UFLEX Limited (NSE: UFLEX) Q2 2025 Earnings Call dated Nov. 18, 2024
Corporate Participants:
Surajit Pal — Vice President, Investor Relations
Rajesh Bhatia — Group President and Chief Financial Officer
Analysts:
Sachin Bobade — Analyst
Aman Kumar Sonthalia — Analyst
Saket Kapoor — Analyst
Yash Dedhia — Analyst
Chirag Singhal — Analyst
Kaushik Poddar — Analyst
Marcel — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the UFlex Limited Q2 FY ’25 Earnings Conference Call hosted by Dolat Capital. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sachin Bobade from Dolat Capital. Thank you, and over to you, sir.
Sachin Bobade — Analyst
Thank you, Chinmaya, and good evening, everyone. On behalf of Dolat Capital, I welcome you all to the Q2 FY ’25 earnings conference call of UFlex Limited. Hope you all and your family members are staying safe and healthy. From the management side, we have with us from Mr. Rajesh Bhatia, Group President and Chief Financial Officer; and Mr. Surajit Pal, Vice President, Investor Relations.
Now, I hand the floor to Mr. Surajit Pal for the proceedings. Over to you, sir.
Surajit Pal — Vice President, Investor Relations
Thank you, Sachin. Good afternoon, ladies and gentlemen. Thank you for joining us today for the Q2 FY ’25 earnings call of the UFlex Limited. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are predictions, projections or other estimates about future events. These estimates reflect management’s current expectations about the future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied.
I would now request Mr. Rajesh Bhatia, Group President and CFO for his opening remarks, following which we will open the forum for an interactive session and question-and-answer session. Over to you, sir.
Rajesh Bhatia — Group President and Chief Financial Officer
Thank you. Thank you, Surajit and thanks for the introduction and welcome all the participants on this call.
The underlying for the Q2 is that it has been a continuance of a good momentum what we started the Q1 with. And the same momentum continues in the packaging films business, India and overseas. And that’s what is reflected in results. Even on the packaging side, especially the aseptic packaging, normally Q2 and Q3 are normally a lean season. But still, in this season, we’ve seen a much higher capacity utilization level at about 93% vis-a-vis 83% in the last year. The packaging film prices in India are much better. Overseas could be still better, but there will be — because there are lot of exports happening from India. So, the prices are remaining in a sort of check. But I think the volume has picked up in those markets as well and that bodes us well.
So, to give you a perspective on the numbers, you would have gone through those, but still I’ll reiterate them. So, the topline consolidated, we had 13.7% increase on a Y-o-Y basis to about INR3,853-odd crores and the backdrop is that the Packaging Films revenue witnessed a growth of 23.4% on a year-on-year basis. So, this 13.7% Y-o-Y growth what we see in the Q2 is backed by 23.4% Y-o-Y growth in the Packaging Films business revenue. The sales volume for the Q2 are up 10.9% year-on-year, again driven by the Packaging Films sales volume growth of about 14.6%. The Q2 standalone revenue increased by — standalone now I’m talking about, that increased by 19.3% Y-o-Y to about INR1,970 crores, again driven by the Packaging Films revenue growth of 39% Y-o-Y and Q2 standalone sales volume are up by 4.2% Y-o-Y, driven by the Packaging Films sales volume growth of 10.8% Y-o-Y.
As I said earlier, the Aseptic Packaging business continues to do extremely well. And this quarter, we achieved a capacity utilization of 93% even in this lean period. The same period last year, we had achieved a capacity utilization of 83%. So, on a Y-o-Y basis, this quarter, we’ve seen a 17.6% volume growth, which is there. Even in the month gone by, which is October, the sales volume is up by about 24%. So, if I talk about October last year versus October this year. So, the good momentum in that business is continuing. And post the capacity expansion to 12 billion packs, which we are expecting by the end of December. So, the Q4 will be the first period during this fiscal, FY ’25 during which we have that capacity available. So, we are expecting as of now that business that enhanced capacity. Overall utilization for Q4 will be about 83% even post the enhanced capacity for 12 billion packs, which means that on a Y-o-Y basis, we have a 20% volume increase in the sales volume. So that’s what about the Aseptic business.
Now, India BOPET industry, in particular, I just thought I’ll make a mention to you. Last quarter, when we were — we had — we were there on this call, I had indicated that towards the margins had the prices and the margins had increased, but more or less these are reflected in the period post-June 15. And so the full impact for the quarter was not there. But this quarter, we’ve seen the full impact and you know of the increases what happened till 15th of June 2024 and thereafter also there have been increases. So, if I see on a Q2 versus Q1, at a gross margin level, the margins have gone up by — industry-wide margins have gone up by about 200-odd percent.
And even in the current quarter, over the Q2 quarter, the margins are up by about 20%, which means that if the prices did continue to remain the way they are, the current quarter packaging films business, at least on the PET side will also be better in this quarter even over the Q2, which on an industry-wide basis has already seen about 200%-plus the gross margin increase. The BOPET industry also, the gross margin increased by about 36% in Q2 over Q1. But unfortunately, we’ve seen some price correction in that market. And in the current quarter that is going on, we are down to almost at the Q1 level. So, whatever we achieved in Q2, if we talk at the current levels, all those gains have been diminished.
On an industry-wise basis, again, the BOPET exports from India in the quarter reduced by about 10% in Q2 over Q1, largely because the prices were good, domestic prices were good in this quarter. And even for BOPET, they were down 5% Q2 versus Q1, again, largely because of the higher domestic prices where the exports contracted a bit. For UFlex India in Q2, the volume growth in the PET business has been about 14-odd percent. And while the overall Packaging Films volume growth, we’ve seen about 10.8%, but for the PET where we have a dominant capacity and BOPET capacity, our BOPET capacity is rather not too high, so we witnessed about 14% volumes increase in Q2.
Having said that, all the good things are the Flexible Packaging margins in this quarter were impacted and as usually happens when the Packaging Films prices to go up so steeply, there is always a lag fact in the Flexible Packaging margins because their prices are fixed for the last indexes, which are pertaining to the previous month or quarter. And when the raw material prices increase, so during that quarter or that month, you don’t get certain increases, but those increases come your way in the next quarter as per the terms in the first quarter. So, we’ve seen a contraction in margins in that given that we had a steep increase in part in the Packaging Films prices and that’s what sort of kept the gross margins down a bit both on a consolidated level as well as on a standalone level in this quarter.
The exceptional items, again the currency devaluation in Nigeria, Mexico is just continue to affect those M&As out of those translation losses. As I had explained earlier also, in Nigeria, we do business in naira, in Mexico in pesos, and Egypt in Egyptian pounds and then the business which is transacted in the local currencies has to be converted into the reporting currency, which is INR and there are devaluations of that currency figures in INR. So, you will always have a situation where you will have those translation losses of which are exceptional in nature. We’ve been seeing Nigeria and Egypt and Mexico, all currencies are devaluing continuously at least in the last two fiscal years.
And even in this quarter, we’ve seen a currency loss of INR79 crores in Nigeria, which was INR99 crores in Q1. And in Mexico, we’ve seen a INR14 crore loss, which was INR51 crore in Q1. And in Egypt, the loss is zero which was INR31 crores in Q1. So, while the losses have come down from a level of INR180 crore in Q1 to about INR92 crores, INR93 crores in Q2, but they still continue to appear on the P&L cycle. Ignoring these exceptional losses and including some of the M2M of the currency swaps that we have.
The normalized EBITDA for this quarter is INR438 crores versus INR408 crores in Q2 of FY ’24. Standalone EBITDA is up at INR215 crores this quarter versus INR168 crores in Q2 of the same period last year. And again, that is because the Packaging Films business has seen a much higher prices in the current financial year — in the current quarter. But having said that, there is an impact of Flexible Packaging margin contraction because of the reasons I just explained. And the India business stands at an EBITDA of INR215 crores versus INR168 crores in Q2. The overseas business EBITDA is INR223 crores this quarter versus INR240 crores in the Q1. This has been impacted a little because of the higher energy costs in Hungary business in the Q2, which are now normalized in the current quarter.
Our gross debt as on 30th September and net debt is at about INR5,800-odd crores versus — March position was about INR5,600-odd crores. So, we’ve seen a net debt increase of only INR200 crores in this current fiscal and there are a few projects which are under pipeline and we are seeing completion happening in PET chips plant which we are expecting will come in H2. Expected timeline is between January to March. So, this will be a game-changer for our offshore business given that almost, while this will take care of our requirements of PET chips in our Egypt business, but this will also cater to our European operations, our Nigeria operation as well as our operations in the UAE. So, all of them will become fully self-sufficient in terms of their raw material requirements.
And still, we have certain surpluses over there, which we can depending on the dynamics of the freight and all that, which we can export to Mexico or USA. So that on a long-term basis will take away the fluctuations in the quality and in the pricing of key raw material for the PET industry and will augur well for the overall business the years to come. This apart, we’ve announced an expansion of new greenfield capacity in Egypt for our Aspetic business as we think that the Aseptic business in India has been operating at more than 100% capacity for the last few years and we see a tremendous increase in exports in that business as well. And today, we say that we are looking at about 35% to 40% exports coming in India from India’s Aseptic Packaging business by exporting the Aseptic Packaging to the other world markets.
But having tasted that success in that business, I’ve been saying over the last few calls that, that business looks very exciting and it’s the time to take into the global market. So, we chose Egypt, especially because we know we are already there, it is quite a substantial business side for us. The cost parameters in Egypt vis-a-vis manpower and our energy costs are quite akin to what you had in India and it has an advantage that of a treaty advantage especially when you are looking at exporting to the Europe market. I think you have that advantage of mill duty when you export from Egypt into Europe. But apart from Egypt and — so Egypt also consumes today about close to about 5 billion packs a year, which is all imports. So that’s the natural market.
We are looking at the markets in Africa, which we are currently serving, the Middle East also, but at some point in time, we know that we have been exporting with to our international customers and at times we’ve seen in season that because of that, sometimes we are not able to meet the local demand. So, the local demand has always been a priority. Only that during the lean period this starts actually after 15th of August and goes up till end of December. In India, especially when the winter season sets in, the requirement goes down and we’ve been trying to fill our plant with export orders in this time, but you can’t really pick and choose of the timings. So, your customers would always need some product throughout the year.
So, while the seasonality maybe there for India, but for the world market, it will be a different seasonality. So, we thought that Egypt is a good venue where we could set up this. It has a large market of its own, doesn’t have any facility. There is no producer currently, so that market plus the European market will become very handy. And since a lot of customers who we are exporting, we are already qualified. So, the time taken for the customer qualification for this time around will be much less as compared to to what we did in the first set of facilities at Sanand. I think just to give you a number that PET chips facility in Egypt, when it is fully operating at full capacity utilization will also boost our EBITDA by about, this year, we are expecting normalized EBITDA of INR2,000 crores, which should boost our EBITDA by another 5%-odd or so. And the Asceptic Packaging Egypt on a full capacity utilization will also give us a 20% higher EBITDA our current level of operations.
If we talk about H1 also at the same time, H1, if you see the EBITDA has grown up by about 24%-odd, if we compare H1 of last fiscal versus H1 of this fiscal. And again, largely driven by the packaging sales volume, which is up at about 13.8% on a year-on-year basis and Aseptic Packaging sales volume up by about 10% Y-o-Y. Now that position more or less I have already said, so the consolidated EBITDA for H1 is INR903 crores versus — it’s gone up by about 23.9% this H1 over the last fiscal H1 and again driven by the Packaging Films of 13.8% and Aseptic of close to about 10%. And the standalone EBITDA for H1 stands at INR429 crores, which is up close to about 21% over the same period of last year. So, if we see H1 FY ’25 versus H1 FY ’24, you will see a much better performance both on the Packaging Film side. Aseptic Packaging continues to grow from on every sequential quarter basis. And now with the new capacity coming on soon as well as international capacity coming on soon in FY ’26, I think that’s one business which has been contributing higher EBITDA margins and we look forward to replicating that success of the Aseptic India in the overseas markets as well.
So, that’s been basically the summary for the financial performance for the Q2 as well as H1. We are now open to any Q&A that you may like to ask us. Some of the details which are not available in instantly, we’ll note down and try to get back to you as soon as possible because sometimes some of details which are very, sort of you guys keep on looking at the numbers day-in and day-out, but we try to answer them as best as possible, dealing with, we’ll be happy to come back with you certain numbers what you maybe looking-forward to. And certain numbers which we can’t share also we will also thank you for that.
Thank you for everything.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Aman Kumar Sonthalia from AK Securities. Please go-ahead.
Aman Kumar Sonthalia
Good evening, sir.
Rajesh Bhatia
Good evening.
Aman Kumar Sonthalia
Yeah. Sir, my question is that in the last con-call, you have said a lot about the recycling business. So this time, I think you have not given the utilization level of recycling business because you have set-up few plants overseas and few plants in India. And nothing is talk much about the recycling during this opening remarks. So whether now, we are not that much optimistic about the recycling business going-forward?
Rajesh Bhatia
No, we are very much optimistic about the recycling business. But some of the EPR guidelines in Europe and in India are coming, like I’m told Europe, the new EPR guidelines which mandates the recycling comes into in play from 1st of January and in India from 1st of April or 1st of June. So, there is nothing — there was nothing — while the facilities are there, they are running also as well, but what we’ve been saying is the real momentum comes only when you look at, when the laws are enacted and people are forced to spend extra money in terms of complying with those requirements.
So that is why, while we remain upbeat about that business and that we see that over the next few years that it will also become a very formidable business for us. But this quarter, we’ve given some certain numbers in the presentation, what we have achieved. If you want, I can talk about those numbers, but I think those presentations are with you and you can look at in detail, where we’ve given PCR, MLP, all that what we have achieved in terms of our production in this quarter. The major theme for the next few years, aided of course, by the legislation changes in the world markets India where we operate in.
Now in India also frankly, there have been a few times the government has postponed the compliances and all that. So, because not everybody is ready for it and ultimately in this industry, when it’s relating to the food packaging, you can’t take chances with that. So, the whole industry sometimes is not prepared. If we are prepared — our preparedness is much ahead of them, still that does not count and the government may take a view that we need to postpone it by another quarter or six months and all that. But having said that, this will all come regulation only. We are ready to, sort of…
Aman Kumar Sonthalia
Sir, right now we are exporting around 40% of our Aseptic Packaging capacity, so production, 35% to 40%?
Rajesh Bhatia
[Foreign Speech] But otherwise, generally you can take about for the year as a whole about 35-odd percent.
Aman Kumar Sonthalia
35%, say 40%, sir. [Foreign Speech] we are expanding our capacity by 5 billion pack [Foreign Speech] will take care of the market which we are exporting. So definitely, [Foreign Speech] in India is right now 7 billion, 40% [Foreign Speech] and again 50% we are increasing the capacity, 5 billion pack. [Foreign speech].
Rajesh Bhatia
[Foreign Speech] we took about three years to come up to a decent number in that. Next 3.5 billion that was sold-out from day one itself. This now when we are expanding to about 12 billion packs, we are expecting about 80% to 85% capacity utilization level in the Q1. And obviously, Q2 will be a better capacity utilization number. Now, the next plant we are going to achieve in FY ’26 and beyond. Now, you will have to make a big thing here also, but the markets are so huge. Look at when we started in India, we already had Tetra pack in India, who was already manufacturing.
Now, Egypt which is consuming about 5 billion packs a year has no Tetra pack over there. So, Egypt is all importing its requirement so that’s the market which comes to you very naturally. And then when we look at exporting to Egypt to Europe from there, you have an advantage from this thing. While your question is right in terms of — and we may not have all the answers on the day one issue, but we feel that we will be able to replicate our India success in this business in Egypt very, very successfully and much earlier than what we achieved in our India business. We’re very, very upbeat on that capacity.
See, India, we already suffered for a couple of years because we didn’t have the capacity to cater to our domestic as well as our offshore customers. But with this enablement, if we have to swing capacities between India or Egypt plant serving a few offshore territories, I think we can always swing that. We can look to garner a larger market share in India. And if we all believe that next five years, when you become a $5 trillion or $7 trillion economy, the multiplier impact of that on the consumption economy is going to be 10 times of that in GDP multiplier. So, you have to set-up capacities, you have to look at expanding in a market which is growing and which is giving you a healthy EBITDA margins as well.
We’ve seen Packaging Films business segment, what kind of a EBITDA margin it takes, what kind of cyclicality has gone in the last few years, a few good years were COVID years and all that. And thereafter except for Q1 and Q2, you’ve seen a single-digit EBITDA margins from industry as a whole. So clearly, there are requirements, we’ve been clearly contacted by more customers as who can you give us more and we know our bottlenecks now. We can’t give more than what we are currently doing. So, we had to circumvent some of those things.
Aman Kumar Sonthalia
Sir, the liquor industry will be the biggest game-changer because still there are few states [Foreign Speech] where this Aseptic Packaging is not allowed in the liquor industry. So, if they allow that, I think it will be a big market for us.
Rajesh Bhatia
Yeah, yeah, Aman. [Foreign Speech] So, if all the states in India were to allow this to take care of the spurious liquor issues, I think, from the current capacity, we will need at least three times of the capacity in India only to cater to those — that market. But having said that market is there only in India and we will obviously try to look at Africa also. But because India [Foreign Speech] Bihar and all these places, you know you have a lot of spurious liquor being packed and sold and all that. So, I think over that period you will find that many states will allow liquor to be packed in Aspetic and the customer also knows that this is one packaging [Foreign Speech]. Like I tell you, when I buy ghee for my own home, I buy only Tetra pack ghee, [Foreign Speech] Aseptic packaging ghee, because that is the only one which is which is pure. [Foreign Speech] your chances of going wrong are at least 99 times of other packages.
Aman Kumar Sonthalia
Okay. Sir, one more question, [Foreign Speech].
Operator
Mr. Aman, may we request that you return to the question queue for follow-up questions as there are several other participants waiting for their turn.
Aman Kumar Sonthalia
Okay. No, issues.
Operator
Thank you so much. The next question is from the line of Saket Kapoor from Kapoor Company. Please go-ahead.
Saket Kapoor
Namaskar, sir and thank you for the opportunity. Sir, currently, in BOPET films, what are the margins? [Foreign Speech].
Rajesh Bhatia
I refrain from giving margins and that is why I said if I see Q1, Q2, there has been a 200% rise in the margins, gross margin and from Q2 versus current quarter also, there is a 20% increase in the margins. But margin is a very [Technical Issues].
Saket Kapoor
Sir, your voice is cracking.
Rajesh Bhatia
Hello. Hello?
Saket Kapoor
[Foreign Speech].
Rajesh Bhatia
I’m saying I refrain from giving an absolute number of the margins and I gave the margin percentages. So as I said, Q2, there has been more than 200% increase in the BOPET margins and 35% to 40% increase in the BOPP sales margin. Current quarter also, there is BOPET continues to be strong and over Q2, there is a 20% growth in the margins in that business, but in the BOPP industry, the margins are today in this quarter are the same as what was there in Q1.
Saket Kapoor
And sir, what are the dynamics for the BOPET film industry currently that are favoring sustainable and increase in margins Q-on-Q also? And how do you see the trend for H2?
Rajesh Bhatia
So, I’m quite confident that H2 margins in the BOPET industry will remain at reasonable levels. Frankly, I feel that the BOPET margins currently what are prevailing, there maybe a little scope for them to be better and it’s a dynamic situation because the BOPET exports have gone down by 10% in this quarter versus the Q1. So, with a more product availability in the domestic market, the market may take a cut in the margins again. Then again exports will rise and then this phenomenon will continue.
But the current margins on a more or less on a — I think the BOPP margin should be better than what they are. And hopefully, in H2, those margins will be at a Q2 level, which will be great for the industry. Having said that, the demand-supply equilibrium in the PET versus BOPP, BOPP it is better, but still the BOPP prices are lower because PET [Foreign Speech]. So, pet exports have really jumped from India which means that the capacity available to cater to the local market is lesser and that’s why the prices have firmed up.
Saket Kapoor
[Foreign Speech] That means globally we are competitive or globally capacity [Foreign Speech] that is why we are exporting?
Rajesh Bhatia
So, opportunity is always there because India is a much cheaper cost jurisdiction as compared to the Europe or the Americas. So, India had an overcapacity. So everybody resorted to exporting the product from India and utilizing their capacity. As a result that then that extra capacity from India got absorbed in the overseas market, the margins in India improved, which means that the overseas market remained under siege because of the large exports from India. Otherwise, the Packaging Films margins in the Europe and Americas would also have been much higher had India not exported so much of volumes into Europe and Americas.
Saket Kapoor
A small question and then I’ll join the queue, sir. So, globally, BOPET utilization levels ex of India, what it is and geography-wise if you can say. And in our country, you mentioned about export opportunity or demand scenario, as an industry utilization levels what it is on major players?
Rajesh Bhatia
So, [Foreign Speech], which will give you in the markets we operate in, what are the levels, our capacity utilization levels in those markets. And obviously, we see that there is a — in the past, we have achieved a much higher peaks in those markets, so which means that today that is being serviced from India at a cheaper cost as compared to what is being produced in those markets by us or other players. In overseas market, there was not an irrational capacity addition what we witnessed in India and that’s where somewhere the equilibrium, all the producers from India are trying to maintain the demand-supply equilibrium in India by exporting the stuff.
So, if you see the slide nine of our presentation, you will find all the answers as to at what capacity utilization level are all plants are operating. Poland and Hungary facility, Poland especially, which is a PET, we have a capacity utilization currently of last quarter of about 68%, which was in Q1 at about 78%. But in the past, we have achieved almost 100% capacity utilization in that facility itself and the USA is more than 100%. So, we are doing perfectly well over there. If you see Mexico, Mexico, we are doing about 85%, but that is not because of any other thing, that is because the plant has some technical issues which are being looked into. In terms of demand of the product in the Americas market, I had explained on this call last time also that our combined capacity in Mexico and USA is about 8,000 tonnes a month, while we’ve been now selling for this fiscal at least at the rate of about 10,000 tonnes per month, which means that we are importing the product in those markets from other jurisdictions, especially Nigeria as well as India.
Saket Kapoor
Yes, sir. Thank you for the explanation. I’ll go through the slide once again and let me follow-up definitely. Only concluding part was from Mr. Pal, as he also alluded earlier that the management is taking all steps to create that value for shareholding community, wherein we investors are — it is very difficult for investing community to value the company because of various geographies, the type of businesses and the various subsidiaries there and the exchange complications also. So, what steps management is taking in this annual wherein we can expect right value for investors of our company?
Rajesh Bhatia
So, I think the best way according to me is to separate your commodity business from value-added business, from your packaging business would command a different multiples as compared to your Packaging Films business, your Aseptic business, your chemicals business will command a different premium and that’s also a very substantial business for us. So, restructuring maybe one way to unlock that value, which is quite common in the corporate that you separate your businesses into separate companies so that you know each business is much more visible.
And the second is that we have now been presenting to you our turnovers, our volumes from each of these businesses, the kind of margins we have in each one of these businesses. So, I think before, I will suggest to all the investors who are on the call to look at these details with much more insight and see that what is the value. I think the management idea is that when the businesses have achieved a substantial size and they need to be operated as a separate entity, only then we should look at the restructuring aspects of things. But as when they are too much interdependent on each other and all that, then creating — so today, yes, we have the separate SBU, but creating those, transferring those SBUs to separate companies will only emerge at a stage where the interdependence of the businesses are much lesser and typically, flexible packaging and packaging films business which has packaging film as its raw material, I think those linkages will have to come down pretty sort of drastically.
Again, some of the other initiatives which we had taken earlier and I shared with you that listing our offshore subsidiary in Dubai in NYSE and so some of those initiatives, again, we will and the markets have not been there for the last couple of years for those initiatives to be implemented. But we surely implement those and that is a low-hanging fruit that if you can list your offshore subsidiary and when we were talking to our bankers on that, the valuation scheme offered by them were much more than India, India valuations. So obviously, the India valuations would have got adjusted looking at the offshore business valuations. So, we’ll do that, be cognizant of that fact, including carving out each one of the business, but let first be it be of a substantial size. And as a first step, we can look to list our offshore subsidiary to increase shareholders’ value.
Saket Kapoor
Yeah. Thank you, sir. I’ll join the queue.
Operator
Thank you very much. [Operator Instructions] The next question is from the line of Yash Dedhia from Maximal Capital. Please go-ahead.
Yash Dedhia
Hello, sir. Thank you for the opportunity. Am I audible?
Rajesh Bhatia
Yeah, you are audible.
Yash Dedhia
About the U.S. business, I wanted to know after the recent political change in U.S., how do we foresee the market developing over there for us?
Rajesh Bhatia
You’re talking about the U.S. markets or?
Yash Dedhia
U.S. market.
Rajesh Bhatia
So, we are very upbeat about U.S. market, with all the focus of the new government as we hear from the media and all that U.S. should get back to its core manufacturing also and stop importing the products from China and other jurisdictions. So I think, we currently also we are doing very well in the America market. As I said that, that we already have products facility over there. So, we surely look at more revenues coming from those markets and if there is a need to grow in those markets, we’ll take those decisions at an appropriate time.
I had said in the last call also that this 2,000, 2,500 tonne deficit for U.S. markets, which in the Americas, of course, not only U.S., in the Americas cannot be left like that over a very long period of time. So, at an appropriate stage, we would like to ensure that this deficit is met by way of producing these products in the local markets only. But today, because there is a surplus capacity both India and Americas, we are optimizing our overall company’s plant utilization, feeding the products to those markets. But on an overall basis, that’s the second largest market globally after Europe, Americas. Whether Trump or somebody else, I think one thing is certain that U.S., given its dominant position in terms of consumption will remain so and that augurs well for every business including ours.
Yash Dedhia
Yes, understood. And the prices of BOPET and BOPP in overseas market, how are they shaping up?
Rajesh Bhatia
As I had said that there is a competition from cheaper imports into U.S. from India. So, the prices are sort of being — are under check, As the India market will start to ease in terms of its demand-supply situations, the prices will be better. Given the fact that we are already operating at more than 100% capacity in those markets currently, despite the margin pressure, the pricing pressure in there, that itself speaks volumes that we are competitive in the market. And obviously, as a U.S. manufacturer, over the products coming from India, you definitely get a premium over there. But to the extent of the current premiums, no, I think there is scope for them to improve and it will improve over the next six months to a year time or so, because India market growth being at about 10% to 12%, that itself will mean that your propensity to export will keep on reducing.
Yash Dedhia
Reduce. Yeah. Understood. Thank you. Thank you for the opportunity.
Operator
Thank you very much. The next question is from the line of Chirag Singhal from First Water Fund. Please go-ahead.
Chirag Singhal
Thanks for the opportunity. Sir, I wanted to ask you regarding the capex. So in Q2, it’s mentioned that we have incurred total capex of INR348.8 crores and there is a breakup given. So, it’s mentioned that INR122.4 crores is spent towards miscellaneous maintenance activities. So, if I remember correctly, I think INR100 crore to INR150 crores per year used to be our maintenance capex every year. So, was there any one-off during the quarter? And for the full year, what is the total capex guidance? And if you can provide the split between growth and maintenance?
Rajesh Bhatia
So I think as of now, what we have on the capex side is already disclosed to you that what we spent on each one of those projects, so the two projects out of those four, actually three out of those four which are being completed in the current financial year itself. So, there is about $18 million to be spent on the Egypt PET facility project. There is about $1 million $2 million to be spent on our project for the CPP facility in Mexico. And then in Sanand also, I think maybe another INR50-odd crores would be remaining to be spent in terms of the existing projects which we are completing this year. Then there is this $126 million which we have to spend on Aseptic Packaging, which will happen largely in FY ’26.
So, if you see the growth in that debt from March to September, this being to the tune of about INR200 crores, while we have spent in H1 capex of — how much we spent on H1 capex? Just a moment I will give you. INR629 crores in total H1 capex. So I think, as I had said earlier also, our existing commitment amortization is about INR1,000 crores a year, which we are doing and new capex is being done, new debt is being taken for that. But in the absence of any large ticket capex, including this one. So, a large part of this $18 million plus $2 million plus INR50 crores in Sanand is coming to an end in this year. So, the next year, when we get into, I think there’ll be not more than $80 million of the capex what you need to carry to the next financial year. Is that okay?
Chirag Singhal
Yeah, got it. So basically, INR1,000 crores per year for this year and next year based on the ongoing projects?
Rajesh Bhatia
Yes.
Chirag Singhal
Correct? Yeah. And so out of this, how much would be the maintenance capex? Like what is the maintenance capex?
Rajesh Bhatia
Maintenance capex could be about INR200-odd crores.
Chirag Singhal
INR200-odd crores. Okay. So, on an annual basis, it will still be around INR200-odd crores, because I asked you because in Q2 the number seems very high.
Rajesh Bhatia
So, some of the capex which is not incremental like adding some of the balancing machines and all that also falls part of the — forms part of the maintenance capex only.
Chirag Singhal
Okay. So secondly, what I wanted to know from you is regarding the overseas business. So, if we look at the spreads in overseas, as if you look at the EBITDA margins, then there is no improvement in on a Q-o-Q basis. Now, if we look at the Indian data, then clearly the industry spreads and prices have gone up significantly on a sequential basis. So, you said that in overseas, it is because of the dumping mainly coming from India. Did I get that right?
Rajesh Bhatia
Yeah. As I said, overseas margins could be better, but because currently there is Indian exporters are exporting a lot to Europe as well as America. So, their prices are under a sort of check.
Chirag Singhal
So, is that the — like the Q2 trend is continuing even in the current quarter or you have seen some increase in the prices in your overseas operations?
Rajesh Bhatia
Q3 also, we are more or less at the same number.
Chirag Singhal
So despite this, do you believe that we’ll be able to do that INR2,000 crores plus EBITDA that you’ve added for the full year or there will be some change in this?
Rajesh Bhatia
No, I think so, we will get that because that number was — we were predicating that number on the basis of our Mexico CPP line coming into play, our PET chips in Egypt coming into play in November earlier, but now it is being delayed a bit and our incremental Sanand capacity coming into play, of which as I said that on a Q-on-Q basis, in Q4, we’ll be 20% higher sales volume in that. So, existing business plus, as I said, Q2, Q3 BOPED margins are 20% higher over Q1, Q2 and the lag impact of what we had in Q2 for the packaging business that will also be gone by. We will have higher capacity available for the Sanand for Q4. The PET chip capacity will come into play, which will give you the savings, which will may not give you a very large lower unless you want to sell outside, but it will give you a savings in terms of your raw material cost. So, INR2,000 crores is pretty much insight.
Chirag Singhal
Got it. Okay.
Rajesh Bhatia
[Foreign Speech]
Chirag Singhal
Correct. Got it. Got it. That would be it from my end. Thank you.
Operator
Thank you very much. The next question is from the line of Kaushik Poddar from KB Capital Markets Private Limited. Please go-ahead.
Kaushik Poddar
Yeah, just a minute, let me get off the speaker system. See, is there any other capex planned other than the last one that you had announced for the Aseptic Packaging at Egypt. Will there be anything more because we see that newer and newer capex come up unexpectedly, I guess. So, is there the full at least a temporary pause off of that?
Operator
Mr. Kaushik, sorry to interrupt you, but your voice isn’t clear. I request you to please repeat your question.
Kaushik Poddar
Yeah. See the last capex you have announced is for the expansion of Aseptic Packaging in Egypt. Is there any other capex that is on the table?
Rajesh Bhatia
No, sir. As of now, there is nothing which is on the table, which is approved by the Board and announced by us. Having said that, as I said earlier as well that you know, in the U.S. market, there is a clear gap today between what we sell and what we produce. So, as and when the management may take its view that we need to have because you know that gap which is 2,000 tonnes to 2,500 tonnes today, in two years time, except that gap maybe 3,000 tonnes, 3,500-odd tonnes. So, you will have to take a call in terms of producing it locally. So one, that is one area where I see that you know, as and when there is a management and the Board call to take that, that we need to produce this locally rather than importing it from other jurisdictions, that is one thing which I find that is a low-hanging fruit. Other than that I really don’t think so.
But having said that we keep on looking at opportunities in terms of where we can get a good project in the existing lines of business and all that, but I don’t think so there is any other than that possible in the packaging film. So, there are three businesses only; the Packaging Films, Flexible Packaging, and Aseptic Packaging. The Packaging Films business as of now, except for this gap in America looks pretty full. There are scope for improving the existing capacity utilization in Europe, in Nigeria, in Dubai, in Egypt. So, the focus is on that because there is existing capacity available which you will always give the first priority to use that to occasion.
The next one is Aseptic where we are already announced. So, the total capacity is going to be about 24 billion packs, of which currently we’d be selling about from India in Q4 at a run-rate of about 10 billion packs. So, FY ’26, we’ll see as to what extent we can utilize our capacity from there. But clearly, having shown the intent to increase that capacity from 12 billion to 24 billion packs, there is work to be done over the next few years in terms of absorbing and utilizing that capacity. Then our third large SBU is flexible packaging in which where we don’t have any international plans at all, as I’ve said many more times and currently, we don’t have any other plans to expand in India also in that.
Kaushik Poddar
Okay. And can we expect an EBITDA margin of 13%, 14% in the second half?
Rajesh Bhatia
EBITDA margins for Q2, I think we are targeting about 13-odd percent, between 13%, 13.5%.
Kaushik Poddar
That is for Q3, it’s for Q3.
Rajesh Bhatia
No, I’m talking about H2.
Kaushik Poddar
Okay. H2, yes, yes. Yeah.
Rajesh Bhatia
So, we are targeting 13%, 13.5%, let’s see.
Kaushik Poddar
Okay. Okay. Thanks a lot. Thanks a lot. Okay.
Operator
Thank you very much. [Operator Instructions] The next question is from the line of Marcel who is an Individual Investor. Please go-ahead.
Marcel
Yeah, but Bhatia, I have made some analysis on the finance cost and the exchange losses. So, this is a very important question for the finance health of our organization. See, since you are operating in some hyperinflation economy like Mexico and Nigeria, especially Nigeria, wherein the economy of the country is also going to be worse because of the oil prices dent from $85 per barrel to now $72. So, like you can see that in the Q1 of financial year ’25, the naira has divided by 17.5% and in Q2 divided by 9% and again till now divided by 2%. So, total at 28% devalued. In Mexico, in Q1 devalued by 10.6%, in Q2, 7.3%, and now 4%, total, 22% devalued.
So what I can see that in the last one and half years, we have lost about almost INR1,100 crores only in the exchange losses. So, what our management is doing to contain these losses. Otherwise, on the one hand, EBITDA looks very fine, but that entire EBITDA is eaten by the finance cost and the exchange losses. This is number one. So, like how to mitigate these losses of exchange losses is number one. And since these two — like even Egypt is also like passing through some trouble, but their exchange rate is little stabilized. So, more concerned is Mexico and Nigeria and you are further expanding in Mexico. So, how these loss will be contained because it can be contained only by having high margin from their product, number one.
Number two, in the finance cost, again, we are spending how much — we already spent about INR900 crore we spent in the last one and a half year. So, our entire profit has gone away and we are now having net debt of INR5,900 crore. So, ours is only one — one big — sorry, one packaging company, which is having such a high net debt. So, there is very urgent need to inject the funds. And nowadays, for example, every company is launching QIP. So, why don’t our management seriously consider to have either preference allotment or QIP launch so that some INR2,000 crore, INR3,000 crore, INR4,000 crores is injected in the company and the company should be made relatively half debt should be released, so that the finance cost can come down and otherwise whatever sales you maybe have, it is being eaten by the regularly by the finance cost and on the top these exchange losses. And these exchange losses are not going to be reduced in the near future because of the — like because of the economy situation, especially of the Mexico and then Nigeria, please.
Rajesh Bhatia
Okay. Thank you, sir. Thank you for this expansive question. [Foreign Speech] in terms of the losses of the currency and all that. [Foreign Speech] I’ll only ask you one thing. You know, when you are in India, [Foreign Speech].
Marcel
Rupees.
Rajesh Bhatia
[Foreign Speech]
Marcel
[Foreign Speech] it is devalued by 3%, 4% per year, not like Pakistan rupees, which is devalued by 40%. I am talking about the situation which is an exceptional situation emerging for a company in Mexico, [Foreign Speech] Egypt and plus this is Nigeria. Nigeria, exchange rate is now NGN1,669, which is like in the — on 31st March, it was only NGN1,306, against $1. So, what I am saying [Foreign Speech].
Rajesh Bhatia
[Foreign Speech]
Marcel
[Foreign Speech] because like my friend has been in the CIS country before. So, I know that like wherever this happens such an economy, even the local citizen whenever they get salary, they immediately convert to dollar. [Foreign Speech] Yeah, in terms of rupee, what I’m saying…
Operator
Sorry to interrupt Mr. Marcel, may I request you to please ask your question offline? We need to move on to the next participant.
Marcel
This is very important question. This is the most important question, ma’am, like so far anybody has asked the question. And so, so Bhatia sir, my question that like if the company makes some QIP at least the finance cost can be released at least to some extent to up to 50%.
Rajesh Bhatia
Sir, you are very right there. [Foreign Speech] India is not giving us the right value currency. [Foreign Speech] they were looking at enterprise valuation of 10 times to 12 times. [Foreign Speech]. India prices will obviously reflect those revised valuations. [Foreign Speech]
Marcel
[Foreign Speech] because they are in losses. So, like you cannot go for in the — at least in the next two years until the exchanges stabilizes or [Foreign Speech] but those solutions are not available for next two years. So, at least India [Foreign Speech].
Rajesh Bhatia
[Foreign Speech] These are important markets for us. We are a long-term player in this. It’s the same situation [Foreign Speech].
Marcel
So, I am not citizen of Nigeria, I am a citizen of India. So, we need to get ultimately into dollars. [Foreign Speech] by doing some better hedging derivatives.
Rajesh Bhatia
[Foreign Speech] They are notional losses only. They are only translation losses, sir.
Marcel
[Foreign Speech] so that is the real loss, whenever we dispose of the entity. So, the point I’m providing is that if we can increase the margin or the gross profit from the product flow of Nigeria, Mexico, Egypt, then at least [Foreign Speech] I’m only alerting very, very, very, very serious question, sir.
Rajesh Bhatia
[Foreign Speech]
Marcel
[Foreign Speech] at least if the promoter can make some lot or some money is injected in the company, at least our finance cost which is a real outgo can be reduced.
Operator
Thank you very much. [Operator Instructions] The next question is from the line of Aman Kumar Sonthalia from AK Securities. Please go-ahead.
Aman Kumar Sonthalia
Sir, we have developed some very high value BOPP film in Hungary. So, can you throw some light on this product and how it can scale up and what is the value addition in this product?
Rajesh Bhatia
I think we will have to connect offline on this to give you more perspective, [Foreign Speech] so you do more of the value-added films. [Foreign Speech] but we are happy to share details with all this offline.
Aman Kumar Sonthalia
And sir, the flexible business, right now, FMCG company they are not doing. There is virtually very little growth in the FMCG company. [Foreign Speech]
Rajesh Bhatia
Flexible packaging business, [Foreign Speech] that is a steady-state business for us where we are neither growing nor shrinking. We are only trying to improve our product profile to more of pouching, but less of roll form where the margins are higher. So, we are not — you would have seen over the quarter the volumes in that business are closer to about 20,000 tonnes a quarter. So, we are not — we don’t have a surplus capacity, much surplus capacity. And we are not planning any further capacity to take that business forward.
Having said that, [Foreign Speech] cut-throat competition. Some of our large customers, I will not name them when they work in India market and they work in the world market, their behavior thing with respect to onboarding a vendor based on just the pricing is very much different. So, these large customers will never onboard a vendor who is not a renowned name in the converging industry and all that, but somehow in India, their behavior is different. It’s more price-sensitive market. So that is why the competition in some of the products is much more. So, we are looking to realign our portfolio in that business, both domestic and in the export market. You will not see much volume gain and all that over there. We are only saying [Foreign Speech].
Aman Kumar Sonthalia
Film Chamber, why should — we are not focusing more on value addition. [Foreign Speech]
Rajesh Bhatia
Absolutely right. We had ’22 and ’23 one of the best years for the packaging films industry. During those years, each and everything was selling. So, when everything and each and everything is selling and that too at a good price and all that, your focus is what. Your focus is to increase the throughput so that you can produce and sell as much as possible. It’s not only me, it’s everybody else in the industry is that ’24 was a slightly difficult year after Russia-Ukraine crisis. And after the raw material prices corrected sharply in FY ’24 because of the supply-chain stabilizing and that brought in a lot of stock losses because after raw material prices, different jurisdiction, [Foreign Speech].
So, those were difficult years are but after that things are quite good, normal. [Foreign Speech] both India and overseas, Polyplex, Jindal Poly, [Foreign Speech] SRF, you can see everybody’s profile, everybody has done better performance in Q2 versus Q1 and in Q1 versus Q4 of FY ’24. Now having said that, this is the time when we said we started that exercise in FY ’24 where I said that we were looking to the value-added — more value-added products. And in the years to come, surely we are oriented towards that and you see much higher throughput of the value-added products in FY ’26 and beyond.
Aman Kumar Sonthalia
Sir, one last question, [Foreign Speech].
Rajesh Bhatia
[Foreign Speech]. There are no non-core assets, which we will look to sell it off and neither there is a mindset of that sort of, the mindset is grow, streamline, go for better value-added products and improve your margins, distinguish yourself from the from the normal industry products and give you option to the customers for the higher value-added products. [Foreign Speech] all growth-oriented and revenue maximization and profit maximization.
Aman Kumar Sonthalia
Okay, sir, thank you.
Operator
Thank you very much. The next question is from the line of Saket Kapoor from Kapoor Company. Please go-ahead.
Saket Kapoor
[Foreign Speech]
Rajesh Bhatia
Decline, the only reason for this decline is the capital investment that has been made. [Foreign Speech]. Q1 was the first month of that child birth. Q2 is the second month of that child birth. [Foreign Speech] 100% of capacity, it comes and hits your P&L. So, as and when those projects, those investments which have been made are utilizing a higher capacity utilization level. So obviously, your EBITDA will become higher, which will offset the higher interest cost. The only difference is when you set up a project to complete the project, the interest cost comes and hits you on the day one of 100% of the capacity and your capacity utilization gradually only goes up. [Foreign Speech] unless the accounting policies allow, [Foreign Speech].
Saket Kapoor
This is clear that the [Foreign Speech].
Rajesh Bhatia
[Foreign Speech] because depreciation is for a much longer period of time. [Foreign Speech] but the incremental impact is much less. [Foreign Speech] So, after depending on the useful life of assets, 4% to 5%, annualized, [Foreign Speech] because I mean, currently let’s say Egypt, local interest rates, Nigeria, local interest rates, India, 9%, 10%, but in some of the other territories, costs are also higher. [Foreign Speech].
Saket Kapoor
[Foreign Speech]
Rajesh Bhatia
[Foreign Speech] We’ll tell you offline.
Saket Kapoor
For this year, what is our current maturities, standalone? Or what is our cost of funds?
Rajesh Bhatia
[Foreign Speech] Average cost of borrowing should be around 10%.
Saket Kapoor
10%. You mentioned 10%?
Rajesh Bhatia
Yes, sir.
Saket Kapoor
What is our current rating?
Rajesh Bhatia
Our current rating is — long-term rating is AA minus, CRISIL and short-term rating is P1+, which is the highest-level of rating.
Saket Kapoor
Okay. And current year maturity is INR1,000 crores? [Foreign Speech]
Rajesh Bhatia
[Foreign Speech] outlook of our ratings is stable.
Saket Kapoor
[Foreign Speech] We are unable to value the company correctly because of these factors only. So, we should work it out. What is the role of E&Y in our company? Do we have them as an IR or consultant, Ernst & Young?
Rajesh Bhatia
They do the internal process audit for all our businesses, all our units.
Saket Kapoor
Okay. And for IR, did we hire an external IR?
Rajesh Bhatia
For IR, we have PwC, but I think we’re looking for [Foreign Speech].
Saket Kapoor
Okay. Thank you and all the best.
Operator
Thank you very much. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Surajit Pal
Yeah. Thank you, ladies and gentlemen, for the engaging questions. We will soon have the transcript of this call on our website www.uflexltd.com. We look-forward to speaking to you again in the coming quarters.
Thank you, and have a great day.
Operator
[Operator Closing Remarks]