Yash Pakka Limited (516030) Q4 FY23 Earnings Concall Transcript

Yash Pakka Limited (BSE:516030) Q4 FY23 Earnings Concall dated May. 02, 2023.

Corporate Participants:

Pranay Pasricha — Brand Head

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Jagdeep Hira — Business Head

Satish Chamyvelumani — Business Head, Compostables Division

Ramjee Subramanian — Innovations Head

Neetika Suryawanshi — Chief Financial Officer

Sachin Kumar Srivastava — Company Secretary and Legal Head

Analysts:

Saiyam Jan — — Analyst

Vishal Sharma — — Analyst

Harsh Goel — — Analyst

Taniya — — Analyst

Jeet Kala — — Analyst

Akshita Talesara — — Analyst

Vignesh — — Analyst

Unidentified Participant — — Analyst

Presentation:

Pranay Pasricha — Brand Head

Good afternoon, everybody. Welcome to Q4 FY ’23 Earnings Conference Call of Yash Pakka Limited. From the management, I would like to welcome 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.

Now, I would like to hand over to Mr. Ved for initial remarks. Thank you, sir.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

[Foreign Speech] welcome to this investor call. Pranay, can you just start the presentation and I’m going to go through it? Sachin, you maybe want to check with Ramjee he has not joined yet. Great, thank you so much for joining in. We’re just going to take you through what has been happening in the company and update you on the progress and of course, update you also on the commitments that we’ve been making and how things are moving. Happy to have you all. Pranay we can move to next slide. Next please.

Yes, so just to reiterate, our whole focus is singular, how do we provide regenerative packaging at scale and that’s the quest we are on as a company, go-ahead, once more. So what we are doing is basically focusing on the food packaging, carry and service sectors. So, totally focused on the food sector and trying to build scale within that, within the sectors. There are three product ranges that we are building on and my colleague Ramjee will also present more-and-more on the patents that are being created and the new products that are going to come in the next few quarters.

So the three areas that we’re focused on is compostable flexible packaging. This is basically packaging things like chocolates, nuts, potato chips, multilayered substrates. So we built certain biomaterials already and now we’re starting to commercialize those. The second has been packaging. The second has been our traditional segment of food carry, which has been done so far through utilizing our regenerative papers, but now we’ve come out with a new again patented product called mineral pellets, which again is going through numerous trials and initially, we are saying it for certain harder structures like cutlery, but eventually, we’ll also move into carry products from that.

The third of course has already been commercialized. But as you see the delivery container, which we’re very excited about and we’ve been building the traction for that and we have some great news that Satish will eventually share with you and I’m sure some of you have already come across it in the digital media, in terms of the tie-ups that we are doing and how we’re scaling it up through partnerships. So those are the three domains, we are focused on.

Next, please. So from my side, my role has become more-and-more of focusing on the international growth of the company, and I will restrict my update to that and of course, my colleagues will take it forward on the India business side and the different sectors, such as compostable packaging and the innovation domain. Go ahead. So the first of course you must have read about the tie-up that we’ve given of course talking to you about it in the past few quarters. Now it has come to fruition, there we’ve already signed about 500,000 tonnes, 400,000 initially, and another 100,000 is coming in now. So 500,000 tonnes of bagasse, we’re trying to make it 600,000, so that will lead to Guatemala becoming one of the largest sites compostable packaging in the world and that will give us about 400 tonnes a day of pulping capacity, which we’ll convert to different substrates, very similar to that in India. So that is already being done and the next step are in motion. Go ahead.

The next of course comes in, how do we fund and I’m sure that’s a question on your mind as well. So what we are doing right now is being talking to a lot of funding advisors, investment bankers in order to structure this whole equity and debt. So this is already in motion. We are hoping that within this quarter, we will be finalizing the funding advisors. And we will of course update you on that by the next quarter. The next part, any plant that you have to set up, any plant and a business establishment. So again, that has been moved forward. We have already identified few lands in Guatemala. We are trying to basically buy them as soon as possible so that there is something on the ground. So we are hoping, again, in the next quarter, we will try and close the land and as well as fence it. And of course, we’ll have another entity in Guatemala. So Pakka in Guatemala will also be created hopefully within this quarter.

The next part is, of course, we want to be making sure that lowered — the risk is lowered and lowered. So we are, of course, doing a lot of product tie-ups based on the products that we have created in terms of flexible packaging and molded fiber. And hopefully what we want to do is we’ll have a production of about 100,000 tonnes in flexible packaging itself. And the idea is to do a pre-tie up before the actual even investment happens. So the — again, the talks are in ongoing kind of advanced stages, and we are hoping in the next quarter we’ll have somes tie-ups in place. We’ve also recently hired our head for brand and impact, who’s leading this, lady called Margaret Lydecker. And she will also be focusing on this and building those tie-ups.

We are also — and again, Ramjee will brief more on the product, but we are also looking to create newer and newer substrates. So a lot of research, tie-ups are in the envelope. We are heading this month to various places in Europe and in U.K. for certain sort of conferences and exhibitions. And basically, we’re meeting our potential partners and doing numerous tie-ups for certain products that we have in mind for the future. And this could be products which are three to five years, in terms of timeline, but again, they need more and more thought and strategy in order to be able to build it. So we are again doing some tie-ups for that.

The last, of course, and not the least, I’m sure you guys may have read our board minutes as of a couple of days back. We decided that we are going to drop our traditional name of Yash and stay with Pakka. And it’ll be Pakka that will be the name of the company globally as we go forward. So, of course, India will become Pakka Limited, U.S. is already Pakka Inc., or whatever we established in Guatemala will also be called Pakka, it’ll probably be plc. We already have a subsidiary in Singapore called Pakka PTE. So we’ll try and retain that. The idea behind it is to, one, make it very simple, make it very aligned with what we are doing, which is basically what name Pakka means, which is packaging with the soul and stay with that and try and move more and more towards value-added product. And that’s the idea behind the brand name change. And of course, happy to even have further questions or any of these as we go forward. I hand over to Jagdeep. Thank you.

Jagdeep Hira — Business Head

Good afternoon, everyone. And I’ll take you with the performance for Yash Pakka as whole of the entities. And we look forward for value up in the change for the investors. So for the year, it has been the highest annual revenue almost INR420 crore, 419.9 crore, highest profit, which is INR72.3 crore, almost 17% of PBT. Highest server export, which is around 27% of total volume. Molded production had been up by 24%, ranging to almost 50% of its installed capacity as of now. And neither the less, we have been appreciated by different organizations, associations on people, planet, and performance, which is we were rated among top 50 companies as best place to work. CIA awarded us the best water efficient industry. UP government has awarded us best energy-efficient plant in whole of UP. Next, Pralay.

Yes, Pralay, click on all. So I’ll take you to Q4 versus q3 not very prudent to compare, but still we would like to compare. We had gone a bit low. So revenue have been almost 3.5% lower than last quarter. Profits, almost 30% down from Q3. This is because of shift in the packaging and the lower NSR received, approximately 5% lower than Q3 and Q4. Raw material costs have gone up by 7%, impacting to INR5 crore. Fuel costs has gone up by 5%. And there have been some provisioning on making all the team members as a partnership in the company, which we had applied ESOPs for every individual working as a part of Yash Pakka. Next, Pralay.

On slide in between, yes, that’s it next. So, as Ved said, we’re just focusing on international footprints and I’m looking after the project Jagriti now. So the team based out of Ayodhya would be putting up project Jagriti to value of the chain. So, key aspects of it would be the existing machine going up by almost 12% on the productivity. A new establishment will come, which would be 100 tonnes of flexible packaging, which is vision of the company, along with the quoing of the base paper from PM4 to the final flexible packaging. Accordingly, the pulp mill recovery is going up to better hold of the need for balancing out the requirement. Our new power plant is coming up of 10 megawatts. So this has been worked upon. And we are under negotiation with to finalize paper machine and the coating plant.

Next, Pralay. So key updates for Indian business going forward, enhancing the value chain for all of you, your values and the company’s performance. The Jagriti is coming up — the project Jagriti is coming up, in the previous, as stated. So we are looking for outsourcing of molded products, which will double our capacity, whatever we have, the install capacity that has to come in as at least 80% of the efficiency along with the similar production we are looking from the outsourcing. So flexi pack and mineral pallet, Ramjee would speak more about it. So we are developing flexi packs and mineral pallets for rigid packaging. And then enhancing the molded efficiency by reorientation of designs as in the given infrastructure. So that is — that was it for Indian business.

I’ll pass it on to Satish take you through compostable business. Thank you.

Satish Chamyvelumani — Business Head, Compostables Division

Thank you, Jagdeep Bhai and Ved. Good afternoon, everyone. I just wanna quickly run over the last year’s performance. Most of the quarter’s numbers have been addressed in Jagdeep’s presentation. So I want to give an overview of how we ended the year. As against 32.5 — sorry, INR32.3 crores last year, we finished the year with about INR52.3 crores. This is 80% jump or 79% jump over what we did last year. So the revenue almost doubled. The revenue growth was driven predominantly by growth in QSRs as in their consumption as well as we increased the customer base. And along with that, we also went slightly wider to increase our territories based on where we are. Again, we — around our strongholds, we went and captured little or lot more territories, if you will. So that also helped us in achieving this good milestone.

On the bottom line, though, because of the scale-up, we sort of doubled our losses. So from negative INR3.5 crores last year, we went to about negative INR7.9 crores. And this is primarily — this was primarily driven by higher scale-up costs. When we try to scale-up, the manufacturing capacity that we expected did not come through. So there were some higher costs, and more importantly, we also incurred worse than estimated, if you will, startup costs for outsourced manufacturing. That was a necessity that we had to do, because of what we invested at the partner facility. Now we have the delivery containers and it’s — again, it starts from here. So we are pretty excited.

I — with this optimism, I want to give you guidance for the next year where we would end up. Pranay, can you go on slide further? Yes. So, like what we did last year, we expect the growth to be, at least 2x if not little over 2, which is at 2.3x. The target for the series is INR120 crores, as against the INR52.3 crores that we did last year. And we will certainly, again, looking at what is happening this month and what had happened in March, we are looking at swinging the bottom line into the green. Definitely a INR10 crore sort of a number that we are looking at from negative INR7.9 crores.

Some of the key updates that I wanted to give you. You can click all if that’s okay. As Jagdeep just mentioned, our Ayodya plant efficiency is improving very commendably. We were at 175 metric tonnes a month. This is two months ago. In April we hit — we crossed 200 metric tonnes a month, but we had some downtime due to power supplies. But the outlook is we will be at about 230 to 240 metric tonnes a month by the end of this quarter into the second quarter. As Jagdeep mentioned, the outsourcing model is picking up. We have already started one plant in Bangalore. We have — that’s where we make our delivery containers. We have signed up another plant in the north. Hopefully, in the next investor call we can give you, or we can disclose the name and further information on that.

Apart from partnering with people who have existing capacity, we are also kickstarting a couple of Greenfield projects, one is in advanced stages. So, this again will be a great breakthrough in terms of capacity expansion for us. Ved indicated at the beginning of his talk that there are some excitement in the market that you would’ve seen. Zomato came out and endorsed CHUK as the compostable packaging partner for them, right? So this is Zomato Hyperpure endorsing us. And we are a part of — I mean, we are listed in Hyperpure, our volumes with Hyperpure is growing. Similarly, we have also partnered with — or not partnered, listed with Jen [Phonetic], which is — which was a two-year-long effort, which came to fruition last quarter. So these are expected to drive the volumes up.

And there’s a new program that you’re launching called Sustainability Partnerships, which is not in a — rather than CHUK being bagasse molded products, what we are trying to become is CHUK will become the sustainability partner when it comes to food service packaging for large institutions. So this would also mean that we will have the end-to-end offering that are endorsed by — that are CHUK designed, or endorsed by CHUK, which would ensure that there is a Pakka quality guarantee and Pakka service guarantee that will be on these products.

And we are also looking at overseas expansion towards the end of second quarter till the beginning of third quarter. There is a lot of work that is going on in expanding the market overseas, as well as acquiring the capacity around the world. So those are the quick updates on the top of what Ved and Jagdeep has already told.

So I’m gonna pass it on to Ramjee, I believe.

Ramjee Subramanian — Innovations Head

Thanks, Satish. Good evening. The innovations update for last year from where we start for the flexible packaging first. We have research conceptualized, developed, a compostable structure based on cellulose, cellulosic materials, and it has been successfully certified — tested and certified made a successful compostable product, such a rich and significant value of properties. The IP has been filed for the same. And this product in terms of the current stage is ready for business case evaluations, foot packaging stability studies are in process. And by the first quarter, we’re looking at completion of business case evaluation, followed by two quarters in terms of continuing forward with beta trials for the business case evaluations and the launch of the product by the end of this year.

The key aspects of flexi pack is that it’s a novel structure. Second, we are working from product backwards, so we are working with three different companies, two of which are global and towards looking into the converting and the packaging performance studies. And finally, of course, as Ved was mentioning, we are also working on global research tie-ups for compostable flexible packaging on cellulosic as well as biomaterials. The second part of it is on the mineral pallets. This is a product which has come out of upcycling of waste lime sludge. And this is an upcycle compostable product. Again, this product has been — we have qualified for migration studies. We have an IP filed on this. And as we speak, the product we are looking into the recipes. The commercial viability of this product will be done by the first quarter, the second quarter we’ll be looking into the beta trials, and we’ll be having the soft launch of this product in the cutlery by the third quarter of this year, the target that we have.

And in the moolded product, we have a significant novel product that we are looking at with superior oil and moisture-resistant prototypes and oil and moisture resistant properties for the molded delivery containers. For this, we are now working on the recipes, which we are looking at launching after the beta trials in the third quarter of this year. So that summarizes the innovation update.

I’ll pass it on to Neetika.

Neetika Suryawanshi — Chief Financial Officer

Good evening, everyone. I think most of the issues have been covered. I’ll cover the three highlighted sections here. We saw a quarter-on-quarter increase in the cost of both primarily attributed to the incoming raw material cost. We saw power and fuel rise up year-on-year because of the higher incoming raw material cost. And the finance cost is higher quarter-on-quarter, primarily because we have a renewal, which is due in the month of February. So those charges and plus higher working capital utilization because of the seasonality as we stock during this period. Pranay can we tails overhead?

We see the next year as a promising year, just like this one, and we hope that we will be having an increment in the revenues at least by 15%, and the EBITDA going up by at least 20%. The primary reasons or the drivers would be the new that we are targeting, specifically in the molded and with the better NSR there and with the new strategic tie-ups that we are aiming for our capacity enhancement, which will be driving this growth.

That will be all from my side on the finance side. In terms of the last call carry on the pledge share. So we are still struggling with these banking working procedures, as the next step we have appointed a security trustee for the comfort of the bankers, and we are having those documentations done. We targeted to get these reviewed as soon as we can in this financial year.

That will be all from my side. I think we can — I’ll now pass it on to, Sachin, now for the questions.

Sachin Kumar Srivastava — Company Secretary and Legal Head

I think we can open for the questions.

Questions and Answers:

Pranay Pasricha — Brand Head

[Operator Instructions] Someone named Subscription Sticks has a question. Please unmute yourself and please go ahead.

Saiyam Jan — — Analyst

Yes, good afternoon, everyone. Am I audible?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Yes.

Saiyam Jan — — Analyst

Yes, actually, my name is Saiyam Jan [Phonetic]. I’m investor in the company. This is my company’s id. Nevertheless, so my question is that, since I was seeing in the balance sheet that year-on-year, our borrowings have not been decreased. It was INR107 crore the last financial year. And this financial year also, we are closing at INR107 crore, but still, we are giving INR2.4 as a dividend. So why the company is not actually reducing it and giving away the money to the shareholders? That’s my first question.

Neetika Suryawanshi — Chief Financial Officer

So basically, the loans that we have on the balance sheet have reduced. It is just the working capital utilization, which has gone up, and that’s primarily because of the growth in the incoming raw material. So it’s not that we are not repaying the debt and we are still paying the dividend.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

And just to add to that, we have created a dividend policy to be — to just be very clear on the system and every year we do discuss it in the Board, but basically, the primary idea is to pass 20% of our profit — net profit towards dividend. So, we don’t get into too detail the discussion, at least the idea is to make sure that the investor keeps earning from dividends as well.

Saiyam Jan — — Analyst

Okay. And last time — in the last con call that we are soon going to list on NSE, what’s the update on that?

Sachin Kumar Srivastava — Company Secretary and Legal Head

We have already filed all the papers on the national stock exchange. They are reviewing our papers. They are reviewing our papers, that is under their surveillance. So soon — very soon we are going to hear from them any updates.

Saiyam Jan — — Analyst

Okay. And in the June con call of the last year, we were given the presentation in which it was projected that this financial year, we’ll be closing at INR500 crore approx sales and INR100 crore of profits. But currently the profits — the sales is around INR410 crore and the profits are around INR49 crore. So this why so much lag in the projections and the actual results? And what are the next three years’ revenue, which we’re looking forward as a growth projection?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

So, no, I think the figures were for PBT and the PBT just now is 420 — sorry, PBT is INR72 crore out of which paper has about INR80 crore. And of course, the remaining was to come from the molded fiber. And the molded fiber has been much lower in terms of expectations. But that’s it, we’ve absolutely haltered, we were definitely looking at INR500 crore and INR100 crore, and the idea is definitely to exceed that in the coming year, and that’s what I think Satish in has presentation also showed that the idea and we cut it. So, the idea is that definitely cross that barrier this year. And yes, — and basically we expected the molded fiber to fire much more than we were able to make it happen this year.

Saiyam Jan — — Analyst

The last question that in the next two to three years with the partnership with Hyperpure Zomato, what number or what number of sales are we addition looking from the Zomato segment? Like, can you quantify in terms of numbers?

Satish Chamyvelumani — Business Head, Compostables Division

I don’t think I can put a number or finger on that number yet. What we know is the opportunity is very big. And we are testing the waters in terms of the products right now both the dine-in and the delivery products are going in. We do expect the delivery products to take off at a much rapid pace. If you are asking whether you can quantify whether it’s going to be INR10 crores, INR20 crores a year, I think it’s a little too early to say.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Pranay, and investors, could I just request to restrict your questions to max two and just ask them right away in the beginning so that we are not taking everybody. We see a lot of hands being raised, and we want to ensure that we address the maximum number of people. So if you guys can just ask, mute yourself, and then we’ll answer all the questions, or at least two questions that you ask. And I’m sure even if you don’t ask others will ask similar questions. So, yes, I request you to please restrict two questions and right in the beginning. Pranay, if you can monitor that?

Saiyam Jan — — Analyst

Okay. Thank you. Thank you so much.

Pranay Pasricha — Brand Head

Thank you. Next question I take from the chat from Bikram Mehta, he had posted earlier. So his question is, last quarter you had given a guidance that compostable breakeven this quarter, it seems to be in loss. Also this is a trend of — is the trend of lower NSR and increasing cost expected to continue this quarter?

Satish Chamyvelumani — Business Head, Compostables Division

So, yes, quarter-on-quarter we have been improving. Where we faltered is, especially over the last two quarters, we had much higher startup costs than expected. And those were sort of unavoidable last minute expenses. And again, to make sure that the products are made and getting delivered, especially the delivery container products to the partners, we really had to get this going. However, what had happened over the months, even with the — all the manufacturing process, there’s a good trend, where the cost is coming down considerably.

Meanwhile, beginning of this year, the NSR has also increased. We should see the results in — our results are increased NSR this quarter and the next. So the NSR is not being pushed down, the NSR is actually going up, and the cost is, even though it was higher because of sudden scale-up and a new start, that is coming down, especially the outsourced manufacturing startup cost. I look at that as a one-time occurrence, and the model is being tweaked where we do not incur that higher startup cost anymore. So both are in the right direction, and you will see the results in the — not this quarter. I mean, you will see the better results this quarter, but much better the quarter afterward.

Pranay Pasricha — Brand Head

Thanks, Satish. I’ll take the next question from Captain Vishal [Phonetic]. You can go ahead with your question.

Vishal Sharma — — Analyst

Yes. Hi, good evening. Am I audible?

Pranay Pasricha — Brand Head

Yes.

Vishal Sharma — — Analyst

Okay. I’ve got two questions. The first one is for, Satish, our company has started CHUK in April 2018, and it’s been about five years in CHUK, and we are still making losses. So if I ignore the first three years in the past two years, we made a loss of approximately INR24 crores in CHUK, which amounts to approximately INR6 of EPS in the company. I’m not taking into account the working capital, which is used in CHUK. So, it’s disappointing for shareholders like me because the guidance given by Satish a couple of quarters back was that CHUK would break even in this quarter, or at least we would be in some profit. And in the last question, Satish has again said the same thing. So I would really appreciate if the management is very transparent, as in when exactly are we looking at this compostable or CHUK to be profitable, or at least break even. Because this is just eating away profits from the paper segment? And my second question for Neetika, Neetika I would like to understand it’s been more than 12 months, can you kindly elaborate why is it taking more than 12 months to release the pledge? Can you give me a detailed explanation on this?

Neetika Suryawanshi — Chief Financial Officer

Sure. So basically, we had our shares pledge and there was a internal decision taken by SBI that they would even release them, but then when they released it on paper and on documentation, they will have to ensure that the documentation is done properly. So there was a change in officials in the branch, as I understand. And that has led to some delays. We are sorting it out, plus we have our — the documents are basically drafted with PNB and SBI is the lead consortium banker. So basically the documents have to move from PNB to the security trustee for the comfort of all the bankers. So that is taking this much time.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Satish, do you want to respond?

Satish Chamyvelumani — Business Head, Compostables Division

I’ll take the first question.

Vishal Sharma — — Analyst

Yes, yes, Satish, please go ahead.

Satish Chamyvelumani — Business Head, Compostables Division

Yes, the last couple of quarters, we were looking at breaking even. Unfortunately, there were couple of startup costs that went way beyond our estimates, and that has resulted in a negative for the last quarter. We are trailing this trend by about two quarters, I would say. I would expect us to be not — we’re not necessarily making huge profit, but I would expect us to be coming closer to breaking even in the second quarter, end of second quarter this year. But positively in the black in third quarter this year.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Pranay, keep moving.

Pranay Pasricha — Brand Head

Yes. Next question is from Harsh Goel [Phonetic]. You can go ahead.

Harsh Goel — — Analyst

Okay. Am I audible?

Pranay Pasricha — Brand Head

Yes, please go ahead.

Harsh Goel — — Analyst

So the question is, we are looking for a huge capex in the coming years, but the managerial remuneration, specialty to Managing Director, Jagdeep Hira is up by 4x nearly to INR2.5 crores and we are paying dividends. So is this a fair financial policy of the company? This is my first question.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Can you ask all your questions at once?

Harsh Goel — — Analyst

Another question is from the papers that is there anything special about Yash Paper that differentiate it from the market competitors? What’s so unique that a person will choose Yash Paper, like there is special food grade qualities, which no company has, or like what so special and is it easy to make, or it’s like a technology with only Yash Pakka has and no company has? Like, is it a generic thing or it’s really very specific to Yash Pakka? Thank you.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

I’m going to take those. First is Jagdeep. So I think the amount of growth we’ve seen in the last five years, I don’t think anybody can really doubt Jagdeep’s compensation. I think he’s led us from the front and really turned the company. So, I think, honestly, the more we appreciate him the better it is. And I think that’s something that you as investors and me as an investor is also benefited from. The second is dividend, which we have already answered, that there’s a certain policy being made as a prudent company that [indecipherable] must get some dividend yielded. And the idea is that 20% of the PBIT needs to be parked for dividends. And that said, we do discuss it on the Board, but it is so far we’ve not had any doubt that we should or should not be giving that dividend.

The second question you asked was around what makes Pakka special. I would say many, many things. I would say, we are not really like any other paper company number one. Of course, we are very focused on compostable packaging and not paper. And you will see that we will keep moving away from pulp and paper as such. So if I start to count, there’ll be lesser fingers — like more fingers needed than my two hands at least. But starting with, I’ll just take a few things to give you a flavor of how we are different. The first thing is, of course, our raw material waste and how we utilize waste, which is sugarcane bagasse. And that said, some companies do utilize different waste, but there is very few companies that are exclusively based on renewable fiber like the way we are.

The second is in terms of process. It’s extremely, in terms of the way we process, we recover almost 95% of our chemicals. We — all our electricity is most — like I would say, almost all our electricity is self-generated from biomass. There’s numerous other things within the process, which, of course, at some point I hope that you’ll visit and you can see the magic that is created. The third, of course, in terms of products. All the products that we make literally are specialized. We don’t make any generic products. We are mostly in food and pharmaceuticals right now, focusing more and more on food. So, of course, our molded fiber is something that we’ve got in. And, of course, we are slowly trying to turn that around and make sure that we are earning in that. More than that we are coming up with numerous IPs, two of them, Ramjee mentioned right now. And the idea is to really be focused on creating more and more value-added products. Utilizing agricultural residues in order to solve bigger challenges like packaging.

And so of course, I would say that in the next couple of years, especially with the investments that we are doing in India and beyond, you’ll see the company move more and more towards specialized food packaging products. So those are just few of the differences. And at some point I think we can enumerate those differences. But we are very different from a regular and paper operation. I hope that helps.

Pranay Pasricha — Brand Head

Thank you. Next question is from Taniya [Phonetic]. Taniya, you can go ahead.

Taniya — — Analyst

Good evening, everyone. I have just couple of questions. There is a CWIP of INR19.37 crores on balance sheet and INR17.08 crore on standalone, what is the nature of this INR2.29 crore in terms of subsidiaries? And if you can split INR19.37 crores in terms of [Technical Issues] as well as materials? That’s first question I have.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Neetika, could you hear that question?

Neetika Suryawanshi — Chief Financial Officer

No, not very well.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

I think it was what I heard was CWIP. There is some money.

Taniya — — Analyst

Can I repeat?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Yeah, please do. And a little bit louder, your voice is very muffled.

Taniya — — Analyst

I’m so sorry for that. Am I better now? Am I audible?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Yes, much better.

Taniya — — Analyst

So there is a CWIP of INR19.37 crore on consolidated balance sheet and INR17.08 crore on standalone. So I just want to understand, what is the nature of CWIP of INR2.29 crore in some subsidiaries that might be there? And if you can split INR19.37 crore of CWIP in terms of maintenance and growth capex? That’s the first question.

Pranay Pasricha — Brand Head

If you have another question, please ask that also.

Taniya — — Analyst

Yes. So, I would like to understand the rationale for selecting Central America as a manufacturing facility center over there. Then, if we can setup manufacturing base in Mexico, Belize? And secondly, I would like to understand the strategy to increase wallet share from the existing customers since we have key customers when we have [Technical Issues] So what is the strategy for increasing the wallet share from the existing customer base?

Neetika Suryawanshi — Chief Financial Officer

I’ll go with the first one.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Yes, and I’ll take the second. Go ahead.

Neetika Suryawanshi — Chief Financial Officer

So Tanya, the INR2 crore investment is in the subsidiary for innovations. And as you can understand from all the presentations that we just made, we are looking at new product and new technologies both. So it’s basically for that. You also had a second part to the question. I’m sorry, I couldn’t understand that well.

Taniya — — Analyst

If you can split INR19.37 crore CWIP in the consolidated figures in maintenance and growth capex, how much percentage of that will go to growth capex and maintenance?

Neetika Suryawanshi — Chief Financial Officer

The entire is towards the growth capex, because that’s what we are hinging on when we say that we are developing new products.

Taniya — — Analyst

Okay. And is this one is entirely for Ayodhya the Jagriti side or something USR as well?

Neetika Suryawanshi — Chief Financial Officer

This is for a technological [Technical Issues] so yes, it is for the entire organization as a whole.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Yes. I’ll take the other two. The way I understood your question, Tanya, is on the North America side. So our focus is to build these unique products and [Technical Issues] rest of the world. Can you, yes, somebody on mute? So, yes, so basically that’s the idea. And we are looking at, it’s very difficult for us to transport products from the India base. And it’s also difficult to expand India beyond a certain limit in terms of the raw material usage that we have. So what we are doing is that, we are trying to base — build bases different places, and of course, we have ambitious plan to build a 400 per day line in Guatemala. That’s the first, and that will take at least two, two and a half years to actually commission. So that’ll be my personal focus. And of course, the focus of the organization to ensure that comes in line. And of course that is to service the North America market, primarily the flexible packaging and molded fibre those are the two basically ideas that we are pushing.

The second you ask a very pertinent question in terms of wallet share, and that’s exactly what Satish is looking at when he talks about sustainable, or regenerative partnerships. And the idea is to provide a end-to-end solution and not just be a supplier, but try and partner with the companies, which is what is happening with companies like Zomato and a couple of others who we can’t mention right now. But looking at solutionizing from them — for them from end-to-end as a company, of course, we are very focused on a singular mission, which is to lead the planet cleaner.

And what we realize is just by supplying, we can’t do that. So that’s another motive by which we are operating to provide end-to-end solutions. So the idea is that if a customer takes the entire range of solutions from us, we ensure that it’s compostable, and then we set up a composer in the end. And what comes out of the facility is actually compost. So that’s the model that Pranay actually who is on this call is leading. And we are hoping two beta sites this year. And once they are done, we will scale those up. And the idea is in the next three years to go to 100. So that’s the internal target to have 100 partnerships where we do end-to-end solutionizing, which of course, as you say, increases the wallet share. But as far as we are concerned, also ensures that in the end of the day, we are not just taking out — we are not just being happy that we supply the regenerative product. We are also ensuring that it’s actually becomes compost and not close the line. I hope that helps.

Taniya — — Analyst

Thank you.

Pranay Pasricha — Brand Head

Next question from Mr. Jeet Kala [Phonetic]. You can go ahead with your question.

Jeet Kala — — Analyst

Yes. Good evening, team. I have a couple of questions. First is to Ved, sir. Sir, on Guatemala acquisitions, like you said, I mean, the plan is to take it to 400 TPD in a couple of years’ time, and which I believe is probably 3x the current Indian size, but it’s still far away from the company FY ’25, FY ’26 big goals that we have had. So are we looking at another Guatemala kind of a site, which is you on anvil? Regarding this, I mean, a couple of quarters back you mentioned on the call that the fund raise could be in the range of some $200 million. So can we just get a ballpark number on the amount of fund raise that can happen in the Phase 1 over the next couple of quarter? And regarding the Indian site, what is the capex done on project Jagriti till date and what is the expected capex on project Jagriti for this current FY ’24? So these are the questions from my side. Thank you.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Thanks, Jeet. And I’m hoping to see you on the site. You — I thought you were going to come and visit us. We are very excited about that, do come.

Jeet Kala — — Analyst

Sure.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

But, yes, great questions as always. So, of course, on the — I’ll take the Guatemala side and I’m sure Jagdeep would like to take the India side. So first, from our side, yes, it is an ambitious project, but then we have short lives. We are going to try our best, and that’s something we’ve been repeating in every call. Yes, the idea is to do 400 tonnes per day. We are more or less through with the raw material tie-up for that. The site selection is happening right now. The funding partnership or the advisor is being selected now. As far as we see right now, it seems to be very, very positive.

Yes, the figure is absolutely right. It’ll be somewhere in between $200 million to $250 million. We are doing the financial modeling — detailed financial modeling this month. The team will be sitting in Guatemala and fine-tuning the model. And I think by next quarter we would be in the public space. We would be able to tell you what is the exact figure that we are going to raise for Guatemala, and then make sure that that project goes through. And yes, that said, it is an ambitious project. We are very excited about it. And I hope that you can see the light of day. As far as the timing concerned, I would say, we are definitely looking at about 2026 as the startup or around. So if we’re sitting here now, it’s about two, two and a half years. So we are looking at at least ’24, ’25, so end of ’25-ish is when we are looking at the startup there.

So, yes, so if you look at our earnings in terms of the ’26 target that we have set, it may shift a little bit. I mean, Guatemala has to be on track to be able to get to INR2,500 crores, which is the target around then. So yes, it might shift by a few months to ensure that that happens. But India will, of course, kick in gear, but Jagdeep is a better person to answer that, of course.

Jagdeep Hira — Business Head

Hi, Jeet. The total Jagriti project would be near around INR550 crore. And the investment has gone around 2%, 2.5% for the Jagriti project as of now.

Jeet Kala — — Analyst

And in the current year, how much it’ll be?

Jagdeep Hira — Business Head

So in the current year, it’d be almost around 30% of the total project value.

Jeet Kala — — Analyst

Okay. Ved sir, regarding another site, are we still looking at finding another site, and it’ll be of what size? Eventually bigger than Guatemala?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Too early to say, Jeet. I would say, we’ll focus on Guatemala. We keep our ears and eyes open. I’m speaking at numerous sugar conferences, meeting a lot of sugar companies from around the world. But it’s hypothetical right now. We will not — we can’t afford to have more focus — more areas to focus on than we do right now. I think with Jagdeep and an amazing team in India, I have the freedom to be able to look at one more site, but still that site is not actually kicking into gear. We’ll definitely not be investing more. So, that will be too much of dilution of energy. So I would say setting India right, getting Central America in order, and then looking at the next site. So I would say the next site is about four years.

Jeet Kala — — Analyst

Okay, thank you.

Pranay Pasricha — Brand Head

Thank you, Jeet. Next question is from chat from Rohit. Any new customers that are using CHUK compostables? That is his first question. And second question is, do you have received any orders from Gem [Phonetic]? If yes, can you please let us know the order value volume or the volume of the order?

Satish Chamyvelumani — Business Head, Compostables Division

Sure. Multiple new customers down south A to B has increased their volumes dramatically. We have been working with Nesco, this is in the West. TVR has increased their volumes pretty well. So again, overall, there is a lot of customer acquisition that’s happening, predominantly in QSR segments. But one very large customer that came in recently is the Shrine Board. So this was a work that was done over probably about 24 months or so. So their volumes are pretty big. This is something that has happened recently in the last quarter, a large customer, which is Shrine Board by itself. So based on the success of Shrine Board, now Iscon [Phonetic] is coming in. So it’s not just the QSRs, we’re also looking at where else disposables are absolute necessary, and we are going after them as well to service them.

Gem, well, as a first step, we are working with Indian Oil. It hasn’t come to fruition yet. Gem has been a really, really long road that just came out to giving us results now. This was listed in March. So we do expect a few orders coming — Gem is gonna be a slow start, but it is important that we are there, especially when we are trying to address the government usages, if you will. So this will take up a little bit of time. It’s slow to begin with.

Pranay Pasricha — Brand Head

Thanks, Satish. Next question is from someone named iPhone. You can ask your question.

Akshita Talesara — — Analyst

Yeah, sorry. Akshita Talesara [Phonetic] here. Hi, Jeet stressed a little bit on the molded product. You mentioned that, you have some startup costs that hit this quarter. Could you elaborate that a little bit? Like, is it like to get the outsourcing unit up and running? What exactly is this? Because you have north coming this quarter, then we’ll see that cost again this quarter, right? And also, I think last quarter you mentioned that you have some negotiations with some outsourcing unit in Calcutta also, right, so what happened to that?

Satish Chamyvelumani — Business Head, Compostables Division

Okay. I’ll address one after the other. First one is, yes, you’re absolutely right. We incurred a much higher cost than anticipated in getting the first unit up and running. There were — again, this is — the delivery containers are something that we haven’t had a great success in the earlier years, as you know. But we identified the right machines, we identified the right manufacturing partners. However, we had to do a little more of trials while we are trying to produce this at scale. So that resulted in costs that we did not anticipate — I don’t want to say, we did not anticipate that exceeded our estimates by a large number. So if I looked at the beginning to where we are, the costs were much higher. However, right now they’re at a very, very reasonable number where we are actually seeing a positive contribution from those products. So that’s the first one.

And then the second point that you raised, which is a manufacturing partner that was identified in Kolkata, we ran trials. The costs were coming out to be a little more than what is acceptable for us. We have decided not to pursue that any further. But with that said, the model is alive and kicking. There are few other partners that we have identified, and they are closing deals at the purchase prices that are very acceptable to us.

Pranay Pasricha — Brand Head

Thank you, Satish.

Akshita Talesara — — Analyst

Okay. Just one question linked to this. You mentioned the Hyperpure collaboration, Hyperpure, if I understand, well, it runs very thin margin. So, could you throw some more color on what margin Pakka looking at? Because last call, I remember you said that you’ll not lose out any relationship for pricing. So does that mean you take that hit in your P&L, how will this look like?

Satish Chamyvelumani — Business Head, Compostables Division

Two things, Hyperpure runs on very thin margins for commodity products, right. And we definitely are not a commodity, especially at compostable packaging in the current times is a sought-after product, right? Second thing is when we say we would not lose out the relationship for pricing, there is always at an arms length, if you will, right? It’s not like we will sell this at cost. We are maintaining our current NRSs and the current contribution levels with Hyperpure as well.

Akshita Talesara — — Analyst

Okay. And one last question, is that Ved while you are listening from the investors for the fundraise because given that Pakka Inc., I mean, as of now has no revenues and the India business has seen a little slowdown temporarily. So, what are you hearing from them? Like any comments, any color on that?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

In terms of the race for the international project?

Akshita Talesara — — Analyst

Yeah.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Overall, but I think the — in the end, the proof of the pudding is the meeting. So till somebody doesn’t put a check on the table, it’s all in the air. But we are continuing, it’s a new domain, new territory for us. We are taking numerous leaps of faith in pursuit of our dreams, our purpose. So that said, we believe in it totally, but we don’t know exactly what the dilution figure is going to be. Of course, our investment bankers, we are saying maximum this dilution and that’s it. You have to value at the kind of — this kind of level. And that said, we’ll come out with the numbers in the next couple of quarters. So positive overall, we are having — we are definitely trying to close the investment advisor this month. And we are talking to a couple of investment bankers further this month. The debt is more or less tied up, of course, it’s easier. Lot of different agencies have come in and said that we’ll provide the debt, debt subject to equity, but the equity is the challenge. So it’s going to be fun and game. So, it’s a good journey. All I can say is that right now, and we are, of course, hoping that we will get the required results.

Pranay Pasricha — Brand Head

Thank you. I’ll move on to the next question from Vignesh [Phonetic]. You can ask your question, please.

Vignesh — — Analyst

Good evening, sir. Yeah, most of my questions are answered. Just one question on the accounting side of it. Just want to understand company is paying tax around 30%, 31% for last two years. Would we be shifting to the 25% tax slab like many of the manufacturing are doing it as of now for the current year?

Neetika Suryawanshi — Chief Financial Officer

Deliberating upon it, we’ll update you.

Vignesh — — Analyst

Okay, fine. And it’s a request on my side if the PPT could be uploaded before the earnings call start. I mean, it would be helpful for us to go through it, before coming for the call. Yes, thank you, and all the best.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Thank you. Totally. Apologies from that. I saw there’s other couple of people we didn’t realize that the PPT hadn’t been uploaded, but I’m sure soon after the call, we will.

Pranay Pasricha — Brand Head

Veenu, you can go ahead with the question.

Unidentified Participant — — Analyst

Yes. Good afternoon, Ved. My first question is, earlier Brickwork was doing the credit rating and they pulled out from this exercise. Have we approached any other credit rating agency to do the credit rating, what’s the status on that?

Neetika Suryawanshi — Chief Financial Officer

I’m sorry, if you be a little louder. I could just make out parts of your question.

Unidentified Participant — — Analyst

Yes. I just want to know the status on the credit rating, because earlier Brickwork used to do the credit rating and they pulled out and in one of the conference calls, I remember you mentioned that you have approached some other agency, I don’t remember the name. Any update on that?

Neetika Suryawanshi — Chief Financial Officer

Yes, this credit rating is already done. They retained the same rating for us, and in fact, the rationale also adds the projects. So, we’ve already completed that. That was in February.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Who is the agency?

Unidentified Participant — — Analyst

Published?

Neetika Suryawanshi — Chief Financial Officer

It’s already published. Yes, Care.

Unidentified Participant — — Analyst

Okay. Another thing is to — another question — so the second question is to, Satish, can you elaborate on the two products which you are going to launch? I read about one 350 ML bowl and some of the products you are going to launch this month. So can you elaborate on that?

Satish Chamyvelumani — Business Head, Compostables Division

Sure. So, there’s a huge demand that our sales team and the partners out on the field have noticed that there is a good demand for a product that between our 500 ML dine-in products and 250 ML dine-in product. So we are coming up with a dine-in 350 ML bowel, which would be, well just like any other CHUK product will continue to have the same design language and the same performance promise. So that is a dine-in product that we are looking to launch. And also a smaller 4CP, which is predominantly used in the west, in Western India, I mean, that is also on the envelop for this month.

Unidentified Participant — — Analyst

Okay. Okay. That’s all for my side. Thank you.

Pranay Pasricha — Brand Head

Thank you. Next question is from Saurabh on chat. Good afternoon, Ved, sir. You have guided us in the last call that we are targeting INR2,500 crores by FY ’26. My question was that, the revenue that we’ll be generating from North America business in the future was included in that guidance.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Yes, of course. I don’t think India expansion will warrant that kind of revenue. It has to be both India and U.S. to Central America kick into gear. And as I said earlier in an answer that it’ll be a few months more as we kick into gear in the Northern America market. So it might shift to the 2027 actually instead of ’26, but I think we’ll keep you updated on the progress that side. This side, of course, we are already kicking into gear in terms of the project on this side.

Pranay Pasricha — Brand Head

Thank you. Next question is from Vishal. What is the target revenue contribution of new innovation products? Stamp versus actual and by which financial years?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

So the main objective is to focus on flexible packaging and that will start kicking into gear around financial year 2025, ’26, partial that year. And then of course, like I said, 2026, ’27. As far as we foresee, we will definitely look at that becoming almost 50% to 60% of our revenue shares by the time kicks into gear. And of course, by then molded will of course also rise. And then, the paper that we produce now is going to keep being 30-odd percent of the revenue eventually. But — because in the Central America side, we are not doing any base paper, it’s all either flexible packaging or molded fiber. So that will take a bigger chunk of the overall revenue.

Pranay Pasricha — Brand Head

Thank you. Next question is for you Satish from Dr. Madhya Arjun [Phonetic]. I would like to know about the consumption in terms of market size and growth and your steps to it that information will inspire us?

Satish Chamyvelumani — Business Head, Compostables Division

That’s a great question. Thank you so much for asking this. I always keep saying the compostables is a very nascent industry in India. However, when you look at disposables as a market, we have about plastic disposables is to be — I mean, it’s told to be around 2,000 tonNEs a day, right? That’s how much of plastic disposables are being used, and we are looking at slowly penetrating into that compostable segment. So, the size of the market is definitely huge. However, some of the compostables have some limitations as well, which we are seeing. So while Ramjee and company is continuing to help us out with newer materials, we are also going out and expanding not just with bagasse, but any other compostable partner, like let’s say, it could be a compostable beverage cup, compostable cutlery, compostable — even though, it may or may not be a CHUK product. We are still partnering with people that are making compostable cutlery, paper cups, beverage cups, and you name them, right, beverage couplets, straws. So we are trying to expand the offering to go in with a full basket, if you will. To chip away at the 2,000 tonnes a day sort of a market.

Pranay Pasricha — Brand Head

Thank you, Satish. Next question is again for you from Pravin Sharma. You just said that CHUK is being backed by PBT, you also presented in your presentation that CHUK will make PBT of INR10 crores this year. Now going by the above two equations, does it mean that CHUK will be making losses in Q1 to Q3 and there will be a huge profitability only in Q4, which will wipe out the losses and end the year with INR10 crores profit? Is this was your visibility?

Satish Chamyvelumani — Business Head, Compostables Division

I mean, this is — I mean, I would definitely need to present a detailed plan on why this shift is actually happening. If you look at the first quarter of this year, our capacity continues to be the same, 95% of our supplies come from the Ayodhya plant. Whereas, as we have been addressing, there are couple of new plants that have come into our fold in terms of outsourced manufacturing, which we expect to procure supplies from in the second quarter and third quarter, right. So what would happen is right now we are at say 200, 210 metric tonnes a month, but our overheads continue to be the same. When we go into the second quarter and third quarter, the overhead will be spread out that well resulting in a much better profit.

It’s not — I don’t wanna say it’s a hockey stick sort of a profit growth. There is a gradual — in the first quarter, the cost is being controlled. The cost has come down. There is a good uptake in NSR. So we will come closer to the black in the first quarter, but the chances are we will continue to be in red in the first quarter. Not too much of red, close to black. In the second and third quarter though, you will start seeing, the results of increased capacity while the fixed overhead remaining the same. I think that’s where the numbers are going to change. I hope that explains this question.

Pranay Pasricha — Brand Head

Thank you. Ved, you want to continue with the questions?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Yeah, I think I would like to definitely address all those are pending.

Pranay Pasricha — Brand Head

All right. So, question from Harsh, what keeps CHUK different from Ecoware, and could you please put some light and pricing of the product with respect to competitors?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Absolutely, absolutely. I mean, this is — that brings a lot of smiles to my face, primarily because we are so proud to go out in the market and say we are the best. And time and again, we have been proving that we are the best. I have been very vocal in telling everybody that we have the best brand equity when it comes to compostable products in the country, right? So that — the brand equity has been built primarily because of two, three reasons. One is our promise and the way we are sticking to our promise. We are all natural in color the Red Dot and Good Design award-winning products. But more importantly, our formulation beats every other product out there hands down, right? So the brand equity is not just — again, obviously, our marketing team has been doing a great job, but it’s not just the result in terms of the marketing activities, but the product performs every single time.

Those are the three major differentiators that have given us a much better brand equity among B2B clients in the market. It’s not just Ecoware, you could ask, or you could name any other competitors that are in the market, we beat them hands down. I don’t want to go into that more, but what we are so obsessed about is meeting with customers requirements and making sure that the customers are happy. That above all these things that I mentioned differentiates from — I mean, differentiates us from anybody else out in the market. And this brand equity is definitely giving us a much better pricing advantage while the market has been softening over the last six months because there have been quite an influx of new players that have come in with inferior formulation and better pricing. The market hasn’t moved completely away towards them, but it hasn’t moved away from us, right? We are continuing to grow, and the limitation has been supply chain for us, which we are fixing.

Pranay Pasricha — Brand Head

Thank you. Next question is from SP Jeet. I am based in Kolkata. I tried to buy a product and found that of packet sizes 125 pieces, which is odd as other similar products are selling at 25 packet size. I would like to know why you made the packet sizes 125 and logic bhind it?

Satish Chamyvelumani — Business Head, Compostables Division

Couple of reasons. One is the 125 piece pack is predominantly for business-to-business buyers and we call them as bulk pack. There is also a retail pack, which is available in 25 pieces, 25 piece packs. And the reason why we maintain the 125-piece pack is, as you all know, we probably pay 4x the price of plastic wrapping. Instead of using plastic, we use compostable PLA packaging. And in order to provide the pricing advantage to the customer, we look at what component would add value and we eliminated that, right? So most of our business-to-business customer who buy, or who buy the bulk packaging, they like these larger numbers. So we went for the 125. And second, if you are looking for a retail consumption, they are available in 25 piece packs.

Pranay Pasricha — Brand Head

Thank you. I would just like to inform that some of the questions have been answered on the chat only by Mr. Ved, so you can check those answers there. I’m just covering the ones which haven’t been answered. Next question is from Vishal to Satish again, what are the margins for delivery containers of current figure?

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Pranay, we should definitely close in 9 minutes by 5:30.

Pranay Pasricha — Brand Head

Sure.

Satish Chamyvelumani — Business Head, Compostables Division

We expect the margins to be slightly low to begin with. But as three to four months go on, our cost will continue to get better and we should be coming in closer to about 15% to 20% margins. Today we are operating at thin margins, and that’s primarily because of our, I don’t want to say lack of experience with these products, but these are newer products to the market. So there is a slight pricing advantage that we are giving to the customer, and also taking a slightly higher cost from the manufacturing partner. But both these things will improve in the next quarter or so.

Pranay Pasricha — Brand Head

Thank you. Next question is from [indecipherable] who is asking about revenue growth for FY ’24 and also growth in terms of PBT.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Already spelled.

Neetika Suryawanshi — Chief Financial Officer

Already replied.

Pranay Pasricha — Brand Head

Next question is from Praveen to Jagdeep, raw material cost has gone up from December, by when do we expect this increase in RM be passed on in selling prices?

Neetika Suryawanshi — Chief Financial Officer

So a partial impact has already been seen in the quarter results, but I think since our costs are all fixed, we don’t see any — sorry, Hiraji was to answer. I’m sorry, I just was already unmuted.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Sorry. I said we were very happy, both Jagdeep and I were smiling that you answered it.

Neetika Suryawanshi — Chief Financial Officer

I just thought I was unmuted, sorry. Please go ahead.

Jagdeep Hira — Business Head

Praveen, though this was a purchase call increasing the raw material pricing by 5%, but we are — we had ensured this same pricing goes on and on for another three years. Because we entered into a long-term contract with the raw matrial supplies, with the sugar mills, basically. And we see it’s only a time right now where the NSR has gone down for three or four months. But we see it up going in couple of months now. So we’ll back on track. But yes, the raw material was the purchase call where we had secured 80% of our total raw material price. So just for security for another three years, and then further three years we’ll be gaining further contracts.

Pranay Pasricha — Brand Head

Thank you. I think that’s it in terms of the questions. Ved, you want to say anything.

Ved Krishna — Non-Executive Vice Chairman and Strategy Head

Thank you all so much, for again, trusting us with your money, trusting us with your investments. We thank you for all your continued guidance and support as we move forward towards the mission that we’ve created as an organization. Now we are extremely proud of the team that is working day in, day out towards this mission. And I can, again, as every time I can let you assured, leave you assured that we will leave no stones unturned as far as effort and focus is concerned in order to achieve the aim we’ve set out to achieve. So thank you all again.

Neetika Suryawanshi — Chief Financial Officer

Thank you.