Satia Industries Ltd (SATIA) Q3 FY23 Earnings Concall Transcript

Satia Industries Ltd (NSE:SATIA) Q3 FY23 Earnings Concall dated Feb. 13, 2023.

Corporate Participants:

Diwakar Pingle. — Investor Relations

Rachit Nagpal — Chief Financial Officer

R.K. Bhandari — Joint Managing Director

Analysts:

Rahul Kanwar — AB Advisor — Analyst

Yogansh Jeswani — Mittal Analytics — Analyst

Manzil Shah — AMA Services Private Limited — Analyst

Prashant Rishi — Cascade Capital — Analyst

Rohit Sukheja — — Analyst

Kunal Jain — District Asset — Analyst

Gurvinder Juneza — Fortune Advisors — Analyst

Lalith — TSG Capital — Analyst

Balamurali — — Analyst

Hemant — — Analyst

Govindlal Gilada — — Analyst

Utsav Anand — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Satia Industries Limited Q3 FY23 Earnings Conference Call. Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from EYIR. Thank you and over to you sir.

Diwakar Pingle. — Investor Relations

Good afternoon, everyone. On behalf of Satia Industries Limited, my pleasure to welcome all of you to this company’s Q3 FY23 earnings conference call. You would have already received the Q3 FY23 results and investor presentation, which has already been uploaded on the exchanges and on the country’s website. To discuss the company’s business performance in the quarter gone by, we have with us today Mr. R.K. Bhandari who is the Joint Managing Director and Mr. Rachit Nagpal, the Chief Financial Officer of the company. Before we proceed with the call, disclaime,r please do note that anything said on this call between interaction and in our collaterals with reference to outlook towards the future, which can be constructing statement, must be read in conjunction of the risks the Company faces. And these risks may not be updated from time to time. More details are presented — provided at the end of the investor presentation and other filings that can be found on the Company’s website at www.satiagroup.com.

Should you have any queries or any further information than this call, you can reach out to us at the mailing address mentioned in the company collaterals. So that said, I’d now like to hand over the call to Mr. Rachit Nagpal. Thank you and over to you Rachit.

Rachit Nagpal — Chief Financial Officer

Thank you Diwakar Ji. Very good afternoon. On behalf of Satia Industries, I welcome you all to our quarter three and nine-month financial year ’23 earning call. And I hope New Year 2023 is going great for all of you. As you are aware, our company is in Agro and wood-based paper pulp producing company and is fully backward integrated. Our locational advantage in the wheat belt of India continues to ensure year around availability of raw-material.

We are happy to announce a strong set of quarterly numbers with a 10 consecutive quarters of improvement in EBITDA margin, which is in line with our guidance stated earlier. Healthy pricing scenario and our cost-cutting measures, like the caustic soda recovery, rice clean, and green energy production capabilities are the key reason for the steady increase in the margins.

Coming to our numbers, we have reported highest-ever sales and EBITDA during quarter three financial year ’23.

Revenue from operations has increased by 125% at INR4,868 million. For nine-month financial year ’23, revenue from operations grew by 129% to INR13,631 million. Our continuous efforts and focus on our profitability have shown fruitful results with improvement in our EBITDA margins for the second consecutive quarter. For quarter three financial year ’23, we reported EBITDA of INR1,102 million and margins of 23% which are now near to all time high quarterly margins of 27%.

Strong volumes, better sizing, high operational efficiencies are the key factors for the improvement. For nine-month financial year ’23, our EBITDA was INR2,725 million, a growth of 118%. EBITDA margins were 20%. We expect these margins to sustain if prices remain at current levels, which we believe so. PAT for the quarter was INR648 million, a growth of 124%. The nine-month financial year ’23, PAT grew by 105% to INR1,459 million. Our current order book is off over 30,000 tonnes and these would aggregated in quarter four and thereafter.

Such orders provide solid visibility to us and helps us to effectively steer through the volatility in the prices, if any. We continue to improve capacity utilization. [Indecipherable] PM4, we started operations from Feb ’22, an almost a year back. We expect it to improve further in the next year along with our backward integrated suspension of wood pulping, which would come on-board by the end of this financial year ’23.

We are keenly looking-forward to our plans of entering cutlery business in the next financial year, with the installation and commissioning of eight machines for making different products in the business. But paper industry continues to be in lime light due to broad growth factors [Technical Issues] education policy, which we have been hearing since more than a year. We believe these have long legs of growth and we haven’t even [Technical Issues].

The new education policy ’23 is expected to bring significant changes to the way education is imparted in India. It is emphasizing the importance of teaching a wider range of subjects, including arts, sports, vocational skills in addition to traditional academic subjects and aims to provide education to all. This is opening more and new avenues for growth for our segment of writing and printing paper. We are happy to announce that Board has announced 20% in [Technical Issues]. With this, I thank you once again for joining in and listening to me patiently. We can now request the moderator to move towards that question-and-answer session. Thank you.

Questions and Answers:

Operator

[Operator Instructions]. The first question is from the line of Rahul Kanwar from AB Advisors. Please go ahead.

Rahul Kanwar — AB Advisor — Analyst

Hi, good afternoon, sir, and thank you so much for taking my question. First question would be, if you could give me sales volume for this quarter, last quarter and Q3 FY22.

Rachit Nagpal — Chief Financial Officer

Will you please repeat the question

Rahul Kanwar — AB Advisor — Analyst

Yeah, I need the sales volume for this quarter last quarter, and for Q3 FY22.

Rachit Nagpal — Chief Financial Officer

This quarter we sold almost 53,000 tons of paper and last quarter, we sold 51,500 ton of paper. And last year, overall sales was 1,43,700 ton. So this year, the total tonnage should be anywhere around 2,10,000 ton.

Rahul Kanwar — AB Advisor — Analyst

Okay, okay, I get it. Sir, what will be our outlook for the paper prices for next quarter and this quarter?

R.K. Bhandari — Joint Managing Director

Yeah, paper prices for instance as Mr. Rachit told, we have an order book of almost 30,000 ton. So maybe in that, in this last quarter we may be having a price rise of further 5% to 6% over this over the last quarter and then maybe almost similar prices in the next quarter. So for next two quarters, we look very good, yeah.

Rahul Kanwar — AB Advisor — Analyst

Okay, okay and sir, now I have one more question if I sneak in. So are we thinking of any cost-reduction by [Technical Issues], fuel, chemicals and [Indecipherable]..

R.K. Bhandari — Joint Managing Director

That we event told, yeah we told in our last call also. Now we have two boilers. One, we are running on [Technical Issues]. The other is being run on the rice straw. Rice’s price is anywhere between INR8,000 to INR9,000 a ton, which we use almost 500 ton per day. So, we are converting that boiler. We are putting up a new boiler, which will be again running on rice straw only. The price of rice straw is almost INR2000 a ton. This is almost one fourth of the rice as on date. So that will be one major cost-cutting that will come in the next one year, in the next financial year.

Rahul Kanwar — AB Advisor — Analyst

Okay, okay, understood. Thank you so much sir. I’ll go back in the queue.

Operator

Thank you. Next question is from the line of Yogansh Jeswani from Mittal Analytics. Please go ahead.

Yogansh Jeswani — Mittal Analytics — Analyst

Hi, sir, thanks for the opportunity. Just couple of questions. So, you have told about this in the past, but if you could just share more detail on the pulping capacity in terms of how much cost-saving are we expecting on EBITDA per ton basis. And will this start accruing from Q1 itself once the plan gets commissioned in Q4 or will the ramp up take time and it will be increasing.

R.K. Bhandari — Joint Managing Director

Yeah, part of the would pulping capacity with starting the last month of this quarter and rest as we rightly said will ramp up in the first quarter. So today, if we look at our pulp percentage, we are almost using 50% of straw pulp and 30% of wood pulp and we use almost 10% to 15% of [Technical Issues] waste paper [Technical Issues] pulp. So that pulp cost is almost price INR5000 to INR6000 higher than the wood pulping cost, number-one. That we will be replacing 100% number-one. And number two, we are using wood pulp because of low strength waster paper pulp, which is to the tune of 8% to 10%. So this will be reduced to almost 5%. So cost of this pulp is also almost more than 40% to 50% higher than the in house would pulp. And looking to the international prices of the imported softwood, hardwood pulp.

So definitely, it is going to effect the overall [Technical Issues] EBITDA margin in the times to come.

Yogansh Jeswani — Mittal Analytics — Analyst

Okay. And sir, could you quantify it simplistically in terms of — because for me to make that calculation, I still have to think about what kind of yield comes out from purchase, you could just give a siimplified number even a broad-based number. I do understand pulp numbers will be [Technical Issues].

R.K. Bhandari — Joint Managing Director

Yeah, if we look at our raw material, cost of material consumed, it comes anywhere around 49%. So once we are fully operational with wood pulping cost we may come near 42% to 43%.

Yogansh Jeswani — Mittal Analytics — Analyst

Okay, that’s helpful sir. Second question is on the capacity side. So after the PM4 forthcoming up, our capacity is almost 205,000 tons, right. And this year, we are expecting to close the year with 2.10 lakhs. So in a way, we are more than 100% utilization. Going forward, what is our expansion plans? Are we thinking of any other capacity expansion other than that cutlery machines which again I am guessing is a very-very small among given our total size and scale, cutlery will be a very small portion. So, any other growth.

R.K. Bhandari — Joint Managing Director

Yeah. We started TM4 in February and if I look at the average speed of the machines that we achieved in this year, the average speed of the machine starting from February till date is 900 meters per minute. While this machine is designed to run at one meter to maybe even 1,100 meter per minute. So number one, 10% increase, we are expecting from for PM4 more by taking this machine to over 1000 meter per minute, which we are already ready as on date.

Average was 900, but we are running at 1,025 meter as an date. So once that average come for the whole year, so the production is likely — if the grammage of the paper remains the same, average grammage remains the same, so we should be ending up almost 9% to 10% higher in production on that machine itself, number one.

And number two, management has — management is working on a plan to increase the speed of PM3 also, modernizing PM3 and increasing its speed from present 650 meter to 725 meters per minute. This project will be taken up in the next two financial years. So, it will start maybe take off in the mid of next financial year and end up by end up being finalized in the next financial year. So these are the two immediate plans. PM4 will be effective in the next year itself and PM3 upgradation will start giving result in the next financial year after the next to next financial year, yes.

Yogansh Jeswani — Mittal Analytics — Analyst

Understood. Last call, you mentioned that we did touch 1,100-meter per minute in PM4. Was it again the guidance I might be looking?

R.K. Bhandari — Joint Managing Director

1100 is the ultimate design that they have given, it can go safely up to 1100 meter. But we haven’t so far touched the 1,100 meters. We have now gone through our peak of 1025 meter per minute only. The whole French team was here for 7, 10 days to do whatever needs to be done on this machine after returning of more than one year. So did that and we achieved a gain 1,025 meter. So that was the peak we have seen so-far.

Yogansh Jeswani — Mittal Analytics — Analyst

Okay, sir. And 1 last question, sir, then I’ll get back on the. Can you say what are the current realization in market for writing and printing paper?

R.K. Bhandari — Joint Managing Director

Print realization is anywhere near INR88,000 to INR90,000 a ton. Since we had, we are now aggregating the highest realization orders that we bought in the large one quarter in the last three four months, so our realization could be 5% to 6%, 7% higher than this in the last quarter. Otherwise, [Indecipherable].

Yogansh Jeswani — Mittal Analytics — Analyst

And do you see these realizations to stay for at these levels? Or are we now seeing some sign of slowdown here?

R.K. Bhandari — Joint Managing Director

Presently for next three to four months, maybe up to June, the things seem very, very stable. But after June, we have to see how does this new education policy take up and what kind of response we get from the market, maybe till then we can keep our fingers crossed, yes.

Yogansh Jeswani — Mittal Analytics — Analyst

Got it sir, thank you so much sir, I will get back in the queue.

Operator

Thank you.[Operator Instructions].The next question is from the line of Manzil Shah from AMA Services Private Limited. Please go ahead.

Manzil Shah — AMA Services Private Limited — Analyst

Hello. Yeah, thank you for the opportunity. And, sir, congratulations for a great set of results. Sir, a few quick questions. Sir mentioning that we will be doing 2,10,000 tonnes by FY23, so what would be no sustainable growth rate for FY24 and FY25. That was my first question. Second, as you mentioned that in capex we are planning to so basically four PM4, we are planning to increase the speed of the machine from 900 meters to 1,011 meters per minute and in PM3, we will plan of upgradation in FY24. So the result will be received in FY25 Apart from these two things, are we planning any more capex in our new machine right now or any capex in the cutlery segment. So that was my second question. And the third question was regarding, sir or what was the capacity utilization till nine months. And what would be the normal depreciation run rate quarter-wsie So yeah, so these are the four questions sir. Thank you.

R.K. Bhandari — Joint Managing Director

And definitely, it’s nice thing. I will request Rachit to clear afterwards. So, as far as growth given that we target, so I think 7% to 8% increase in number, volume of production is likely to be sustained under all circumstances because of increase in speed of PM4, number-one in the next financial year and next to next financial year with coming up of modernization PM3. So the capex in cutlery, as we had told in the last call also won’t be more than INR10 crores to INR15 crores because infrastructure is already in place. We have already placed order for six machines. Two machines have been dispatched today already, two are already installed.

So four machines should be running in a month or so and net four machines should be here in the first-quarter of the next year and the numbers from cutlery segment. should start coming from next financial year. If everything goes well. So capex, other — presently management doesn’t have any plan to going for any new machine, but definitely one one boiler is coming as we explained earlier, which will be burning rice straw a fuel to economize on the fuel saving and second capex that we are doing, which we have initiated already because with the increase in wood pulping, we will be having higher-level of black liquor with us. So for that, soda recovery boiler with the higher capacity. Presently, we are running two soda recovery boilers. So we intend to, in the long-run, keep these two as standby and a new recovery boiler of 1000 ton solid per day is being installed, which will — which should be operationally within one or one-and-a-half year So that is a laid out plan already. Yeah, so appreciation I think Rachit, he will be able to explain better.

Rachit Nagpal — Chief Financial Officer

Yes, sir, quarterly, the appreciation is around INR30 crore to INR32 crore. This year, like we are expecting INR125 crore to INR130 crores appreciation this year. So in next financial year, it may be like it is somewhere around INR120 crores INR125 crores.

Manzil Shah — AMA Services Private Limited — Analyst

Okay, so sir. If I can squeeze in just two more questions, just regarding EBITDA. So when we are going — we are like strengthening our backward integration. So. So how will our EBITDA margin stands for the coming two years, so FY24 and FY 25. So can we expect an EBITDA margin of 20% to be sustained.

R.K. Bhandari — Joint Managing Director

Yeah, 20%, definitely will it be sustained by all means. But its our parcels material consumed, which is the now at almost 48% to 49% because of higher prices of wheat straw. So even wheat straw prices are now coming down slightly. So if we are able to control our costs from raw materials consumed to the level of 42% to 43%, so we should be doing EBITDA even at the last quarter level also in the longer run on sustained basis, which could be anywhere around 22%, 23%, yes.

Manzil Shah — AMA Services Private Limited — Analyst

Okay, so can we expect. So currently paper price writing and printing paper prices are close to 88,000 to 90,000 a ton. So if. If they are — the raw-material prices go down, is there any chance where we can find the paper prices are correcting maybe you said after June like till June you said that the prices will remain stable 00 will remain firm but probably after June.

R.K. Bhandari — Joint Managing Director

Yeah, because the total family of paper industry if you talk of the brown paper or you talk of the few thousand folding box, you talk of [Technical Issues], you talk of tissue, is that total family members in the paper industry, they have come down and pulp prices internationally, they have also come down substantially, almost from 10,070 dollar per ton to todaty softwood pulp is 830 per ton, which is almost 250 — 25% down. So that way, definitely prices can correct.

Manzil Shah — AMA Services Private Limited — Analyst

Okay, okay and. even up correction of prices, we will be able to sustain the 20% EBITDA margins.

R.K. Bhandari — Joint Managing Director

Yeah, minimum 20. I think we can — we are was quite definite about that 20% we shall be able to maintain, which we have been maintaining almost for the last three-four years also.

Manzil Shah — AMA Services Private Limited — Analyst

Okay and sir in our presentation, you have mentioned, you have given some information relating to the packaging industry. So are we planning to also get into packaging like packaging products as well.

R.K. Bhandari — Joint Managing Director

Not yet, not yet,

Manzil Shah — AMA Services Private Limited — Analyst

Okay. So we’ll be into writing and printing and the cutlery segment, This will be the two segments.

R.K. Bhandari — Joint Managing Director

Yeah, that will be the main focus. So if cutlery goes good, maybe we may expand in that segment.

Manzil Shah — AMA Services Private Limited — Analyst

Okay, okay. Thank you sir, thank you for your time. I’ll get back into the queue. Thank you sir

R.K. Bhandari — Joint Managing Director

Welcome. Welcome.

Operator

[Operator Instructions].Next question is from the line of Prashant Rishi from Cascade Capital, please go ahead.

Prashant Rishi — Cascade Capital — Analyst

Sir, just following on the last question that was mentioned. You said pulp prices are corrected and paper prices are corrected. So, pulp prices have corrected more than paper prices would have corrected recently, right?

R.K. Bhandari — Joint Managing Director

Yeah

Prashant Rishi — Cascade Capital — Analyst

Okay, sir, so going-forward just a theoretical question, are we better-off say buying pulp from open-market and manufacturing paper versus what we are planning to do putting up a wood pulping capacity and then producing paper in a scenario where pulp prices are crashing and paper prices are going down slowly. Are we better off buying it — pulp from the market?

R.K. Bhandari — Joint Managing Director

And because it is the backward integrated unit, when you — when we make pulp, so if my pulp let’s say we presume a figure of target pulp, lets say it is between INR55,000 to INR60000 a kg, which comes to almost $725, &720 So, still, when I make pulp and get black liquor, which I create in soda recovery, I get steam also. So from that steam, I make power. So that benefit if we reduce from this[Technical Issues] so even if price below 700, it is more viable to make paper in house, number-one. Number two, when we make wheat straw pulp, that price is much lower than this. It is almost. 25% to 40% lower than wood pulp price. So that price, we can never get from the bought-out pulp, yeah.

Prashant Rishi — Cascade Capital — Analyst

Okay, okay, all right sir. Sir. I have another accounting question, maybe Mr. Rachit can help me. When I look at the liability section on the balance sheet, there is something called security deposits. So around INR100 crores of security deposits are outstanding year-after year. I just wanted to get a sense of where have you collected these deposits formal. Are we paying interest on these deposits — total deposits?

Rachit Nagpal — Chief Financial Officer

No, these are treasury deposits. A major of the amount are interest-free deposits. We are taking it from our dealers, from like vendors, from our contractor. These are the deposits we are taking from them only.

Prashant Rishi — Cascade Capital — Analyst

Okay, some are interest on this.

Rachit Nagpal — Chief Financial Officer

No

Prashant Rishi — Cascade Capital — Analyst

. All right, that’s it from my side. Thank you and all the best.

Operator

Thank you. The next question is from the line of Rohit Sukheja from [Technical Issues]. Please go ahead

Rohit Sukheja — — Analyst

Good afternoon. as you mentioned in the quarter that you were increasing wood pulping capability to 350 tons. So when we will see that capacity addition and also how much percentage of our profit would increase by the capacity addition?

R.K. Bhandari — Joint Managing Director

Rachit, I think you can go ahead. Yes.

Rachit Nagpal — Chief Financial Officer

Could you please repeat the question.

Rohit Sukheja — — Analyst

Sir, you mentioned in the last quarter you were increasing wood pulping capacity to 350 tons. So, so my question was when will we see that capacity addition and also how much percentage of our profitability increase by this capacity addition.

R.K. Bhandari — Joint Managing Director

Yeah, it will definitely increase. As I explained earlier because we will replacing it with waste paper and imported wood pulp price, wood pulp, which is costing almost INR5,000 to INR10,000 [Technical Issues] So that. It will definitely add to our margins by minimum three to four percent, yes.

Rohit Sukheja — — Analyst

Okay sir, okay, thank you so much.

Operator

Thank you. Next question is from the line of Kunal Jain from District Asset. Please go ahead.

Kunal Jain — District Asset — Analyst

Thank you sir, thank you for the opportunity. So my question is like, has this CBSE and ICC syllabus change and how that will effect our topline business revenue-wise?.

R.K. Bhandari — Joint Managing Director

Revenue-wise, the change in syllabus, that will. I think help keep the market in the buoyant more instead of increasing our top-line. We can only make what we can make as per our capacity. But it will sustain that demand in the market. It will keep the pull in the market. It will keep up the prices also, table-price. So to that extent, definitely it is going to affect the top-line, yeah.

Kunal Jain — District Asset — Analyst

Okay, and anything on the new education policy. So how much we see this coming in?

R.K. Bhandari — Joint Managing Director

Yeah, because as we explained earlier also, the printer who publish guides, help books and all the supplementary material, so, they have been for the last 2.5 or 3 years. They have been holding that they printing to the minimum level. So once NCERT or government takes, let’s come out with their total curriculum as per the new schedule, so. I think that work will start afresh. So that will add to the writing, printing paper demand in the coming one or two years on that sustained levels at higher level. So that is what we are expecting, yeah.

Kunal Jain — District Asset — Analyst

Okay sir, thank you sir. That’s it.

Operator

[Operator Instructions]. Next question is from the line of Gurvinder Juneza from Fortune Advisors. Please go-ahead.

Gurvinder Juneza — Fortune Advisors — Analyst

Yeah, thank you for giving me the opportunity, sir. I have a question on the liability side of your balance sheet. When we analyzed, we realized that a fair bit of your liabilities are due for payment in the next one year. So I wanted your guidance on how are you planning to repay or roll over that debt and at what terms are you likely to get that fresh debt?

Rachit Nagpal — Chief Financial Officer

That is the part of the long-term loan, which is payable due within the year. So that is due within one year as per the schedule, somewhere around INR110 crores.

Gurvinder Juneza — Fortune Advisors — Analyst

Right, sir, what I wanted to understand was, obviously you will probably need to rollover some of these facilities because the free-cash flow in the next 12 months is going to fall short of the repayment, which is okay, but just wanted to understand what’s your preparation and what kind of response the banks are willing to give you, what kind of lines are the willing to give you.

Rachit Nagpal — Chief Financial Officer

So, yes, in the normal course, like for our repayment schedule. INR110 crores is almost due for repayment in the next year, but management is also planning to pay additional debt of maybe somewhere around INR20 crore to INR30 crores in the next financial year. So, we will start reaping like INR130 crore, INR140 crores in the next year. So that is our plan.

R.K. Bhandari — Joint Managing Director

Whatever du, it will be definitely paid and we intend to pay even more than whatever it due. So that is the plan of the current [Technical Issues]. Maybe we’ll pay some amount extra in this financial year also or whatever has been due in this financial year, yes.

Gurvinder Juneza — Fortune Advisors — Analyst

Got it, sir. Got it, sir, And sir, what’s your total capex plan for the next 12 to 18 months. I mean, of course, you’ve outlined the areas in which you will make the capex. But an amount — an estimated the nearest INR25 crore estimate of your capex plans.

R.K. Bhandari — Joint Managing Director

Yeah. I think with soda recovery boiler and other small project, it could be anywhere around INR100 crores to INR125 crores each year in the next two financial years.

Gurvinder Juneza — Fortune Advisors — Analyst

Alright. Alright sir, thank you very much.

Operator

[Operator Instructions] Next question is from the line of Lalith from TSG Capital. Please go ahead.

Lalith — TSG Capital — Analyst

Hello sir, good afternoon and congratulations on a wonderful set of numbers. I just wanted to ask [Technical Issues] announcement in January saying we’ve gotten orders worth 17,000 tons from Maharashtra and other states and it’s going to continue at around INR200 crores of revenue. So that comes up to around INR115000 per ton. So is that a sustainability margin, what the kind of margin are we going to make on that. And is that sustainable price that we could look at for the next twelve months maybe?

R.K. Bhandari — Joint Managing Director

Yeah, that value inclusive of GST and delivered. Okay. Yeah, so the realization that we get is, again, as I explained in the range of, which is higher than the market by 5% to 10% depending upon order to order. But because market was going up at the time of these standards so maybe you have noticed that in our third quarter, our margins are on the low side because we were executing orders which we had taken on the lower rate. So while [Technical Issues] so maybe when other people are having lower realization, we maybe executing orders, which we had had at very-high price in the peak market and people are enjoying secret. So, that phenomenon almost continues with Satin as I have been telling you earlier, and even in corona period, we were able to maintain our margins [Technical Issues] flat only and our numbers also. We made almost 110% capacity utilization even in COVID period. So. the margins are likely to be maintained in the next two quarters because of these two big orders that we have got recently. And thereafter, we will be with that market. Yeah, as it happens with everybody else.

Lalith — TSG Capital — Analyst

Right sir. And just a follow-up. So this quarter’s results, we put out you know you jump in, our results have come from the power generation and the drop-in the paper segment. Yeah, so any clarification on that as to why happenedd?

R.K. Bhandari — Joint Managing Director

Yeah, it was due to some transfer pricing advice from one of our advisors. So earlier, we had been booking the [Technical Issues] transferred to paper segment from power segment at a lower. cost So, they advised use we need to book it at a higher price looking to the entirety of the team that we pass-on to the Paper segment. So that is why our sector profitability from the higher side, and Paper segment is on the lower side. S we get benefit of 80 IA deduction in power segment. So ultimately overall figure means nothing.

Lalith — TSG Capital — Analyst

All Right. And this we are going to continue to do this going-forward?

R.K. Bhandari — Joint Managing Director

Yeah, because they explained a very scientific basis. They gave a very scientific basis of steam and tariff fee. How much every is there in the steam once power power is expected from high pressure steam and low pressure steam is given to that paper or pulp sector, yeah. We would continue that.

Lalith — TSG Capital — Analyst

Thank you. Thank you so much sir and have a good day.

R.K. Bhandari — Joint Managing Director

Thank you.

Operator

Thank you. Next question is from the line of Balamurali, Individual Investor. Please go-ahead.

Balamurali — — Analyst

[Technical Issues]

Operator

Sorry to interrupt you, but we are unable to hear you. May I request you to speak to the handset, please.

Balamurali — — Analyst

Yeah, my question is on the cutlery business.

Operator

Balamurali, sorry to interrupt you. Your voice is not coming very clear. May I request you speak through the handset.

Balamurali — — Analyst

Yeah, my question is on the cutlery business. How much quantity from this capex [Technical Issues] or what kind of revenue flows expected from the next year from [Technical Issues]? Yes. As we told our total — we’ll be having xis new machines of one ton [Technical Issues] per day and two machines we have already with us with 2 ton capacity each. So total tonnage capacity is almost 10 tons per day. So if we have 70% utilization, if we are able to take from these machines as we find is the prevailing practice in the industry, so 7 ton per day we should be ending up at full capacity utilization, minimum 2,000 tons of cutlery in a year. So if the price is anywhere in the range of INR200 a kg to INR250 a kg depending upon the item to item, so the top line for this segment should range between INR40 crores to INR50 crores. Yes. And 1 more thing in Q4, how much you can expect us from total segment production figures, sir, cutlery almost 100% capacity, cutlery not cutlery, paper segment..

R.K. Bhandari — Joint Managing Director

From the paper, paper, we should be doing almost 55,000 ton minimum.

Balamurali — — Analyst

Okay, thanks a lot.

R.K. Bhandari — Joint Managing Director

Welcome.

Operator

Thank you. Next question is from the line of Hemant, Individual Investor. Please go-ahead.

Hemant — — Analyst

Thank you for providing me the opportunity and congratulations on a very good set of numbers. Sir, basically, two questions from my side. First of all, we had earlier guided for INR2000 crores of revenue in FY 23. So we have already done close to INR1360 crores. So are we on-track to deliver INR2000 crores? If that is the case, I think Q4 numbers should be better than Q1, Q2 and Q3, which will be my first question. The second question is when do you expect burn new education [Technical Issues]?

R.K. Bhandari — Joint Managing Director

Yeah, as you rightly said. I think my estimate is definitely PM4 number will be on higher side, almost almost 10% more than last quarter. So we should be crossing INR500 crores easily if everything goes fine. So we may be anywhere near INR2,000 crore So maybe INR1900 crore if everything goes well. So that is the right observation as you may.

And new education policy, because we know how does the government moves, so once the curriculum and all those things are rolled out, so I think the true effect will come in the next season, because for this season, all the — for the next session that is going to happen in the next year, all the textbook boards, they have — they have either already done their buying and printing is going on in full swing. So from next year onwards, that effect should come, yeah.

Hemant — — Analyst

Sir 1 more thing is given the kind of growth which the company has given but actually, the market cap is not reflecting the sale. So what steps the I mean, management is taking to create more investor are sort of thing?

R.K. Bhandari — Joint Managing Director

Management has already given interim dividend of 20% and let’s see what’s the final dividend. So number one is management is ready to share whatever votes they have with the investors. So that should make by investors interested in the script and the confidence with our consistent performance. So we have been going to the market time and again after every quarter and answering whatever queries to our best ability that we could answer and take our position very, very transparent. So I think it is up to the investors then to see and trust on timeline, on the transparency that management has. And definitely, people will come.

Hemant — — Analyst

Okay, sir. Thank you for that.

Operator

The next question is from the line of Govindlal Gilada, Individual Investor. Please go ahead.

Govindlal Gilada — — Analyst

Hello.

R.K. Bhandari — Joint Managing Director

Hello yeah

Govindlal Gilada — — Analyst

Good evening, sir. Thanks for leaving opportunity. So earlier, you answered to the questions regarding paper outlook. just one confusion. You told us recently pulp prices are corrected because of that paper prices have corrected or there is some misunderstanding from my side.

R.K. Bhandari — Joint Managing Director

Yes. I said that international pulp prices may be softwood pulp, which was the $1,070 almost three months back, it’s now at $830. But definitely since the delivery lead time in getting that product delivered is two to three months. So whatever we have booked two to three months back so we get delivery after two to 2.5 months, number one. And number two, that component of imported pulp in our final product is 5% to 10% only.

Govindlal Gilada — — Analyst

I know, sir, softwood pulp [Technical Issues]. So my understanding is correct, that you told recently prices have been corrected or because of this, [Technical Issues] what we are getting around raw material cheaper going forward, prices will correct. What you have told, I don’t understand sir, just clarification. No, no Internet pulp prices, they reduced because of resolving of logistic issue, number-one mainly, And energy prices coming down internationally, as you know, gas prices which in the Europe are always anywhere near EUR20, they have come down to almost to EUR3, EUR3.5 and coal prices, they have also come come down. So energy prices have come down, number-one and logistic issues have been resolved, number two. So these are two major reasons which are making mobility of the pulp difficult and prices were going up. So that depends on the new capacities that come up internationally as in hardwood case, there is the capacity, two capacities are coming for almost 4 million tons every year. So, once they come, hardwood, which was at 960 is now available at almost 760 or near about that range. And similarly. wheat prices which had peaked at one time even our national economic survey rose, small line in that survey [Technical Issues] further prices have become very, very high in India. So it went up to almost INR10,000 a ton Now they have come down to almost INR9,000 or INR8,500, almost 10% decrease is also there. So I think things are normalizing. And yes, let’s see what happens in the future. So — I understood, sir. This hardwood pulp prices have come down. So any — your view sir, going forward little longer term, how the pulp prices you are seeing? They already came down from 960 to 760. So a longer term, what’s your view on pulp prices, sir?

R.K. Bhandari — Joint Managing Director

Actually a lot depends on China, like. India. hardwood, India softwood is 830, China is 890, 900, Europe may be even still higher. But similarly, hardwood international players, this trend is likely to sustain for some time. That is for definite, for another five to six months. Yes.

Govindlal Gilada — — Analyst

Sir, import of these pulp prices coming down, your view is that paper prices will sustain at this level to June? Yes, I said after June, even paper prices may correct. . So because of the raw material prices pulp going down or generally after June, two, three months, off season will be there?

R.K. Bhandari — Joint Managing Director

The demand because of the — because demand is at the peak from January to June. So once that demand subsides and then prices may correct to some extent. That’s what I said.

Govindlal Gilada — — Analyst

How much they can come down, sir, or assume to later say three, four months because of [Technical Issues] starts in November, they can go up again, sir?

R.K. Bhandari — Joint Managing Director

Yes. Actually, not more than 5%, 6% because internationally, today, the price is anywhere around $1,100. So if import price we see, so even that comes anywhere near INR86,000 to INR88,000 ton only.

Govindlal Gilada — — Analyst

Sir you mean to say, right now Indian prices are at import parity?

R.K. Bhandari — Joint Managing Director

Yeah, yeah, rather slightly on the higher side because of nonavailability of imported paper number one. And second, because of the early lead time that we have in delivering the goods. Yeah.

Govindlal Gilada — — Analyst

To sum up what I understand and what you told– so in spite of the prices coming down, they have come down also, prices will hold till June, you are telling that then because of off season, 5%, 6%, they may come down. Then again — but you see longer term [Technical Issues] 1.5, two years, what can be the [Technical Issues] paper prices, sir

R.K. Bhandari — Joint Managing Director

One to two years, really, we cannot take chance now as I said earlier, that new education policy, how does it unfold, how aggressive the government is in implementing the schedule that they have given to different boards and so it depends on government [Technical Issues], yeah.

Govindlal Gilada — — Analyst

Net-net, even the prices come down a little bit for three, four months. So this FY ’23 this year what we are going to conclude is [Technical Issues] EBITDA.

R.K. Bhandari — Joint Managing Director

Yes. Yes. Because as I said earlier, the raw material prices have come down on and are coming down. Chemical prices are coming down. So fuel prices, they have substantially come down. So the margins are likely to be maintained in the industry.

Govindlal Gilada — — Analyst

Versus quarter three, quarter four, this coming quarter [Technical Issues] chemical and coal all that, it will be some benefits to that?

R.K. Bhandari — Joint Managing Director

Yes. There will be definitely some benefit and quarter four numbers will be better than quarter two.

Govindlal Gilada — — Analyst

[Technical Issues] how much the average quarter and a quarter four, right now, how much there any [Technical Issues]?

R.K. Bhandari — Joint Managing Director

Actually, we are not buying any coal. But definitely, they have come down substantially. I can’t quote the exact number because there is a lot of variety in the coal segments looking to the [Technical Issues] value of the product.

Govindlal Gilada — — Analyst

Great sir, thank you sir, for all answering so patiently. Thank you very much. All the best.

Operator

Next question is from the line of Utsav Anand, Individual Investor.

Utsav Anand — — Analyst

Thank you sir, Congratulations on the gate number, sir. I’d like to ask the profitability increasing, do we see the dividend percentage increasing over time, over the next few quarters?

R.K. Bhandari — Joint Managing Director

I think that is the [Technical Issues]

Rachit Nagpal — Chief Financial Officer

Sorry, you are asking for dividend?

Utsav Anand — — Analyst

Yes. Do we see that increasing because we see that the net profit margin of the company is increasing, right? That has gone up from over the past two quarters. [Technical Issues] percentage of dividend increasing down the line?

Rachit Nagpal — Chief Financial Officer

Yes, definitely, management is planning to — for the dividend policy that will definitely, you will see the increasing trend. We have already announced 20% interim dividend, and we are — maybe we can plan any final dividend too. So you will see the increasing trend in the dividend.

Utsav Anand — — Analyst

Okay. And just wanted to update regarding the raw material prices like the wheat straw and that has been used [Technical Issues]? Are we coming down? So do we see the profitability increasing in the Q4 as well, like the MTM margins going up?

R.K. Bhandari — Joint Managing Director

In Q4, definitely, as we explained earlier, the number should be better than this. And definitely, once the [Technical Issues] consumed, which used to be earlier in the range of 40% to 41% in agro industry, which has now gone up to 45%, 46% and in some cases like ours where we are using waster paper and [Technical Issues] pulp to almost 48%, 49%. So Once we come to that level, we could expect a higher EBITDA margin. Definitely. Yeah.

Utsav Anand — — Analyst

Okay. And what’s the current rotating capacity of the company?

R.K. Bhandari — Joint Managing Director

It is almost 160 to 180 ton day.

Utsav Anand — — Analyst

Like you mentioned in previous con calls, are you planning to increase it to 300? Any update on that when can that be done?

R.K. Bhandari — Joint Managing Director

Parts will be started in the last quarter because eight [Technical Issues] 2, 3 digesters with the new technology that we have been telling earlier, which will be consuming low steam and giving higher pulp. So they’ll start in March only. And next six, we will start in the first — by the end of the first quarter of next financial year.

Utsav Anand — — Analyst

So by March 5, what capacity you will reach from 160 to? What capacity we will be at?

R.K. Bhandari — Joint Managing Director

So we’ll be adding almost from present 160, we should be exceeding 200 ton per day.

Utsav Anand — — Analyst

By March, right?

R.K. Bhandari — Joint Managing Director

Yes, by the end of March.

Utsav Anand — — Analyst

And the balance 100, that will be when?

R.K. Bhandari — Joint Managing Director

Rest will be by the end of the next quarter in the next financial year.

Utsav Anand — — Analyst

Any reason why this hasn’t delayed because we were expecting this to be in this coming [Technical Issues].

R.K. Bhandari — Joint Managing Director

Yes. This is the project of its own kind which needs a lot of instrumentation and reworking lot of fabrication. This is a project of its own kind which is second in India, I think, if I am not wrong. The first was done by JK in [Technical Issues]. Yeaj. The second company is Satia. So there’s a lot of work in that, a lot of engineering involved and since it has to be — it’s not a new plant. So we have to run the existing facility also and do changes in the plant on earning basis only. So, it take a lot of time. Yeah.

Utsav Anand — — Analyst

Okay. So by March, we will be going up to 200 and [Technical Issues] approximately near 200, right?

R.K. Bhandari — Joint Managing Director

Yeah, yeah.

Utsav Anand — — Analyst

Just one more thing when we reach at 300, right, for the pulping capacity, keeping a normal scenario, what profitability? Do we see is being [Technical Issues] further?

R.K. Bhandari — Joint Managing Director

Because profitability is linked to so many factors, but definitely, the costs that we have been paying over and above the normal cost by using waste paper and [Technical Issues] that will be corrected.

Utsav Anand — — Analyst

Like do we say 4%, 5% margins being added to this from next year.

R.K. Bhandari — Joint Managing Director

Minimum 3% to 4% yes. That’s [Technical Issues]

Utsav Anand — — Analyst

And I hope there’s no delay for the right [Technical Issues]. It will be one year that has been delayed, right?

R.K. Bhandari — Joint Managing Director

We are trying to maintain quite strict schedule, but since we have to have 160, 180 tons pulp every day so we cannot shut down the total facility and then do whatever work has to be done. So [Technical Issues].

Utsav Anand — — Analyst

Yeah, yeah, I understand that. That is the [Technical Issues]. That’s one more thing, right? I see the profitability has gone up also. Do we see the debt being a bit earlier that gets the entire cost down?

R.K. Bhandari — Joint Managing Director

Pardon?

Utsav Anand — — Analyst

As the profitability has increased, right, they are getting much more better NPM and all these things. So do we see that we pay a debt much earlier? So that will help us with you on the interest?

R.K. Bhandari — Joint Managing Director

As I already said, even management is paying to — intend to pay some debt they intend to prepay even this during this financial year. So next year again, we’ll be paying more than what is due to the institution. Yes.

Utsav Anand — — Analyst

Like any range on idea, how much additional you will be paying this year?

R.K. Bhandari — Joint Managing Director

Minimum 5% to 10% this year and maybe more next year.

Utsav Anand — — Analyst

5% to 10% of the additional that is required, right?

R.K. Bhandari — Joint Managing Director

Yes. At least 5% to 10% of the total debt payable it is almost INR100 crores plus in a year.

Utsav Anand — — Analyst

Okay. And what is the outlook for Q4 and Q1? Final question from my side? And how is the outlook looking at? Because the [Technical Issues] orders for [Technical Issues].

R.K. Bhandari — Joint Managing Director

I said earlier so it should be better than Q3. And since price realization is going to be on the higher side and production numbers, they are likely to slightly exceed or remain the same we should be overtaking the top line for — that we achieved in the quarter three and should be doing more than INR500 crores. So looks to be good for me much better than quarter three.

Utsav Anand — — Analyst

Sure, thank you so much. Congratulations on the great set of numbers, sir.

Operator

[Operator Instructions]. Next question is from the line of Manzil Shah from AMA Services. Please go ahead.

Utsav Anand — — Analyst

Sir, just two bookkeeping questions to Mr. Rachit. What would be the cost of funds, cost of interest rate for — on the debt we have right now?

Rachit Nagpal — Chief Financial Officer

Yes. As we are aware, [Indecipherable] is increasing. It is like every month. So trend cost is around somewhere around 8% to 8.25%.

Utsav Anand — — Analyst

Okay. 8% to 25% Okay. And the tax rate, basically, what I’m seeing that last year, we had a tax rate of around 18%. So what would be the tax rate for the full year this year, full this year?

Rachit Nagpal — Chief Financial Officer

We are matching company. So, we are paying around 17% match, but yeah, effective taxes somewhere around 12%, 13% due to the higher ATIA. So we are like enjoying tax holiday plus we have some agricultural tax-free income, some nontaxable REC income. So effectively, the tax rate is 12% to 13%.

Utsav Anand — — Analyst

Okay. So is it expected to continue in the coming two years also?

Rachit Nagpal — Chief Financial Officer

Yes. In fact, for the next five, seven years, it should remain the same.

Utsav Anand — — Analyst

Okay, next five to seven. Okay, thank you, thank you.

Operator

I now hand the conference over to the management for closing comments.

R.K. Bhandari — Joint Managing Director

Thank you, investors, for your interest in the company. We wish you all a very, very happy and prosperer new year. Thank you. Thank you for your response again. Goodbye.

Operator

[Operator Closing Remarks]