about the EBITDA per kg overall and for paints, lubes and FMCG during this quarter?

Janumahanti Lakshmana Rao — Chairman & Managing Director

We didn’t have the breakup for this quarter. But in general, it is like this paint will be in the tune of around INR42 rupees. Overall average I’m talking, lubricants also will be in the range of INR30 to INR35 range and food and FMCG will be typically around INR18 per kg.

Anshul Agarwal — Emkay Global Financial Services — Analyst

INR50 rupees okay. And now given the fact that volumes have dipped by 10% for paints in 3Q. So how is the 4Q started? Is there some uptick in the demand in our offtake?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes, in January, we have a very good demand uptick and as I told you, the plant of Asian Paints in Satara is undergoing expansion and it may go into production from back into full production from March. So there is some disruption in their activities because of the expansion project, but they will back into normalcy from March onwards. And we — certainly it gives the numbers of Asian Paints which different during last three, four months we’ll be back into normalcy or better going forward.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

So what sort of volume growth are we targeting in 4Q for paints in general and overall for the company?

Janumahanti Lakshmana Rao — Chairman & Managing Director

4Q paint growth we anticipate 8% to 10% only, because from a minus 10% probably it may come up to 7% to 8% plus side. Lubricant will continue to have decent growth because this DF is relatively new, so this growth in the Q4, comparative to Q4 of last year will be again in double-digits, but we are more positive on food and FMCG, we hope to cross at least 30% growth we clock in food and FMCG in this quarter over the previous Q1 is our guess.

Amnish Aggarwal — Prabhudas Lilladher — Analyst

Okay, thanks a lot. Sir, it’s very helpful. I will come back if I have more questions.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Sure.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Hitesh Taunk from ICICI Direct. Please go ahead.

Hitesh Taunk — ICICI Direct — Analyst

Thanks for the opportunity. Sir, my question is on the lubricant front, as you mentioned that there was a significant growth of low-margin business and going forward, you are looking, I mean you are estimating a same kind of double-digit growth in the lubricant segment. Then, are you afraid that there could be impact on the margin of the company? If I am wrong, please give some explanation on that? That is the first question.

Second question. Sir, if you can elaborate your capex plan for FY ’24? You mentioned the plants and all detail, but I missed absolute number of capex for FY ’24 overall, and if you can give us segment-wise capex like for paint, for lubricant and also for FMCG and even pro forma that will be really helpful? And third question is on FMCG front, sir. You mentioned that you are very confident that you will be going to clock around 30% kind of volume growth. And I believe that we are going at approximately 20% to 25% [Phonetic] CAGR on that business as well. So, what gives you so much of confidence that this segment is likely to grow by 20% to 25% CAGR for the next two years. I just wanted to know which new segments or say existing customers’ wallet share are you going to gain? These are my three questions.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah. Coming to your first investment question. The investment again will be in the tune of INR100 crore and INR125 crores for the next financial year as in this year. We are already in this year, incurred more than INR80 crores so-far and we have machinery and other ROBOTS coming up in the next few months, which will complete I think more than INR100 crores investment in this current financial year. And the next year, we have, we will be crossing again INR100 crores, INR120 crores overall investment.

Panipat and Cheyyar will be the rest of the INR50 crores. We have spent, we are spending around INR12 crores, INR13 crores on the land for both the locations put together. There will be addition INR50 crores investment at Panipat and Cheyyar for ABG and at Daman, we are setting up a food and FMCG project where we have earmarked around INR20 crores to INR25 crores, that is for food and FMCG. And in Sultanpur, we are having this pharmaceutical machinery arriving in the first quarter of next financial year to the tune of around INR15 crores in the first phase and we are also adding one printing technology, new digital technology machine, arriving in March. So, that maybe a March or April.

So, next year, we’ll be having at least INR25 crores investment at Sultanpur, INR25 crores at Daman and Panipat and Cheyyar to the tune of INR50 crores to INR55 crores and Sandila where we are planning for this Berger and KNP, to the tune of around INR15 crores to INR18 crores in the first phase will be spent. So — and there’ll be toolroom machinery, there will be other ancillary equipment, balancing equipment to the tune of INR5 crores to INR10 crores. All put together next year plan is also in the tune of around INR120 crores of capex. Out of which around INR50 crores plus a part of it, Panipat, that is say INR55 crores, INR58 crores will be for food and FMCG and pharma and the remaining INR55 crores to INR60 crores will be surface mainly for ABG.

Hitesh Taunk — ICICI Direct — Analyst

Okay, sir. And about your FMCG growth plans, sir, any new products [Technical Issues]?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Actually, if you look at our nine-month figures, our food and FMCG has grown by around 35%. Only in the Q3, we have a small dip of 25%, but for the first two quarters it was more than 40%. So overall, nine months, even today it is a healthy 35% growth. And as generally it happens whenever Diwali is late and Diwali closes in October-end or November beginning, there’ll be sudden drop in all the consumable and FMCG, food and FMCG product consumption, including edible oil, ghee and sweets and all other products, even restaurant packs, sweet packs.

So this is again, is the reason for the Q3 to be dull historically, it’s not this Q3. But typically, our growth rate in the food and FMCG is exceeding 35%, 40%, that’s why I’m very confident at least 30% growth, we will be achieving again, in the Q1 of this current year. My guess is would have been 40%, but for the delay in three major products that Kissan Jam and Horlicks 2 packs were delayed again into February. Some trial lots only they have taken in the month of, end of January and trials are all successfully completed on that filling lines. So hopefully, we are expecting some call-ups to start in Feb-March.

So, even if we do not get much in this quarter, you will still clock at least 25%, 30% growth in food and FMCG in Q4 of the current financial year. But Q1 of next year we’ll definitely have these three products up and sold, so they will be again adding for the next year growth. These are the three products which can contribute about 10% of our sales. So, apart from 25%, 30%, which we normally see, additional 10% will come from only these three products. That’s why I’m confident next year also, we’ll see 30%-plus kind of growth in the food and FMCG segment.

Hitesh Taunk — ICICI Securities — Analyst

I beg your pardon, sir, three products, you said, Kissan Jam, Horlicks and…

Janumahanti Lakshmana Rao — Chairman & Managing Director

Horlicks 2 packs, 1 kg and 2 kg packs.

Hitesh Taunk — ICICI Securities — Analyst

Okay. And, sir my other question was on the Lubricant segment, which is growing much faster than…

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah, the growth of DEF is basically because of low-end product it is. And there are low-end techniques to manufacture them. So, the margins may not impact so much because a lubricant as it is constitute around 25% of our sales and in that 25%, 10% of them constitute DEF, the growth, which is coming from is DEF. But if you see the overall growth of our lubricant it is 17.5%. So, 7.5% is a healthy growth coming from IML containers and regular lubricant containers, which are shifting more and more into IML. So, I wouldn’t be much worried about those 10% of the lubricant packs, which are at low-margin because we are getting more-and-more QR code conversions in IML in the next few quarters. Already, Shell has introduced, given us clearance for four SKUs. One SKU has already been supplied and the balance are going in February and once they see that software and our supply chain is all set for QR code traceability, they want to go more and more into QR coded IML.

Similarly, Castrol is also at final trials after a long gap, which we anticipated this to happen six, seven months ago, but due to the software compatibility and internal changes they have adapt to get into QR code, they are taking longer time. So, we anticipate better realization from this QR coded IML containers going forward. So, that will more than offset this small low-margin business. So, I wouldn’t be worried about that impacting the margins. What will impact the margins is growth in food and FMCG and growth in pharma going forward. Even the margins what we negotiated with ABG Group are reasonably strong and sustained, they won’t bring down our overall EBITDA.

Hitesh Taunk — ICICI Securities — Analyst

So, sir, when you are saying that we have new customers for the Lubricant segment that too on higher margin products, so that means that can we anticipate the segment which was growing very dull on the volume point of view, 4% to 5% kind of growth historically, can grow by around 10% to 12% CAGR for the next two years in terms of volume?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes, certainly, because not only that, whether they go for QR or not slowly more and more lub companies are shifting their packs and brands into IML. That itself is growth enhancer for us, even if the industry growth at 4% to 5%, we can easily get 8% to 10% growth in the lub for the next two, three years. If the QR code adoption also catches up, which again not want to be too optimistic because it’s been taking long-time by the leaders, but once the leaders adopt it and other follow the trend, it can catch up. But in spite of whether QR code emerges, I mean, entrenches the others or not, getting 8% to 10% growth in the regular lub business is certainly possible.

Hitesh Taunk — ICICI Securities — Analyst

And, sir my last question is book keeping question, sir. I missed the absolute volume numbers for the segment-wise, if you can share it once again, sir?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Absolute numbers, means tons, I can give you.

Hitesh Taunk — ICICI Securities — Analyst

Paints and lubricants.

Janumahanti Lakshmana Rao — Chairman & Managing Director

It is 3,800, lubes, it is 2,100, food is around 16,025, sorry, 1,625.

Hitesh Taunk — ICICI Securities — Analyst

And sir, in the revenue point of view, sale for the same?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Sale point of view, 70 — 46.5% is paint, 25.7% lubes, balance is food and FMCG.

Hitesh Taunk — ICICI Securities — Analyst

Okay. Thank you, sir. That’s all from me. Thank you.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Bhargav Buddhadev from Kotak Mutual Fund. Please go ahead.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Yeah, good evening team, and thank you for the opportunity. Sir, my first question is, how big is the revenue contributor of Shell as a percentage of overall lubricant revenues?

Janumahanti Lakshmana Rao — Chairman & Managing Director

No, it is, Shell is contributing out of total, let’s say 100 of lubricant sale, Shell must be in the tune of around 20%.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Of lubricant revenue.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Of the lubricant revenue.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Okay. So given that Shell is a large customer, is it fair to say that other players may also line up, if the project with Shell is a success?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah, if Shell starts, actually they are starting with only four SKUs. They have more than 30 SKUs. In this four, they want to go into the market and look at their entire supply chain be ready to adopt the QR code. Because QR coding is just not for identifying the product but to ensure that there is a traceability, there is a promotion opportunity, dynamic promotions, which I explained in my previous calls. So, that is what they want to completely test with this first brand. Once this brand is proved then it is and the supply chain adjust to this utilization of QR code’s effectiveness, they want to see for the next couple of months. And I’m sure once they taste the success, they will certainly go for shifting most of their brands into QR.

Similarly, Castrol is also, almost there. Probably, they may take another month or so to test their internal software and tie-up the software to the supply chain issues that arise out of QR code. That process they’re in and once that is streamlined, they will also be moving into it. And there a couple of FMCG companies, [Indecipherable], dairy we are talking to them about introducing this for their promotional side of QR code. So, things are slowly getting opened up and companies are showing interest and identifying the effectiveness of QR code, but for their internal supply chain arrangements, they may take a little longer time to adopt this.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Okay. Secondly, sir, on the pharma side as of now, there’s this IODEX as the OTC customer. Are we in talks with mainstream of pharma companies given that we are targeting revenues to come in the next six to eight months?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Next six to eight months, we are not targeting there. It’s basically only from IODEX is one major item and there are a couple of other dairy products where we will be using our regular IBM. But going to pharma, we will be starting sometime in June-July. And as I told you in the last calls also, it will take at least four to five months for us to get the approvals and we are in touch with most of the pharma companies, but they all are awaiting for the samples to be submitted and then only they take the things forward.

And we are also planning not to have all the eggs in one basket, like only export containers. We are also planning effervescent tablet tubes and desiccant canisters to add to our product portfolio. We are in talks with, very initial talks with a nasal drops development company and if that also comes in, we may have that product range also in the initial phase itself. So, that we don’t have a long period of gestation after we start, set up the mission in June-July. Hopefully, these products will take-off quickly than the export tablet packs, which have longer time for clearances in terms of both American side and mainly the customer side clearances. So, while that project goes — that product cadence has take little longer time till sale beginning of next calendar year, we will be pushing our sales in the other segments, so that keeps our facilities also busy.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

And sir, last question is on food and FMCG. So, given that our organic growth is in high double digits, what would be our penetration with our existing food and FMCG clients? Penetration, meaning how much adoption have they done of IML? Is there a big room for growth organically?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes, there is still a long way to go in India for IML. Now slowly restaurants are identifying IML is a better way of fishing out most of this Swiggy and other sales across the counter or take-home packs. So, because it retains the brand image, it is very convenient for the client because some kind of tamper-evidence, leak proof.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

So, the penetration of IML with our customers would be what, single-digit?

Janumahanti Lakshmana Rao — Chairman & Managing Director

What you mean by the customers single-digit?

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

What I’m saying is, assuming if we are dealing with an ice-cream customer. I say, for example Amul. So Amul would not have converted all their containers or packaging to IML, right. They would also be selling in other packs. So, what would be the share of IML in their own packaging is what I was asking?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah, in the dairy industry, I would say it is in the tune of 20%, 25%. The entire ice-cream nowadays majority of the people have shifted to IML containers, nobody can sale nowadays in ordinary dab looking containers anymore. Everybody is looking at well decorated ice-cream container. So, that way it is more or less adopted. But even today lot of this butter, ghee, cheese, only the top brands have shifted, some of them are still not shifted from tin or other forms of packing. There is a long way to go.

And coming to another area where we are finding shift coming is protein powder, that peanut butter and other product, people started shifting. I would say about 15%, 20% of the market is now using IML and remaining 80% to 90% are yet to shift. Cashews packaging slowly started in IML containers because they look better and exporting that product in a 5 liter square pack or 2 liters small pack would look much better than selling it in tins and putting a stickered decoration on it. So, that is very initial stage. I would say hardly 5%, 3% to 5%, so it can grow multiple times.

So, like that there are various other segments. For example another area catching up is dates. Dates, earlier which were there in ordinary paper packing and later on cardboard packing and later on into ordinary plastic packing are now going in for IML containers. So, dates is another product, which is slowly moving more and more into IML. Sweet boxes are still I would say, hardly 2% to 3% or maybe less than 3% of the sweet boxes used in the country. I would say less than 1% are currently in IML containers. The top brands are slowly going in for that and the secondary and tertiary brands have also will not have choice in next two years to adopt into IML sweet boxes. Because as and when people start comparing, they will attach quality to the decoration. So, they think sweet is much more superior than the other ones, companies like Haldiram’s, couple of their franchisees, and Haldiram’s have shifted to IML, but other brands are yet to do that.

So, the local, regional brands, we were on the edge watching what’s happening, they will slowly shift to IML containers for their sweet boxes and karas and all that, snacks. So, that is another big area. And coming to the restaurants, the move has started. Earlier the restaurants, whenever you order some food, they will give you in a plain colorless container, put it in a bag and give it to you, but now they want that container to carry their brand image, carry the address and phone number or Swiggy or whatever. So that customer recall will becoming and more and more awareness about the product will be there and the brand will be spreading for a marginal extra cost. So, that awareness is coming up in restaurant packs. We anticipate big growth in restaurant packs in the next coming quarters. Actually, even we started exporting couple of brands to US chains of Indian restaurants in USA for restaurants, sweets and some even batter for idlis and dosas.

So, like that there’s a long way to go in the food products, every niche area including in the FMCG side, there are several products, which can be converted from conventional packaging to IML containers. The process is going on and we are keeping ourselves at the helm of the affairs. Actually the digital printing machine, we are getting in the end of February beginning of March is capable of giving very short runs without even a day of development time. There is no delay. If you receive the art work today, you can start printing in few minutes. So that kind of a quick response printing technology we’re adapting, in March this year it will be starting production and that will be taking us into market faster.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Great, sir. Very well explained. Thanks a lot and all the very best.

Operator

Thank you. [Operator Instructions] We have the next question is from the line of Venkat Raman from Orient Securities. Please go ahead.

Venkat Raman — Orient Securities Pvt. Ltd. — Analyst

Thanks for the opportunity. I want to know what is our overall market share with Asian Paints in terms of packaging? How does it compare with your competitor let’s say Hitech Corporation?

Janumahanti Lakshmana Rao — Chairman & Managing Director

See, Hitech has plants all across wherever Asian Paints has a plant so they certainly have higher market share. And in fact if you analyze their balance sheet, they being a listed company, you will notice in the pail segment they get almost 75% of their revenues from Asian Paints as against around 25%, 30% in our case. And coming to absolute numbers of Asian Paints, I guess Hitech should be having 30% to 40%, 35% to 40% share of Asian Paints business. Mold-Tek may be having around 20% because we don’t have plants all across wherever they are. In Rohtak we don’t have a plant, in Chennai we don’t have a plant. But other locations, we have a plant wherever they are and there we are getting around 25% to 30% of their business share typically. So on overall six plants, probably our percentage would work out around 20%, 22%; balance 40% is spread between five to six small and medium-size unlisted companies.

Venkat Raman — Orient Securities Pvt. Ltd. — Analyst

For Mysore and Vizag plants whatever expansion plans that Asian has envisaged, there we have again equal footing with Hitech or are we still a secondary partner?

Janumahanti Lakshmana Rao — Chairman & Managing Director

As far as Hitech is concerned, they’ve always been given a little because — I don’t want to say that but they are kind of — the company is promoted by one of the director’s family and sometimes we equal Hitech. Maybe you’re correct in Mysore we are selling as much as Hitech does, but I don’t have exact data. But in my general opinion, we come as the second in the supplier choice to Asian Paints.

Venkat Raman — Orient Securities Pvt. Ltd. — Analyst

Okay. Thank you so much.

Operator

Thank you. [Operator Instructions] We have the next question is from the line of Prashant Shah from Serum Institute of India. Please go ahead.

Prashant Shah — Serum Institute of India Limited — Analyst

Thank you. Can you hear me?

Operator

Yes, please go ahead.

Prashant Shah — Serum Institute of India Limited — Analyst

Yeah. Sir, you outlined the plans very nicely and the prospects look very good for the company. I would just like to know what is the perspective of the competitive position that you see. What are the risk factors you see wherein our plants may not work out perfectly? This is my only question.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yeah. See, like some kind of disruption in the general trends of economy could definitely lead drop in consumption of FMCG or paint or lubricant; the consumption can impact our growth plans. That is one. Second is the general projects being several, we are now — earlier we used to execute one or two projects every year like say Sultanpur was happening, then we initiated Kanpur that was last year. But this year we have five projects simultaneously coming up and that’s a challenge we need to really handle while taking care of the growth that is coming in the company’s all other areas of growth we are facing in food and FMCG, we are gaining share in paste, and even in the lubricants we may expert swing of demand due to IML and QR IML.

In the paint, it is mainly due to new entrants coming in and new opportunities, new plants that we are setting up. So next year the challenge for the company could be executing these projects of Daman, second unit Panipat, Cheyyar, and Sandila [Phonetic] and probably the Sultanpur pharma project successful completion by end of Q1 or beginning of Q2 in this year. So, there will be lot of pressure on the team to complete these five projects or at least four of them in the next maximum 12 months — 12, 15 months maybe, Cheyyar can give some time till April next year. So in next 12 to 15 months, we need to complete these projects and take care of the new products that we’re introducing in pharma and make sure that pharma we are there in correct location with proper facilities.

Thankfully we have got the team in place and we could add correct hands in both pharma and even in our food and FMCG and those personnel are slowly getting grip of the subject and hopefully they will standby when the company requires their services. So, that could be another challenge of executing of these five — four to five projects in the next 12 to 15 months and bringing them into full-fledged production. So, these are the two risk factors — not the risk factors, but two major factors that can influence our projections. But we have been looking at the trends in food and FMCG, that is what gives us more confidence of growth in the next two, three years. But by the time we are ready with all these plants by next year, these plants themselves can be real growth engines for us.

Prashant Shah — Serum Institute of India Limited — Analyst

Okay. Thank you, sir. Sir, just one other point. Have you been able to complete the pass-through of the RM increases for the last few quarters?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes. We always have that same passing-through mechanism with 90% of our clients and other clients we take our own favorable way. But with 90% of the clients, it is either monthly or quarterly passing on both sides up or down the price we pass it on. So, that way we absolutely have no problems. And in fact we have now started asking for higher conversion costs because of increase in power and labor cost that will happen periodically once in two years. So now we are in that process of seeking higher price for conversion to cover up and maintain our margins.

Prashant Shah — Serum Institute of India Limited — Analyst

Okay. Would you be able to guide what has been the raw-material cost for us for the last quarter and what are the trends going on for current quarter so far?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Raw material is around INR105, INR111.

Prashant Shah — Serum Institute of India Limited — Analyst

Sorry, can you please repeat?

Janumahanti Lakshmana Rao — Chairman & Managing Director

INR102 for this quarter.

Prashant Shah — Serum Institute of India Limited — Analyst

INR102 for Q3.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes.

Prashant Shah — Serum Institute of India Limited — Analyst

Okay. And what has been the trend in this current quarter so far?

Janumahanti Lakshmana Rao — Chairman & Managing Director

It is just ramping up a little bit now. Some INR2, INR3 it’s gone up I think. Prices are firming up. In December also there’s a little firm up and in January again another INR1, INR2 rise is there. Not to the extent what it was last year. Last year this time it was in INR120 level.

Prashant Shah — Serum Institute of India Limited — Analyst

Okay. Thank you sir.

Operator

Thank you. We have the next question from the line of Pulkit Singhal from Dalmus Capital Management. Please go ahead.

Pulkit Singhal — Dalmus Capital Management — Analyst

Thank you for the opportunity. So, just trying to understand the overall volumes for the quarter. Are they 7,525 tons or any other figure and what was the growth?

Janumahanti Lakshmana Rao — Chairman & Managing Director

7, 550 tons.

Pulkit Singhal — Dalmus Capital Management — Analyst

7,750 tons.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes.

Pulkit Singhal — Dalmus Capital Management — Analyst

And versus what in the base?

Janumahanti Lakshmana Rao — Chairman & Managing Director

You mean the previous Q3, it was 7,330 tons. –

Pulkit Singhal — Dalmus Capital Management — Analyst

So, there has been a 3% volume growth and a 10% EBITDA decline despite having better mix of food and FMCG in the mix and I’m just trying to understand this aspect a bit better because your EBITDA per kgs have only been coming down. I mean Q1, Q2, Q3, are all lower than last year despite higher food and FMCG. So, what are we missing out on?

Janumahanti Lakshmana Rao — Chairman & Managing Director

One reason as I just explained in the previous question, the power and labor costs have gone up in the last six, eight months in several locations at Andhra Pradesh, in Vizag, Mysore, Hyderabad, and even Daman. The power costs have been increased some six, seven months ago and we are negotiating with our clients to add it back in our conversion. So, that is one reason. The second is these several projects what we started, we have started recruiting some of the manpower; key people for pharma, key people for our plants that are coming up at Daman and other locations. So, they will be — they joined; some of them joined six months ago, some of them joined three months ago, some of them joined just in this month. So, there will be effectively utilized only as we go forward in the next few months.

Like say Sultanpur plant will be operational in March and other plants might go into production only by end of this year. So, some of these overheads are also bearing a little bit of pressures on our margin for this current short term. But as we improve our utilization of capacity, so another factor which impacted us severely in this quarter in particular is the drop in our Kandala plant which is Satara plant due to Asian Paints going on for an expansion mode and so there the capacity utilization have falling to 60%. So, that is another area which has dipped in the margins. They are going back into production with expanded capacity from March ’23. So, we will be coming back to our 40% plus kind of margins very soon once these few things are corrected.

Pulkit Singhal — Dalmus Capital Management — Analyst

Right. This one-off cost that you mentioned for new facilities because your employee cost has been pretty flat for the last five quarters so we are not seeing that in the employee cost, even your other expense was lower. So from where are these costs then?

Janumahanti Lakshmana Rao — Chairman & Managing Director

At this particular time there is a sharp rise of more than 15% in the employee cost and more than that. INR28 crores for the nine months for the staff is now INR32.5 crores and for the contract labor it is INR19.55 crores has become INR23.76 crores which is more than 20%. So, mainly there is an increase in the employment cost — employee costs in this current year due to the various staff and trainees have been taken and they have been under training and getting ready for the new plants.

Pulkit Singhal — Dalmus Capital Management — Analyst

Right. But sir, if you look at your revenues excluding Asian Paints and we’re talking about non-Asian paint revenues for the last five, six years; there’s not been any material improvement there. I mean you also share your maximum — your top customer revenues and if I subtract it from paint segment revenues, that has not happened in the last five, six years despite the industry also having grown. So, why has that been the case?

Janumahanti Lakshmana Rao — Chairman & Managing Director

No, I didn’t understand your question.

Pulkit Singhal — Dalmus Capital Management — Analyst

Sir, if I look at the last let’s say four or five years and you provide the breakdown of paint revenues and we also know how much Asian Paints contributes because you have disclosed the top customer revenue and you’ve done that. So when we subtract your paint revenues excluding Asian Paints, that is non-Asian Paint revenues, that hasn’t materially grown in the last four, five years that is the revenues all the other paint companies and that is despite…

Janumahanti Lakshmana Rao — Chairman & Managing Director

We are not really fighting to grab any market share from rest of the paint companies because we are focusing more and more on food and FMCG and more and more into pharma and high value-add products rather than paint pails. The story is different with Asian paints or ABG because they look at quality, they look at high speed filling machines, filling lines requiring high quality paints. So, their realizations and their way of volumes and business is much better than going back into other paint companies which are more very, very price conscious. So, we are not growing in that segment as much. We are not putting too much effort to grow that business.

Pulkit Singhal — Dalmus Capital Management — Analyst

Okay, got it. In your 20% guidance the growth for next year, what is the paint industry volume growth that you assume?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Yes, next year we are hoping that the growth volume would be in the region of 15% to 18%. Of which, I’m looking at 8% to 10% growth would come because there’s slack in this year and that has to be covered up if the economy does well. And more than that, Asian Paints is expanding its capacity at Satara which will be operative from March and there we are jumping up by — they are mentioning around 40% to 50% increase. So that should translate to a similar rise in Satara’s output, which is currently pegged at 60% so it might go up to 80%, 90% capacity utilization if their plant’s expansion completes in March. So, that is one area why we are positive about paint segment contribution. Though ABG is talking about starting their plant by December, January; even if there is a couple of months delay, I’m not counting that business to come in this financial year. So, this will be purely on Asian Paints coming back and their projections for Mysore and Vizag which are again in more than double-digit — healthy double digit. So that is why we are confident the paint industry — paint growth for next financial year will be in the tune of at least 8% to 10%.

Pulkit Singhal — Dalmus Capital Management — Analyst

Okay. And lastly, what is the EBITDA per kg we should assume for next year as per your internal calculation?

Janumahanti Lakshmana Rao — Chairman & Managing Director

Next year I think we’ll be again back to 40, 42 bracket, which is this quarter got missed. But fourth quarter itself we are hoping we’ll be back to 40, 42 bracket, which will bring us the overall year which is now nine months 40.24, probably will be in the region of 40, 41 bracket for the overall year. Next financial year it should inch up at least to 42, 43 because we have three major launches of new FMCG products, which got delayed actually and now the trials have been completed so I can hope they will start in Feb, March. And even Iodex will start sometime in April, May so that will also be with better margins than our total average. So, I’m guessing that next year we can aim at between 42, 43. Unless pharma comes in, we hope the numbers will be only reasonable from ’24-’25, once pharma comes in, probably we can aim at 44, 45 kind of EBITDA in ’24-’25 onwards.

Pulkit Singhal — Dalmus Capital Management — Analyst

Great. Thank you and all the best.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Thanks, Pulkit.

Operator

Thank you. Ladies and gentlemen, that was the last question. As we have no further questions, I would like to hand the floor back to the management for closing comments. Please go ahead.

Janumahanti Lakshmana Rao — Chairman & Managing Director

Thank you very much to Emkay for arranging this conference and I also thank all the participants for their time and interest they have shown in our company operations. Wish you all a very happy evening and good luck. Thank you very much.

Operator

Thank you, Mr. Rao. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.