UFLEX Limited (UFLEX) Q3 FY22 Earnings Concall Transcript

UFLEX Limited  (NSE:UFLEX) Q3 2022 earnings concall dated Feb. 12, 2022

Corporate Participants:

Yusuf Nasrulla — Investor relations

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Analysts:

Prashant Sharma — Quantum Securities Pvt Ltd. — Analyst

Yash Dhantavadiya — Dante Equity Research — Analyst

Jatin Kumar — Alpha Capital — Analyst

Kamaljeet — — Analyst

Saurabh Sharma — — Analyst

Shubham Agarwal — Aequitas India — Analyst

Chirag Singhal — First Water Capital — Analyst

Ayush Jalan — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Q3 FY ’22 Earnings Conference Call of UFlex Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Sharma from Quantum Securities.

Thank you and over to you, Mr. Sharma.

Prashant Sharma — Quantum Securities Pvt Ltd. — Analyst

Thank you, ma’am. On behalf of Quantum Securities, we welcome you all to Quarter Three FY ’22 Results Conference Call of UFlex Limited. We thank the management for giving us the opportunity to host this call. The management is represented by Mr. Rajesh Bhatia, the Group CFO; and Mr. Yusuf Nasrulla, Investor Relations.

I now hand over the call to Mr. Yusuf Nasrulla. Over to you, Yusuf.

Yusuf Nasrulla — Investor relations

Thank you, Mr. Prashant Sharma. Good evening, everyone, and I would like to welcome you to the third quarter FY ’22 earnings call of UFlex Limited. On the call today, we have our group CFO, Mr. Rajesh Bhatia. Our discussions may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that can cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements which reflects our opinion only as on the date of this presentation.

Please keep in mind that we are not obligating ourselves to revise the publicly released result of any revision to these forward-looking statements in light of the new information of future events. I would like to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner. Let me highlight a few achievements of this quarter. UFlex’s net profit jumped by 96% year-on-year to INR313.2 crores. Net revenue rises by 64.6% to INR3,474.3 crores. EBITDA rose by 48.5% year-on-year to INR618.7 crores. We have the highest ever quarterly production and sales volume.

I would now like to invite Mr. Rajesh Bhatia, Group CFO. Over to you, sir. Thank you.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Thank you, gentlemen, for taking your time out on the weekend to be on this call. I’m sorry that we should have sort of planned so that we could have this call on the weekday just to get a better audience. And we can take care of this definitely in the times to come. But sometimes this becomes inevitable, so please excuse us for that. I think you — all of you would have already gone through results. It’s a fairly decent financial performance.

Notably, it is a 38% volume growth, which has actually meant that all the overseas and Indian packing — packaging films capacities, except for Nigeria, which was at about 60%, all of them are above 95% utilization levels, including the enhanced capacities, which came on stream in the last financial year and this financial year. And I think the scope for any increase in the volumes now will come from debottlenecking from existing plants, which we normally do because once the warranty periods are over, we are able to increase our throughput by changing by running the plants at a much higher speed and also future implementation of our project in Dharwad, CPP line in Dubai and our Sanand plant expansion, doubling the capacity there of the aseptic packaging plant to about $7 billion tax a year. So we also had during this quarter, the raw material prices continue to increase.

And on a year-on-year basis, depending on the territory we are in and depending on our contractual commitments from the suppliers in terms of the prices. So the continuous pressures on the raw material pricing side is there in this quarter itself. Of course, on a year-on-year basis, it is as high as 80% in certain territories. And in India, if I were to say, it’s about 50% increase in the raw material prices for the pack films and about 36% increase for the BOPP raw material prices.

So overall, but as I said that — this — we even had a similar impact in the last quarter, but we changed our strategy where we — last quarter, we were always happy about that we have order book position, which is 1 month, 2 months. We changed that strategy to book for the shorter durations as the raw material prices are rising. And we suffered in the last quarter because of this because even though the volumes were higher and selling prices also were higher just because we had — we were carrying a higher order book.

We couldn’t convert that buoyancy into our higher profitability margin, but that position will be corrected and we started booking for shorter durations, our order book position. And that’s what coupled with — if I see on a quarter-to-quarter basis, the raw material pricing is still manageable, maybe about 3% to 6% range generally. So — and driven by a larger volume, which led to a higher — a much better absorption of the overhead. So EBITDA for the year — for the quarter is higher at about INR619 crores, roughly about 18% of the top line.

But if I were to negate the impact of the raw material price rise and just take the volumes, I think the EBITDA is close to about 20-odd percent or so on a constant raw material pricing basis. The working capital, the liquidity position of the company continues to be very good. We have — as we’ve improved our production, obviously, the working capital requirements go up because of the higher prices, higher production levels, and we’ve hardly borrowed from the market — from the banks to fund those.

And lastly, all of that, we’ve tried to ensure that we use our liquidity to — for the enhanced working capital requirements for both for the extra volumes and extra pricing that is we had to pay. Crude already, we feel that continues to spurt it’s — the brand as we speak is about $95. So the pressure on the raw material prices is continuing, but I think equally notable is that all of that has been down and rather there has been a margin expansion in this quarter just because we changed the policy to not to have a very large order book and move to a smaller size of the book.

The demand levels in BOPP and the pack industry continues to be good. In fact, in the packaging space also, this quarter, we had — we had the higher volumes marginally. But there also, the prices went up dramatically. But in the packaging space, the EBITDA margins continue — still continue to be under pressure, though it did a bit better than last year, but still not a happy situation. And it’s only the packaging films and the aseptic packaging films category, which is continuing to give us the desired operating and EBITDA margins.

And that’s what has led to almost about 50% increase in EBITDA on a year-on-year basis and almost on a — even on a quarter-to-quarter basis, if we see EBITDA increase is about 46%. The PAT is up about 96% on a year-on-year basis and about 84% even on a quarter-to-quarter basis. So overall, again, a very decent performance set of numbers, 38,000 volume growth overall all across. And I think the next round of larger growth will now come from the balance we have in Nigeria, where we are still operating at about — for the quarter, we operated at about 60% capacity. So we spoke there. Rest of the plants, as I said, that almost are at about 95%. So between 95%, we can take it to about 105%, 110% when we fully debottleneck the machines.

So there is a bit of an upside there. But as I said, the next round of upside will now come from these three expansion projects, which are getting completed in FY ’23. Aseptic packaging is going to be getting commissions in probably — we’ll try for this quarter, but if not this quarter, the first quarter, for sure, Dharwad will happen in Q3 and the Dubai CPP will happen probably in Q1, that’s what we will try to prepone it but if there are slippages in terms of the travel restrictions and all that, probably another one quarter as a fallback. So that’s basically the highlights for the — for this quarter.

And I’m happy to take any questions you may have on our financial performance — on our performance in this quarter.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Yash Dhantavadiya [Phonetic] from Dante Equity Research [Phonetic]. Please go ahead.

Yash Dhantavadiya — Dante Equity Research — Analyst

Hi Mr. Rajesh Bhatia, sir. Firstly, I’d like to congratulate you and the entire UFlex team on a stellar quarter. So my first question is with the rising crude oil prices, since this quarter, you’ve seen some passage of the rising input cost. I want to understand that will we be able to continue this trend of passing on the input costs?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think as I said that last — ever since pandemic has happened, the demand momentum continues to be very strong, and that’s where till date, we’ve been able to pass on the costs and also improve the margins on an overall basis because typically, you may find that EBITDA margins may still on a year-on-year basis, you may still find a bit lesser because if the top line is growing by 65%, while the volume growth is only 38%, the rest of it has come from price increases, which is basically driven by the higher raw material cost. So your ratio of EBITDA to turnover will always look a bit skewed. And that’s why I explained that if I were to take it at constant prices, EBITDA margin is about 20%, which is fairly decent. And based on the present demand dynamics today, passing on the higher raw material prices does not seem to be much of a concern.

Yash Dhantavadiya — Dante Equity Research — Analyst

Okay. Also, you said that you reduced the order book time, right, timeline before you used to take orders for I think around one or two months. Can I understand how you’ve reduced it and by how much?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So depending on the territories in certain cases, now we’re doing only a weekly order book position. In certain cases, we still do a fortnight. We still do in certain territories for one month. Also depending on where the demand concentration is be deciding as to how do we do that. But where we have a much larger demands coming in, in those jurisdictions, we largely reduce it to week or 10 days kind of time as against to 30 to 60 days — 30, 45, 60 days going as much as we’ve been going over here.

Yash Dhantavadiya — Dante Equity Research — Analyst

And the raw material pricing, how is that updated for your company? Is it per week or monthly?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So the raw material prices are linked to the index for a month.

Yash Dhantavadiya — Dante Equity Research — Analyst

Okay. So, it is monthly?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Mostly, it is — mostly, it is that. And in case of homopolymer, which is used in BOPET, they are more or less spot, you can say. Spot means every time I’ve given orders, suppose I give an order for the next 15 days, so the price validities for the next 15 days. And then when the — so — when the prices are going up continuously, from that side also, you have to be cautious that you don’t have stopping at a much higher cost because so long as you are able to perform that extra cost to the customer.

So that risk, at least you don’t want to keep it to yourself that you stock or you commit yourself for a quarter or for a larger duration. And then the spot raw material prices fall and you still committed at a higher level, which will erode your margins. So because the demand momentum is there and the market is able to absorb the higher prices as the higher prices are declared by our suppliers. So even on our side for our raw material sourcing also, we are not committing for very long.

Yash Dhantavadiya — Dante Equity Research — Analyst

Also, let’s — one more. I have a hypothetical question if that is okay. My question is, if crude oil crosses, let’s say, $100 per barrel, as per the present demand situation, do you think we’ll be able to continue the operating profit margin of, let’s say, around 17% to 18%. And if you could give guidance in this way, it would be very great because right now, the way crude oil is moving, it really looks like it’s ready and obviously, the inflation crisis or I don’t know how to put it, but whatever is happening in the crude oil market and how inflation is increasing day by day, would you — do you think these operating margins, I think they are a 17.55% this quarter. Do you think they are sustainable and they will be — you -will be able to sustain these margins even if crude oil crosses $100 per barrel?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So as I said that the price today, the margin — so I have to look at the margins in the absolute terms now. Now if from here the raw material price rises, say at about 20%, and that 20% added — gets added up to my revenue and my EBITDA margins will look a bit skewed. But in our industry, the margin per se is less of a monitoring factor. What we look at is that per kg or per ton, what is our EBITDA? And so long as that number is being maintained despite the higher prices while the EBITDA to turnover ratio may — you may find it a bit skewed.

But I’m looking at maintaining my EBITDA per kg or EBITDA per ton margins, which is where our concentration is, rather than looking at 18% EBITDA margin or so. So the raw material prices from here go on, say, by another 50%, which I have to pass it on. I know for sure that my EBITDA margin at that stage would not be surely not be 18% or so would be less, but if I see my overall quantum of that EBITDA, I think that’s where our concentration is. That’s where we want — that’s what we want to maintain.

Yash Dhantavadiya — Dante Equity Research — Analyst

Yes, sir. Sir, one last question. I’m sorry for taking so many questions. But my last question is regarding the debt. When I think the capex is going to get finished this financial year, hopefully.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Not this financial year, it will go into the next financial year. Let’s say, Q2, Q3 also, it will go to.

Yash Dhantavadiya — Dante Equity Research — Analyst

But, this financial year Q2 or next financial year Q2, you’re telling me?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Next. Next. Next financial year.

Yash Dhantavadiya — Dante Equity Research — Analyst

Which expansion is — I think Sanand is supposed to.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Dharwad.

Yash Dhantavadiya — Dante Equity Research — Analyst

Okay. Dharwad will take that much. Do you think we hit the debt ceiling or do you think there’s more on that line to come in with the debt?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I see the long-term debt as of the 31st December is about INR2,500-odd crores. So I think if I look at long-term debt and another INR1,000 crores is the short-term debt, which is largely — which is basically all of the working capital. So I see that probably a feeling of, say, long-term debt saving of about INR3,000 crores.

Yash Dhantavadiya — Dante Equity Research — Analyst

So, when can you give a guidance that when — which quarter do you?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think Q3 — Q3 somewhere.

Yash Dhantavadiya — Dante Equity Research — Analyst

Q3 of next year?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Q3 of next year. So that’s when you think [Indecipherable] where we complete the.

Yash Dhantavadiya — Dante Equity Research — Analyst

The capex cycle.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

[Indecipherable] expansion, yes.

Yash Dhantavadiya — Dante Equity Research — Analyst

Okay. Thank you so much, sir. And I would like to congratulate you and the whole team again. This was a really stellar performance, and I hope the stock starts reflecting the performance in terms of its price. Thank you so much.

Operator

Thank you. The next question is from the line of Prashant Sharma from Quantum Securities. Please go ahead.

Prashant Sharma — Quantum Securities Pvt Ltd. — Analyst

Yeah, thank you so much for the opportunity. And sir, congratulations on good set of numbers. Sir, basically, I want to know about your pricing power. So let’s say the raw material prices start decreasing — price of these raw materials start decreasing. Now since you have shorter contracts, can your customer demand lower pricing? What I mean to say is do we have some pricing power to offset it for some time?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Difficult thing because whatever our contractual commitment from our customers are also, we’ve not seen that people backing out from there. So it suited us to move from a higher number of days to a lesser number of days given that the raw material — raw material prices were rising. But we rarely, rarely seen any customer or supplier not sort of meeting their commitments with respect to the committed offtakes by them. So if we are taking a lower order position book as of now, when the prices continue to fall, I think we may change our strategy to look at a higher period book again.

But yes, you will have to assess that situation. And it might so happen that you may have a lag of one month before you actually get to see whether — whatever is now the fall in prices is that for real or that is just transactory. The same thing what’s happening in the stock market. We always see that the market comes down by 5% or so and then again it gets back.

Prashant Sharma — Quantum Securities Pvt Ltd. — Analyst

Right.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So similar thing we are witnessing in our raw material sort of levels also. So as of now, we are happy having a shorter book. But that strategy will always be live to the situation in terms of our reaction.

Prashant Sharma — Quantum Securities Pvt Ltd. — Analyst

Sir, my next question is regarding your capacity utilization. So what I want to know is how much of more sales can be — extra volume can be generated from our existing capacity, given that we already have a 38% jump in the volume numbers?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So as I said that this quarter, we have other than Nigeria, we almost hit the ceiling. So the new capacity, whenever you set up the plant initial for a year or maybe a little longer period, you operate the plant as per supplier specifications and then beyond that period, then your warranty is over, when you tested the machines fully, you can increase the speed of the machine because whatever all these machines in our industry are all European machines. So normally, they will have an extra built-in for about another 10% to 15% or so. So that’s the optimization you can do once you hit the feeling as per the designated capacity by the supplier. So in the areas where we are already, say, 95%, probably another 10% we can go over and above our designated capacity as of now.

Prashant Sharma — Quantum Securities Pvt Ltd. — Analyst

Okay, okay. That’s all from side. Thank you, sir.

Operator

Thank you. [Operator Instructions] The next question is from the line of Jatin Kumar from Alpha Capital. Please go ahead.

Jatin Kumar — Alpha Capital — Analyst

Sir, my first question would be on the current spreads in this quarter, the Q4 quarter, half of quarter has already passed. So any guidance on how are the spreads putting up in this quarter versus how were they in the previous quarter?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So this quarter, as of now, continues to be extremely good.

Jatin Kumar — Alpha Capital — Analyst

So is it similar to last quarter or are they even better than the last quarter?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Very difficult to say. But as of now, I can say slightly better than the last one.

Jatin Kumar — Alpha Capital — Analyst

And sir, any long-term color on, say, two, three years’ color on how spreads do we — how much spread do we expect? Do we expect to hold the current spread stay or do you expect them to normalize a little bit going forward [Indecipherable]?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think they should normalize a bit. As of now, the whole world is living on higher prices, higher inflation, higher profitability, whichever — whichever sector you take it. And even in the sector where the demand is at straining like automobile and all that, still they are riding on higher prices and still delivering good numbers. So today, the situation continued the crossover to be higher prices, higher inflation, and higher margins than I think I saw one presentation where they said that this is probably the first time the Corporate India, the top companies have a net profit margin of above 10%, which probably hasn’t happened so far.

So I think this concept of shortages, this concept of supply chain disruptions, higher freight, which clearly seems to be a case of not so much of a capacity concern, but the freight price is going up by a factor of 10 times since pandemic, while the other commodity prices may have only gone up by 30%, 40%. I think — I think they’ll be — in the next couple of years, they’ll be normal — or return to normalcy. This does not seem to be sustainable for a very long run. Somewhere — whenever in any industry if the margins continue to be very high, obviously the new investments flow in there. And the extra capacity which gets built up during the high times always takes care of health in normalizing the situation.

So yeah, next two years or so, definitely, the normal time should return, whether it is because of the new capacity that gets created. Even today, the new capacity that gets created has raw material sourcing issues because now the free flow of raw materials from one geography to another geography is possible. But then, the cost at which you are now going to do it is — is ridiculous and sometimes you’re better off buying locally rather than getting supplies from countries like China or Indonesia or Thailand.

So I think those new realities are setting in for the new capacity. And that has to be — that has to be seen. Having said that, today, the raw material people also are making a much higher margin than what they were pre-pandemic and so there will be capacities that may come up in that space itself, which will, again, rationalize the prices. But if the freight prices remain so high that this equally been where the capacities are and the consumption are will remain a challenging issue.

Jatin Kumar — Alpha Capital — Analyst

Sure, sir. And sir, we are saying that we have reduced our contract duration as EBIT clients, we have moved to shorter duration. So any impact on volumes due to this change in policy or volumes you expect to stay strong only?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

No. So long as demand is robust. So all that I do is now. So if there is a customer A and he comes to me, so I tell him and he wants 200 tons. I tell him that I’ll as of now book you 70 tons only, which I’ll supply you in the next 10 days or so. And we’ll have another 70 tons, which you can book after or even if you want to book it that way, fully, then the pricing will always be subject to sort of change. So as I said that the demand side is there. So that’s where the 38% volume growth has been achieved. So as of now, on the demand side, not much of pressures are seen.

Jatin Kumar — Alpha Capital — Analyst

Sure, sir. Thank you and all the best.

Operator

Thank you. The next question is from the line of Kamaljeet [Phonetic], an Individual Investor. Please go ahead.

Kamaljeet — — Analyst

Thanks sir for taking my question. And congrats for the great set of numbers. Sir, my question is what is the R&D expenditure to the sales ratio?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

We can give you offline.

Kamaljeet — — Analyst

Okay. Sir, just a few months back, there is a patent UFlex has filed. So what will be the opportunity size for this particular patent? And how — when it can be materialized?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I don’t know which patent you are talking about?

Kamaljeet — — Analyst

The chemical one, 340937 something — 903.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

That has very limited opportunity at this point in time, that’s what we see.

Kamaljeet — — Analyst

Okay. And sir, the — recently, I think that you are supplying some packaging solution to the ISRO as well. So what will the opportunity size in that particular area?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

All these are — all these are niche products, but the market sizes continues to be less. They are more like your showcasing of your capabilities in terms of some of the very smooth serious stringent requirements for some of these organizations that you may need so ISRO not a bulk consumer of these. But then even if you sell small quantity for some of the specialized products, the margins will always be better because of the small quantity. And whenever you create specific as per their requirements, obviously, you will drive higher pricing as well. But as I said that there is no volume gain here. It’s more of a showcasing of your technical capabilities as to what you can deliver.

Kamaljeet — — Analyst

Sir, in last call, you mentioned about some delay in supply chain, so whether it has been improved significantly or is it still the situation is there?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

No, the supply chain issues continue to be there, albeit they are much better as compared to Q1 and Q2, where the raw material availability itself was becoming a challenge. The availability is no longer any challenge. But now the challenge has shifted to the landed cost of these raw materials, depending on your jurisdiction from where you were sourcing these and landed prices in some of the territories like Mexico or U.S.A. or Europe, which are — which were where we were importing some of these items. So the focus is now more on the landed cost of these price inputs rather than any availability issues.

Kamaljeet — — Analyst

Okay. And sir, whether our payment receivable will be improving in the forthcoming quarters or the receivable versus the payment mechanism will be in a balanced state because?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Payment mechanism continues to be the same. Payment mechanism, there is — there are no.

Kamaljeet — — Analyst

Okay.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

It has not got any effects of that because your customer profiling is almost the same.

Kamaljeet — — Analyst

Okay. Sir, in this particular financial year, how many patents we have received or there are – we have filed or we are getting some patent.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I’ll not — I don’t think so any patent we have received. If there are any filings, I’ll have to get back to you offline.

Kamaljeet — — Analyst

Thank you, sir. Thank you.

Operator

Thank you. The next question is from the line of Saurabh Sharma [Phonetic], an Individual Investor. Please go ahead.

Saurabh Sharma — — Analyst

Hello Bhatiaji. First of all, congratulations on.

Operator

Sorry to interrupt you, Mr. Sharma. Your audio is not very clear. May I request you to come into handset mode and speak a bit louder?

Saurabh Sharma — — Analyst

Is this any better?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Yeah. Please go ahead.

Saurabh Sharma — — Analyst

Yes. Hello Bhatiaji. So congratulations on the numbers, especially the bottom line that the company has delivered, it is quite heartening to see in excess of 20% margins on the overseas operations, overseas packaging films operations, and that brings it more in line with our peers. So that is really heartening to see and congratulations to the entire team and you as well for completing this feat. My first question, sir, is about the gross and net debt on — as on December ’21. Could you please share that number if you have it kindly?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So the long-term debt as on 31st December is INR2,500-odd crores. And long term and short term put together is INR3,500-odd crores.

Saurabh Sharma — — Analyst

And is that the gross and net number? Are they the same [Indecipherable]?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So the cash on hand is about — that is a net number INR3,540 crores, about INR700 crores is the cash in hand.

Saurabh Sharma — — Analyst

So sir, considering the cash generation that is going to happen and things, of course, are looking fairly all right now, are there any plans to distribute the cash to shareholders yet?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think as of now, though we’re looking at completing those projects. And as I said, even during this quarter, the cash in hand has improved by close to about INR100 crores. We’ve not borrowed much from our working capital bankers rather we used the cash available in the system to fund your higher working capital requirements driven by the higher raw material prices and higher receivable levels because both of them get infected. So we’ve not looked at any borrowings — substantial borrowings in this quarter. If you say on a net basis, the increase in the borrowings between the last quarter and this quarter is only about INR125 crores net worth.

Saurabh Sharma — — Analyst

Okay. Okay.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

And we are almost close to sort of finishing expansion projects so.

Saurabh Sharma — — Analyst

The reason, Bhatiaji, I asked about cash distribution is from a technical perspective, from the market perspective of the stock price. What happens usually is that.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

This is a different comment on this call about any management policy matter on the distribution.

Saurabh Sharma — — Analyst

Okay. My only limited point, Bhatiaji, will be about the kind of shareholders that the stock attracts. There are different kinds of investors. There are people looking for capital gain. There are people looking for distribution in terms of dividends also. And there are many institutions, long-term players, you can take an insurance company, you can take long-term institutional investor, mutual funds as well for that matter. There are several dividend yield schemes also like you would know and that kind of increases the marketability of the stock. So that was my only limited point.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think very good point. We will definitely take that into account. Your thought process, we will definitely keep that in mind.

Saurabh Sharma — — Analyst

My second question is about Nigeria plant, Bhatiaji, and you said that its operating at around 60%, 65% of nameplate capacity right now. So are there any reasons for not complete utilization because as I understand, Nigeria is not short of raw materials, right? And demand is not a problem really.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

[Foreign Speech] Nigeria raw material also we have to get from rest of the world because [Foreign Speech] so, in Nigeria, raw material also has to be sourced from outside.

Saurabh Sharma — — Analyst

So is that the constraint in Nigeria or are there any political considerations?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

No. There is no political constraint or such. To begin with, we had constraints on the port capacity limitations, which was resolved then we got into the factor of higher phase because we knew in Nigeria, the demand is going to be — which will take about 50% of the plant capacity and rest of the 50% you will look to export, and that was also considered natural because that would take care of your dollar requirements in Nigeria as well. But the higher freight costs are limiting the exports. From there, you have to export to America or any other jurisdictions, so that viability as of now is a bit of a concern.

Saurabh Sharma — — Analyst

Exports in general, if you look at export-oriented firms that are operating in India, they are doing quite well in terms of exporting their product all across the globe. So this is a Nigeria specific problem export because otherwise, exports do not seem to be a bit — too much of a problem globally so [Indecipherable].

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

But exports [Indecipherable] because even the Indian companies who are looking at exports are also constrained by higher availability and the freight costs as well.

Saurabh Sharma — — Analyst

But do you see a difference — in terms of export, do you see a difference between BOPP and BOPET films? Are BOPP doing better — in volumetric terms and quantitative terms, is BOPP better than BOPET?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think almost.

Saurabh Sharma — — Analyst

My understanding is that BOPP is doing quite — in volumetric terms, BOPP exports from India are doing much better than BOPET. So is that something that you have observed differently?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

[Foreign Speech] In BOPP, what had happened was, as I said, whatever supply constraints I spoke about, which were there in the last couple of quarters. They were more on the BOPP raw material availability rather than the PET raw material availability. So probably, that has led to higher exports of BOPP. So some of the plants in the Western world and the Europe probably didn’t have enough raw material to operate at the higher — their peak capacity. So they had to curtail their production while India had availability. So there was obviously export potential from here itself, which has happened.

Saurabh Sharma — — Analyst

So India is better in terms of raw material availability right now?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Yes. Yes. Yes. India is.

Saurabh Sharma — — Analyst

For both BOPP and BOPET?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

BOPET is not an issue across whether in India or elsewhere.

Saurabh Sharma — — Analyst

And one more question, Bhatiaji, I had about this — the exchangeability of, let’s say, BOPET and BOPP, so I — what I — it’s a technical question that I have no idea about in terms of are the same kind of machines — can the same machines be used to produce both kind of prints?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

No, no, no.

Saurabh Sharma — — Analyst

It’s only raw material.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

[Indecipherable].

Saurabh Sharma — — Analyst

They cannot be remodeled or reconfigured to produce?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

No.

Saurabh Sharma — — Analyst

Okay, alright. Thank you Bhatiaji. I’ll come back in queue. Thank you.

Operator

Thank you. The next question is from the line of Shubham Agarwal from Aequitas India. Please go ahead.

Shubham Agarwal — Aequitas India — Analyst

Yeah, thank you. And first of all, congratulations to the entire team of UFlex. Sir, my first question was relating to the industry. So I just wanted to understand over the next 18 to 24 months, what kind of capacities that we are expected in BOPET and BOPP to come up globally? And how would it impact the demand scenario and margin, if any?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think in India, we are likely to see a higher capacity expansion over the next two years in BOPP and BOPET. Globally, the capacity increase does not seem to be a challenge given the announcements sort of made so far. So in India, as I said, India can absorb additional because now the plant sizes are larger. [Foreign Speech] so India can absorb on plant each other — each year for this and another plant for export purposes. But if there are more than two plants of BOPP and BOPET coming on stream, obviously, [Foreign Speech] which can sort of dampen the industry position.

Shubham Agarwal — Aequitas India — Analyst

Okay. So basically, you are saying for each BOPP and BOPET 2 lines are more than enough as of now in India per year. That is total four lines, more than that would be a challenge?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Yes.

Shubham Agarwal — Aequitas India — Analyst

And then secondly, I just wanted to understand like given the demand scenario currently is very robust. I wanted to understand which are the key sectors where you are looking at a very good demand coming from?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think I’m told it’s across all the segments, but basically because our things mostly go into the food packaging, and that’s where — so there are e-commerce activities on where if you — which is increasing and pandemic has really fueled the e-commerce business, which actually consumes. So apart from the primary packaging, the secondary packaging consumption, if — like if you have something shampoo, which you’ve ordered. So the shampoo, the first, the plastic bottle in which or the pouch in which shampoo or that liquid is then on the top of it, they’ll pack it in a bubble wrap or any other similar material.

And then there is a cardboard box on the outside. So it’s not only your polyester or BOPP, which goes into the plastic but also the secondary packaging, which is poly, again, another subset of the polymer chain. So all this is really helping the demand side. Also on foods, vegetables and all that now even when you order on e-commerce, each piece now you find is wrapped in — I’ve seen of these in my house, even when I order a papaya, it’s packed outside either in — either in the poly — while polycoating or sort of what do you call that net sort of nylon and all that material.

So I think we’ve seen — because we largely — our consumption is largely for the food packaging. So I see that the demand is growing beer, the demand is going in the e-commerce market all across, even we don’t make those PET bottles but when I look at some of the PET bottom supplier companies and they also happen to be sometimes our raw material suppliers also. They’re doing exceeding well. There’s so much of demand for the PET bottles today, much more than it was pre-pandemic. So everything which is packed is more in demand now.

Shubham Agarwal — Aequitas India — Analyst

Correct, correct. No, sir, fair and so if I take this question slightly ahead, currently, we are looking at a situation where substitute of packaging, whether it is aluminum or whether it is tin or whether it is paper, everything is on fire. So do you see a situation where some of the product, which, let’s say, are that in aluminum or tin gets transferred to BOPET or BOPP and if that has happened?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

So I think it depends on the product. So the flexible packaging is innovating enough to at least migrate from the rigid plastics to like your shampoos, your handwash, and some of the other liquids, the standup pouches. All that migration is where we see is happening. On the can migration to — and on the other hand, there is migration also happening from the PET bottles to glass bottles also at least in the restaurant space where when you’re dining outside nowadays, you find that you go to the restaurant, so they’ll bring the water in a glass bottle rather than in a — unless you order — unless you order a PET bottle.

On a can to plastics, I think the requirements are very, very different, very, very specific. And there are products like cool drinks or beer, which comes in can and which comes in the PET bottles or it comes in tetra packs. But the consumer preference there in terms of whether he wants to drink this in a can or a bottle or tetra pack is driving that — driving that consumption. So obviously, the higher-paying consumers can afford a can, and others would drink former PET bottle but on an overall basis, I only see that migration happening from a higher cost packaging to a lower-cost packaging for the products there the MRP is not very high.

Shubham Agarwal — Aequitas India — Analyst

Sir, coming to the capex part. So you mentioned we currently have three projects in line, which is expected to get completed by the end of FY ’22. So I wanted to know what is the exact amount of capex that is left to be done on all these three projects, if you have the numbers?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think total to my mind, I think say about INR400-odd crores or so.

Shubham Agarwal — Aequitas India — Analyst

400-odd crores?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Yes.

Shubham Agarwal — Aequitas India — Analyst

Okay. And — but earlier in the call, you mentioned that the long-term debt can hit a ceiling of INR3,000 crores, which is a INR500 crore addition, so why would we.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

[Foreign Speech] That is why I said around INR3,000 crores.

Shubham Agarwal — Aequitas India — Analyst

Okay. So — but all in all, we have just INR400 crores of capex then, correct?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I don’t think so there’s anything other than this. Anything other than this is only normal your sustaining capex, which you keep on doing on a year-to-year basis.

Shubham Agarwal — Aequitas India — Analyst

Got it. And then earlier in the call, you also mentioned that the way you track the EBITDA is EBITDA per kg or EBITDA per ton. So sir, would it be possible for you to tell us what was the average EBITDA per kg for BOPP and BOPET respectively? It would be really helpful to track.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

We’ll not — no, no. We’re not sharing that number — those numbers.

Shubham Agarwal — Aequitas India — Analyst

Okay. Okay. I understand. No problem. And lastly, on the revenue potential, given that you have already shared the utilization level. So given the situation where we can reach up to 105 and then Nigeria also picks up, what is the additional volume from the Q3 level that we can expect?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think Q3 whatever is there now we can expect max 10%.

Shubham Agarwal — Aequitas India — Analyst

Max 10%?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Yeah, max 10% from here on an overall basis. And then the additional volumes will come from these enhanced — these new capacities on aseptic, Dharwad, Dubai CPP films that we’ll have the volumes coming setting in from this starting from the Q1 of this year to Q3. So FY ’24 will be the first full year where we will see the impact of these additional capacities coming into them.

Shubham Agarwal — Aequitas India — Analyst

Okay. Fair, fair. And sir, would it be possible to give the revenue potential for all these three projects based on current prices?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think Dharwad should be about INR800 crores, aseptic should be about INR600-odd crores — say INR500-odd crores, and Dubai should be about INR150 crores.

Shubham Agarwal — Aequitas India — Analyst

Okay, great. So we still have around INR1,200 crores of additional plus 10% volume growth for next two years?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Yes.

Shubham Agarwal — Aequitas India — Analyst

Fair enough, sir. Thank you for all your answers and best of luck.

Operator

Thank you. The next question is from the line of Chirag Singhal from First Water Capital. Please go ahead.

Chirag Singhal — First Water Capital — Analyst

Thanks for taking my question. Mr. Bhatia, congratulations to you and the team for a great set of numbers. Most of the questions have been answered. Just one more question. When can we see the ramp-up beyond the nameplate capacity? So you mentioned that there is a warranty period. And after that, you can undertake debottlenecking and there will be some sort of.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Next one year, it will happen. Next FY ’23, this ramp-up will be there.

Chirag Singhal — First Water Capital — Analyst

Okay, okay. That’s it from my side. Thank you, sir.

Operator

Thank you. The next question is from the line of Yash Dhantavadiya from Dante Equity Research. Please go ahead.

Yash Dhantavadiya — Dante Equity Research — Analyst

Hello. I’m sorry, I had a question regarding the Nigeria capacity and I think that’s already answered. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ayush Jalan [Phonetic], an Individual Investor. Please go ahead.

Ayush Jalan — — Analyst

Good evening. Thank you for the opportunity and congratulations on a great set of numbers. I had a couple of quick questions. During the last con call, you had mentioned that our credit ratings have been upgraded. So have you seen any improvement in our interest costs because of that?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

We’re still working with the banks to make that happen. State Bank has reduced it by a couple of percentage points already. And I think with all other banks also this will happen. But this will happen largely on the rupee 5 because this is a local rating and as of now, the long-term debt on India balance sheet is only about INR1,000 crores. Working capital also is likely to be impacted, but that will come up in their perspective renewal also while a long-term path, the few banks we’ve already worked it out and other banks have work in progress.

Ayush Jalan — — Analyst

And sir, my next question is on the recycled films. Are you seeing any increase in inquiries or demand for that given the raw materials for the BOPET and BOPP? Are they similar now in costing or is there still a very big difference?

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

I think the difference in costing is not much, but the difference in the realization is definitely much, so I think broadly, what we see is that post the pandemic, the focus will be again back on the recycling and basically, for the plastics industry as such. So currently, while Europe may have about 40% of their plastics being recycled and America 25% but still the site recycling in the packaging business — in the plastics still continues to be at quite a low level. And we’ve seen that the authorities across the world are putting up need for more recycling of the plastics and all that. So I think that is going to be gaining momentum.

And not only gaining momentum from a point of view of players like us or many others in the industry because we are in packaging space itself also, which is where the real — the challenge is that how do you recycle something, which has multiple layers and all that. So those solutions will continue to be showcased to the world and to the respective authorities that look — there is a solution to this. Yes, this solution has not been sort of implemented because the differential probably does not justify that.

But if the regulatory pressure is fair to do these, like today, the way it happens in India, while the government says that the plastic waste has to be put in use in the boilers by the cement industry and all that. But actually, it’s happening only on the paper, so there are truck movements shown, there are collections shown by some of these agents and there are — but if I look at the price, which they are charging or which they are being paid [Foreign Speech] forget about the cost of picking those, packing those and sending to those cement companies and then cement companies using in there.

So I think even in India, we will definitely see new EPR guidelines coming in the very, very, very, very shortly. All the developed countries are already looking at expanding scope of recycling, so the plastic bottle recycling into yarn and now for — even for the PET chips, which is used in the manufacturing of the factors is already gaining momentum.

We have that plant now in India already. We are setting up that plant in Mexico and in Egypt also where the glass — the PET bottles are collected and then you recycle them, make the PET chips from there, which you use in your polyester films making, which commands a better pricing as compared to — so one — two factors are achieved. One of your raw material source sourcing become local partially and for these conversions, you are able to get a better pricing. So today, they are not mandatory. But I think the way that regulations will come, they will sort of become mandatory or then it will so happen that they’ll be — when they become mandatory even outsiders will come and set up those capacities to take advantage of those regulatory business opportunities created by the regulatory changes that are coming.

So I think the whole focus around the plastics recycling, increasing that recycling levels because if you ask me in other substrates, that is whether it is can or it is your cardboards or it is your glass. I think the recycling levels are pretty high. They are as high as 80%. So plastic is fairly well behind that. But the advantage in favor of plastics is that on an overall the carbon basis, it is still the lowest. So there is one deficiency today that it has not been recycled. But on a carbon footprint, cross can or — or glass or other things, it has the lowest carbon emission. So that’s a plus. And now the packaging once you have more focus coming on recycling of the packaging plastics, I think the plastics will no longer will role than the way it is being reflected today.

But if we don’t have the plastics, the food wastages are going to be humongous. Even today, across the world, 50% food is still being wasted despite the use of the plastics as a primary source of packaging food. Now whether it is in the developed countries, that wastage is on account of your supply chain or other issues. And in the developed countries, it’s at a consumption level and all that, all that is very different. But the point is if plastic is not there, then at a farm level, would you be able to pack those vegetables in a glass or aluminum container? Will there be so much of that will increase the cost so much and the carbon footprint so much that we can’t even imagine.

So — so that this world is not deprived of the food. I think the plastic usage will only keep on increasing, rather, there is the food — United Nations agency for food and agricultural organization, FAO, they suggest that to reduce the food loss — waste and loss, you must use more packaging than what is being used today. So there they say — advocating that fee increase the use of the packaging to reduce the food wastages, which are as high as 50% of the production levels. And the only way to do this is you pack as much as possible.

[Foreign Speech] whatever is the use of the plastic that is there for food preservation and dispatch, logistics and till it reaches the consumer. [Foreign Speech] so how will you consume, which will mean [Foreign Speech]. So at least I have to see one country which could think beyond these four things to put a ban on for the use of the plastic.

Ayush Jalan — — Analyst

Correct. Sir has there been any government help on using those enzymes to make the plastics more biodegradable [Indecipherable]? [Foreign Speech]

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

That still remains a work in progress.

Ayush Jalan — — Analyst

Okay. Sir, thank you once again for all the details. Wish you all the best for the coming quarters and thank you so much, sir. That’s all from me.

Operator

Thank you. As there are no further questions in the participants, I now hand the conference over to Mr. Yusuf Nasrulla for closing comments.

Yusuf Nasrulla — Investor relations

Thank you, everyone, for joining us today, and we look forward to staying in touch in future quarters. Have a nice day.

Rajesh Bhatia — Group President, Finance & Accounts & Chief Financial Officer

Thank you. Thank you, everybody.

Operator

[Operator Closing Remarks]