Yash Pakka Limited (516030) Q3 FY23 Earnings Concall Transcript

Yash Pakka Limited (BSE:516030) Q3 FY23 Earnings Concall dated Feb. 08, 2023.

Corporate Participants:

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Neetika Suryawanshi — Chief Financial Officer

Satish Chamyvelumani — Business Head, Compostables Division

Sachin Kumar Srivastava — Company Secretary & Legal Head

Dr. Ramjee Subramanian — Innovations Lead, Business Head

Pranay Pasricha — Brand Head

Analysts:

Unidentified Participant — — Analyst

Pujan Shah — Congruence Advisers — Analyst

Presentation:

Operator

Hi. Good morning, and welcome everybody. Emkay Global is pleased to invite everybody for Q3 FY23 Earnings Conference Call of Yash Pakka Limited. From the management, we have Mr. Ved Krishna, Vice-Chairman; Mr. Jagdeep Hira, Managing Director; Ms. Neetika Suryawanshi, CFO; Mr. Satish Chamyvelumani, Business Head, Compostables Division, and Mr. Sachin Kumar Srivastava, Company Secretary.

I would now handover to Mr. Ved for the Q3 presentation. Over to you, sir.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Thank you so much. Thank you, Gopalji. Thank you all for joining in as always. I regret that actually Jagdeep is not there. He had to take a flight and he is on a flight now, going back from U.S. to India. So he could not join today, and I think my colleagues, Dr. Ramjee Subramanian is also there today. So, thank you all for coming in and listening to what we’re doing. Of course, we are excited to give you various updates. And moving forward, I am just going to recap very quickly about our business, and then of course focused on what we’ve been doing in the last quarter. Go-ahead, Sachin.

So the single idea for us is to provide regenerative packaging at scale. Go-ahead. Again. And fundamentally, build most significant global enterprise for providing food packaging, carry and service products. Next, Sachin.

So this is the agenda for today and I’m going to quickly introduce my team that is there. Gopal is obviously already introduced, but there are few new faces and people joining us as we go on this journey. So, of course, I want… Neetika is going to be talking to you about financials. She has just joined us as our Finance Lead. Dr. Ramjee Subramanian has joined as our Innovations Lead and these are the two new faces that you’ll see today and of course, we will go through what we’ve been doing, how we been doing and of course, the products, the projects that we are tackling at the global level, as well as at the— in the India side.

Go ahead. So, as you are all aware, there are three products that we are working towards and the singular goal is to be the Earth cleaner and this is by the way of building three unique products, which will provide better biomaterials to the planet and to human kind. The first is Food Packaging Materials. Materials, which is multiple layer substrates, the kind you use for chocolates, biscuits, potato chips or the snacks etc. The second is Food Carry, which has been our traditional business in terms of paper, but we are also — Dr. Subramanian is also going to talk about our mineral pellets. We’ve just gotten into the patent phase. Of course, the Compostable Packet, this thing, I’m sure remains of interest to you. And of course, it’s high focus for us as well and we are looking forward to growing this business and there is a certain strategy that we are applying and I’m sure my colleague, Satish will talk more about it. Go-ahead, Sachin.

So these are the key updates for this quarter from a holistic perspective. We have finalized Project Jagriti after much back-and-forth as we’ve been talking about it probably to you for the last year. But finally, it’s taking shape. I am going to talk more about what it includes. So, we’ll keep moving right now. The other one is global site finalization for the global project. So more or less, we are finalizing the site in Central America and the progress has been made there. We are almost at the cusp of signing the MoU with three sugar mills and hopefully, two more joining at the later stage to make it a 400 ton per day site. Next.

We have great trade and stating that we have created two new materials, which have now even further gone forward towards patenting and also for various tests, and my colleague, Ramjee will talk more about it. Next please, Sachin. We have also started producing moulded fibre, as you know that you’ve been struggling in this domain in terms of the capacity. We have now finalized two sites. One is already up and going and you probably have seen a lot commercials and advertising in social media for our delivery containers, and the next site is also going to start within the next month, catering to the East side of the country. Go-ahead, Sachin.

Since Jagdeep is not here, I am very, very proud. I would have wished that he was here because this is the highest quarterly revenue. So a big applause to the team. We have clocked INR110 crores, which is great pride for us, and also the highest quarterly profit at INR23 crores and we are hoping that we keep making it even better. Not only that, we’ve just been awarded a Great Place To Work certificate for — that’s literally — first, we were awarded a Great Place to Work gold certificate and now it’s in the top 50 manufacturing facilities, companies in India. Not only that, again, the team has gone ahead and done a lot of work towards energy conservation and the UP government just awarded us that award also. And beyond that, again, Sachin, next, the next award that we’ve just received is the CII National Award for Water Management and those of you who have been reading our annual reports are probably aware, but the team in the last five-six years has brought down water consumption from 110 meter cubes per tonne to about 30 meter cubes per ton today. Go ahead.

Neetika, do you want to talk a little bit more about financials?

Neetika Suryawanshi — Chief Financial Officer

Sure. Thank you, Ved. It think it gives me immense pleasure to share with everyone, as we said that this has been the most profitable quarter for us and the most profitable nine months as well, as we can see the numbers have improved from the last quarter and that has been driven, besides the the healthy NSR, we have been more efficient in how we have been operating and that includes all the sectors. So, I think we should be fairing better. The only challenge that we see today is the increasing raw material prices but we will be doing our best to curtail whatever we can in the next quarter as well. Over to you, Ved, again.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Yeah. Let’s move ahead, Sachin. So let’s talk the highlights for Project Jagriti. We are going to be investing about INR550 crores and we are very, very excited about this, the situation, the project is moving really fast. Our existing PM machine 3 is being expanded by about 12% to 15% and focusing still on food wrappers and bag paper. What is most exciting is, we are setting up a new paper machine for butter paper or grease proof paper, as butter paper is more generic, but grease proof paper is the technical work, which actually will be the base paper for flexible packaging as I showed earlier slide, that these are the focus areas and our innovation team has come up with some new formulations, and we are now looking-forward to providing the market with the commercialized Flexible Packaging base. Even today in U.S., there was a meeting with various big organizations. We’ve been working with certain global entities and there is a lot of positivity there.

To support all this, there are a few things which we are doing in terms of pulp mill expansion, chemical recovery, setting up another power plant, of course, upgrade of the effluent treatment and numerous upgrades to infrastructure to really make it even stronger world-class global facility. So, very, very happy to give you a clear announcement on Project Jagriti in Ayodhya and of course, happy to have questions when we get to start interacting.

Go ahead, Sachin. I will hand over to Satish for update on Compostables, please.

Satish Chamyvelumani — Business Head, Compostables Division

Good morning, everybody. Thank you very much for joining us.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Satish…sorry, Sachin, I think you might have to go to — I think you may have an older presentation. Satish had updated it. But Satish, you can talk about it.

Satish Chamyvelumani — Business Head, Compostables Division

Okay. So there are three major areas that we would one of touch upon. One is revenue growth. We, the last quarter has been the highest for Compostables and we are on track to bring the overall revenue to 2x the last year’s fiscal growth. I mean, sorry, last year fiscal’s revenue number. And as we have been targeting, we are getting very close to operational breakeven. That is definitely in sight. And one of the key points that I wanted to address is that has been some high one-time costs, primarily due to the development on the Delivery Containers, which leads us into the next topic, which is the Delivery Containers, right, and as Ved announced with a lot of excitement, we have launched Delivery Containers and yes, initially the response was a little lukewarm, but there has been some solid effort that’s being put by the team, both from our sales team, our distribution partners across the country, as well as our marketing team. Sales is actually picking-up. We we should be running at or we should be selling 100% of our capacities somewhere about April timeframe. We are getting very close to that already. So there has been some initial on-field quality concerns, but again the team has done a tremendous job to arrest that and find the right markets. So we are doing reasonably well for the Delivery Containers launch.

And the third big update that we have always been talking about was the outsourcing. And as Ved slightly touched upon, we have two facilities that are co-producing for us. One is the Bangalore facility and yeah, thank you, Sachin. We may want to play it. Thank you. So the Bangalore site for Delivery Containers, that’s been pretty stable now. During the initial phases we had had some, well startup troubles, like any other processes, but that has been stabilized now and our output is increasing month-on month, very commendable job. As Ved mentioned, there is also a new site in Kolkata, that we are working with. We are running some trials there. They will be producing CHUK products starting March and this is primarily to cater to the East and also some high-volume products that would be made there. And in addition to that, if — the last investor call. I was not able to participate, because I was at a few overseas manufacturing plants, and that is also giving as some good leads. So we are working with them on buying their additional capacity and all these are under negotiations. So an exciting year ahead, the2022-23, I think we will close somewhat closer to 2x revenue and then hopefully, next year, we’ll get these outsourcing plants help us out with the increasing demand.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Is Dr. Subramanian there with us? Sachin, otherwise, I will continue.

Sachin Kumar Srivastava — Company Secretary & Legal Head

Yes, sir.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Is he there?

Sachin Kumar Srivastava — Company Secretary & Legal Head

Yes sir.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Ramjee, do you want to take this up. Sachin, you can put it on play mode. If he is not there, I will continue. So, we of course have Dr. Ramjee Subramanian leading our Innovations. Ramjee has enormous experience in the cellulose and related disciplines. He has spend most of his time all over the world. Thailand, Singapore, Finland, a long, long-time and then Switzerland, and then came back to India. Worked with the ITC sort of. And now leading our whole focus on Sustainable Packaging, Regenerative Packaging and of course, things were moving anyways and they are moving even more now. Of course, the biggest focus is Flexible Packaging, and there, very happy to state that our product has been certified now and certain patents have been filed and now we’re going to do certain studies on food packaging this quarter.

Mineral pellets is another patented product that we’re coming out with. Again, that has been food migration studies that have been done and again, by quarter one, 2024, commercial viability will be established. On Moulded fibre, there is lot of effort that has been going on. Better oil and moisture resistance and again, there has been some prototyping that’s taking place. These are just few of the projects and of course, many more that we’re undertaking all in this space of food packaging. But again, building a strong lab and Team in Bangalore now, and again, there’ll be more to tell when we meet next quarter, because the significant investments and effort that have been done on the innovation space. Okay. Sachin?

So, the targets remain pretty similar as last time. Not pretty — more or less similar. We have finalized the project and now we’re going to do the financial tie-up. And again, that is already in motion. I know there’s going to be a question around this, but it’s going to be a mix of internal accrual, equity and debt. All positive and we are definitely very confident of getting this moving by next quarter. The — again, the finance, we are very close to finalizing the manufacturing site in fact I’ve just come to New York to start talking to investors now. So as we speak, we are going to start that mechanism as well now.

As I said in the previous slides, that there is a very strong effort and movement for future products, and by future, we mean, products coming out in the next year to two, but also products coming out in the next five to 10 years and there is a very strong team being created out of Bangalore and it will be one of the greatest labs in the world for compostable packaging and biodegradation kind of facility. Satish already spoke about this. There is lot of effort by the team to build the outsourcing mechanism and again, become a sustainable partner to various big organizations in different disciplines, where we can provide end-to-end solutions and I’m sure, next quarter, Satish would be talking more about that. This is just what we believe in, in terms of going and doing things which are — which look as possible.

Sachin, can you move? Thank you so much for listening to me. Very happy to have questions. Pranay, I think he will coordinating that. So, Sachin, we can stop sharing and of course, our team is here and we’d be very happy to take your questions and we will be spending half an hour to 40 minutes doing that.

Satish Chamyvelumani — Business Head, Compostables Division

Ved, Ramjee also joined.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Okay. Before we start questions, Ramjee, do you have your video on because I have other few people on the screen. Yeah, there you are. So Ramjee, do you want to say a few words about you as the known person in the cellulose space and of course, a little bit about your plans. I did present the screen. I am sorry, we should have had you here before, but go ahead and at least talk to our investors a little bit about you.

Dr. Ramjee Subramanian — Innovations Lead, Business Head

No problem. I am Dr. Ramjee Subramanian, heading the Innovations at Pakka Impact. The vision is to have, is to do innovations at scale for regenerative packaging and to build a cleaner planet. My background. Before this, I had — I was working in Finland in South-Eastern University of Applied Sciences, Fibre Laboratory, and before that, I was, for 10 years, in ITC, and I have a background — extensive background in academics, as well as industry in terms of food value chain, coatings, substrate, creation of new structures for flexible substrates, as well as working on the substrate developments as well. So, that is the short introduction.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Pranay, we can open it up for question.

Questions and Answers:

Pranay Pasricha — Brand Head

Thank you, Dr. Ramjee. Thank you, Ved. [Operator Instructions]. So, I have just opened up. There are already a few questions. I will just open up the first one. So, Captain Vishal Sharma, you can go ahead with your question.

Unidentified Participant — — Analyst

Okay. Hi. Good morning. Am I audible?

Pranay Pasricha — Brand Head

Yes, you are audible. Please go ahead.

Unidentified Participant — — Analyst

Okay. I have — my first question is for Ved and Satish. I have attended most of your con-calls and in the previous two con-calls, Satish had committed, that CHUK will definitely be in profits in the third-quarter, but unfortunately, this has again not happened. So, I as a shareholder, feel that there is some lack of transparency, because the assurances of claims made in the con-calls don’t happen and CHUK is still a loss-making business for the past 19 quarters. So, I would like to understand from Satish, since he has said that CHUK will be profitable from the next quarter, what exactly are we going to do different in the next quarter? That’s my first question.

Satish Chamyvelumani — Business Head, Compostables Division

Sure. If you look at just the quarter results, yes, we are marginally profitable, not by a huge number. That’s why I said, as for the overall year, we should be coming within the vicinity of breaking even. Right. As far as the quarter goes, we have been profitable, but again the numbers are consolidated into the overall numbers, but as a division, we are not losing money. So as the quarter goes, we are being profitable. When I say we will be coming towards breakeven, that is for the entire year. I hope that clarifies.

Unidentified Participant — — Analyst

Okay. So, I hope from the next quarter onwards, we could see better numbers from CHUK because it’s been quite some time that we’ve been expecting better numbers from this division. Since it is definitely a good product, but somewhere where we are lacking in. Why isn’t it selling the way it should be?

Satish Chamyvelumani — Business Head, Compostables Division

Again a very valid concern. Again, since we are reporting consolidated numbers, we did not want to have a separate P&L to be presented here. That could again lead to confusion. So we presented only the consolidated figures. As I said, overall, the revenue is doubling. In fact, month-on-month, we are averaging little over 200% compared to the same-period last year. That’s one good thing. So the products are selling. Right. And we are definitely seeing a pricing pressure from the market. So what has happened is, in June-July timeframe, when the ban on single-use plastic came about, there was a huge spike in demand. The prices started going up, but then again, there are lots of, lots of players started coming into the market for production. So now, the single-use plastic is easing off if you will. So that’s why we are seeing a slight downward pressure on pricing. So, we are not aggressively increasing the prices, but our volumes are increasing.

As I said, we are a little over two times in terms of revenue when you compare to the same period last year. Right. And in terms of profitability, the bigger hit as I mentioned during the presentation is that we had high one-time costs due to the startup of the Delivery Container site in Bangalore. Again, that’s a very — even though we controlled it pretty well, but it’s very typical for a high-speed large-scale manufacturing to have the cost slightly higher because we started-off with one-shift for like 15 days. We went on to second two shifts for the next 15, 20 days and then, we went on to three shifts after about 30, 35 days overall, right. So the products that they have produced had higher fixed costs, but as I said, over the last few months, we have done a pretty decent job in controlling the cost to bring the delivery containers under the under a manageable limit. Let me put it that way.

Unidentified Participant — — Analyst

Okay. So, I hope to see better numbers from CHUK from the next quarter.

Satish Chamyvelumani — Business Head, Compostables Division

Definitely yes.

Unidentified Participant — — Analyst

Okay. My second question is, I as a shareholder, I’ve been tracking the price. I have been holding the stock for a very long-time, and I want the management to intervene in this scenario, because I feel that at times, the price of the stock is being manipulated because I’m very surprised. In September 2022 to October 2022, our stock hits a lifetime high. The FPI who was invested in our stock exits properly at a higher price. After that, our stock tanks by about 47-odd%for no reason. No bad news which has come out from the Company. As in the way the price comes down, it feels as if, has Yash Pakka stopped making packaging materials or have they stopped making paper or has the Company stopped. What exactly is the reason for this fall in the price of the stock?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

So, probably, maybe it’s a weakness, but that’s not something we as a team focus on. We leave it — we do, we try and do good work at our side. We work day-in, day-out towards the singular idea that we are pursuing in terms of making good products and looking at newer products and getting our profitability, etc., etc. I like, I would draw blank when it comes to the stock prices. Yes, people come in, come out, maybe there is some manipulation in the market, but we want to stay away from it. So, I don’t even know what we can do as a company. So, I don’t see much intervention, when it comes to that. I would say that your belief in us is what is important and we will keep serving it by strong performance and that’s the focus. But as far as somebody coming in, playing with the stock, we have — we are not the best people for that. You as investors understand the market more. I do get enough flak on Twitter and stuff like that, but I can listen to it, but does not much we can do. And I understand it from your perspective because it’s your money that is invested. But from our side, what I can assure you is that we will leave no stone unturned in our effort in actual business. That’s what I can assure from our side.

Unidentified Participant — — Analyst

Because I was more concerned…

Pranay Pasricha — Brand Head

Thank you.

Unidentified Participant — — Analyst

I was more concerned because it’s quite a coincidence that they come in at a lower price and they get a very timely exit. So, anyway, let’s hope that this stops in the future.

Pranay Pasricha — Brand Head

Yeah. Thank you, Captain Vishal. I’ll move on to the next question from Ayush Mittal. Ayush Mittal, Ayush Mittal, you can unmute and go ahead with the question.

Unidentified Participant — — Analyst

Hi. Good morning, everyone. Am I audible?

Pranay Pasricha — Brand Head

Yes. Please go ahead.

Unidentified Participant — — Analyst

Yeah. Congratulations on a very good performance. So, my question is for Ved sir. Hi, Ved. If we see the performance of our company, I think big increase in profitability is also due to the upcycling in the paper sector and we are seeing that not many companies have been doing very well. So, first, I wanted to get some of your sense around where do you see the profitability going forward because in past we have seen that in cyclical sector, when everyone starts doing too well, things reveres and then there is a big hit on our profitability. So some thoughts on your outlook on the Paper segment, which has been a key contributor to our numbers.

Second, like the earlier participant asked, I think the CHUK Segment, given all the work we are doing, we all feel that business has much bigger potential in terms of growth, in terms of profitability. So some thoughts on that. And third, the capex outlay that we are charting out is very, very large given the current operation size and those things. So, how do you plan to fund it, given that paper sector is cyclical in nature and the numbers today that we seeing might not be there two years down the line. That’s it from my side. Thank you.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Good to see you, Ayush. Long time. But basically, all three questions are very valid. The first, you are totally right, that there is an upswing in the Paper segment. But that said, we don’t typically work in so-called generic market segment. None of our products go there. The all — all the focus that we have is towards long-term relationships and most of them are long-term contracts. That said, like, there is always market forces that are acting. We have — we definitely have a lot more pressure when it comes to costs right now. The cost of raw material is higher. The cost of fuel has gone through the roof. Thankfully, our order book remains solid and our forward contracts remain good. So, that said, so basically, we do hope to continue the performance for sure. But yes, you’re right, it is coming a lot from the Paper segment. I’m just trying to clarify that it’s not the generic paper segment. So maybe it won’t be the same cycle as everybody has.

The second, in terms of CHUK of course, Satish has spoken in more detail about it, but of course, we remain very buoyant, and that’s what we’ve been saying. We are trying numerous things. The core issue, which Satish did not point out this time, but we’ve talked about a lot is the overall machine efficiencies. Those, we are still sort of not there yet. That said, we are exploring the world. We are trying to solve whatever we can, because we know that we need materials. Today we have about 200 tons, 300 tons in hand. The market demand that we have is over 1,000 tons. So that’s the kind of. Like, this is definitely an interesting problem to solve. There is a demand, but we need materials and materials at the right price.

The second, of course, sorry, the third one, I actually don’t see it as a very, very expensive project. The last time we did a big expansion, it was almost 4x of our turnover. Just now, it’s only 1.25x of our turnover. We clock about, nearing about INR400 crores this year and the project cost is INR550 crores, which is about 4.3-ish of the total turnover. Sorry, 1.3-ish the turnover which is is not that high. So I’m not that flustered about it. I’ve said right at the beginning the whole funding is through internal accrual, some equity and debt and all three seem to be positive. We will, Ayush, we will keep taking very bold steps. We are here to give our best towards maximizing regenerative packaging. So, the most of the expense and most of the focus is on the next segment, which is the Flexible Packaging segment where we have some breakthroughs and we now want to commercialize it. And I’m hoping that in the next year and a half or so, you will see transformation in that segment by the way of the actual retail, CPG goods changing in terms of chocolate packing and biscuit packing and stuff like that. That’s what we want to see. For that, we will have to take bold steps. There are no small measures that we can make and we are here to do that. So yeah, we continue to do that. I’m glad you consider it bold. I actually don’t get it bold. We will take — you’ll hear more bolder steps in the next quarter.

Unidentified Participant — — Analyst

Great. Are we also doing some brownfield capex at our existing location to optimize or build upon the same kind of things that we have?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

This is all for that. This is all for the existing brownfield. This is all for the existing location. The one you’re talking about is about the existing location. The one that I’m thinking about is for the global expansion.

Unidentified Participant — — Analyst

Yeah. Yeah. That’s why…

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

That will definitely be very, very different numbers than what you’re seeing right now.

Unidentified Participant — — Analyst

Okay. Okay. You’ll…

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

They will be much bolder.

Unidentified Participant — — Analyst

Okay. Great to hear from you. Thank you.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

We have one life, Ayush. I know you are a bold man and I know we need to keep taking bolder steps as well. It’s a short life. We will do our best.

Unidentified Participant — — Analyst

Thank you.

Pranay Pasricha — Brand Head

Thanks, Auysh. Next question is from surtech [Phonetic]. I think you have posted it on the chat as well. I will just read it out. Hi. As advised during the last con-call, please update on NSE listing and pledged release. Neetika?

Neetika Suryawanshi — Chief Financial Officer

Sure. I will go ahead. On the pledged release update, we have received the order from the bank which gives us the release. It has to be substituted by a property, which will take some time. We are aiming within this quarter, and those are more on the legal and the technical issues, not a fault on our side. So, I think, we should be through with this within this quarter. On the NSE as well, we are going ahead and we’ve done our bit. Sachin, if you want to add here, I’ll request you to add here.

Sachin Kumar Srivastava — Company Secretary & Legal Head

Yeah. Regarding the NSE, we have already moved the application. So we are expected to be tabled this 14th February and by the end of this month, we will get the listing approval from the NSE.

Unidentified Participant — — Analyst

Hi. Good evening, Ved and good morning, all the panelists. Thank you so much and. I just wanted to congratulate. It was a very good quarter for our Company. I have just put the simple questions we discussed so many times. The one thing which concerns, sir, if we are saying that we will release the pledge for last one year end then there is some problem that keeps on coming. Then what happens, it gives a little setback. Actually what is happening?

And I’ll just put a follow-up question if you don’t mind regarding capital, Captain Vishal, what he asked. If you saying you are not concerned about the pricing, because if you see the Company is public listed. So the company value comes as the investor profile. What type of investors are invested in the company? Here, most of the retailers. If anyone is coming and selling stock and the profit going out, it means, he is not trusting the Company. He is not trusting the business. He is not trusting the management. He is not trusting the promoter. So, if an investor comes and stays for a longer period of time, then he believes in the company. So, the stock price does matter a big way. Suppose if the price comes at INR10, the Company valuation comes down. And if you want to go for expansion, you will not because your value is already known. So, the price do matter, sir, and if it is manipulated, at INR134, Aegis Investment Fund had just gone out and the price came to INR27. It was quite disheartening for us. Whatever you’re doing, we trust you and that is we remain invested with you. So just please have a look, sir and my best wishes. If you can say something, I will be very glad, otherwise, thank you so much.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

No, no, absolutely. No, so just let me clarify. I didn’t say that we are not bothered about the price. I said that we are not doing much about the price. We can’t do much about the price. So, whether Aegis stays or goes, that’s not something in our control and of course, I understand and appreciate the fact that most of our investors and retail investors are staying, and that is something that’s important for us. And we of course, what I was trying to assure was that we will put our best foot forward when it comes to actual business. But I can’t stop Aegis or anybody else from staying or leaving. So that’s the challenge. I would rather focus a lot on the work that we are doing and hope that the results of that work will result in more and more investor confidence and hence people staying longer, people believing in us and I think the results will show and the steps we are taking and the products that are going to come out in the near-future give you give you and others more confidence.

So, I didn’t at all mean that we don’t care about the share price. We totally do of course. We are connected. And you’re right, expansions get affected. Valuations get affected. Bankers even get affected. So, we are totally not — but the way, we definitely want to keep our focus on the actual business. So that’s what I went. Thank you, sir. Thank you so much. It was a great comment. Thank you so much.

Pranay Pasricha — Brand Head

Thank you. I will move on to the next question from Pujan Shah. You have posted on chat as well. EBITDA margins for few quarters and FY’24 and ’25? So, Neetika, you might want to take the lead?

Neetika Suryawanshi — Chief Financial Officer

Yes. I will go ahead and take the lead. Thanks, Pujan for your questions. I’ll just give you the exact numbers with me. So, for the quarter ended December ’21, we were at a 22% EBITDA…

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Can I request? Pranay, if somebody can mute. There is some there some background sound. Some people and a baby. Not it is better. Sorry, go ahead Neetika.

Neetika Suryawanshi — Chief Financial Officer

So, December ’21, we were at a 22% EBITDA for the quarter. September ’22 quarter, we were at 21%. December ’22 quarter, we are at 24%. Nine months, December, we are at 23%. Nine months, ’21, December, we were at 27%. March of ’22, we were at 24%. So, I think we hope and presume that we will be at the same levels. Not as high as 27% maybe, but we should be in the early 20s for sure in ’24. ’25 I think is still a long way. We’ll have to see how the market turns up and how the cost of the raw materials, etc., fluctuates. So, I think, hopefully, we should be around the same numbers. Should there be a development in the industry, which is out of our control, then I can’t say on that. But given our performance, we should be doing better or maybe maintaining the stable levels. I hope that addresses your question.

Pujan Shah — Congruence Advisers — Analyst

Okay. Thank you. All the best for the future.

Pranay Pasricha — Brand Head

Thank you. Next question is from Shashank. He has posted, I wanted to know if there is office in Kolkata or any plant or site in Kolkata? Satish, you might be able to answer this.

Satish Chamyvelumani — Business Head, Compostables Division

Yeah. We do not have an office in Kolkata. However, we do have a partner plant that is coming up in Kolkata. We are working with them to run Chuk products. As I mentioned earlier, by March, they will be making a few CHUK products to the Eastern market, if you will.

Pranay Pasricha — Brand Head

Thank you. Thank you. Bijal Shah, you had a question. If you have a question, please go ahead. Bijal Shah, please unmute.

Unidentified Participant — — Analyst

Yeah. Hi. Just a second. Hi. So my question is, you — Mr. Krishna, you said that your business will not be as cyclical as other paper companies. I’m very new to the company and attending this call for the first time. Could you just give us the profile of your product and compare that with regular paper companies? So, I would like to understand why you are saying that your profitability will not be as cyclical as others?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Yes. So first of all, welcome and thank you for trusting us and investing in the organization. We deal in products which are basically very much adhering to customer usage. So, most of our products fall into food packaging and food carry. Those are the segments that we focus on. Most of our contracts are long-term. So typically the cyclicality happens in writing, printing or graphic papers or it happens with packaging grades like corrugation grades or liner grades, which are more generic and they are more around commodity markets. We don’t make any commodity grades as such. You will rarely see a Pakka product in the market. Like, if you were to go and buy a paper in open paper market, you really get a sheet of Pakka. So. Pakka will typically will be going into converters that are converting for large-scale organizations in specialty applications. And hence, since the product focus is on B2B, industrial, the tie-ups that are little bit longer. That said, I’m not at all saying the pricing pressures are not there. They work both ways. We have pressures on the cost side. We have pressures when the market goes down. In between, when we were in the COVID period, everybody saw that we were still selling and making money. So, everybody started moving in our segments. Not that it’s not easy to build the same quality and products, but it does damage the market for some time. So you know of course we are in the vagaries of business and they affect us, but overall, the business model is to stay-in very-very specialized products.

Unidentified Participant — — Analyst

So, okay. And if I can ask a second question. So, as I understood from the commentary that CHUK is closer to full capacity utilization, and still we are and it will be in the month of April or so around and still we are talking about just around breakeven. So how does CHUK actually become meaningfully profitable or is it all about scale that when you would be able to build scale, it will become profitable or is my understanding, there are some gaps in it?

Satish Chamyvelumani — Business Head, Compostables Division

Okay. I think there is a small clarification, Ved actually provided. When we say full capacity, at the current efficiencies we are selling out, if you will, right. Our demand definitely is up there. Tt exceeds the current capacity, at the current efficiencies. Where we have — where we do see the opportunities is to increase our own efficiency, thereby the capacity increases at our own plant, as well as the cost comes down. Right. So that is one area where we are definitely focused on.

The second thing is, yes, definitely scale. We are, as Ved said, the demand that we see is somewhere closer to 1,000 tons per month, and in March, we should be somewhere about 330 tons — 320 tons to 330 tons a month. Right. And how do we fill the gap with the same set of resources. Obviously, the fixed-cost will come down dramatically when we sell 1,000 tons for the same amount of resources compared to selling 330 tons, right. So it’s the two-pronged approach. One is, better cost efficiencies through improving our efficiencies. Second thing is, achieving scale through acquiring additional capacities, and both are in the works.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

And Bijal, just a further clarification, since you haven’t been in previous meetings, we’ve made a lot of mistakes in terms of technology choice in the CHUK division, which has meant that our capacity utilization has been under 50% and that we still struggle with. We haven’t been able to solve it and the team has tried. We can’t even imagine that how hard the team has tried, and everyday continues to try. But we were new to the segment. We did as much study as we could of the global manufacturers. We chose a technology which we felt was the best at that time. It did not work and we are — we do have challenge and that’s something that we’re working with. When we go globally, we see similar challenges, but that doesn’t absolve us from our mistakes. We have made mistakes. We take full responsibility for it and we are learning and hopefully we can convert those mistakes in the near-future. But yeah, there are significant errors that we made and we could not access the technology well enough. But, the significant capital investments, you cannot write them off. You have to keep working with them and keep improving.

Unidentified Participant — — Analyst

Okay. Thank you very much. I will join the queue.

Pranay Pasricha — Brand Head

Thank you, Bijal.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Thank you.

Pranay Pasricha — Brand Head

Next question is from Mukesh Sehgal. Mukesh, you can go ahead with your questions.

Unidentified Participant — — Analyst

Good morning, sir. Congratulations on good set of numbers. My question is, I am taking this question from your last presentation where you have set the target for the current year of topline of INR500 crores and profit-before-tax of INR100 crores and INR700 crores topline for next financial year, that is ’23-’24 and profit-before-tax of INR150 crores. I just want to know where we are now to achieve these objectives?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

So we will end up, like I said this in the last con-call as well, but we will end up around the INR400-ish crores mark and at around the INR90 crore mark. So, I would say, far from the topline, but not so-far from the bottom-line, which is a great thing in my understanding. Next year we are getting into our time for planning for next year. Of course, when we present the figures, in the previous, the time when presented, it’s not as detailed. We get into our planning in March and we will get into hurdle, the entire team meets. The process of planning for next year has already begun and we will close the numbers in March and we will able to give you our targets for next year when we meet in April-May in the con-calls there. One thing I can assure you, we will never be lacking in ambitions.

So, the effort will be to, one, to set higher targets. The second is that, earlier as a company, there would be separate targets set internally, separate targets presented to the investors, we’ve stopped doing that. So basically, you get to hear what we think about it internally. So, we don’t want to have separate sets of data. So, sometimes you might find it very, very audacious and big and ambitious, but we have a feeling that we should present what we think, otherwise, we shouldn’t think big. So, I’m hoping that the numbers that you’ve set for next year are actually lesser than what we actually plan and we present in April or May.

Unidentified Participant — — Analyst

Sir, my next question is that the power and fuel cost has gone very high. What we are doing about it?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Lots of things, because that’s obviously a big, big concern for us. I think this is more challenge for India, overall. Coal allocations are minimal and hence lot of people are jumping into the fray, when it comes to different fuels like agri residues. We had been there traditionally. We’re doing a bunch of things. We’re trying different biomasses. We are also setting up another 10 MW in the new project, which is a big challenge because if your power and fuel cost is so high right now, what is it going to be when you setup another capacity, similar capacity, as presently, we do about 8.5. So, we’re going to operate at a similar level at the new capacity as well. So, which means that it’s challenge. So, the team again is been experimenting with various things, numerous biofuels.

Our boilers, the design primarily right now for rice husk, which burns in a certain way. The technology is called Fluidized Bed. It basically burns in the air and it’s made-for that specific gravity. So, the challenge that we have is that we can only experiment with a certain amount of fuels, which are at a similar specific gravity. So that’s the challenge with our technology. But what we are doing in the next boiler, is take a more multi-fuel boiler. Personally, we don’t like it because multi-fuel also means lower efficiency because there is a wide variation in fuels, but we have to live with it. So yeah, a variety of things being done, but these are definitely totally market forces and we can try our best to procure well, but that’s where our entry exists.

Unidentified Participant — — Analyst

Right. Thanks. Thanks a lot.

Pranay Pasricha — Brand Head

Thank you, Mukesh. Next question is from someone who has logged in with the name of iPhone. Please you can unmute, state your name and go ahead with your question.

Unidentified Participant — — Analyst

Hi, sorry. I am not sure. My name is Akshita Talesara. So, my question was, you mentioned in the PPT that you are going, you are trying and finding out the outsourcing units and if I fairly remember, you mentioned that the pulp will go in from the India unit. So, what happens to the cost when you transport to the outsourcing, I mean, the international one and then bring the product back to India?

Satish Chamyvelumani — Business Head, Compostables Division

Thank you for that question, Akshita. So the pulp because of the nature of the pulp and the process limitations that we have today, we are looking at supplying pulp only to our domestic partners. With overseas partners, we are trying to use their pulp, however, with our formulation. So that’s one of the reasons why there is a slight delay in getting the overseas partner started, whereas the domestic partners, again, we are onto our second partner within the next month or so. I hope that answers. Yeah.

Unidentified Participant — — Analyst

Yeah.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

And that said, again, as Satish said, Akshita, the bulk transport is limited basically because we still only do wet lab pulping, which is basically that you dry to 35%. We don’t dry it more. So, you’re absolutely right. If you can’t transport the pulp the long way and get the product back, that won’t work. So it has to be dearer. In fact, ideally, you stay within 300 kilometers, 400 kilometers. You don’t want to be transporting 65% water. But just now, yes, we are doing it, but that’s not a long-term strategy. And what we’re doing in our Central America project as well to make a lot of bulk similar to what Satish is doing in India, supply to other.

So the basics, just let me explain the basics, so that you understand the concept a little bit better and appreciate it. The pulp, if you dry it, we can fit 25 tons in a container. The Moulded Fibre products are relatively light-weight [Phonetic] and you cannot fit more than 6 tons to 7 tons in a container. So you want to be nearer to the customer when you are manufacturing the Moulded Fibre products. So that’s what we’re trying to do. Build pulp sites which are big and then built off-source, outsourced of sites which are nearer to the customers and we can then supply then pulp. But it has to be dried, just to clarify. In other sites, it will be, not in India.

Unidentified Participant — — Analyst

Okay. Thank you. Also on this mineral pellet thing, you mentioned in the last quarter that you only one in India to do this. Wanted to understand that this is the best way and therefore you have and edge here or it is one of the way to do it and you chose to do this one because globally people do it and there are other ways. Some people use pineapple and avocado. I mean, there are lot ways to do it. So, wanted to check on that.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

It’s an amazing world out there, Akshita. There so many people doing amazing things. So, the genesis of the mineral pellet and of course, Ramjee can come in and maybe add more technicality to it, but the genesis of mineral pellet is from a challenge that we had in our organization or as a pulp making organization that we end-up with something called lime sludge, which is inert calcium carbonate, and that we are not able to make use of. Instead, we can try and recover it, but that’s the best but that’s not economically very, very viable. So what the experiments the team has done is to blend it with bioplastics. So we’re not the first in India, we the first in the world to do this. So it’s a patented technology, which we have applied for patent. As far as I know, maybe Ramjee can clarify that as well, but — so we are the first-in the world.

So basically what happens is the bioplastics are basically more expensive than plastics, than petroleum-based plastics. The way we bring down the costs is by adding a lot of minerals, which is 50% to 60% of the total configuration. So, then you can bring the cost-down and you can try and price it very similar to petroleum-based products and yet be compostable or biodegradable.

Ramjee, in case you want to add a little more, please do.

Dr. Ramjee Subramanian — Innovations Lead, Business Head

Yes, sir. The primary concept in this is waste realization. As Ved rightly pointed out, it’s about converting the waste into a product which is useful. That is number-one. Number two, it is a patented production, which will be patented globally and it is unique. From that perspective, it is waste realization and then having useful properties out in the market. That is number two. And of course, from the technology perspective, this technology, we are looking at improving the mineral filler amount as much into the markets as possible and we have been quite successful in that and we are proceeding forward towards making the products in the… So, it is in the labs case and we will be looking at the business case valuation as we formalize swiftly out of the work that we are doing.

Unidentified Participant — — Analyst

Okay. And one more on, I mean, I’m not sure how, what percentage of your revenue does New York Burrito actually have, but I just realized that earlier, they would have moulded products of CHUK but now it’s been replaced by Pappco. I don’t know how much does that contribute but why did we lose that? Any other QSR brands that we’ve launched and why? Is it more on the pricing part or what is it?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Sorry, what was the name of it? Satish, did you get the name?

Satish Chamyvelumani — Business Head, Compostables Division

No. Pappco

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

What was the name of the customer?

Unidentified Participant — — Analyst

The QSR brand was New York Burrito and Pappco is there. Earlier, it was CHUK. I am sure it is a very small part…

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Akshita, we have just now order demand 1,000 tons. We can do 300 tons. It is the sad thing in our… We are trying really-really hard to find a way, because this A good opportunity.

Unidentified Participant — — Analyst

But, is it a pricing issue, I mean what is there?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

We don’t want to lose any customer. We will try and provide the best product, at the optimum price. So we don’t want to lose any customer because of pricing. I don’t think, well Satish, if he knows the customer, you can talk more about it because he knows the you concept. Yeah, go ahead, Satish.

Satish Chamyvelumani — Business Head, Compostables Division

Yeah. I’m sorry, Ved. So this was, if I recall correctly, New York Burrito wanted something which is oval, which we do not have. We have our sample container. They tried with that but then obviously they wanted us to go for an oval container, which does not conform to our design language. Number-one. Number two, the volumes are not there for that particular customer to start an oval container, whereas Pappco is using something that’s a pretty standard design. So, we again, by principle, we are sticking to our design, our uniqueness and there has been a lot of thoughts and research that has gone into coming up with our designs So, we do not want to compromise on it. So that probably reasons why they moved away from us.

Unidentified Participant — — Analyst

Okay. And one last one…

Satish Chamyvelumani — Business Head, Compostables Division

We will get them back, Akshita. We will get them back. Don’t worry.

Unidentified Participant — — Analyst

Yeah. Yeah. Yeah. I mean hopefully, yes. Just one last question that, I mean, you know that the execution muscle here in India is a little weak. I mean, it’s not that strong, how it’s otherwise should be in moulded product segment. Do you think going right the way in the U.S. operations and trying to run their pattern will be, I mean, just wanted to understand if it fits well or maybe try and do it better here in India, have the mould ready and then maybe do it in the U.S. also?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Satish, can I step into this one?

Satish Chamyvelumani — Business Head, Compostables Division

Please do. Please do. Okay. Because I am looking more on the international side.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

So number-one, we are not entering the U.S., still we have sorted India for sure. So we have a long way to go in terms of corrections that we need to do in India. We talked about the gap in supply-demand. That needs to be sorted. Satish, I’m hopeful by next time, will talk more on his concept of sustainable partnerships, which is that we want to not just be a provider of moulded fibre, we want to provide end-to-end solutions that we’re trying to do a lot of tie-ups globally to be able to bring very interesting solutions. Ramjee, is of course, building a lot of new solutions in the domains of starches, bioplastics, etc., etc., etc. and combinations of those. So, the ultimate aim is to be able to provide the buyer with an end-to-end solution. So that’s something that’s really important. We have to have to, have to sort India before we go anywhere else.

In terms of the U.S., it’s about 2 years, 2.5 years away. Basically, because that will not be sent from India. It will be sent from our Central America facility because we don’t want to move products across the world, because that is also, we are added to the idea of doing right by the planet as much as we can and I think shifting material across the world is not the best way to supply to the market. So, yes, those few things on the U.S.

Unidentified Participant — — Analyst

Yeah. Okay. Thanks.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Satish, if you want to add anything?

Satish Chamyvelumani — Business Head, Compostables Division

That’s perfect. Yeah.

Unidentified Participant — — Analyst

Okay, thanks.

Pranay Pasricha — Brand Head

Thanks, Akshita. Our next question is from SGS on the chat. What are the timelines for innovation product to be commercialized? The market segments or the key customers identified? Ramjee, maybe you can take this.

Dr. Ramjee Subramanian — Innovations Lead, Business Head

Yeah. We have given the timeline perspective in the presentation. Essentially what we are looking at is the business case valuations by the next quarter for mineral pellets and the quarter later for the flexi and then after that, we have to scale it up and move forward. So we are looking and or, depending upon the product, product performance requirements, we are looking at approximately six months to one year of….

Satish Chamyvelumani — Business Head, Compostables Division

And just to clarify the process further, normally, yes, we have a customer partner who we work with very closely. So typically what Ramjee would take a product and then have an application in mind. So, say flexible packaging, we’ve been working with shampoo for now, but, I know that Ramjee is looking at chocolates. So then having identify one partner and then understand what they want and then work with them for many various beta trials continuously with that. Even today I was in a customer partner’s office discussing how we are moving in the shampoo’s segment that Ramjee’s tema is doing. So of course, and then they were very happy because we had reached certain stage of prototyping. So yes, so basically that’s the methodology that the team uses.

Pranay Pasricha — Brand Head

Thank you. I will move on to the next question. The next question is from Vikram Mehta. Please go ahead with your question.

Unidentified Participant — — Analyst

Hi, Ved. First of all, as a human being, one is full of admiration for what you guys are doing and I really hope you are able to pull off most of what you are endeavouring because we all know that the planet badly needs it. Just a couple of questions and one observation. Maybe we could discuss this offline later. Building on what Ayush mentioned earlier, a, I think from where we are still perceived as a paper company, right, and therefore, we get those kind of multiples. Secondly, what tends to happen is, that when a Company announces a big capex, right and as you mentioned there is some equity fund raise also involved in this, right, it tends to weigh on the stock price because our current market cap is about INR400-odd crores and the capex is INR550 crores, plus another potential round of capex in the U.S., right. So in a way, it might be counterproductive because, obviously, we don’t want to dilute it. At the same time when the market sees a big valuation happening, it tends to weigh on the stock price. I think a little bit more of planning is needed in terms of just how to optimize all of this to make sure all of what you’re trying to do is financed properly, because clearly, paper is going through a super-cycle right now, which is in some way, giving us great profits to work with. But I think a little bit more thought, and reflection is required on that front to make sure that any dilution if needed, happens at an appropriate price, because there are clearly great options in your portfolio and if even some of them pay off as we envisage, we could see exponential growth, right. That’s the observation and happy to chat with the team offline, if it helps.

Second, I just wanted to know a little bit on the IP part and the pricing power of CHUK. Now clearly, if the demand is 1,000 tons and you are able ti supply only 300 tons, we want meaningful ROI on this business. The machines haven’t performed as we expected, which is bound to happen. They’re going to be more ups and downs as we go forward. So just wanted to sense some, when can we get some pricing power on the product and, b, are the patent and IP registrations being done for the U.S. also or are we limiting them to India at this time.

Satish Chamyvelumani — Business Head, Compostables Division

On the…

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Sure. Go ahead, Satish.

Satish Chamyvelumani — Business Head, Compostables Division

Go on, Ved. You finish that and I’ll come back to the…

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Yes. So very valid points. I think the challenge is in our history. I think, we’ve grown from a very-very small company and I think it’s been very — I totally agree with you. I think it’s more what we can do right now and sort of it being as planned as probably we could be. I totally appreciate your thought there. We do have Neetika now and she is a little bit stronger on the keeping us more leashed. So, of course, I am hoping that good sense will prevail more. She is definitely already beginning in a lot of systems and controls, etc., etc. We do have high aspirations to be able to do impact more than anything else and you are totally right, you can’t do impact by piecemeal approach. So you have to get more strategic. We are constantly looking for people who can guide us. So yes, if you have a thought process, I totally agree, we will love to connect. I think initially a conversation with Neetika and then yes, she can loop us in.

The idea for U.S. is definitely not to invest anything from India. So, the idea is we have a subsidiary in U.S. We will dilute our India holding. So, we own 100% right now of Pakka Inc. Pakka Limited or Yash Pakka Limited right now will dilute the holding that it has, hopefully not beyond 30% to raise the capital, and that depends on how well we pitch? How well we do our Investor rounds and our roadshows. So that’s what we’re working on right now.

In terms of India, again I’ll be with you. I don’t see it as a huge capex, but yes, I agree with you that we can’t do it from internal accruals, which would have been ideal, right. So internal accruals, even in the next year, free-cash will be INR70 crores, INR80 crores. We don’t want to spend all of that. So internally we would spend about INR50 crores, INR60 crores max, and then, we will have to raise another and similar INR60 crores, INR70 crores sort of. We haven’t yet totally looked at how we hope that it won’t be a dilution. We are looking at structured equity where we can buyback the person investing. So we are looking at numerous options, instead of shareholder dilution. If there has to be a dilution, okay, it could be a promoter dilution, but that also if we get good valuations. So again, but still too early to actually give a very confirmed point-of-view. Looking at various options, learning, but you’re maybe right, not learning fast enough. So probably drill some good sense into us and we are happy to learn and you guys are in the business and understand it more.

In terms of IPs, we always try to go for global IP. So that’s something we try and do. I think, we have Ramjee to talk more about it. I think CHUK has a design based eight especially on delivery containers. The other products, the patents that have been filed are again global IPs for the Flexi pack and the mineral pellets, but the effort is always to go for global. It cost a little more, but then you at least have a have a clear global IP. Is that right, Ramjee or I am a misspeaking.

Dr. Ramjee Subramanian — Innovations Lead, Business Head

Yes, you are right, but it has to start from India. So it will take some, process takes time, but all our IPs will be global in nature, because it has got global impacts. So, anyway we will have to go global.

Unidentified Participant — — Analyst

Well, sir, I will be happy to touch base with Neetika offline, but just one small thing, that given what we have achieved in the first-nine months, is there something extraordinary happening in the last quarter, it will be able to hit the INR90 crores profit?

Neetika Suryawanshi — Chief Financial Officer

I think efficiency…Sorry, go ahead, Ved.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Go, ahead Neetika. You are fine.

Neetika Suryawanshi — Chief Financial Officer

No, I was just saying that we have just aiming for more efficiency on the financial expenses side and also on the raw-material sourcing side. So that could be the two main things that we aim at. Over to you, Ved.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Yeah, and it’s basically, it’s not that far. So we do feel that we will hit around the INR90 crores kind of figure.

Unidentified Participant — — Analyst

Well, thanks. I will connect with Neetika offline and maybe pull Ayush also in the conversation and all the best.

Pranay Pasricha — Brand Head

Thank you.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Ayush always sends suggestions to us. Always welcome.

Unidentified Participant — — Analyst

Sorry, just second question I had asked regarding to the pricing power of CHUK. Given that the demand is 1,000 tons and supply is 300 tons, I am sure we could, I mean obviously the idea is to get a proper higher or safer rate.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Vikram, it is the way we have structured our business. Sorry, Satish, I am taking your words. The way Satish works or Satish is building the business is basically very aligned to the customers. So, instead of saying that we just going to take a price advantage because we had over ordered, what we do is, but similar to what Akshita said earlier, we actually have to stop serving certain customers. So we choose, let’ say Haldiram has been with us for a long time, Chai Point. So we chose about five or six key customers and we make sure that they are served first. So, but that also means we honor the commitments we made on price. So, it’s just the business model because we truly believe in long-term, because this is a short-term issue. We don’t want to be — the only way you can do that is that you are just open player in the market. Yes, I agree with you, we can the price at 20% higher, even today, and we will sell out, no doubt, but then we haven’t built the bonds that you need for the next 10 years. You’ve been very, very opportunistic. So that’s not something that — we think of it as, what would we feel is somebody was doing that of the other side. So, I think we make a choice. And we do talk to them that our raw-material basis have gone up. Can you help us? But we don’t tell them that we will stop supplying, because we can supply elsewhere. So we would rather take that strategic approach. And hopefully, we at least hope that in the next few years, the customers, they’ll reward us for that.

Unidentified Participant — — Analyst

I think, raising the U.S., I raising the funds for the venture in the U.S. in the U.S. is a good idea. I think you’ll get much better value for your proposition over there than you will get over here. I think Indian capital markets are still early nascent, for something like that. So, all the best. Thanks and may God be with us.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Thank you.

Pranay Pasricha — Brand Head

Thank you. There was a question from vivoi2202. If you can state your name and ask your question please.

Vivoi2202, if you are there you can ask your question, otherwise, I will move on.

Unidentified Participant — — Analyst

Yes. Thank you. My name is Rishi. Hi, Ved. I follow your podcast sessions and you are like, good. I just have one question regarding who are our competitors? Do you see any threat to the business? Like someone coming with the product that can disrupt the business?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Hah. Huge. Don’t know how to answer this. So anybody, the way I see it. The way we talk to, say when it comes to moulded fibre, for example, we have 1.4 billion people in the country. We eat three times a day. Total market size 4.2 billion. We eat out of steel, crockery, banana leaves, Styrofoam, plastic, melamide. All those potential competitors. So, but then the market opportunity is also huge. And in the same be we look at, if you look at carry segment, you can, ultimately the market is looking for carrying something from A to B. They’re not looking for paper per se. So the point is that, anything that you can use to carry in terms of it could be poly and it could nonwovens and it could be jute and it could be paper and other papers, they are all in the same market. So the point is that we always think of it as, what is the usage. And then you look at the packaging, which again we are developing in terms of multi-layered. You can look at numerous formulations within that. So there is always a challenge, but then that’s what we are here for, to try and build better and better products. We don’t focus that much on competition as such, but we focus very much on building better and better biomaterials. So that’s our focus and we will continue to do that. Yeah, like I said, the market remains huge. There is a lot of space, for everybody. But we as a organization, will keep building better biomaterials. We are not here, sometimes we are told, are you plastic warriors? Are you replacing plastics? No, ] plastics are amazing products. There are humans who created it. But the challenges that we didn’t think about end-of-life. So what we as an organization are doing are building better biomaterials. So that’s what we’ll continue to do. And then when we say better biomaterials, it’s the performance, it’s the cost, it’s the availability, it’s the dharma of packaging is to protect it. So it’s the protection itself of what is inside. So you know it’s broad things that we discussed when we think about building products. Yes. I know I haven’t answered your question, but I don’t know how to answer it beyond this.

Unidentified Participant — — Analyst

Okay. Got it. Like in previous con-calls you mentioned, we are discussing with Zomato regarding like — yeah, any update on that?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Satish, are you in a position to say something.

Satish Chamyvelumani — Business Head, Compostables Division

Well, we are…

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Satish is frozen. Yeah, go ahead.

Satish Chamyvelumani — Business Head, Compostables Division

I don’t know what’s happening with the Zoom this. We are working very closely with them. In fact, our partnership with Hyperpure is becoming better, if you will. And there are orders that have started to flow from Zomato’s site. We are using Hyperpure as a channel, as of now. And there is a very clear interest from the Zomato’s side that we would up ante on this over the next few quarters.

Unidentified Participant — — Analyst

Thank you.

Pranay Pasricha — Brand Head

Thank you. I will move on to the next question from Rohit Chaudhary on chat. What equity dilution do you plan for further expansion and probably at what price?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

No idea. So, it’s just too early, but by next quarter, we will talk.

Pranay Pasricha — Brand Head

I will move to the next question from Dinesh Jain. Will we be getting any capital subsidy from UP State’s Industrial Promotion Scheme 2022 for Project Jagriti? What will be that amount? Also…

Satish Chamyvelumani — Business Head, Compostables Division

That is…sorry, go ahead.

Pranay Pasricha — Brand Head

Also, will we be getting favorable allotment etc.? Next question is, what was the amount of one time Bangalore facility cost because of which we made a loss in full division on a consolidate basis and what is the present efficiency or capacity utilization of mould [Phonetic] machinery?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Sachin, do you want to answer the first bit, the UP?

Sachin Kumar Srivastava — Company Secretary & Legal Head

Yes sir. We have actually entered an MoU with the Uttar Pradesh government for this new industrial policy, where we are claiming at least 25% of our capital investment in subsidy in the form of investment. So, the policy is still under the consideration. The rules are under the consideration. The rules are under pipeline. So, we are surely going for consideration of this thing. Over to you, Neetika.

Neetika Suryawanshi — Chief Financial Officer

Thank you, Sachin. So as per the announcement done already, we will fall under another 25% bracket. However, there is a clause of an eligible investment as I have even stated in my reply on the chat. That will still entitle us for a 22% subsidy. And yes, you asked if we will be getting some favorable allocations from the government. Theoretically, yes, there are a lot of help that the government will be extending to us.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Satish?

Satish Chamyvelumani — Business Head, Compostables Division

And yeah, and on the Bangalore facility costs, again, it’s not like we invested a huge amount to start this up. The products that came out during the initial phases, where at a much higher price because of as we said, we have resources for three shifts, but we were producing only for one shift. So that was during the startup period. So, the procurement costs were higher for the first few months than the selling prices. We still have a sizable amount of stock at slightly elevated prices where we will be taking a small hit but from February onwards, the pricing, the selling price is definitely higher than the purchase price. So the overall estimate of the losses from higher procurement price from the Bangalore plant should be somewhere in the INR75 crores to INR90 crores range. And that is spread over the last five, six months.

Pranay Pasricha — Brand Head

Thank you. Next question is from Sandeep in chat. What is the plan and timeline for international expansion? By when are you planning to raise funds? What will be the total amount raised and what valuations are you looking?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Yeah. I don’t know if I would bite my tongue on this one later but yes, so basically the idea is to set-up a significant or setup eventually significant facilities wherever we can get sugarcane or rice husk, because that’s the fiber we know better than what we know at the fibres. The first one that we are toning with and this is again new for us is in Central America, we are on the cusp of signing the agreement with for the supply from sugar mills and that we are hoping that happened this month. But we can’t be 100% sure till that is on pen and paper. So, yes, everybody is assured that this month we will close it but we actually put ink on paper, there’s always that fear.

We are entering a law of unknown territory with huge desire to make impact, which means a significant capital raise. So, I don’t want to put it in the number right now. I think, it will be immature of me to say the number right now, but we are looking at significant capital raise. There is no dilution of the Indian companies side but dilution of the Indian shareholding in the American Company will have to happen. That said, just starting our investor sort of relations, finding the right investor advisor. That work has begun. I am sitting right now in New York to meet people and that’s what we will do from tomorrow and see how that goes. Get initial feel and see how we can do that, but definitely there is only one thing we can do is, we can track. So, will try very hard to make sure that we build better and better for more impact.

Pranay Pasricha — Brand Head

Thank you, Ved. Next question is asked by Manish for you Ved. Please elaborate on the status of Pakka Inc. They are having cost in the quarter on the same. So would want to know when would we get some return?

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Yes, this is a long churn. I think investment in Pakka Inc or Pakka Impact, both of them, there will be significant investments and this is something we are doing consciously for global expansion. We don’t think there’s going to be much returns for the even the foreseeable future, because till the plant in Central America doesn’t come up, we will have to keep spending. A lot of it will be capitalized. So that way it’s not opex. But, in the end, this is a decision that we will have to take because without — so, just now, it’s mostly four or five of us right now in the U.S. office and some consultants in Guatemala and Central America, where we are spending money. But we will start hiring more people and the return will only come in maybe two years time. But that said, hopefully the investment by Pakka Limited in India, Yash Pakka Limited will actually get returned as soon as we get investors in the picture. So that’s the key the direction headed.

Pranay Pasricha — Brand Head

Thanks, Ved. I think this is the last question. As declared, capex are up around INR650 crores in phased manner will be materialized? Can you share the timeline? And why had corporate tax rate has consolidated level at 33%? Why our corporate tax rate is 33%? Go ahead, Neetika.

Neetika Suryawanshi — Chief Financial Officer

Okay. So, on the corporate tax I have to be addressed, we are at a standalone of 29.5%, but given that the subsidiaries are not making any profits, the total absolute value of the tax then gets divided by a smaller revenue in the consolidated and hence the percentage on an average increases to 33%. I hope that addresses. I can probably give it over to you with, Ved.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Yeah. So, the first part was on the was, oh, I lost my chain of thought. It was to do with the investment. Yeah. So, the INR550 crores, typically in a capital project like the one we will be getting into it is about the timeline of to commercialize almost two years because the machine deliveries are at least a year and the project itself takes time. I am sure the finance raising will take three months or so. That said, basic engineering has already started. The orders will start happening. All that will start moving. So we are hoping, at least that we definitely get that 2025-26 first-quarter onwards. So that’s the broad timeline that we will follow.

Pranay Pasricha — Brand Head

Thank you, everyone. I think we are done with questions.

Ved Krishna — Non-Executive Vice Chairman & Strategy Head

Great. Thank you all. Thank you all for joining another investor call. Thank you all for having your trust in us and investing in the organization. As you can see, the team is growing and we are definitely getting great people with us that we will keep making our most, biggest effort to maximize our impact,and thank you for trusting us with your investments and we’ll try our best to make sure we live up to that trust. Thank you. Thank you, all. Namaste.

Satish Chamyvelumani — Business Head, Compostables Division

Thank you, everybody.

Pranay Pasricha — Brand Head

Thank you.

Operator

[Operating Closing Remarks]