Please note that this conference is being recorded. I now hand the conference over to Mr. Sachin Bobade from Dolat Capital. Thank you. Over to you, sir. Thank you, Ziko. On behalf of Dolat Capital, I welcome you all to the Q4 FY 2023 Earnings Conference Call of UFlex Limited. Hope you all and your family are staying safe and healthy. From the management side, we have with us Mr. Rajesh Bhatia, Group President and Chief Financial Officer. Now, I hand the floor to the management for their opening remark, and then we would have question and answer session. Over to you, sir. Thank you. Thank you. Thanks, everybody, for being on this call. The key highlights for the FY 2023 and for the Q4. You know, FY 2023 marks the highest ever revenue UFlex has earned, and vis-a-vis last year, we are up by close to more than 11%. We also achieved the highest ever packaging business sales, both aseptic and flexible combined. Over the last year, we have about 33% growth in this. Our Indian business is, you know, highest ever EB volumes and has done the highest ever volumes. It's also achieved the highest ever profitability. For the year as a whole, we have an EBITDA of about INR 2,070 crores versus INR 2,278 crores last year. It's about down by about 9%. The year was also exceptional in the sense that, you know, we suffered a devaluation loss of about INR 150 crores in by two devaluations done by the Central Bank of Egypt. We've also had a substantial foreign exchange valuation losses arising from the dollar strength across all against all the against all the other currencies, which was also substantial for the year at about INR 190 crore. When we look at the PAT level versus last year, INR 350 crores is almost about INR 340 crore is what helps it financials. A very substantial part of this is non-cash. You know, this is what a hit we had to take in the numbers because as you consolidate into INR, your final balance sheet. The interest cost for the year is also slightly higher because, you know, we've seen the interest rates going up in all the jurisdictions. Euro, where we had, you know, zero Euribor, we now sitting at about 3.35%. U.S. dollar interest rates have also gone up. Plus the working capital of where we started in the business in Nigeria, we've had, you know, a higher impact of both on account of the interest cost increase as well as on account of the working capital deployment. Overall, the interest cost for the year went up significantly. Couple of things more, you know, aseptic packaging business did very well. For the year as a whole, we had about 93%-94% capacity utilization levels. We also had a volume growth of about 115% in that business over the last year. The businesses for flexible packaging as well as for the, which also includes the holographic films, has also done pretty well, and we have had single-digit growth in those businesses, as well in terms of the volume. While the packaging films business has shown some kind of a softness because of a bunch of certain capacities, as well as the, you know, the impact of the demand in Europe, driven by the Russia-Ukraine conflict, which has led to a higher energy cost there, higher EMI costs, which the people are paying because of the higher interest rates. All this affected the consumption. The same story happened in the U.S. as well. At the time when there was a bunching of capacities, these two situations in Europe and the physical impact of the Fed aggressive rate hikes did impact the demand for the packaging films, because as the consumers, you know, cut down on their certain consumption to pay for their higher energy bills and pay for their higher mortgage EMIs. That impacts with the demand at the time when the new capacity had come on scene. Q3 was probably the worst hit, and that Q4 is far better. As we go into the month of May now, we feel we're seeing a better sizing. Not at the same level at which we had in Q1 of the last year, but in Q1 of this year. Definitely, you know, there's certain pricing increases that have been taken, by the industry as a whole. Hopefully, I think in next quarter or so, we'll see a better performance by the packaging, of packaging films business as well. In the meanwhile, the other businesses, whether it is inks, adhesives, whether it is packaging, flexible, adhesive, cylinders, all of them continue to do very well. So if I were to segregate between the two things, the India business has done pretty well, where we've seen the record turnover, record volumes, record profitability, so that business has stood up. The overall, you know, if we see India business EBITDA also with this last year is up. The entire profitability volumes, the entire business has done pretty well. It's the overseas bit, especially Europe and U.S., where the demand got impacted and the price pressures came. That business is, you know, slowly coming back to the normal levels. Hopefully next few quarters, we'll see a much better performance from this part of the business. That's the advantage we had, in terms of the diversification, what we have value-added products in the packaging. If I see the results of all the other peers, I would see that between the Q3 and Q4, they are down, as high as 80%. 30%-50% is very normal, but, you know, about, there are some numbers which are down as much as 80%-85% as well on a quarterly EBITDA basis. Simply because, you know, that part of the business, flexible packaging films, that went through a bit of a pain because of the overcapacity and the situations that happened in Europe. So that in a way is nutshell, the whole performance for FY 2023 and Q4. I think the aseptic packaging business, you know, as I said, we are at 93% capacity utilization. So we made efforts to debottleneck the existing capacity and all that, and hopefully, this year's survey is going already. We are, you know, from the declared capacity, we should be at about 120%, 115%-120% utilization levels with this debottleneck. We are exploring further opportunities as to how do we debottleneck more in that business from the existing plant itself. So that we could take it above capacity levels to about 12 billion packs a year from current seven billion packs a year, while there continues to be a healthy demand for the product. We've also established well there in our export countries. Currently we are also exporting about 40% of our production from the packaging business. That in nutshell is what we've done in FY 2023 and Q4 2023, FY 2023. I'm ready for any questions that you may have. Just one thing more. We had announced earlier, you know, that we are setting up a facility to manufacture our raw material for the packaging films, polyester packaging films. You know, we in India, we are already at an advanced stage in that project, and we will probably complete that by the end of FY 2024 fiscal. We've also now taken up a similar investment in Egypt also, with where, you know, from which facility we take care of Middle East, Nigeria, Egypt itself, as well as our Poland facility. Our dependence on the market for procurement of the PET chips will become very minuscule. The intention is to capture those margins which are there in the backward by doing this backward integration. Our size today, almost in the polyester films being almost the largest player in the world, I think we required a bit of protection, or you can say a strategic investment to ensure the raw material availability. We've suffered enough in the last three years when the raw materials were in a short supply. Not only the cost, but availability was also an issue. Of course, you know, the higher freight rates also didn't help that business. We've lost substantial margins because we were buying all the raw materials for the PET films plant from the third parties. You know, with the enhanced capacities coming in India, Poland, Nigeria, Russia, I think that then, we need to insulate ourselves. These two investments are not going to be, you know, accretive of the top line, they'll give us the higher margins as well as, you know, quality control over the raw materials. You know, the availability will no longer be an issue, though in the last two, three years also, we didn't let our production of the PET films suffered, and most of the plants we were operating already at 90% plus utilization levels throughout the period. Yes, there was a lot of, you know, effort in terms of, you know, procuring and as well as getting these ready. Hence these two investments were planned, and they've been, they're coming up well. In India, by the end of this current fiscal, we'll be up and running in that facility also. Thank you. Thank you. That's what I wanted to say. Hello? Hello. Thank you very much. Should we open for a question and answer session? Yes. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Rushabh Shah from Anubhuti Advisors LLP. Please go ahead. Thank you for the opportunity. Just, I think, wanted to understand again on the PET chips plant, which you are setting up in Egypt. What will be our capacity, and again, what will be our absolute CapEx on that part? Can you please guide? About $70 million is the CapEx, and that should produce about 200,000 tons of chips. 200,000 tons? Yes. Okay. This will primarily cater to the Egypt plant, and along with that, even to Nigeria and Dubai. I had missed that part of your initial commentary. Nigeria, Dubai, Poland, and maybe to, with some portions to Americas as well. Okay. How much of our requirement will be fulfilled from this plant in, for these all plants? The raw material requirement. I think we should be about 60%-70%. 60%-70%. Perfect. Perfect. Secondly, my question was with respect to our Dharwad capacity. I think that whole 63,000 tons has been commissioned from April month, correct? Yes. Okay. we are expecting revenue to the tune of INR 700-800 crore incremental per annum from this plant? Yes. Okay. Margin profile will be the same as what we are doing on a standalone basis, or will there be any, I think, positive or negative to that? The same what we are doing currently, except that, it will be bit, you know, because it's a new facility, it's a larger facility than the existing one. The manpower, you know. Mm-hmm Per ton output, that cost is going to be much lower. It's a more efficient plant, so the power consumption is also going to be more efficient. A bit of savings on the costs, but, you know, overall, if we see, in the southern part of the country, the margin, the prices and all that, That's going to be pretty much the same. Understood. Just on this PET chips plant, which you are setting up, which we are setting up in Panipat. Earlier, we were guiding for it to be starting by April 2025, when we initially announced this whole project. Not 25. Okay, is my understanding correct, that we are now commissioning it by likely of Q4 FY 2024? Yeah. Yeah. Okay, okay. In terms of, we were also setting up an 18,000 ton CPP plant in Dubai, we announced, along with the Dharwad capacity. Any update on that? That has also been commissioned. this month itself, April, sorry, this quarter? This quarter. Okay, okay, understood. Just one last question on the pricing part. I think in the yesterday's TV interview, you mentioned that pricing is, I think anywhere up 13%-15% from last quarter. Just wanted to understand, was this in context of global prices, or it's or India specific, or it's across the space that pricing has moved up? The India prices moved up, so does the global prices also get impacted a bit. I think overall itself, you know, there's been an increase. Okay, okay. Any rough, can we assume that margins for the entire year basically would be better than what we have achieved in FY 2023? I think we'll be better off than 12%. We are or three, if we, if we ignore that exchange aspect. I think it's too early to say as to how the packaging film business shapes up. I think let's give it another quarter before we make any judgment on as to what is the margin that we see. Because that's a substantial business for us, and the margin profile of that will depend overall, you know, what margins we make. Aseptic margins and the packaging business, the flexible packaging business margins, have improved in the last one year, in FY 2023. Overall margin guidance, you have to give us another quarter before we come back to you. Okay, what were our aseptic margins in FY 2023 as a whole, if you can spell out? Uh, just- Revenue and margins. 70. 70? Okay. Revenue number, if you can guide us. No, we'll not share that one forever. Okay, okay. Just last one part. For, I think April and May, these months have been relatively far better than what we were seeing in Q3 and Q4 of FY 2023. Yeah. Right? Yes. Understood, understood. Perfect, sir. I'll join in the follow-up queue. Thank you so much for the update. Thank you. Before we take the next question, a reminder to all participants that you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Kaushik Poddar from KB Capital Markets Private Limited. Please go ahead. Can you please clarify, the income tax raid that happened in sometime back, I mean, some months, a few months back? We had- Is there any development? We've given guidance that, you know, at UFlex level, we not worried about any adverse impacts of that. Though we haven't heard anything back from the department, but, you know, that's the view we are maintaining. It's just because some of the customers, end customers have some questionable practices, and they come back tracing the original supplier from whom they take the raw material. There's nothing, you know, sort of beyond that. We've already clarified to the stock exchanges our position on this. There's been no update or any changes thereafter on that. Just to get myself clear, there is no notice or something you have received from IT department, is it? No demand has come. No demand. Okay, okay, okay. See, the packaging division gets a much higher P/E multiple, and especially your aseptic packaging, I think it's a great thing you have. Is there any possibility of demerging the packaging from your film business? Not in any immediate future, but, you know, these kind of restructuring options can always be explored at an opportune time. We are blessed with as to what are the kind of margin the aseptic, or what are the kind of valuation aseptic will have, or the flexibles will have and all that. If you ask me, at this point in time, no, there's nothing like that. On the sustainability front, I mean, all this usage of used plastic, has there been any incremental new development, something going up or coming down or something of that sort? Or it's? No. More or less the same. There's nothing on that. Okay, okay. Thank you. Thank you. Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Nirav Seksaria from Living Root Capital. Please go ahead. Yeah. Hi, sir. I think I joined a bit late. Sir, could you tell me, you had given a guidance in 2022 regarding a profitability, but we won't get it, reach that level. What was the actual problem behind that? I'm not able to hear you clearly. Can you repeat? Mr. Seksaria, may we request you to use your handset, please? Yeah, sir. Is this better? Yeah. Please speak, and then we'll know. Yeah. So in year 22, you had given a revenue guidance and a profitability guidance, but we weren't able to reach that level. What was the exactly the reason behind it? For the revenue guidance, I think we are more or less there. We've said about INR 15,000 or so. We are at about INR 14,800 or so revenue. The last two quarters, we did have a price impact on the packaging films business, which, you know, sort of so we were a touch short of about INR 15,000 crore of guidance that we had given overall for the year. You know, as I said already, that started happening because Europe had a problem, dual problem. One is, you know, as a consumer, within your limited budget, you started allocating more for your energy requirements, you started allocating more for your mortgage payments. Obviously the consumption got impacted there. U.S., it was more of from the point of view, that, you know, the higher mortgage payments, you know, somewhere the consumer adjusted their other, you know, sort of requirements, which brought the, which impacted the demand. This all got impacted at a time when certain new capacities also came on stream, you know. That's the reason why we see, the prices started softening and the demand getting impacted. Hopefully in Europe now, the energy prices are back to the normal levels. A little bit higher though, but still there's a lot of respite, and we see, you know, that, at least, in the wholesale markets, the prices are back to the normal. Once that translates, you know, that benefit gets also onto the, right. That pricing power will come back in Europe to, you know, and the propensity to consume will increase. That's what we are all waiting for. In the meanwhile, the excess capacity gets absorbed. Because India per se, where the capacity came, has been growing still at a decent pace. India, you know, six months is good enough to absorb one new plant that is set up at 10%-11% of the demand growth rate. I think all these things when happen simultaneously, the recovery takes a bit of a time. That's what, is expected, you know, in the current quarter, somewhat, and then from the next quarters, I think the things should be much better than what they were in Q3 and Q4. By when do we expect the E.U. and the U.S. business to normalize? I think we should, we should look at, Q3 and or Q4 of FY 2024. Okay. Thank you so much, sir. Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Avanish Shah from Arka Fincap. Please go ahead. Hi, sir. Quick question from Arka. On the repayment profile of the term debt, if you can just talk about the maturities for FY 2024, 2025, 2026. I don't have that number as of now, but I think overall basis, that should be within INR 500 every year, overall. Cumulatively, over the next three years, it's going to be INR 500? Oh, no. Every year. Every year. Okay. This is at the standalone or consolidated? Consolidated. Okay. Thank you, sir. Thank you. A reminder to all participants, you may press star and one to ask a question. I repeat, you may press star and one to ask a question. Our next question is from the line of Rajeev Arora from RS Leasing Consultants. Please go ahead. Yeah. Hi, good afternoon. Thanks for taking my question. First of all, congratulations on reasonable set of operational numbers, despite all the headwinds and the exchange losses that the company sustained. My question is on the debt side. This year, the debt has increased by about INR 500 crores. Where do we expect, do we have any capital expenditure for which we may have to take debt? Where do we see our debt levels, on a consolidated basis in the next financial year? Thank you. I think the only project we have right now is the chips plant. All other projects have been completed, and the debt is fully drawn for that. That's the one. This project is about close to about INR 580 odd crores, of which the debt level would be about INR 350 odd crores. Even if we take all the debt in the next financial year for this, minus, you know, sort of the debt level, the amortization. I don't see that, you know, from a current level, net debt of about INR 4,400 crores, there's going to be any substantial, you know, sort of incremental increase. We should expect, say about 4,500 crore INR, on net basis. Is that a correct understand? There's a working capital debt which we've not drawn, because, you know, we incurring a lot from the internal accruals and all that. Maybe if we draw that, to, you know, another maybe INR 500 odd crores. Okay. Sir, one more question, on the trade receivable side, there is a quantum jump, from last year. In fact, last year as compared to the year before the last year. Can we expect the levels of trade receivables to come down to the levels they used to be two, three years, three, four years back? How can that be, when we have from FY 2020 through 2021, our top line was about INR 9,000 crore. Today, we are at about INR 15,000 odd crore. How can the debt, how can the receivables be at the same level when the volumes are growing, when you know, the commodity prices were high in the last couple of years and all that? It can't be at the same level, so it's the best to see it as in relation to your. Debtors turnover ratio. In terms of the debtors turnover ratio, sir. Yes. Yeah. Okay, thank you so much. Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Rushabh Shah from Anubhuti Advisors LLP. Please go ahead. Just an extension to the question asked by last participant. I think for the next two years, our CapEx requirement would be to the tune of 700-750 odd crores, yeah. We'll be taking it. Any incremental debt, or this will be more funded from internal accruals itself? No, we'll take the, whatever is the, debt possible to be drawn for that, we'll take that debt. Okay, okay. Are we looking for any repayment on this fiscal, or the debt levels will be going up from these levels? No. we are looking at the normal amortization, which may be to the tune of INR 450 or INR 500 crores, each year. those normal amortization payments will continue to be made. Okay, okay. In terms of our aseptic packaging, I think last time what we guided was that we are, I think, we were going from nine billion pouches to 12 billion in FY 2024. Are we going ahead with that project? Part of the debottlenecking of the existing plant that we'll do. That will not happen in FY, so that might only materialize by the end of FY 2024, or at best in by January 2024. You know, that opportunity keep on looking in terms of how do we debottleneck our existing plant to produce more from this plant. That typically happens because, you know, you have more capacity, let's say sometimes on printing, sometimes on extrusion. You just try to find equipment to balance that, so that. Today, our printing capacity is more in that plant, and extrusion is a limited capacity. We may, we are going to add one more extruder in the existing plant, that's it. Okay. Currently, we are almost running above our capacity utilization, what we have. Currently, we are at a much higher than our existing capacity numbers. Understood, understood, sir. Thank you for the opportunity. Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Nirav Seksaria from Living Root Capital. Please go ahead. Sorry, I joined a bit late, could you quantify the foreign exchange loss we had this quarter? This quarter? Well, for the year, sorry. For the year is about INR 340 odd crore. This was majorly because of the Egyptian currency? 150 crore of this is because of the announced devaluation by the Egyptian Central Bank. The rest of this comes from because, you know, after the Egyptian Central Bank announced a certain devaluation, the market is still pricing in the further devaluation or the further because, you know, literally this dollar strength against all the currencies is driving all these countries hard, Nigeria, Egypt, Mexico. We're seeing a constant pressure in terms of, you know, their currency values vis-a-vis dollars. When we convert those currencies into dollars and then from dollars to rupee, you know, that's the impact which at a consolidation level. If you talk of, you know, there, you know, like in India, if we are, if we're making a balance sheet in rupee, and in Egypt, we are making a balance sheet in Egyptian pound. There in the local currencies, you know, there is only a positive impact seen in that business. The moment you convert into INR reporting, that's what the, you know, the fluxes, the differential comes into play. When you convert your existing receivables, your existing debt at a dollar level, then that's where you take it. Sure. Thank you so much. Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Avanish Shah from Arka Fincap. Please go ahead. One more question from our end. What would be the geographical split of the revenues for FY 23? I think, I'll say it in this manner, that, you know, India is the largest, then next comes, Egypt and then Mexico, Poland, and then all the others are almost at the same level. Okay. India would be roughly 40%? Yeah, India would be about 40%. Understood. Thank you. Thank you. A reminder to all participants, you may press star and one to ask a question. Our next question is from the line of Rajeev Arora from RS Leasing Consultants. Please go ahead. My question was. Thanks for taking it again. Are we considering any hedging instruments so that we can avoid any foreign currency losses in future? No, actually, it's not possible. You know, you can do that only to the extent that, you know, you have your liabilities to hedge. You know, you have regular sales, so when those have to be converted into the dollar number and from dollar to INR, so that impact cannot be there avoided on the balance sheet. Now, suppose to an extent you have a dollar loan and earning in a local currency, and then you have to convert, so you can probably hedge that, like, you know, we do hedge it in India. Only that hedging is sort of possible. Ultimately the, you know, the whole profit and loss account, your turnover and all that, suppose losses will come on your balance sheet, the conversion losses will appear on your balance sheet. To which extent did we have the hedging in place? We didn't have any hedging in place. We did not hedge. Are we considering anything like this in future because of the lessons learned now? No, we're not looking at any hedging as of now. Can it be suggested that to the extent the stock is there, constant stock on an average basis, to that extent, we can consider taking hedging, foreign currency hedging? Would it be possible? Is that a good suggestion? Not, you know, sort of, we looked at this, but, you know, reacting to a situation now Okay. I s not going to help it. You may, because, you know, today, if you talk about the, you know, your forward covers are much more expensive than what they were. If you book now and then you end up losing money on that as well, it's not the right move. Okay, thanks. Thank you. Thank you. A reminder to all participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all participants, you may press star and one to ask a question. That was the end of our question and answer session. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Thanks, everybody, for participating on our earnings call for Q4 and FY 2023. We'll shortly update you know, as and when there is any updates on any of our business, which has a substantial impact. You know, the Q1 of FY 2024, we are upbeat on the flexibles, we are upbeat on the aseptics. There has been a pickup in the packaging films business as well. As I said, but it's too early to say, make a, you know, sort of a final judgment about as to how the FY 2024 is going to shape up from a packaging films business perspective. We'll be back with you with more insight about the business as we, you know, report our earnings for the next quarter. Thank you. Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines.