Satia Industries Ltd (SATIA) Q4 FY23 Earnings Concall Transcript

Satia Industries Ltd (NSE:SATIA) Q4 FY23 Earnings Concall dated May. 02, 2023.

Corporate Participants:

Diwakar Pingle — Investor Relations

Rachit Nagpal — Chief Financial Officer

Mr. R. K. Bhandari — Joint Managing Director

Analysts:

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

Vishal Prasad — VP Capital — Analyst

Prashant Rishi — Cascade Capital — Analyst

Harshit Jain — RAH Investments & Advisory LLP — Analyst

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

Govindlal Kilada — Individual Investor — Analyst

Gurvinder Singh Juneja — Fortuna Investment Advisors LLP — Analyst

Anil Kumar Sharma — Individual Investor — Analyst

Utsav Anand — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to SATIA Industries Limited Q4 and FY’23 Earnings Conference Call.

[Operator Instructions]

I now hand the conference over to Mr. Diwakar Pingle from EY. Thank you and over to you sir.

Diwakar Pingle — Investor Relations

Thank you so much, Ranju. Good afternoon, everyone. On behalf of SATIA Industries Limited. I welcome all of you to the Company’s Q4 and FY’23 Earnings Conference Call. You’d have already received the results and investor presentation, which is also available on the exchanges and the company’s website. To discuss the company’s business performance in the quarter gone by, we have with us today, the top management of SATIA Industries, represented by Mr. R. K. Bhandari, the Joint Managing Director and Rachit Nagpal, the Chief Financial Officer of the company.

Before we proceed the call, please note that in everything that’s said in this call during interaction and the collaterals, which reflects our outlook towards the future, which should not be construed as a forward-looking statement, must be viewed in conjunction with the risks the company faces and may not be updated from time-to-time. More detail are provided in the investor presentation and other filings that can be found in the company’s website at www.satiagroup.com.

With that said, I’ll now hand over the call to Rachit Nagpal. Over to you, Rachit.

Rachit Nagpal — Chief Financial Officer

Thank you, Diwakar ji. Very good afternoon. I would like to welcome everyone to the Earnings Call for SATIA Industries Limited, where we will be discussing the financial results for Q4 and financial year ’23. Our company is a fully backward-integrated paper pulp producer that is based on Agro and wood resources. We benefit from our strategic location in India’s wheat belt, which ensures a steady supply of raw materials throughout the year. We are pleased to announce that our Q4 and financial year ’23 results are strong, with a third consecutive quarter of improvement in EBITDA margins. This is due to a healthy pricing environment and cost-cutting measures, such as caustic soda recovery, clean and green energy production capabilities. Our Q4 financial year ’23 sales and EBITDA was one of the highest, with revenue from operations growing by 75% year-on-year to INR5,206 million, and EBITDA margins reaching 26.2%, which are one of the historic high. We attribute this growth to our strong relationships with State Boards with a healthy order book. For financial year ’23, our revenue from operations increased by 111% year-on-year to INR18,837 million. Our focus on profitability has yielded positive results, with EBITDA margins improving for the third consecutive quarter. Our Q4 financial year ’23 EBITDA was INR1,362 million and margins were 26.2%. Strong volumes, healthy order book and higher operational efficiencies are the key factors for the improvement.

Our cost of material consumed has come down to 40% in quarter four financial year ’23, as compared to 50% in Q4 financial year ’22 and 47% in Q3 financial year ’23. Our financial year ’23 EBITDA grew by 123% to INR4,118 million with margins of 21.9%. We expect margins to remain sustainable as long as prices remain at similar level, which we anticipate will be the case based on the current scenario.

Our PAT for Q4 was INR463 million, a growth of 57% year-on-year. However, we have made some changes to our depreciation estimates with regards to residual value, resulting in additional non-cash depreciation amount fully booked in Q4. Our PAT grew by 91% to INR1,922 million. Our order book is healthy, with over 24,000 tons to be executed in Q1 financial year ’24. We have recently received orders of over 8,000 tons from Gujarat and Telangana State boards, providing us with solid revenue ability to steer through any volatility in prices. We are also pleased to report that we have currently commissioned two machines of one ton each, we would share more information later during the year.

Given our strong cash generation capabilities, we have made significant progress in reducing our long-term debt, in addition to normal debt repayments, we had repaid INR350 million till April’ 23, out of which the payment of INR263 million was made in April ’23 itself, the rest in financial year ’23. Our credit rating has also been upgraded by Fitch India Ratings and Research from A to A positive, with a stable outlook.

Lastly, we are happy to announce that our Board has declared a total dividend of 40% for financial year ’23. We believe that the paper industry will continue to grow given the National Education policies emphasized on a wider range of subjects, including arts, sports and vocational skills, which create new opportunity for our writing and printing paper segment. Thanks. Thank you for joining us and we will now move to the question-and-answer session. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session.

[Operator instructions]

The first question comes from the line of Manan Poladia from MKB Securities, please go-ahead.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

Hello, Rachit, am I audible?

Rachit Nagpal — Chief Financial Officer

Yes, yes, you are audible.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

First of all, congratulations on a great set of numbers. So my first question is on the depreciation end of things. I know there is a one-off INR60 crore write-off that you have taken. What I wanted to understand was that the rest of the INR50 crore depreciation that is there, relative to q-o-q, INR33 crore, right? So that extra INR17 crore line item will be there in every quarter going-forward?

Rachit Nagpal — Chief Financial Officer

No-no, this is a one-time — like we have changed our estimate in respect of deprecation. This is a technical advice and recommendation as per auditors, we have changed our estimate in respect of depreciation. Earlier, we were taking residual value at 10%, which is now revised to 5%.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

That I understand.

Rachit Nagpal — Chief Financial Officer

What we’ve seen, the depreciation would be INR126 crore for this financial year, so it has a basket depreciation of about INR50 crore.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

Right. Okay, so you are saying, what will be the straight-line, like what will be the depreciation line-item going-forward in the coming few quarters?

Rachit Nagpal — Chief Financial Officer

INR25 crore approximately.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

INR125 crore for the whole year?

Rachit Nagpal — Chief Financial Officer

Yes, yes. For the nest year.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

So about INR33-odd crore per quarter, right?

Rachit Nagpal — Chief Financial Officer

Yes.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

Okay, understood. That’s my first question. Also my second question is on the cutlery that we were supposed to manufacture. I read that you’ve installed two of the machines, right already?

Rachit Nagpal — Chief Financial Officer

Yes, yes.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

So what is the guidance on that segment going-forward, are we going to install the rest of the six machines this year or next year?

Rachit Nagpal — Chief Financial Officer

Yeah, actually those two machines have been erected, but they are still under commissioning. Rest production rate that was to come hasn’t come so far.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

Right.

Rachit Nagpal — Chief Financial Officer

Once we are confident and that was the part of the deal that they give us 70% of the rated capacity minimum and we will immediately take delivery of the next machines. So once we achieve this efficiency of 70% within say, next 10 to 15 days, which we’ll come to know, then we will decide the future course.

And we are simultaneously trying to run two machines of Zume also lying with us, we are trying to source out some expertise, where we can run those machines also, yes.

Manan Poladia — MKB SECURITIES PRIVATE LIMITED — Analyst

Right, understood. Thank you, Rachit. I will return to the question queue. Thank you. Next question comes from the line of Vishal Prasad from VP Capital, please go-ahead.

Vishal Prasad — VP Capital — Analyst

Hi, good evening, sir. So the first question that I have is what benefit we get under Section 80 IA? What are the conditions we need to fulfill to get the benefit?

Mr. R. K. Bhandari — Joint Managing Director

So, 100% of the eligible profit which we earn from our core generation division, then which is power generation division, is eligible under this section. So for this year, currently, it is almost INR120 crore.

Vishal Prasad — VP Capital — Analyst

Yes, I understand. So what are the conditions that we need to fulfill, have government prescribed these are the conditions that companies need to fulfill to get the benefit?

Rachit Nagpal — Chief Financial Officer

Conditions like, we have maintain separate books of accounts. We have a separate — we have to separate our power generation from the paper division. So that is why we are reporting publicly that as well for this power generation. And the machinery should be the new machinery, so these are the conditions mentioned by [Indecipherable], which we are maintaining that.

Vishal Prasad — VP Capital — Analyst

Okay, why I asked this in West Coast, they used to get the benefit till 2020, however the assessing officer disallowed it two-three years back. So are we sure — I mean, we are eligible, because none of the other companies are getting this benefit and West Coast also was disallowed after getting the benefits of 20 years.

Mr. R. K. Bhandari — Joint Managing Director

So since 2018, we are getting this reduction and there is no disallowance in the past and we are hoping for the best, like you will agree that in the next few years also we have — we are doing it on the transfer sizing mechanism, which we are — which have taken the advice from big four and we are very hopeful that same will be allowed in the later years too.

Vishal Prasad — VP Capital — Analyst

Okay, and is there a sunset date for this facility?

Rachit Nagpal — Chief Financial Officer

Yes, we have started in 2018, so basically, there are two divisions. So for the first division, we have started taking it from 2018, so from 10 years from that. And for cogeneration two, we have started taking in 2021, so our sunset date would be 2031.

Vishal Prasad — VP Capital — Analyst

Okay, got it. So the next question that I have, sir, is what percent of our revenue has come from state boards this year?

Rachit Nagpal — Chief Financial Officer

Yes, it is approximately 40% to 45%. Okay, so if I look at-the-market and what we have told in the past extra five lakh ton market, and we have a very strong player there, but we still stick to 10%, 15% percent of it. So could you talk about why we we shy away from increasing our revenue from state boards?

Mr. R. K. Bhandari — Joint Managing Director

Yes, I am Bhandari this side. I would like to comment on that. Actually, we have three machines which have watermark paper making facility. So on those three machines, we make almost 1.35 lakh tons of paper every year. And since we have our own dealer network also, more than 80, 85 dealers, so we have fixed quota for them to lift which the lift as the year. So we have to maintain that balance of the year. So number one, because of the limit of the watermarking capacity on the this thing machine and number two, because we want to maintain our shares in open-market also. So that’s why we have kept it anywhere between 50,000 tons to 60,000 tons every year, but of course, looking to the market scenario, we can always increase or decrease it. That is not an issue.

Vishal Prasad — VP Capital — Analyst

Okay, so sir, when we bid for these state boards, do we see the larger, like JK or Century, are those — they are competition or if they are smaller players?

Mr. R. K. Bhandari — Joint Managing Director

Century paper mill, they do come in many tenders, JK, West Coast, all these players, they come into the cover segment, Ballarpur also, cover paper part of books, they normally quote for that segment. Since they do not have machines, where they have watermarks paper making facility, so that is one reason they are not able to quote, yes. And then they have their own network also, which may be good enough to lift whatever they producing. So either you can have that option or you can go in for this option. So that balance one has to see looking to one’s own consideration in the state industry, yes.

Vishal Prasad — VP Capital — Analyst

Okay and sir, of we look at JK and TNPL, they have very strong relationship with the farmers, which give them access to 25,000 acres and 40,000 acres of hardwood plantation, mostly these are farmers, they’re growing for JK and TNPL, this ensures that the supply of wood chips comes to them whenever they want. So are we as a company looking to build such relationships with the farmer, so that we have that trust based relationship and they supply to us mostly — mostly to us because we are increasing the capacity of our wood chips pulp plant and we would be needing a lot of wood chips?

Mr. R. K. Bhandari — Joint Managing Director

One factor is, like you know, Punjab, Punjab is a very rich agriculture area, the farmers are very rich and land holding is — are very good and land too is very fertile. So what they do here is, whatever Agro for ST we encourage, we encourage farmers — we — every year, during the season time, our — we have Operation Green with us and our raw-material — within the raw-material team, they distribute lakhs and lakhs of free saplings to the farmer, who are growing on the bonds of the — boundary of the state fields. So that is how whatever best we can do in our area, we are doing it and we are conscious that this is our social responsibility also, so whatever wood we use, we must plant that. So we try to maintain that balance somehow or the other. Yes.

Vishal Prasad — VP Capital — Analyst

Yes, one last question, sir. So JK has put up a small corrugated plant in Ludhiana, I mean previously, we used to mention that within 100 kilometers, there are no paper mills. Now JK is there and they have put up a small plant and I believe once they are comfortable with the plant, they are going to increase the capacity. So are we going to face challenges in terms of sourcing the raw materials sometime in the future?

Rachit Nagpal — Chief Financial Officer

They are only making boxes, they are not producing any paper in this region, number-one. So even today, our major sourcing, almost 30% is from local area, which is — which will remain good for supply for us only and the rest is from J&K, Shahpur area, Yamuna Nagar and then UP. So there, all the mills were in this field, they are all sourcing from this region. So, I think everybody is getting his share.

Operator

Thank you, Mr. Vishal, please follow-up for questions, follow the queue. Thank you. [Operator Instructions]

Next question comes from the line of Prashant Rishi from Cascade Capital, please go-ahead.

Prashant Rishi — Cascade Capital — Analyst

Sir, is the PM4 backward integration project, is it complete?

Rachit Nagpal — Chief Financial Officer

Wood pulping backward integration for PM4 is 50% already complete, earlier we could make 180 ton of wood pulp from our existing pulp mill, now we can go up to 250 ton. But looking to the falling prices of hardwood pulp in the international market. So may be we may or may not be using that capacity in the near future, in this year. We may be may be buying them using imported hardwood pulp to some extent could be more useful. So that — that is how the company is going to work in this financial year, but definitely, we can today day make 250 ton of hardwood pulp against our earlier capacity of 180 ton, so, which is good enough for PM4, yes.

Prashant Rishi — Cascade Capital — Analyst

Okay. Sir, next question, you said pulp — international hardwood pulp prices are falling. Can you give, can you share some numbers? And for paper prices also.

Rachit Nagpal — Chief Financial Officer

Yes, from $960 per ton, it has come down to anywhere between $500 to $550 per ton. And paper prices, you already know, International paper prices, they are anywhere in the range of $950 plus-minus depending on the quality.

Prashant Rishi — Cascade Capital — Analyst

Okay. Has paper prices have also come down, sir?

Rachit Nagpal — Chief Financial Officer

Yes, definitely they have come down. International paper prices have come down, but in India, so far, now paper prices due to strong demand in the indigenous market, they haven’t come down. Only last month, big mills, they already increased some price and even B-grade mills, they also increased some price but maybe one season is over within next one or two months, those mills who do not have the requisite orders, they may soften the prices to some extent, maybe that is a possibility, we cannot give guarantee.

Prashant Rishi — Cascade Capital — Analyst

Okay. Sir, what were the paper prices in international market earlier, when the pulp prices were $960 per ton?

Rachit Nagpal — Chief Financial Officer

Actually, at that time, from India itself, we were exporting at $1,200, $1,150, $1,200 to Middle-East and African countries and all these places, now from China and Asian countries, so it’s coming, anywhere between $950. So almost $200 reduction, you can say that.

Operator

Thank you. Mr. Rishi, we request that you return to the question queue for follow-up questions. Next question comes from the line of Harshit Jain from RAH Investments & Advisory LLP. Please go-ahead.

Harshit Jain — RAH Investments & Advisory LLP — Analyst

Yes, hi, first of all congratulations for a great set of numbers. My first question is regarding — since you mentioned that the paper prices internationally have been coming down. So are we able to sustain the current operating profit margin of around 26% for the current quarter and for the current financial year FY ’24?

Rachit Nagpal — Chief Financial Officer

Since we have — we have already through at least one month and we have orders in-hand for another one-and-a-half months with us, so this quarter should be good at least to sustain the margin in this range, number one. And number two, if the sale prices are coming down, the raw-material prices, they have also come down. And Chemical price, they have come down substantially, like caustic, which had gone up to even INR65,000 per ton, has come down to INR34,000 per ton. So all prices, they are coming to their older level. So whatever price reduction in the selling price may come, I think it will be offset by cost reduction of raw-material and chemical prices. So the margin on average basis as we did last year, 21% EBITDA near about. So we should be able to maintain maybe EBITDA in the first-quarter, since we have ordered in-hand of prior price realization, so we may have good EBITDA in the first, yes.

Harshit Jain — RAH Investments & Advisory LLP — Analyst

Yes, sorry, so for full-year, can we expect EBITDA percent of around 23%, if not 26%?

Rachit Nagpal — Chief Financial Officer

Yes, 21% plus-minus anywhere depending upon, so you know all — how many factors are there, fuel prices, we cannot predict that and raw-material prices, definitely, they are dumping at the moment, chemical prices are down. So it depends upon the international scenario, like this opportunity has some that hardwood pulp prices are very down. So people are switching over to hard wood use imported more, so that they can save by producing their own wood pulp, which is proving a little costly. Similarly waste paper prices, they have come down significantly, by almost 30% plus. So wood waste we have [Indecipherable] plant. So we are making all those permutation and combination to see that we are able to restrict our cost of raw-materials consumed to 40% plus-minus. Yes, which had at one point of time, gone up to 47%, when our EBITDA came down to almost 20%.

Harshit Jain — RAH Investments & Advisory LLP — Analyst

And my last question would be regarding our fuel and power cost, so any plans to further reduce it? Because previously, couple of quarters back, you mentioned that you would be going to buy stubble from farmers to run your boilers and plant. So any status on that?

Rachit Nagpal — Chief Financial Officer

Yes, already we have one boiler, 50% of the fuel is rice straw, which is only costing us less than INR2,500 per ton, even including — inclusive of insurance and storage and transportation cost, all inclusive. So against right husk fuel cost of almost INR7,000 to INR8,000 per ton. So we are going to start our second boiler by December or January next year. And once that boiler starts, then our 100% fuel would be rice straw. This year also, we have purchased 1.5 lakh ton of rice straw from the farmers and we are storing it and we are using that fuel only. And 50%, we are using rice husk.

So next year, almost 80% to 90% will be rice straw and 20 should be rice husk. So then, our costs will further go down substantially.

Harshit Jain — RAH Investments & Advisory LLP — Analyst

Okay. Okay. Thank you so much and all the very best for future.

Rachit Nagpal — Chief Financial Officer

Thank you.

Operator

Next question comes from the line of BR Nahar from Mili consultants. Please go-ahead.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

Yes, congratulations, Bhandari sir and full team for an excellent result. And I just wanted to know whether, in line with coal prices coming down, whether rice husk prices has also fallen? And if so, how much percentage-wise? Rice husk prices have definitely fallen, last three years, the peak price was almost INR11,000 per ton, rather in the last — sorry — yes, it was INR9,000 a ton. So this year, it has come down by almost INR2,000 a ton, 20%, 25%. We do not know how long this trend is likely to continue but since in Punjab, government is insisting that more-and-more mills they use rice straw, especially the new industry. And most of the mills are trying to switch onto that fuel. So, I think it should remain in this range only, INR7,000 to INR8,000. Okay. And about the wheat straw, also have the prices have come down compared to last year?

Rachit Nagpal — Chief Financial Officer

Yes, presently it is in the range [indecipherable] basis, it is almost INR6,000 a ton. While earlier, in the last year, throughout the year, it was on an average of INR10,000 a ton.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

Okay. So based on this price reduction in raw-material and fuel prices, basically, and keeping the selling price at same level, right, and also caustic soda has come down as you mentioned, sir. So [indecipherable] in this quarter should expand. Like other, almost close to 30%. Can we expect in this quarter, this kind of performance?

Rachit Nagpal — Chief Financial Officer

Yes, that’s what I said, this quarter should be good, looking to all these things as you rightly pointed out, and from next quarter onwards, it depends on the price of the paper, whether it remains stable or goes down, yes.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

My last question, sir, is about paper mill, old paper mill. The plan for increasing their speed and to increase the production of paper by minimum — just debottlenecking. So when we can see the increased production, sir?

Mr. R. K. Bhandari — Joint Managing Director

In this year, like on the new paper machine, we made almost 72,000 ton paper, which was almost 200 ton paper per day. This machine has, on average, GSM 60, a production capacity to make 300 tons, because we have been making lower GSM paper. So we made almost 200 tons, plus the downtime involved in handling the initial problems on the machine, so maybe we are able to get almost 20% more production on PM4 itself in the next financial year. So overall, our tonnage should be 8% to 10% higher quantity wise.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

So we can expect close to 240 tons, capacity wise?

Mr. R. K. Bhandari — Joint Managing Director

Last year we made 2,10,000 tons to 2,09,000. So next year it could be anywhere between 2,25,000 to 2,35,000, yes, in that range.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

Okay. Thank you, Bhandari sir. All the best.

Mr. R. K. Bhandari — Joint Managing Director

Thank you.

Operator

Thank you. Next question comes from the line of Govindlal Kilada, an Individual Investor. Please go-ahead.

Govindlal Kilada — Individual Investor — Analyst

Good evening, thanks for the opportunity. I got two questions. One on NEP demand, sir, new education policy, how incremental demand, how much you’re expecting this year and next two-three years?

Mr. R. K. Bhandari — Joint Managing Director

Actually, I have been talking on this even earlier. So they that there are almost 25 crores students still plus two in India. So if we say that their average bag load is anywhere round average of four to five kg, and we are able to [Indecipherable] is proposing to change curriculum part even 50% of the books, so we should see a tremendous increase in the demand, which could be almost equal to the consumption of writing and printing paper in India, which could happen over a period of, let’s say, one or two years. This is anywhere around 50 lakh to 60 lakh tons. And besides this, the help books, the guides, everything that gets published, along with the basic textbooks, so that demand should come additionally. So, I think next two to three-year seems very good for writing and printing paper. And our mill in writing, printing segment should not face major problem as far as the demand or the profits are concerned. So that is my perception of the market at the moment.

Govindlal Kilada — Individual Investor — Analyst

My second question is regarding this other expenses, they have gone up substantially quarter-on-quarter, INR122 crore to INR144 crore, so what was the main impact on that?

Rachit Nagpal — Chief Financial Officer

It is mainly because of the increase in the fuel cost itself. One was prorata increase in the fuel cost, that was one part, and increase in fuel cost itself per ton of paper led to increase of almost INR4,000 a ton, that was almost INR4 crore. So these two things, one prorata increase in production and vis-a-vis — and the cost of fuel consumed, total cost and second, increase in the price alone led to increase of INR84 crores, yes.

Govindlal Kilada — Individual Investor — Analyst

Actually coal prices have come down, now, sir, quarter-on-quarter?

Rachit Nagpal — Chief Financial Officer

We are not using any coal, since we are using only rice husk, so yes.

Govindlal Kilada — Individual Investor — Analyst

Follow this almost [indecipherable] almost it is a very huge. So you are not seeing converters who import pulp out of India, who make paper out of this pulp buying from outside, doesn’t [indecipherable] captive. So, their cost of production will go substantially down. So you are not seeing that will impact domestic paper prices, sir?

Rachit Nagpal — Chief Financial Officer

You see, the ups and downs in the paper prices they may remain there, like in any commodity otherwise also, but the main thing is that we are able to maintain our margins or not? Definitely if there is an opportunity, whereby we can use imported hardwood pulp or imported wood of good-quality and reduce our overall cost of raw-material and chemical consumed, so everybody uses it to reduce one cost of production only. So that is how we work all-the-time. We have to be as dynamic as the market is. So maybe price is reduced, then you are buying raw-material at a cheaper cost. So, your margins will remain more or less the same despite all those factors.

Govindlal Kilada — Individual Investor — Analyst

No, there are two separate things, sir; one is because of input costs going down, margins will come down. Absolute I want to understand, paper prices, how much from current almost INR1,990 plus the India domestic market. How they can come to? That is the thing I want to understand.

Rachit Nagpal — Chief Financial Officer

Yes, it could come down anywhere between 8% to 10%.

Govindlal Kilada — Individual Investor — Analyst

From current prices?

Rachit Nagpal — Chief Financial Officer

Yes.

Govindlal Kilada — Individual Investor — Analyst

That is for the whole year we should take or it is for half season only?

Rachit Nagpal — Chief Financial Officer

Rest of the period that is likely to come in. I am saying vis-a-vis the import prices. So far, in India, as I said earlier, the import prices, they were never a consideration. They were was not a factor in the domestic prices so far, because all mills were heavily booked. They were not able to make that delivery. So even despite cheaper imports, which remain on the same level, which is what was happening earlier. Due to whatever reason so nobody reduced prices. That did not have any impact on the indigenous paper prices. So, but presuming that in the long-run, that effect may come with the downsizing of the indigenous demand, if it happens, then prices to the most, as we do our calculation, that even if they come down to 80, what kind of margins we will be having on that looking to our present costing theme. So we take, even if it is at 80, 8% to 10% down, we still are able to maintain our margins of 21% plus minus of EBITDA. So that is how we see that. So you can never say that the price —

Govindlal Kilada — Individual Investor — Analyst

So to sum-up, last quarter we had 26% margin, if the paper prices have come down even INR8, INR9 also, some INR3, INR4 cost benefit will get, some 4%, 5% margin effect may come. That is there, no?

Rachit Nagpal — Chief Financial Officer

Yes.

Govindlal Kilada — Individual Investor — Analyst

Last one thing, anything idea on wood prices — wood chip prices, they have come down or gone up, sir?

Rachit Nagpal — Chief Financial Officer

Wood chip prices are now coming down because people are shifting to hardwood pulp. So my thoughts of if I hardwood pulp at $500, so my cost of imported hardwood pulp is cheaper than my indigenous hardwood pulping prices inside the mill. So, this may affect in the long-run on the local wood chip prices.

Operator

Thank you. Mr. Govindlal, we request that you return to the question queue for follow-up questions. Next question comes from the line of Gurvinder Juneja from Fortuna Investment Advisors. Please go-ahead.

Gurvinder Singh Juneja — Fortuna Investment Advisors LLP — Analyst

Yes, good afternoon, sir. Thank you for taking my question. My question is about — sir, this year you have managed to utilize the new capacity. And covered all the initial problems that may have come in expanding and producing efficiently, what is the outlook you have on further addition of — to the capacity in the next year and the year beyond?

Mr. R. K. Bhandari — Joint Managing Director

Yes I earlier said also, like this year we made almost 72,000 tons on the new machine. So next year we could have a digital tonnage of 15,000 to 20,000 ton on this machine, which would happen — which should happen in this year only. So which should our production to anywhere between 2,25,000 to 2,30,000 tons in this financial year.

Secondly, we are proposing to increase that speed, existing speed of PM3, which was running earlier –which is presently running at 650 meter. So, we proposed to take it to anywhere ’round 800 to 850 meter per minute speed. So but that project will happen in the financial year ’24-’25. So then it will increase the production of that machine by another 30 ton per day, which could be another — almost 15,000 ton every year. So that is the future overall prospect. So 15.000 to 20,000 ton plus in this year and another 15,000 ton in the next year. So that is the plan for next two years. Two to three years.

Gurvinder Singh Juneja — Fortuna Investment Advisors LLP — Analyst

Okay. Thank you very much.

Mr. R. K. Bhandari — Joint Managing Director

Yes Thank you. Next question comes from the line of Anil Kumar Sharma, an Individual Investor. Please go-ahead.

Anil Kumar Sharma — Individual Investor — Analyst

Good afternoon, sir. Congrats on the great numbers. Sir, my question is, in this year, we have almost INR400 crore of cash profit, which is a great number. But we have paid only — in percentile terms, it is 40%, but we have given only INR4 crore dividend. And that is very hampering our stock prices. If you see, vis-a-vis your competitors, you know well, they have paid although smaller earning they have paid [Indecipherable] higher dividend. So, that is — that is the problem our stock price is not in consummate[phonetic]. So, what is the policy on that? Can we give some color on that? It is too less. I think that INR400 crore cash profit and INR4 crore dividend is very on lower side.

Rachit Nagpal — Chief Financial Officer

Yes, definitely, we can forwards your feelings to the Board, and we’ll try to put it forward very-very strongly. So that every shareholder is benefited. So the competitor announcing 300% dividend, everybody has his own strategies, so we cannot comment on that, but definitely, as you said, we can take your request to — your perception to the Board. Yes.

Anil Kumar Sharma — Individual Investor — Analyst

Thank you, sir.

Rachit Nagpal — Chief Financial Officer

Welcome.

Operator

Thank you. Next question comes from the line of Utsav Anand, an Individual Investor. Please go-ahead.

Utsav Anand — Individual Investor — Analyst

Good afternoon, sir. Congratulations on great set of numbers. I would like to know regarding the employee expense that’s gone up from INR23 crores to INR30 crores.

Rachit Nagpal — Chief Financial Officer

Yes, yes.

Utsav Anand — Individual Investor — Analyst

Hello.

Rachit Nagpal — Chief Financial Officer

Hello.

Utsav Anand — Individual Investor — Analyst

I’m audible?

Rachit Nagpal — Chief Financial Officer

Yes. Yes.

Utsav Anand — Individual Investor — Analyst

I like to know regarding the employee benefit expense, right. Cost has gone up from INR23 crores ti INR30 crores. And I would now like any particular reason for that?

Rachit Nagpal — Chief Financial Officer

Actually, you look at the specific numbers, so, then the total cost is insignificant. Even if earlier it was anywhere in the range of — it was — last year, it was INR4,227 per ton of paper. And this year it has gone up to INR4,366 only. So one number — one reason is that when we had the new machine, we employed almost 500 more people.

Utsav Anand — Individual Investor — Analyst

Okay.

Rachit Nagpal — Chief Financial Officer

So that was one reason. But if you look at the past patter, our increase is even less than 5%, which is very-very nominal.

Utsav Anand — Individual Investor — Analyst

Okay, like, just wanted to confirm there is no increase in the renumeration for Directors or the CEO, right? Or that has been done? Yes, just wanted to confirm, the increase in the Directors’ remuneration, that is already in the public domain. So, otherwise, the total cost, if you look at the figure per ton basis, so it is hardly more by 4%, 5%. Like, I just wanted to confirm the Director remuneration is same for both people, last quarter, right? It has not gone up?

Rachit Nagpal — Chief Financial Officer

Yes, yes. There is no — this is — this only relates to the normal increments of the employees.

Utsav Anand — Individual Investor — Analyst

Okay, just wanted to confirm on that. And then the export orders, like how do we see the growth coming there?

Rachit Nagpal — Chief Financial Officer

Sorry?

Mr. R. K. Bhandari — Joint Managing Director

Pardon?

Utsav Anand — Individual Investor — Analyst

Export orders. How do we see the growth coming there — over there?

Rachit Nagpal — Chief Financial Officer

Actually export at the moment, is not very competitive. As I said earlier, the paper from China is coming at a price of $950 to $980 anywhere on the world. So we are definitely doing a Board meeting demand of our customer who are attached with us, but that will remain within the range of 4% to 5% only and so that it meets whatever export requirements we have to fulfill our obligation. So we are not focusing much on exports. So out of our total tonnage, 5% we may do export this year.

Utsav Anand — Individual Investor — Analyst

Okay and just last question regarding finance costs. Like do we see this coming down this year? Was it INR9 crore, approximately INR10 crore?

Rachit Nagpal — Chief Financial Officer

I’m sorry, could you please repeat your question?

Utsav Anand — Individual Investor — Analyst

I just wanted to ask regarding the finance cost, right, the finance cost is around INR10 crores, with the profit margins steady, right? Do we see that cost coming down?

Rachit Nagpal — Chief Financial Officer

Yes, it came down definitely. We are in the mode of repayment. As already I — have paid INR35 crores and in the month of April. So, so we are reducing our debt if we came down in the coming years. Now you will get $35 crore in February, right? And the amount you’ll be paying that will bring this quarter as on plans right now. So we have already paid INR35 crores in this quarter, INR26 crore and 2INR7 crores, almost we have paid in April and eight crores. And yesterday, only. So we have a target of around prepayment of INR50 crore that is in addition to the normal repayments. So definitely, — so with this, the finance costs will reduce.

Utsav Anand — Individual Investor — Analyst

Thank you so much. Congratulations on a get set of numbers.

Rachit Nagpal — Chief Financial Officer

Thank you.

Operator

Thank you. Next question comes from the line of Vishal Prasad from VP Capital, please go-ahead.

Vishal Prasad — VP Capital — Analyst

Hi, I have a few more questions, so, for 300 ton wood pulp plant, what would be the annual wood chips requirement?

Mr. R. K. Bhandari — Joint Managing Director

So for 300 ton plant, the requirement will be almost 1,200, 1,000 ton of wood chips.

Vishal Prasad — VP Capital — Analyst

Per day?

Mr. R. K. Bhandari — Joint Managing Director

Yes, because that contains almost 50% moisture.

Vishal Prasad — VP Capital — Analyst

Okay.

Mr. R. K. Bhandari — Joint Managing Director

So, 600 tons is the over-dry weight, and if the yield is anywhere in the range of 47% to 48%, 50%, so the pulp should be around 300 ton. This we don’t buy only wood, we buy bamboo also, which is anywhere in the range of 200 to 250 ton per day. And then we buy veneer waste, which is again in the range of 300 to 500 ton. And the rest of the material, we buy wood, fresh wood eucalyptus or poplar.

Vishal Prasad — VP Capital — Analyst

Okay, okay. For the capex that we have done, I mean we are going to get HGST exemption for a few years, in one of the calls in 2020, you mentioned that getting the refund from the government is really tough. Bhandari sir, why did we say that?

Mr. R. K. Bhandari — Joint Managing Director

Pardon.

Vishal Prasad — VP Capital — Analyst

For the capex that we have done, we are going to get HGST exemption. That would be applicable for many years. So in 2020 — one of the calls in 2020, we mentioned that getting the refund from the government would be a bit difficult, the exemption from the government in HGST, so. I was wondering why did we –?

Mr. R. K. Bhandari — Joint Managing Director

Yes, I think Rachit can better explain, because the first project was started in the year — Rachit, do you have the —

Rachit Nagpal — Chief Financial Officer

Sir, I don’t have the numbers right now, so. I think I can answer this separately.

Mr. R. K. Bhandari — Joint Managing Director

Yes, actually what happened is that we had almost three projects, which we did in the past 7-8 years. And the first project, which we did in — I don’t remember that exact date at the moment, but still the benefit the GST certificate that you have to get from the government, even getting that is a hell of a bearance. So we did meet the top authorities in that state. We had a meeting with the CM also. He said he did give direction down line. So that was the reason that I said that normally whatever we do, we do based on our individual business viability, commercial viability of the business itself. And whatever subsidy or benefit that we get from the government, that we take as a windfall. So that is what I meant in that. That doesn’t mean that we are leaving that unpursued, so we are strongly pursuing that also, there is a separate team — on one of the projects is given to [Indecipherable] only this year, this new project of INR500 crore given to [Indecipherable]. So that there has been maybe some problem, some shortcoming in our pursuing, so they could do a little better. So we are trying our best, yes.

Vishal Prasad — VP Capital — Analyst

Sir, we are we haven’t got anything from the government till now?

Mr. R. K. Bhandari — Joint Managing Director

Yes, not, not as yet.

Vishal Prasad — VP Capital — Analyst

Okay and sir. We have a CWIP of INR137 crore, so what is this for?

Rachit Nagpal — Chief Financial Officer

So it is broadly, one project is PM. So we wood-pulp modification project, plywood capacity addition is there. It is of INR80 crore and we have made payment to to the ITC boiler, like we are enhancing the capacity of the boiler, we have purchased second-hand boiler from ITC. So we have made some payments of around INR20 crore, so majorly it contributes — these two items’ contributing.

Vishal Prasad — VP Capital — Analyst

Rice straw boilers?

Rachit Nagpal — Chief Financial Officer

Yes, yes, rice straw boilers is also under progress, so almost INR25 crore to INR27 crore we have made expenditure on that. So these three projects contribute to CWIP item.

Vishal Prasad — VP Capital — Analyst

Okay, Rachit, how much is the maintenance capex yearly?

Rachit Nagpal — Chief Financial Officer

So, it is almost INR20 crore to INR25 crore.

Vishal Prasad — VP Capital — Analyst

Okay. And Bhandari, sir, one request I have as a shareholder. I mean, we have been very open with our communication in the past few years. But we do our AGM on the last the of the year, 30th of September. So, can we please try to do it a bit earlier so that we as a shareholder can attend it, because there’s lot of conflict on the last day. A lot of companies doing the AGM and we have been communicating pretty well. So if you guys can think about it, it will be helpful.

Mr. R. K. Bhandari — Joint Managing Director

Yes, yes. We have noted down and we’ll see what best we can do about it. So, as I have got the data now, the first project was completed for INR131 crore in 2016, and second project was completed for INR120 crore in 2021, and third, the present one was completed in — on February 2022. So far, the project in completed in 2016. So still we haven’t got anything, though paper work from our side is 100% complete. So that is why I made that statement. I hope I am able to make myself clear?

Vishal Prasad — VP Capital — Analyst

Yes, sure, sir. And sir, if we can do the AGM and physical AGM this year that will also be helpful. We would like to travel and come and meet you guys.

Mr. R. K. Bhandari — Joint Managing Director

Rachit and myself, we both have noted this and we’ll put it further to the managers.

Vishal Prasad — VP Capital — Analyst

And one last comment on dividend, sir. So we have been prepaying the loans and we have been doing pretty good work in terms of backward integration. So I would like to see my company investing and trying to do better rather than giving the money back to me, that I would like to do, but I — I think you guys are doing pretty good. Thank you so much.

Mr. R. K. Bhandari — Joint Managing Director

Okay. Thank you.

Rachit Nagpal — Chief Financial Officer

Thank you.

Operator

Thank you. We’ll take the last question that is from the line of B. R. Nahar from Mili Consultants. Please go-ahead.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

Yes, Bhandari, sir, just one question again. This year, this quarter, here we have increased the depreciation by changing the deficits and policy, and have taken [Indecipherable] credit opex quite substantial. So are we going through now this new 25% slab next year? Is this actually correct? Or something like that or –?

Rachit Nagpal — Chief Financial Officer

Yes, sir, which slab of 45% you’re talking about?

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

Yes.

Rachit Nagpal — Chief Financial Officer

Sorry. Tax-rate of 45%, I didn’t get your question, actually.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

No, my question is that, this quarter you have debited. You have changed the depreciation policy.

Rachit Nagpal — Chief Financial Officer

Right.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

And consequently, the depreciation charge has gone up substantially. And you have also taken credit of about INR32 crores or something like that from deferred credit.

Rachit Nagpal — Chief Financial Officer

Yes, yes, yes.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

So now, two questions, because in other, still the deferred furniture account is still — yor have some balance and second is, are we going ahead on the group taxation policy of 45%?

Rachit Nagpal — Chief Financial Officer

No, no. Depreciation is only a one-time adjustment that has been done. We have changed the residual value from 10% to 5%, taking the technical advice and recommendations from the experts. So, so for that reason only the deferred tax assets has been created. So, consequently, so in the next year, the same will be adjusted towards coming [Indecipherable]in the next years. So that is only the one-time adjustment we have made.

Mr. R. K. Bhandari — Joint Managing Director

Mr. Nahar, I think what you are asking is, we are — we remain below MAT because of the 80IA benefit. We pay MAT every year. So our — since the 80IA exemption is there, so our tax, actual under income tax law doesn’t — it doesn’t increase than the MAT itself. So we are more or less, we shall remain that bracket only.

Bachh Raj Nahar — Mili Consultants And Investment Pvt Ltd. — Analyst

Okay, got it. Okay sir, thank you. Thank you very much.

Operator

Thank you. ladies and gentlemen, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Rachit Nagpal — Chief Financial Officer

Yes, thank you. Thank you, everybody, and we showed you, we’ll be doing our best in the future also. And whatever impressions that we are carrying from our shareholders and investors, we’ll carry it forward and see what best we can do for all the stakeholders. Thank you. Thank you for you interest once again. Bye, bye.

Operator

[Operator Closing Remarks]