UFLEX Limited (UFLEX) Q1 FY23 Earnings Concall Transcript

UFLEX Limited  (NSE:UFLEX) Q1 FY23 Earnings Concall dated Aug. 16, 2022

Corporate Participants:

Rajesh Bhatia — Group Chief Financial Officer

Anantshree Chaturvedi — Vice Chairman and Chief Executive Officer, Flex Films International

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Analysts:

Sanjesh Jain — Analyst

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Zain Banihali — Odyssey Capital Management — Analyst

Yash Dantewadia — Dante Equity — Analyst

Shivam Saxena — ICICI Bank Ltd. — Analyst

Rushabh Shah — Anubhuti Advisors LLP — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the UFlex Limited Q1 FY ’23 Earnings Conference Call Hosted by ICICI Securities. [Operator Instructions]

I now hand over the conference over to Mr. Sanjesh Jain. Thank you and over to you, sir.

Sanjesh Jain — Analyst

Thank you, Seema. Good afternoon, everyone, and on behalf of ICICI Securities Limited, I would like to thank you all for taking the time to join us on UFlex Limited Q1 Results Conference Call. From the company leadership team, we have with us Mr. Rajesh Bhatia, Group CFO, UFlex Limited; Mr. Anantshree Chaturvedi, Vice Chairman and CEO Flex Films International; Mr. Apoorvshree Chaturvedi, Director EU Operations and Sustainability; and Mr. Vinu Saini, Vice President, Corporate Finance, M&A, Investor Relationship. We will have the opening remarks done by the management, post which we will have a Q&A session.

I would like to hand over the proceedings to Mr. Rajesh Bhatia for his opening remarks. Thank you and over to you, sir.

Rajesh Bhatia — Group Chief Financial Officer

A very warm good afternoon to all on the call. Ladies and gentlemen, my name is Rajesh Bhatia, and I am going to be presenting you the results for the Q1 ending 30th June 2022. So for the quarter, it has been a reasonably good quarter. Our top line grew on a year-on-year basis by 46.5% to a little over INR4,000 crores which was backed by 15.7% volume growth on a year-to-year basis. And we had — EBITDA was up by about 44.3% to INR725 crores on a year-on-year basis. And on a Q-on-Q basis, it is up by 4.1% and PAT is again up by close to about 42% to INR375 crores. This is the highest ever PAT by UFlex in any quarter so far, and on a Q-on-Q basis also this is up by 6.9%.

The notable contributions, achievements in quarter was now the first is the Aseptic packaging business where we achieved about 91% capacity utilization, considering the expanded capacity of 7 billion packs, and we had almost 123% volume growth in Aseptic packaging business on a year-on-year basis and even on a quarter-to-quarter basis we had 61% volume growth in this quarter over the March quarter. So that business has done phenomenally well, and enhanced capacity utilization, which was commissioned in April, came very handy for this season. And to the best of our ability we could achieve a very high level of the capacity utilization, and we could have done a bit better, but initial teething troubles, when you set up new things, are always there, but we have been able to overcome those subsequently. And the endeavor is to bottleneck the plant and the purpose is, can you — with the same facility instead that use instead of the rated capacity of 7 billion packs, can you [Indecipherable] to 9 billion packs. Our endeavor is do that, so let’s see the next season as to how do we perform on that front.

The other notable achievement during this period is we’ve achieved 71%-plus capacity utilization at our Nigeria facility. And while we commissioned that in Q2 FY ’22, for the first two quarters we had some logistics and other issues there, but happy to say that now we are ramping up our production and the sale from that particular business and the idea is to again take it to much higher capacity utilization towards what it is expected achieving in some of the other businesses. So overall, the quarter has been decent, and we are now looking at the commissioning of our CPP facilities in Dubai and India, and our BOPET facility in India later which will give us additional revenues as well as profitability. Generally, a good quarter from overall perspective. Thank you.

Questions and Answers:

Operator

Sir, should we begin with the Q&A session?

Rajesh Bhatia — Group Chief Financial Officer

Sure, let’s start.

Operator

All right, sir. [Operator Instructions] We take the first question from the line of Mr. Subham Agarwal from Aequitas. Please go ahead, sir.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Thank you for the opportunity. And, first of all, congratulations to the entire team. Sir, my first question is related to the Aseptic packaging division. Sir, I wanted to know with the commissioning of new line, what would be our current market capacity. And going forward, what is the reasonable growth trajectory that we are looking for this division, given that you have mentioned that will expand our capacity to probably 9 billion packs over the next one year?

So the current rated capacity is 7 billion packs a year now we are seeing expansion, we not looking at any fresh investment, per se. But we are looking to debottleneck the existing facility to see if we can still optimize the production from the same plant between 8 billion to 9 billion packs a year. Sir, what would be our current market share in this division with this commissioned?

Rajesh Bhatia — Group Chief Financial Officer

I think we will have close to anywhere between 22% to 25% market share.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

And what is the reasonable sustainable growth that we can achieve in this division, sir?

Rajesh Bhatia — Group Chief Financial Officer

This business, as I understand, the growth is about 18% to 20% at an industry level, so there is no reason that why we should not be able to achieve that growth.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Got it. And sir, with the new capacity at 7 billion packs, what is the total turnover that we can do and what is the sustainable margin that currently we are doing in this business?

Rajesh Bhatia — Group Chief Financial Officer

I think we can do on top line of anywhere between INR1,200 crores to INR1,400 crores at 7 billion packs output from the pack size and all that, so that’s why I’m giving a range. And the margins could be about 20% and above.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

20% EBITDA level.

Rajesh Bhatia — Group Chief Financial Officer

EBITDA level.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. Thank you. Fair enough. Sir, my second question is related to our BOPET division. So last quarter, we have seen, in India especially, the BOPET margins have started declining. So I wanted to know what is the global trend because we have capacities around the world. So Q-on-Q, from Q2 onwards, how do you see the spread moving?

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Mr. Bhatia, I can answer that, if it’s okay.

Rajesh Bhatia — Group Chief Financial Officer

Okay.

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Hello.

Rajesh Bhatia — Group Chief Financial Officer

Yes.

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Yeah, am I audible?

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Yes, you are, sir.

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Okay. So in terms of the pricing posture of the Indian market related to the BOPET product versus the global markets, the global market prices obviously in a very different direction compared to Indian prices, especially on a gross margin posture. And so far, right now, the summer season has been of a normal nature of demand, but we’re expecting a demand recovery in the European market and a demand recovery in the Middle Eastern and North African and African markets for the last quarter of year, for the balance remaining months. So I think from a gross margin side what you’ve been tracking and correlating in terms of India gross margin, that is not going to have an extremely strong spillover onto the global markets.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. Sir, but globally also we are expecting a lot of lines to come up. So do you feel that the demand would be adequate to meet the additional supply?

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

If you look from the supply side, the net capacity additions for the BOPET extruded factory portfolio is coming in India and China. The rest of the world the net capacity addition is very, very limited and almost negligible if you look at the size of the markets. So I think companies in positions like ours where we have a complete understanding and representing Indian markets along with the global market leaders, I think we’ll be able to manage the trade winds that developed out of the net capacity addition. And globally the picture that’s come out of the pandemic of companies needing reliable suppliers close at hand. That story is continuing to carry weight in the market’s mind. And customers — we feel if we do a good job with our assets, customers will be sensitive to the value addition of that approach.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. Fair enough, sir. Sir, I will come back in the queue. Thank you for answering my questions.

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Okay.

Operator

Thank you, very much. We take the next question from the line of Chirag Singhal from First Water Capital. Please go ahead, sir.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Yeah. Thanks for the opportunity. Just to continue to the previous participant’s question on the Asepto business. So if we look at the next two to three years or let’s say even further four to five years down the line, what target we have in our mind from the current 7 billion packs? Just to get a broad picture on where we’re headed in the Asepto business?

Rajesh Bhatia — Group Chief Financial Officer

I already answered that. If you say from a turnover point of view, I think the current capacity can lead us to INR1,200 crores to INR1,400 crores annualized revenue and the EBITDA margin guidance also I gave. Is there anything else you want to ask or same thing?

Chirag Singhal — First Water Capital Advisors LLP — Analyst

No, no, so that I understood. So we are anyways running at 91% capacity utilization for the entire 7 billion packs and I also understood that with debottlenecking we’ll have 1 billion to 2 billion packs by next year or so. But beyond that, by adding new lines, do you have any target that we can work with that this is a target for the next three to five years in the Aseptic sector business from, let’s say, 8 billion to 9 billion packs that we can achieve from the existing setup?

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

So I think we will be a position to give you a more clear picture on the capacity additions for the Aseptic by the end of the next quarter. I think right now considering what Mr. Bhatia has shared that with the debottlenecking, you’re getting about 20% more on the pro rata capacity that you have today. And I think even if you assume the growth levels in the market of at least 15% to 20%, I think there’s enough room to balance our existing onshore India capacity with that growth trajectory and then make a better decision down the line.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Sure. Okay, sir. My next question is on the, was there any one-off expenses in the P&L because of currency depreciation in Russia for Q1?

Rajesh Bhatia — Group Chief Financial Officer

Because of the currency appreciation in Russia, our loan book swelled by about INR163 crores. So the profitability impact is also there in Russia this quarter because the currency fluctuated. It went from INR0.75 to INR1.25. INR1.25 it came down to INR0.55. So there were impacts on the P&L in the normal course of the business as in the way we conduct our business, the way we collect our receivables, our benchmark to certain exchange rate, and our payables benchmark to certain exchange rate. Yes, we had some underperformance there because of this fluctuation.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Okay, sir. Could you please quantify the impact on the P&L during the quarter as in what was one-off component during the quarter in P&L?

Rajesh Bhatia — Group Chief Financial Officer

We will not be able to share that.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Okay, all right. Okay. Sir, just on the recycling part, so we have been talking about lot of expansions that we’ve been doing in various different streams in the overall recycling. Just wanted to understand from a broad picture that what total capex that you’ve already spent in the recycling, what is the current capacity, the payback period. And also just wanted to understand when we look at, let’s say, a business like aluminum wherein the recycled aluminum is generally purchased at a discount to the LME aluminum and hence giving a benefit to the aluminum producers. Is there some similar advantage that we also get when we use rPET instead of virgin PET and the cost of production goes down and eventually a sustainable profit per kg can be achieved over a period of time?

Rajesh Bhatia — Group Chief Financial Officer

Can I request Mr. Anantshree Chaturvedi to address that.

Anantshree Chaturvedi — Vice Chairman and Chief Executive Officer, Flex Films International

Sure. But, Mr. Bhatia, I think you can give the capex numbers and the payback numbers. I’d be happy to address the pricing and the payback cycle.

Rajesh Bhatia — Group Chief Financial Officer

I think, Anantshree, if you can just give the business perspective, I’ll add those inputs in the end.

Input. Sure, sure. Absolutely. So from a perspective of an input-output ratio, when we add in any kind of recycled resin from our facilities, it’s not exactly the same as what you are describing that the aluminum manufacturers do because for us cost of sourcing, cost of cleaning can vary from geography to geography. However, today the advantage that we all have as an industry is that rPET materials sold at a premium as compared to virgin material. So it’s really today — if we look at the market today, it’s that premium that rPET is sold at that makes up for basically these additional ancillary transition costs to rPET. But once you hit a certain quantity and that quantity is really being defined by the industry, because that industry standard has not really been defined as of now, then you will start seeing some of these benefits that you are seeing that the aluminum makers get at scale. But until that point, it’s really the premium that you get in the rPET market which also varies by geography by geography, but it is a consistent premium in any geography that you are selling in that then allows a better payback period for this material.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Right, okay. So when we talk about premium, sir, could you also help me with the sales volume that we do for 90% or 100% of rPET films as a percentage to the total sales volume, just to understand that what kind of scale we have achieved and what prospects do we have over the next five to six years?

Anantshree Chaturvedi — Vice Chairman and Chief Executive Officer, Flex Films International

We can get you back those numbers. I wouldn’t have those numbers off the top of my head for every geography.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Sure, sir. No problem. Thanks. One more question…

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Just to give you a supplementary insight that you can carry back into your industry is that right now the adoption of the rPET film product is heterogeneous globally, so certain markets are leading in terms of customer demand, whether it’s shaped by the customers or directly by their end customer, and in other markets either because of a lack of regulation or because of a lack of marketing on behalf of the end customers, the demand for 100% rPET polyester film has still not crystallized to a point where we should start, let’s say, exposing more of our film capacities to that product. So I think it will happen over time, and that is one of the reasons why the formalization of the aluminum model is not applying one to one onto the question that you are asking.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Right. Okay. Understood, sir. And Mr. Bhatia, could you help me with the numbers on the capex and payback period?

Rajesh Bhatia — Group Chief Financial Officer

So a typical plant, depending on the location and the cost of civil work at that location, will cost between $10 million to $12 million of an investment here in the PCR. And the payback should ideally be between, say, about four to five years.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Okay, all right. Sir, one last question and then maybe I can join back in the queue. This is on the specialty sales volumes. If we look at the peer set, most of the companies are giving a breakup of how they are — what is the total component of the specialty sales volume as a percentage to the total sales volume at the moment and what are their ambitions over the next two to three years. Now the reason why they are giving and maybe putting it in front of the investors is what they are trying to imply is there is a sustainable EBITDA per kg or let’s say sustainable profit margins in specialty sales vis-a-vis the commodity sales volumes. So just wanted to understand where do we stand currently in terms of our specialty sales volume as a percentage to the total sales volume. And is it fair to assume that there is a sustainable profit per kg? Because we are in a cyclical industry and the spreads clearly are totally volatile in terms of the demand and supply. So if we are able to ramp up our specialty sales volume portfolio, maybe we can have some sort of a sustainable profit per kg going forward. Sir, this is the assumption that I’m working with, but just wanted to know your perspective where do we stand in terms of the specialty sales volume at the moment and whether it is fair to assume that the profits are sustainable in specialty sales.

Anantshree Chaturvedi — Vice Chairman and Chief Executive Officer, Flex Films International

Can I ask you a question? When you talk about sustainability terms, from your definition and your benchmark, how are you qualifying those films as sustainable — as specialty films? Are those specialty films based on whatever the company you are talking to is telling you is specialty or is that you have a benchmark that defines those films?

Chirag Singhal — First Water Capital Advisors LLP — Analyst

No, sir. So I do not have a benchmark personally, but whatever I have heard, I can put it in front of you. So basically, what the companies are stating is that specialties are no longer considered to be just metallized and coated films. It depends on the applications the films are used into which are much more specialized than a simple metalized or a coated film. So what we have known from the presentations is the capacity that we have for the metalized and coating films. But obviously, with whatever we have heard from different companies is that specialty is much more than that. It’s not just restricted to the metalized and coated films. So, yeah, personally I don’t have any benchmark, but this is what fair understanding I have? I’m sorry to spill this on you, but that’s exactly the problem, right. The problem is our internal benchmarks, so what we define specialty is very, very different from what the industry defines as specialty, and that’s the reason why we don’t reveal these numbers because a lot of times what’s being called as specialty is not necessarily specialty. So I’ll tell you, our internal benchmark for specialty is based purely on volume and margin. Those are the two things that we look at when we see internal specialty films. Mr. Bhatia can give you more details at a later time, but that’s the reason why it’s futile to discuss specialty films because there is no benchmark, right. What you are calling and what the industry might be calling a specialty film might not be a specialty film as defined by the industry — in actual reality, but it’s being touted as specialty film because it sounds nice on the presentation or it sounds nice on news headline, and that’s where difference comes in. So UFlex’s definition of specialty is far higher standard than I would say the general industry definition, and that’s why — and a lot of it is linked to our IP, and that’s why we don’t go into the same details because we’re not looking — we’re looking for these products to find a home, not necessarily these products to boost other things. Sure, sir, So when you say that you have some internal thresholds, could you put some numbers to it that a constant INR15 to INR20 higher than the commodity spreads or INR30 to INR40, as in what is the internal threshold that you have to distinguish specialty sales from our community we can elaborate on that later but that the it’s an internal threshold so I think I’ll let this party elaborate on that later yeah okay all right to give you a lot of guidance to give you a rough guidance as a benchmark there should be at least a 15% expansion in gross margin on specialty sales from [Indecipherable]?

Anantshree Chaturvedi — Vice Chairman and Chief Executive Officer, Flex Films International

We can elaborate on that later, but it’s an internal threshold. Something I’ll let Mr. Bhatia will elaborate on that later.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Okay, all right, sir.

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

To give you a rough guidance, as a benchmark, there should be at least a 15% expansion in gross margin on specialty sales, on gross margins. So obviously, that keeps — there are different companies produce these products differently. You will respect the fact that many companies have different kinds of lines, different kinds of downstream equipment, all of which are important because to produce a specialty film, you still need access to the base commodity product because you still need the base chemistry and the base geology [Phonetic] of a polymer product on which you can add value and whether I will sell it to the end customer. So at a minimum you can say there should be at least a 15% expansion in gross margin on account of specialties. That will be at least a minimum threshold for us for it to be economically attractive to us.

Chirag Singhal — First Water Capital Advisors LLP — Analyst

Okay. Right, sir. That was quite a elaborative and thanks a lot for all the answers. And I hope that the promoters participate in the concalls going ahead as well. I’ll join back in the queue in case of any further questions. Thanks a lot.

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Thank you.

Operator

Thank you very much, sir. We take the next question from the line of Mr. Zain Banihali from Odyssey Capital Management. Please go ahead, sir.

Zain Banihali — Odyssey Capital Management — Analyst

Thank you. Congratulations on good set of numbers, sir. Most of my questions, almost all of them have been answered. So I just want to ask, could you give some update on raw material prices, are they going down?

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Sorry, what? You are not audible. Can you please repeat your question?

Zain Banihali — Odyssey Capital Management — Analyst

Can you hear me now?

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Yes, it’s better now.

Zain Banihali — Odyssey Capital Management — Analyst

Yeah. I’m saying are the raw material prices going down?

Rajesh Bhatia — Group Chief Financial Officer

In 4th to 15th July to 15th August, we have some softening of the raw material prices.

Zain Banihali — Odyssey Capital Management — Analyst

Okay. And my second question is there was some issue with the J&K government that you discussed in the last or last to last concall. So could you throw some light on that? Has that been solved, some [Indecipherable] problems?

Rajesh Bhatia — Group Chief Financial Officer

So that matter now we will have to litigate there to get our new rights, not accounted in our — those benefits are not being accounted for now.

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

It’s going to take a long time.

Zain Banihali — Odyssey Capital Management — Analyst

Okay. Thank you so much, sir, and all the best for the next quarter and the coming year.

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Thank you.

Operator

Thank you, sir. We take the next question from the line of Mr. Yash from Dante Equity. Please go ahead, sir.

Yash Dantewadia — Dante Equity — Analyst

Am I audible?

Operator

Yes, sir.

Rajesh Bhatia — Group Chief Financial Officer

Yes.

Yash Dantewadia — Dante Equity — Analyst

My first question is regarding Nigeria. You said you’ve crossed 70% capacity utilization. But has it become EBITDA positive in this quarter?

Rajesh Bhatia — Group Chief Financial Officer

Sorry? Come again.

Yash Dantewadia — Dante Equity — Analyst

Has the Nigeria plant turned EBITDA positive this quarter?

Rajesh Bhatia — Group Chief Financial Officer

Yes, it’s EBITDA positive this quarter.

Yash Dantewadia — Dante Equity — Analyst

Okay. Your Dharwad capacity…

Rajesh Bhatia — Group Chief Financial Officer

Sorry.

Yash Dantewadia — Dante Equity — Analyst

On Dharwad expansion, what top line would that expansion add on full capacity utilization?

Rajesh Bhatia — Group Chief Financial Officer

Dharwad expansion could give you about — if you produce 4,000 tonnes, it will give you about INR50 crores per month.

Yash Dantewadia — Dante Equity — Analyst

INR50 crores per month on full capacity utilization?

Rajesh Bhatia — Group Chief Financial Officer

No, not full. Full would be about 400 tonnes, 500 tonnes per month.

Yash Dantewadia — Dante Equity — Analyst

So are you giving for pack figure. So could you assume the top line figure, just in case?

Rajesh Bhatia — Group Chief Financial Officer

Sorry? I said INR50 crores per month.

Yash Dantewadia — Dante Equity — Analyst

That is PAT, right?

Rajesh Bhatia — Group Chief Financial Officer

That is the top line. Top line.

Yash Dantewadia — Dante Equity — Analyst

Okay. Also raw material pricing, could you elaborate more on that on how much the prices have come down by? Would you be able to quantify it?

Rajesh Bhatia — Group Chief Financial Officer

I think it is too premature. I think this trend has only been for a few days. So let’s not hazard a guess on that. When we’ll have the next quarter, I think we will give you that as to what happened to the prices.

Yash Dantewadia — Dante Equity — Analyst

Yeah, but basically crude oil prices…

Rajesh Bhatia — Group Chief Financial Officer

But as of now, there has been — the fall in the raw material prices have been really marginal only. So I think anything to elaborate beyond that may not be possible for us today because the time period involved has been very, very short.

Yash Dantewadia — Dante Equity — Analyst

Sir, but crude oil has fallen from $115 to I think $90, approximately, so the raw material pricing isn’t cooling at the same speed at which it went up, right? So is that showing a very good demand base?

Rajesh Bhatia — Group Chief Financial Officer

So we’ve already seen that vis-a-vis last quarter versus this quarter how the crude has also behaved. So it’s in line with them. There is nothing exceptional to those fall and all.

Yash Dantewadia — Dante Equity — Analyst

Also you are operating OPM expansion. Is there any visibility in the coming quarter? Your OPM.

Rajesh Bhatia — Group Chief Financial Officer

For Dharwad?

Yash Dantewadia — Dante Equity — Analyst

No, no, overall operating margin, or are you comfortable with 18%?

Rajesh Bhatia — Group Chief Financial Officer

I think 18% as I have been saying earlier, a range of 17% to 19% is quite a comfort zone for us. But again, if the raw material prices fall and the margins are sustained, so your EBITDA margins would always look much higher in respect.

Yash Dantewadia — Dante Equity — Analyst

Also, would you be able to elaborate on the demand in Europe and U.S.?

Rajesh Bhatia — Group Chief Financial Officer

Sorry?

Yash Dantewadia — Dante Equity — Analyst

Would you be able to elaborate about this demand right now in Europe and U.S.?

Rajesh Bhatia — Group Chief Financial Officer

So the demand right now in Europe is struggling with its own energy issues and all that, so the demand is a bit soft but typically that’s been the phenomenon in this period generally over the years we’ve seen. So I think nothing much to get bothered about that on an annual basis will we be able to outperform the last year or two.

Yash Dantewadia — Dante Equity — Analyst

Also, again, on your operating profit margin trend, you said that you are comfortable with 18%, right? But would be able to give the guidance on the coming quarters, if any, or you’d be able to maintain the same margins?

Rajesh Bhatia — Group Chief Financial Officer

We’re not giving any guidance for the next quarter as of now. For the year as a whole, I think we earlier also said about 17% to 19% is our range.

Yash Dantewadia — Dante Equity — Analyst

Okay. And sir, what’s the update on the Dubai listing?

Rajesh Bhatia — Group Chief Financial Officer

On the?

Yash Dantewadia — Dante Equity — Analyst

Dubai listing, the subsidiary that is getting listed in the Dubai Exchange.

Rajesh Bhatia — Group Chief Financial Officer

I think the markets right now are not conducive. And as and when they are back, we’ll be back in business on that front.

Yash Dantewadia — Dante Equity — Analyst

Also, my last question, on the debt front. By which quarter are we expecting the debt to start coming down?

Rajesh Bhatia — Group Chief Financial Officer

So the debt, as we said, the debt has not gone up in this quarter also. It’s the same what was there in the last quarter, despite the fact that we have now CPP and the BOPET facilities under commissioning for which the new debt is being drawn. So the current amortization structure versus the new debt added for those projects is almost keeping the debt at a static level. So I think the debt will peak by March 31st, 2023, and thereafter it will start coming down.

Yash Dantewadia — Dante Equity — Analyst

Could you talk about the new capacity that you’ve announced? You’ve announced — for the pellets you’ve announced the new plant, right? Could you talk a bit about that?

Rajesh Bhatia — Group Chief Financial Officer

We’ve announced the backward integration facility at Panipat where we’re going to manufacturer the resins for the PET films, so that is the project which we are undertaking. And that project will come up in FY 2026. So we will — whatever is the debt added on for that, the current amortization over the next two years will neutralize that new debt which is taken for that project.

Yash Dantewadia — Dante Equity — Analyst

Could you make me understand about how that project is going to help UFlex? It is going to help UFlex expand the OPM?

Rajesh Bhatia — Group Chief Financial Officer

So two things important in that is, one is that will help us protect margins. And we’ve seen in the last couple of years that both the availability as well as the pricing on our even raw material side was getting a bit erratic. Just because we have overall global presence, so we’ve been able to meet our raw material requirements from wherever we can for India as well as our overseas facilities. But yes, availability issues, supply chain issues have been the order of the day, at least for the last year or so. And that’s why we’ve taken the decision for this backward integration, so that even today for some of our facilities in global markets, we source from India, we source from Southeast Asia, and we source from Middle East. And that’s where we’ve been supplying raw material to our offshore businesses. This will help us both quality wise, the consistent quality, not moving from one supplier to another and that results in fluctuation in quality. All those things are going to be plus on this, plus the margins are definitely they’ll — today, both in India as well as in the international markets, the markups on the indices have shot up quite a bit in this space.

Yash Dantewadia — Dante Equity — Analyst

In the last concall, if you remember, I had asked you if you had any plans of listing Aseptic Packaging as a separate entity, and you said, it’s a good idea and the management will think about it. Has there been any thinking in that front?

Rajesh Bhatia — Group Chief Financial Officer

No, we’ve not given any thought process as of now.

Yash Dantewadia — Dante Equity — Analyst

Also in the existing Aseptic Packaging plant, how much would you be able to expand more in your brownfield expansion?

Rajesh Bhatia — Group Chief Financial Officer

So at this plant, we can duplicate the same capacity given the resources in terms of land and others what we have presently at this plant. But currently, the endeavor is not to set up anything new. We are only trying to debottleneck and see whether at the same plant can we take the more output out.

Yash Dantewadia — Dante Equity — Analyst

Yeah. So at the same plant if we choose to double the capacity, you can, right?

Rajesh Bhatia — Group Chief Financial Officer

Yeah, we can.

Yash Dantewadia — Dante Equity — Analyst

Okay. Thank you so much for taking my questions.

Operator

Thank you, sir. We take the next question from the line of Mr. Shivam Saxena from ICICI. Please go ahead, sir.

Shivam Saxena — ICICI Bank Ltd. — Analyst

Thank you for taking my question. Congratulations for a good set of numbers. And only one question is that what will be the impact of plastic ban from this quarter onwards, Q2, what it will be reflected in? In this quarter, how much will be the impact?

Rajesh Bhatia — Group Chief Financial Officer

There is no impact on UFlex for any of the plastic ban because none of the items in the plastic ban affect UFlex. As part of the Aseptic Packaging for certain segments, we’ve been using the plastic straws, so they will be replaced with the paper straws as we’ve already ordered those machines.

Shivam Saxena — ICICI Bank Ltd. — Analyst

So we can say it would be a positive impact on the company if there is a plastic ban? Can we say that?

Rajesh Bhatia — Group Chief Financial Officer

I think there is no impact. I think let’s remain on that as well. How the substitutes for the items which have been banned and how do they impact, what are the alternatives which emerge from there, and how does it help the flexible packaging films companies and all that, I think let’s wait and watch and see if there’s any impact of that.

Shivam Saxena — ICICI Bank Ltd. — Analyst

And what about — have you taken any price hikes recently? After the June quarter, any price hike was taken and will they continue in this quarter also?

Rajesh Bhatia — Group Chief Financial Officer

No. So the price hikes earlier have also been taken based on the raw material price increases. And even in this quarter if you see the top line grew by close to about 47%, while the volume growth is close to about 16%. So there is a substantive — on a year-on-year basis, there is a substantive increase in the price. If you see the last quarter, we had a 65% top line growth backed by 38% volume growth. So this quarter again the impact of the price rise has been there, but as we said that last one month or so, three weeks to be precise, the raw materials — as the crude has come down, the raw materials have come down. So to the extent the raw materials come down, you can — depending on the demand-supply situation, you can either pass on the prices or you can keep some of the margins to yourself. Depending on that, I think that’s a call business takes on a regular basis. But last couple of years we’ve seen that whatever is the price increase that is being constantly passed on to the customer. Only in the flexible packaging business, there may be certain lag in passing on that prices. But generally, in the larger business area for us, we’re passing on the prices.

Shivam Saxena — ICICI Bank Ltd. — Analyst

So, basically, you are saying as the commodity prices go down, then you reduce the pricing or you can reduce — the customers come to reduce the prices also. So top line can reduce by that amount, right?

Rajesh Bhatia — Group Chief Financial Officer

Yeah.

Shivam Saxena — ICICI Bank Ltd. — Analyst

Got it. Thanks.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Mr. Rushabh Shah from Anubhuti Advisors. Please go ahead, sir.

Rushabh Shah — Anubhuti Advisors LLP — Analyst

Thank you for the opportunity. Sir, first question when do we expect the new facility that commissioned?

Rajesh Bhatia — Group Chief Financial Officer

We’re targeting Q3 later or Q4 beginning that’s what…

Rushabh Shah — Anubhuti Advisors LLP — Analyst

Okay, sir. And on the Aseptic debottlenecking, will that also be concluded in this financial year itself?

Rajesh Bhatia — Group Chief Financial Officer

No. I think this year the season is now off, so January next only now the season will start. So, hopefully, by that time, we should have sorted the things out.

Rushabh Shah — Anubhuti Advisors LLP — Analyst

Understood. I think — just wanted to confirm, have our debt levels, on a net basis, have remained flat because our finance cost has actually gone up 7% sequentially. So wanted to understand that part.

Rajesh Bhatia — Group Chief Financial Officer

So the debt level on a constant currency basis has remained the same. Overall, if you see, the net debt has gone up by INR150 crores, and if everything else I were to keep aside, I want to see only in Russia, so because of the currency appreciation there, in rupee terms, their debt has gone up by INR153 crores [Phonetic].

Rushabh Shah — Anubhuti Advisors LLP — Analyst

Okay. And I think while you were answering a previous participant, you said that we have taken a new debt for commissioning of this new plant. So has that debt been taken at a higher rate or is it still in line with the previous debt levels?

Rajesh Bhatia — Group Chief Financial Officer

See, it’s only when you will take the rupee loan, it will always be costlier than the foreign currency loan in our global businesses. So what right now we are adding to the debt level because the offshore projects were already commissioned last year itself. But yes, on a quarter-on-quarter basis, if you see because last year we didn’t have the Nigeria project, it was commissioned in Q2 — towards Q2 end, so this year in Q1 versus last year of Q1, we have a debt of the Nigeria project which has come and hit the P&L. So that’s where you see — despite the debt almost remaining the same, you see a higher interest out [Phonetic].

Rushabh Shah — Anubhuti Advisors LLP — Analyst

Okay, understood. That was all from my side. Thank you for the opportunity.

Operator

Thank you. We take the next follow-up question from the line of Mr. Subham Agarwal from Equitas. Please go ahead, sir.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Yeah. Thank you for the opportunity again. And sir, my question, given the promoters are there on this call, I would like to [Technical Issues]

Rajesh Bhatia — Group Chief Financial Officer

Hello?

Operator

I guess we lost the line from Mr. Subham. I am promoting the next question from the line of Mr. Yash. Please go ahead, sir. Mr. Yash, your line is in talk mode, sir. You may go ahead with your question.

Yash Dantewadia — Dante Equity — Analyst

My question is regarding the dividend payout ratio. Has there been any thought put to that to increase it because in the last 5 to 10 years, your dividend payout [Phonetic] ratio has only declined every year?

Rajesh Bhatia — Group Chief Financial Officer

You’re not audible at all.

Yash Dantewadia — Dante Equity — Analyst

Hello? Am I audible now?

Rajesh Bhatia — Group Chief Financial Officer

You’re not audible at all. Hello?

Operator

Hello, Mr. Yash?

Yash Dantewadia — Dante Equity — Analyst

Yeah. Am I audible now, sir?

Rajesh Bhatia — Group Chief Financial Officer

Little better, it looks like, but only when you complete your question…

Yash Dantewadia — Dante Equity — Analyst

Hello? Now?

Rajesh Bhatia — Group Chief Financial Officer

Much better.

Yash Dantewadia — Dante Equity — Analyst

Yeah. My question is regarding the dividend payout ratio. The dividend payout ratio from the last 5, 10 years has only come down. Has there been any thought put to that? When are we looking to increase the dividend payout ratio, since you said, by the end of this year, we will hit our peak debt level? So is there any plans to increase the dividend payout ratio by then?

Rajesh Bhatia — Group Chief Financial Officer

See, I think the dividend absolute payouts are being increased that’s what I can say, but yes, in terms of the payout ratio, you’re right, that may have gone down. And the only and the only reason for that is as we’ve spent a lot of capital in terms of our growth and that’s where you see — basically if you see in the last — we had an EBITDA close to about INR700 crores. In the last quarter we had INR725 crores now. So today we are looking at an annual EBITDA of anywhere between INR2,800-odd crores, up from about INR900 crores what we had about four years ago. So all this additional EBITDA generation has come against the backdrop of fresh investments being made into the businesses, whether it was Asepto or it was the new facilities or brownfield or greenfield being set up in the offshore locations, and now the backward integration into — so there has been a lot of capex. And as part of the capex, when you go to your lenders for the fresh borrowings, I think there are guidance from them also as to how much you need to plow back through equity into your businesses. So all that has been done keeping in mind that there are enough resources — equity resources from the business to fund those projects and that’s been the primarily deciding factor.

Yash Dantewadia — Dante Equity — Analyst

Yes, sir. Hence my question was based more about the future. I completely understand why you spent money and why you haven’t paid out a lot of dividends in the last 10 years. But as an investor, when I look at other stocks in the same industry doing business, if you are expecting the peak level of debt to come down by the end of this financial year, then wouldn’t you look at rewarding the shareholders, too?

Rajesh Bhatia — Group Chief Financial Officer

No, I think my intention is to create the shareholders’ value and that has been done over the years. It may not necessarily have been through dividends, but it’s also reflected in the stock prices, which are again backed by the performance of the company. So overall basis, the value creation in the last three years has been good. Yes, I agree with you that your expectations on dividend payouts may have been not met to the extent some of the other players are doing. But yes, our endeavor is to keep the growth momentum on, because understand that some of the competitors you are talking about, while we have three or four separate businesses or maybe more as some of the intermediaries like chemicals, cylinders, engineering they themselves are separate businesses, and then on top of that, the three mainstream businesses, the Aseptic Packaging, the Flexible Films, and the Flexible Packaging, so they have their capital requirements from time to time.

Very difficult for me to say that how will the future pan out in terms of the further growth plans today. Whatever we have, we keep on announcing to the market, but yes, on the whole, we are a progressive company. And wherever we see that we can generate much better returns rather than dividending, giving it in the form of dividend. If there are opportunities, reasonable opportunities for growth, I think we’ve been pursuing that. And once we stop pursuing that, then yes, of course, you don’t keep the idle cash with yourself. So there will be distributions, for sure, ahead.

Yash Dantewadia — Dante Equity — Analyst

Yes, sir. I completely get that. And the only reason I asked this question was because definitely in the near future we are looking at a point where the debt levels hit their peak. And once the peak is over, I was just wondering what the company plans on doing with the cash that’s coming in. If you have further growth plans that’s well and good, but if you don’t have further growth plans, you will also be looking at reducing your debt and deleveraging your balance sheet, right?

Rajesh Bhatia — Group Chief Financial Officer

I think the balance sheet is not leveraged. If I see my net debt to EBITDA basis, if I annualize my net debt and the earning numbers, we are talking about less than 1.5 times of a net debt to EBITDA. So I think we are in a comfortable zone over there. But taken your point that I think once we come back to that situation where there are no further opportunities to grow, I think the management will consider probably a higher dividend payout ratio at that point in time. But very difficult to commit anything on this call at this point in time.

Yash Dantewadia — Dante Equity — Analyst

Okay, sir. And also I just have one more thing on the investor front. Would you — what all steps the management is taking to make UFlex a more investor-attractive opportunity? I am not talking in terms of the growth. In terms of growth, I think you guys are firing on all cylinders. But you recently hired a new PR agency, too, right, if I’m not mistaken. So on that front, can I understand what steps the PR agency is taking or what step the company is taking in that front to expand investor awareness?

Rajesh Bhatia — Group Chief Financial Officer

I think that’s an agenda which is currently under discussion with that. And as part of that agenda only, this is the first time you see the promoter core group on the call this time. I think we are in constant discussion with our consultant. And the next couple of quarters we will give you more guidance on — or you will see for yourself as to what we’ve done to improve our investors relationships.

Yash Dantewadia — Dante Equity — Analyst

Yes, sir. And also, from next quarter onwards, would be very helpful if you could give some sort of guidance in terms of at least the coming quarter. That would be really helpful as an investor for me to understand where the business is heading. So thank you so much for the opportunity. Have a nice day. Thank you.

Operator

Thank you, sir. We take the next follow-up question from the line of Mr. Subham Agarwal from Aequitas. Please go ahead, sir.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Thank you for the opportunity. Am I audible? Hello, am I audible?

Operator

Yes, sir. Please continue.

Rajesh Bhatia — Group Chief Financial Officer

Yeah, you are audible.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. Yeah, thank you. So given that the promoters are there on the call, I would like to take this opportunity to understand from them what is the vision that they have in place for the company over the next three to five years, what are the areas that they are focusing on, any new specific areas that they would like to talk about? And given that Mr. Bhatia said, there are multiple growth levers that we would be investing in. So broadly just if you could help us understand what you are thinking that would be very helpful, sir. Thank you.

Anantshree Chaturvedi — Vice Chairman and Chief Executive Officer, Flex Films International

Apoorvshree, do you want to start with this?

Apoorvshree Chaturvedi — Director EU Operations and Sustainability

Yeah, sure. So, obviously, we want to grow more in the film business. The film business will continue to grow and along with that, as Mr. Bhatia has explained earlier in the call, there will be certain capital exposed also to improving the availability and security of raw material because obviously it will be geographically diverse. So we will continue to commit to that strategy of geographical diversification on the expansion of the net film capacity, a certain amount of capital will also go for the polyester raw material, and along with that the Aseptic business is something that — as we have earlier said in the call, that after debottlenecking, you can take a longer-term perspective on the Aseptic business to also make it grow. Along with that, there — obviously, as the film capacity goes up, there will be room to further penetrate the available value additions available in the film sector. So that is also review [Indecipherable] management. Along with that, obviously, [Indecipherable] diverse. We are seeing what’s happening in energy, and we’re seeing what’s happening in what’s marketed as a transition to a different energy base. And if there is any room to grow in those sectors, we can look at that as well. But as of now, the priority will be more growth in the film business with certain amount of capital exposed for the defensibility of the raw material chains and along with growth in the Aseptic business as well.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Got it. Sir, and secondly, see, we understand over the last few years we have gone through a significant capex cycle and we have delivered when it comes to number. But on the same time, it’s not reflective on the share price. Sir, so I think it’s a very good opportunity for the promoter itself to buy shares from market. Obviously, you bought some shares last quarter but what are your thoughts on that?

Rajesh Bhatia — Group Chief Financial Officer

That is the very small percentage that was bought by the promoters. That was only 0.4%. Now, see, since the capital requirements are today elsewhere, so there is no such plan to look at any large-scale buyback structure I think, but to still give more value to the shareholders, the wealth creation for the shareholders. We thought of other routes as to how we can do it and listing our Dubai entity was one such route which we are pursuing. Just because the markets will come back once the interest rate cycle is stabilized, the equity markets. So that would be one huge fillip to the way the company is valued because whatever discussions we’re having, the roadmap that our investment bankers are showing us for that listing, I think this will put the company, UFlex parent valuation also, in a completely different perspective.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Sir, how much are we looking to dilute in the Dubai business?

Rajesh Bhatia — Group Chief Financial Officer

I wouldn’t divulge any details of that at present.

Subham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

No problem. I understand, sir. Thank you again for the opportunity.

Operator

[Operator Closing Remarks]