Ladies and gentlemen, good day and welcome to Ganesha Ecosphere Limited Q1 FY24 earnings conference call hosted by Antique Stock Broking Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. Now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you and over to you, sir. Thank you, Neeraj. On behalf of Antique Stock Broking, I would like to welcome all the participants on the call of Ganesha Ecosphere. Today we have Mr. Yash Sharma, Director of Ganesha Ecosphere, Mr. Gopal Agarwal, CFO, and Mr. Prashant Khandelwal, Senior Vice President from the management. Now I would like to hand over the call to Mr. Agarwal for opening remarks, post which we will open the floor for Q&A. Thank you and over to Mr. Agarwal. Yeah, thank you, Manish, and Antique Stock Broking for hosting us. Thanks to all the participants for taking the time to join us today and on behalf of Ganesha Ecosphere, I extend a warm welcome to all of you at the company's first earnings conference call of FY24. I hope all of you might have had a chance to look into our quarterly numbers and investor presentations already available on the exchanges. Textile sector is among the worst-hit due to downturn in the Western world persisting since last 15 months. Exports of the textile sector are constantly declining. During June 2023 quarter, shipment of man-made products saw a 17.2% decline. Slowdown in Europe and U.S. prompted the dumping from China and the domestic market, which left a demand and pricing pressure on domestic suppliers. Prices of yarn and fiber slid and affected the textile industry's top and bottom line. Yarn and steel sector are major contributors to our revenues. We had to face the heat, which came to us in the form of lower demand as well as dropping prices. On a standalone basis, during June quarter of FY24, company's production volume was at 27,030 tons. Sales volume declined by 8.6% to 24,887 metric tons, as against the sales volume of 27,241 metric tons achieved during Q1 FY23. Average sales price also declined by 17% during the period. Revenue from operations during the quarter came at INR 231.82 crore, which is down by 21% from corresponding last quarter. Due to slowdown in export markets, company's exports were also hit, and it made an export sale of INR 18.02 crore as against INR 33.94 crore during June 2022 quarter. Due to lower volumes and sliding prices during the quarter, our EBITDA margins came down to 7.4% as against 9.4% during corresponding last quarter and 11.4% achieved during FY 2023. In absolute terms, EBITDA during the quarter was INR 17.18 crore. Per-ton EBITDA dropped to INR 6,355 as against INR 9,921 during the corresponding last quarter. Companies incurred an inventory loss of INR 5 crore during the quarter. Raw materials prices were adjusted downward in comparison with corresponding last quarter, but pace was not aligned with falling sale prices. All the other factors led to a drop of profit after tax to INR 11.61 crore. On group level, though some of the product lines were commercially operational during last quarter, March 2023 and June 2023 quarter, ramp-up could not happen as expected. BIS standard for consumption of rPATgranules in food grade packaging was notified during May 2023, which we were expecting much earlier. Our product testing and trials at brand level also took more than expected time period due to various complexities involved in audits and product approvals. Global and domestic slowdown in demand also contributed to a slower ramp-up of production volume. Capacity utilization was at around 30% in Warangal facilities, but sales volumes were at even more lower level. Nepal facilities were ramped up, albeit at a slower pace, and it reached 50% capacity utilization level during the quarter. So on consolidated level, PET was dropped to INR 3.45 crore during Q1 FY2024. Major contributing factors in the drop in PET at consolidated level are interest and depreciation of subsidiaries, which could not be offset due to lower level of operation. So this is from operational angle. Now I hand over the call to Mr. Yash for his comments on the operations of the company. Thanks, Gopal, and I extend my warm welcome to all the participants here. This quarter was not as per our expectations due to the reasons explained by Gopal very well. In fact, we have not seen such a gloomy market environment in the last several quarters now. However, the dust now looks settled, and the demand and prices have already seen some revival since the later part of July 2023. We are expecting to do quite better in the second quarter on a standalone basis. And in view of the festive season and other contributing factors, we are hopeful to operate at a normal level from Q3 onwards as we were doing in the past. In the RPET bottle-to-bottle grade chips, we have finally got our much-awaited first order from one of the Coca-Cola's bottlers, and things have started rolling out with more orders lined up in the cards. We are very close to getting final approvals from many other brands and hopeful in getting onboarded with them in the coming quarter. One more production line of bottle-to-bottle chips is to be installed in our Bhiwadi facility by October, November 2023, and it is expected to start contributing from the last quarter of FY24. FDY production line is also streamlining, and we are expecting to get better results from Q3 onwards. The staple fiber line is going to start its operations from September onwards, and since it's our existing product, we expect that we'll expect to see the results and utilization coming up from next quarter onwards. To conclude, we are still very optimistic in enjoying the fruits of our Bhiwadi investments from FY25. Nepal operations are also expected to be aligned by the end of the current quarter, and we feel that we should be able to achieve 75%-80% utilization levels by the end of this quarter. So this is all from our side, and we are very thankful for your kind attention. We would now like to open the floor for any questions that you may have. Thank you. Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. Participants, you may press star and one to ask a question. First question is from the line of Gunjan Kabra from Niveshaay. Please go ahead. Hi. So thank you for the opportunity. So one thing I wanted to understand is we have got an approval for Moon Beverages, so I wanted to understand how does this approval system work because Coca-Cola HCCB has their own bottling plant, which they want to divest it. So there are too many bottlers, like maybe Ladhani Group, or there's a bottler in South also. So there are too many bottlers as well apart from this. So do we have to take approval from all, or is it just Coca-Cola India will give you the orders, and what's the scope of order size that we can expect from them going forward? I mean, how will it ramp up, and are we just trying for Coca-Cola India, or we are expected to go global and get approval from the other countries as well? I'll take this question. Gunjan, basically, Coca-Cola approval happens from the global side. Our trials and everything that is happening, it's happening on the global side, and it's handled by Coca-Cola Atlanta. Once we get the approvals, we get the approvals to supply to any of the partners in the Coca-Cola system. That is number one. The approval that we've now got from Moon Beverages, it's not an approval. It's basically a first commercial order that Coca-Cola has lined up because apparently, they will be the ones to launch the first RPET bottle of Coca-Cola very, very soon. Our discussions with other bottlers are also parallelly going on, and every bottler is coming up with their strategy for using RPET in certain SKUs and certain products in coordination with the Coca-Cola centralized OU team. For now, we are basically in discussions with all the bottlers of Coca-Cola for starting the ramp-up of RPET. About the volumes, we cannot really disclose how much volumes Coca-Cola might be committing us for this year. They are still finalizing their strategies, but yes, they are starting to commercially ramp up their RPET usage from next month onwards. Okay. So the margins will differ with respect to Coca-Cola and other bottlers, or is it expected to remain the same? Yeah, the margins we are expecting are better than our existing business from our RPET business. Okay. There are also consolidated operating margins to a 10%, and standalone was at 7.4%. So incremental revenue in the consolidated business has not been that high compared to what margins uptick we could see. So if you can say what has happened, or is it because of the Nepal plant that has been operationalized, or how is it? Yeah, basically, the inter-company transactions among the group companies are not part of the revenue from operations in the consolidated results. That's why the turnover between the Nepal unit and the Indian counterpart of our Ganesha Ecosphere, as well as the sales from the Ganesha Ecopet to Ecotech, has been knocked out from the results on a consolidated basis. That's why the turnover is lower, but of course, their margins are coming in the final accounts. Going forward, can we expect some more raw material inventory loss in the coming quarter as well because scrap bottle prices along with finished goods have been decreasing, or has it been normalized? Yeah, basically, the inventory loss is on finished goods, and the process is stock. It is not on the raw material front. So given that we feel that the prices have bottomed out in the Q1, and so in Q2, we are not looking for any inventory loss, great inventory loss. Okay. So just last question, considering the current slow business environment, and the recycled dynamics work a little different with respect to virgin fibers, so I wanted to understand how much margins can we expect in bottle-to-bottle chips and filament yarn in near term. Just wanted to understand the volatility in a down scenario versus the up scenario for recycled material. So what kind of from a very good market, if you are expecting around, say, 20% EBITDA margin kind of a business, then in the slow and the near term, how much margins can we expect in this segment is what I wanted to understand. You see, the ramp-up in the capacity is going slowly. It is not at a very fast pace. So in the near terms, the cost is higher. And so though we see the good margins above 17-18% EBITDA level, but due to the lower level of operations, it might not turn up great in the next one or two quarters. So it may be 15% plus kind of margins you may see in the quarter two or quarter three. Okay. But irrespective of the capacity, I'm just trying to understand product-wise. If in a very good market in bottle-to-bottle chips or filament yarn, if you are expecting around 20%-25% EBITDA margin, then in a down scenario, what kind of margins can we expect in RPSF or filament yarn is what I wanted to understand. Irrespective of the ramp-up, I understand that if the capacity is coming online and ramp-up is not happening at the same rate, there would be a certain extra expenses. But just the product-wise, I wanted to understand the market dynamics. Even in the down scenario, in PSF business, we are hopeful for getting on track by Q3, and 10% plus EBITDA margins will be there in the PSF business. For the bottle-to-bottle and the POY business, we are looking for the margins of 17%-18% at EBITDA level. Okay. Okay. Okay, sir. I'll get back in the queue. Thank you so much, and good luck to both of you. Thank you. Thank you. Next question is from the line of Harsha from Dalal & Broacha. Please go ahead. Yeah. For the opportunity, so continuing with the previous participant question, you did answer that the EBITDA margins for the B2B chips would be, say, somewhere around 17%-18%. But currently, you are the only player who has this capacity. So what I'm trying to ask is, say, in the next couple of years, 2-3 years down the line, could it be a scenario wherein the margins in the B2B chips would kind of get compressed because I believe players would definitely be entering into this space, and the clients that you are dealing with are much larger in size? So they would be having a higher bargaining power and even more suppliers. Yeah. You see, the RPET consumption is mandated by the regulations that will start from April 25 onwards. The government regulations have mandated for the 30% consumption in the very first year, which could be climbed up to 60% by 2028. Given the size and demand of the recycling, it would be great, and we expect by FY29, FY30, the demand of RPET would be in the bracket of 0.9-1 million tons. That is a great demand, and we don't think there would be any pricing pressure because of the size of the market which is going to be created in this space. Okay. One related question to the recent order that you got from Moon Beverages, so can we expect the revenue to flow from Q2 onwards or something later than that? You see, in Q2, the much revenue would not come, but the much revenue would flow from Q3 onwards. Okay. And I believe we have just come out with a press release saying that you have added capacity, right? You will be adding capacity of close to 12,000 metric tons per annum. So I believe that the existing capacity that you have of the same size, so you are expecting full utilization in FY2024? Yeah, we are expecting we would be able to utilize the 80%-90% capacity placement in the first quarter which we are having with us just now by Q4. Okay. Can I get any broad range on the realization of these B2B chips? It depends upon the market, and basically, the prices of virgin chips also play a role. You can see the broader range from INR 95-100-110 level, depending upon the scenario of the virgin chips and other contributing factors. Okay. Yeah. Thanks for the explanation. That's it from my side. Thank you. Participants, you may press star and one to ask the question. Next question is from the line of Manish Mahawar from Antique Stock Broking. Please go ahead. Yes. Thank you for the opportunity. The first question is with regards to if you can just help us with the revenue for the quarter in the trading and yarn business. Sorry, can you please repeat the question? I couldn't get it. Yeah. I was asking about the revenue for the quarter in the trading and yarn business. Yeah. As I told you, the mix of the revenue is about 85% from the fiber business and 15% from the yarn business. Okay. Understood. So secondly, is on the capacity expansion. So we will be adding a line by October/November this year, 12,000 tons, and we are expecting the current capacity to be 90% utilized. So the new capacity, are we expecting full utilization of the 24,000 tons by end of FY 2025? Yes. Yes, yes. We are expecting it. So any future plans for addition after this 24,000 tons? May we expect future additions in FY25, maybe adding one more line or any guidance on that front? Yeah. We are considering adding some more capacity, but the plan has not yet been finalized. We will come back to you after we finalize the plan for adding the further capacities. Okay. How How much land would we have after this October capacity addition at the south plant? Yeah. At the existing plant, we can add 2-3 more lines. Okay. So the south plant, if we add three more lines, the B2B capacity can increase to approximately 50,000 tons. Right. Okay. Are we not looking at any geographical diversification apart from the south plant once we exhaust assuming you announce more capacity addition in 2025, 2026? Will we see any new capacity outside South India, any geographical diversification plan? Yes. We are looking for, we are discussing various opportunities on various geographies, but it depends on our tie-up with the brands, where their consumption plants are situated, where the more quantity can be sold, in which part of the country it works, the logistics and the concentration of the brands, concentration of the customers. So it depends on that. Okay. Just one last question, sir. If you can just help us with some flavor on how is bottle-to-bottle market in terms of end consumer, where is more demand? Is it north-centric, south-centric, any color on that front? Yeah. In fact, yes, can very well answer this question. Sorry. Sorry. Can you please repeat your question? Yeah. I just wanted to understand where is the end consumer market with regards to CSDs or bottle-to-bottle that we are targeting? Is it more towards the north or spread out across India, any color on that? So actually, I mean, if you look at the Coca-Cola market, it's spread out across India, though a lot of bottled water consumption happens in the south of India. So your south of India consumes almost 40%-45% of bottled beverages in any given year because of the temperature profile, the weather profile, and non-availability of potable water. But yes, I mean, all across India, bottle consumption is quite high. So yeah. Okay. I have one more question if I can just ask that. So right now, we heard about Kinley and Pepsi coming out with recycled products in select markets for the SKUs, right? So they might have sold the RPET from some other supplier, or was it imported? Do you have any update on that if you can just help us with that? So yeah. Yeah. Yeah. Please go ahead. Yes, please go ahead. Yeah. So basically, yes. Yes, you're right. So Coca-Cola has already launched Kinley, and Pepsi has also launched Pepsi Black. So obviously, they are trying to launch as many products as possible with RPET consumption. And currently, they've sold it from some of our other suppliers, both imported as well as one another local supplier as well. And we are also expecting to launch very soon with both of them as well. Okay. Understood. So just to follow up on that, will we have some pricing pressure going forward from the imported products in India, or that does not change our pricing dynamics going forward? No, not really. Actually, what the input that we have is that the imported material is even more expensive. So not really. Okay. That helps. Well, I'll come back in the queue for more questions. Thank you. Thank you. Next question is from the line Harsh Jhaveri from Ocean Dial. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity, sir. I wanted clarification on the bottle-to-bottle. So you mentioned that. Sorry. Your voice is not coming clear. Hello. Is it better now? Yes. Yeah. So yeah, sir, I wanted a clarification on the margins you mentioned for bottle-to-bottle of 17%-18%. So is it the margins for FY2024, or you're saying this business will have long-term margins of 17%-18%? No. Basically, this is the margins for the start to start with in the Indian market. So we are expecting the margins will go up as and when we go nearer to 2025 when the regulations will come up. So because all the brands and everybody will be starting the consumption of RPET, so as of now, they are not in a position to because the RPET is costlier than the virgin chips, so they have to adjust everything as of now. So at the pricing front, they are a little bit cautious for giving the higher prices as of now. So we are thinking going forward as the product stabilizes, as the supply chain stabilizes, and as the ramp-up of the RPET increases to match with the regulations, to comply with the regulations, the prices and margins will go up further. Okay. Okay. Sir, are we also exploring export opportunities with Coca-Cola in bottle-to-bottle? Definitely, yes. We'll get the approvals for global consumption, but it really depends on where they want to ramp up their RPET usage. That is something that will play out in the coming years because even the regulation in Europe kicks in from 2025 onwards. We are already under discussions with some bottling partners in Europe as well, but it's all going to play out eventually as the regulations come closer. Okay. Sir, realization would be higher in case of exports, and margins will be higher in case of exports in bottle-to-bottle? This is something that we really have to see as the markets evolve because currently, the markets are still in a very, very nascent stage. The markets are evolving. The product capacities, qualities, are all evolving. So that is something that only the market can tell us with time. Okay. Okay. And then my last question is on PSF pricing. So we have said that things are bottomed out, and it is starting to look up now. So where do we see these prices stabilizing? Actually, the pricing depends on various factors. Presently, the prices were hit because of the global scenario where the exports to the Western world have come down heavily, and dumping from China is also there. So there are pressure on the pricing. You see the cotton prices have also come down. The prices of the crude oil have also come down. So all these factors played a role. But going forward, we have seen such demand is reviving in the later part of the last month. And so prices have also started to look up. But all depends on the demand side, how it will ramp up in the coming quarter. So definitely, we are seeing that the bottom has come out. But how much prices will go up all depends on the demand and supply scenario. Sir, but will we be able to maintain our gross profit per kg number? Yeah. In the last quarter, we could not. But yeah, of course, in the current quarter and the coming quarter, we will be able to maintain the gross margin. Okay. Okay. Thank you. Thank you, Thank you, sir. And that is yours. Thank you so much. Next question is from the line of Dhruv Bhatia from Bank of India Investment Management. Please go ahead. Hi. Good afternoon, sir. So I have just. Dhruv, you're not audible. Can you please come a little closer towards the phone? Hello. Good afternoon, sir. Good afternoon. I just want a clarification. Firstly, is that for the RPET, your current capacity that you have put up is 15,000 tons, and the addition that you're doing is 12,000 tons. Is that correct? Actually, to be precise, the start capacity was 14,400 tons for the line as for the rated capacity from the supplier. But with our experience, we got it with the Indian raw material and everything. We found that the practical capacity, the practical evolution, we can reach 12,000 only. So that's why we have informed the 12,000 capacity. Actually, the line is saved. The rated capacity is also 14,400 tons, but the actual capacity is 12,000 tons looking to the raw material condition, raw material of the Indian market. So you're saying basically the nameplate capacity is 14,000—sorry, is 12,000 tons, but you can probably in your assessment achieve 14,400 tons? I don't think we can achieve the 14,400 tons. Yes, can explain it further, or the Prashant can give us a very well coverage. Prashant, please carry on with this. Good morning. Good morning, Dhruv. So basically, it is the bulk density of the material which controls the output of a line. So basically, in India, what is happening is that we have a lot of water bottles with a very thin layer of PET. The weight of a 1-liter water bottle came down to 18 grams, 18-19 grams now. So if the bulk density is lower, we cannot get a higher throughput of the line. And all suppliers from Europe and the U.S. are basically working on bulk density from their region. The water bottles in Europe and the U.S. are having a thick layer, and the bulk density of their material is higher than what we are getting in India. So that is why we are getting a difference of capacity utilization in India for this recycling. That's why you can say that the nameplate capacity is 14,400 tons. But practically, in India, we can get the production of 12,000 tons only. We are still working on this, and I hope in coming days, we will try to achieve some more production capacity out of it. But yes, until now, this is the final capacity what we have achieved. The new capacity which you announced today of 12,000 tons, that again is a nameplate capacity, and achievable probably would be slightly lower? No, no. Nameplate capacity is 14,400, but the achievable capacity is 12,000 tons. Okay. Okay. So just to understand, so currently, with 12,000 ton capacity that you have, that can do about INR 120 crore of revenue going by the INR 100 realization. And as you mentioned, the EBITDA margin should be 17%-18%. That's the way to think about the RPET business, right? Yes. Yes. Okay. The incremental CapEx which we have announced today, I think the earlier one, Warangal facility overall had an incentive where on a yearly basis, you were expecting INR 15 crore-INR 20 crore of incentives. Does this new announced capacity for Warangal also is it eligible for incentives? We are approaching the government for the same. We are not yet clear will it be able to get the incentives or not. Okay. So the existing capacity is not part of the project. Because it is not part of the original project. It is the expansion. So for the expansion, we have to approach the government. Okay. Okay. And finally, I just want to understand. I mean, you are in discussions, you said, with multiple other customers for the RPET business. This is both in India as well as international at this moment because the last time, I think you had talked about that because from April 2025, it's compulsory that 30% of the bottles have to be that has to be coming from recycled, that you'll be focusing on domestic markets. So are you looking at focusing on domestic or both, and your conversations are and you're looking at new client acquisition both in domestic and exports? So basically, the focus is on domestic, yes, because the regulation coming in India is coming on quite strong. But we are in conversations and open to working with international clients as well. So we are also having ongoing discussions and conversations with international brands as well. Understood. And just lastly, as the virgin PET prices have been falling, how should we think about pricing and profitability for the RPET business going forward when prices fall of virgin PET? So when the gap increases, does that mean that there is more pressure on profitability for the RPET business? Definitely. Definitely, yes. Virgin PET prices do put pressure on the RPET profitability and pricing as well. But then you have to also understand that as the virgin PET prices fall, our raw material prices of the scrap bottles also are kind of linked to it. So they also fall along with it, which is what has been happening in the past six, seven months as well. So definitely, yes. Whenever there will be a pressure on the virgin polymer prices, there will be a pressure on RPET as well. Current realization gap would be 20% where virgin would be 20% cheaper? Correct. Correct. Okay. Fair enough. Thank you so much, sir. Thank you. Thank you. Next question is from the line of Bhavya Gandhi from Avendus Wealth. Please go ahead. Yeah. Thank you for the opportunity. A couple of questions from my end. If you can throw some light on the overall debt levels long-term as well as short-term along. Sorry. I'm sorry to interrupt you. The mic is very close to your mouth, so a bit of eerie sound is coming. Sorry. Sorry. Am I audible now? Yes. Yeah. If you can throw some light on the overall debt levels long-term as well as short-term, and what is our average cost of borrowings and the repayment schedule going forward? How is it like? Yeah. On consolidated level, we are having the total debt of about INR 550 crore on our books, including the working capital debt. Cost-wise, we are getting the funds as of now around 8.5% is the average cost for our funds. The repayment of the long-term loans, which is in the tune of about INR 350 crore, is by 2032. Okay. Got it. Got it. By 32. Okay. And with respect to OCF, can you share the operating cash flow number for the quarter? And do we internally look at OCF to EBITDA because the conversion seems to be quite low, around 16%-17% on an annualized basis? Will that because our repayment of interest or reinvestment capability is decided on OCF? So do we internally monitor that? Yeah. Of course. Of course, the OCF is internally monitored by us. What is it for the quarter? And if you can share that number. Yeah. On operating front, the operating cash flow for the quarter is almost at par because the profitability has to get hit in the quarter, and we are in the investment mode. So hardly we got any surplus on operating fund in this quarter. Got it. Along with the repayments, yeah. Yeah. We see a lot of private equity deals happening in the circular economy space, especially in the recycling. So do you think that the competitive intensity going forward will be increasing because a lot of players will be getting funding from different PE players, and they'll get maybe they can find Starlinger machines and bring in some sort of pricing pressure? So any take on that? Yeah. I think yes. Yes, Yes, you. Please go ahead with the question. Yeah. Definitely. Yeah. So basically, as this was also discussed just back, that the market of RPET that is going to be created and the demand that is coming up globally moving forward is immense. In India itself, we are looking at a 900,000 tons-1,000,000 tons of market being created by 2028. And for that matter, when we're talking about setting up a manufacturing capability for circular economy products like this RPET, bottle to bottle, it's not easy to achieve the desired qualities that is also very practically works good just like a virgin plastic at the performance level of the final packaging. Because when you talk about big FMCG brands, they do not want to compromise at all with the quality of their packaging because that's the first point of contact with these customers, right? So definitely, some capacities will come up. Some of them might not work really good because we have seen a lot of capacities failing outside as well, which have come up. They're not able to deliver the right product which is suitable for application by FMCG brands. We have proved that our quality and capability is better than the most. So we are not facing that much of a pressure or hit in that sense. But looking at the market capacity, looking at the market demand that is coming up and the kind of capability you need to create this kind of a product, we don't feel that we'll face any pressure from the external market. Fair enough. With respect to the regulation which is going to come up by FY25, 30% you need to have recycled bottles, do you think that that can be postponed? Who's the body governing that regulation? If you can throw some light on that, how strict would be the execution in terms of implementing the regulation, something on that front? Definitely. So basically. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Please go on, Gopal. Yeah. Yeah. Yeah. Yeah. Please. Yes. So basically, what is happening is that when we're talking about the regulation being shifted, no, it is not happening. The current understanding of the industry is that the regulation is coming on. There might be a possibility that they can probably offer some kind of a leeway to the brands in terms of the amount of the percentage. Instead of 30%, they would just impose a small penalty if you are lower than 30%. And if you are if you're higher I mean, if you don't do it at all, then there's a very huge penalty. So some kind of acceptable leeways are trying to be factored in, which will ease out the pressure a little bit for the first year. But when we're talking about the regulation, the industry is fully promoting it, including all the FMCG brands as well are also promoting it to come online. We don't see any shift in the regulation happening. Yes, India is also part of the global pact in which they have to reduce the carbon by 1.5%-2%. Correct. Correct. Correct. So basically, it's also part of the climate change strategy that we are already having in place. You know that the Government of India has got a huge fund from World Bank for reducing its carbon dioxide emissions. And RPET, bottle to bottle chips, is a big contributor to that fact because in this polymer, you are saving on your environmental impact by 60%-70%. And that is the reason that it's being promoted very heavily and being regulated very, very soon. Thank you. Bhavya, we are requested to come back in the question queue for a follow-up question. Thank you. Next question is from the line of Nikhil Asija from Goldman Sachs. Please go ahead. Yeah. Hi, sir. Sir, Sir, just wanted to understand what is the peak debt that we are looking at for the current expansions that are ongoing? Yeah. The debt which we are currently having in our books is about INR 550 crore. And going forward, we see the peak debt would not be more than INR 600 crore at any point of time. Okay. Understood. Sir, can you also comment on the quarterly run rate for the depreciation for our subsidiaries? So if we look in Q1, the depreciation rate was much higher than what it was in Q4. So is it expected to continue at this level, or are we expected to see a substantial increase in that as well? Yeah. The production lines which are started, the depreciation is for that. Going forward, we would be having the PSF line to be operational, and the new B2B line is to be started. The depreciation rate would be increasing because of that extension. Sir, can you give some color on quarterly run rate after, I mean, all these lines get operational by Q4? Yeah. On consolidated table, the current depreciation level is around INR 12 crore on quarterly basis. Going forward, we are looking for about INR 35 crore-INR 40 crore depreciation level at Warangal plant and INR 25 crore-INR 26 crore for the parent company. Going forward, it may be around INR 65 crore on the gross level, on the consolidated level. Thank you. Thank you, sir. Thank you. Request to all the participants, please restrict to two questions per participant. Next question is from the line of Deep Mehta from Bank of India Mutual Fund. Please go ahead. Hello, sir. Thank you for the opportunity. Just two questions. First is. Deep, can you please speak a little louder? Hello. Am I audible? Yes. Yeah. First question is regarding our recent order which we have won from Moon Beverages. The duration of this order is around three months. So are we expecting that we'll get short-time frame orders, one after one orders, or do we expect that this short-term order will be converted into something like a long-term contract? Actually, this is not a great quantity, but it is only from one of the bottles of the Coca-Cola system. So we are looking for the orders to come from other bottles also, shortly. And presently, we are not making any long-term contracts with the brands. Okay, sir. So we are expected to have short-term contracts depending upon the pricing and volatility of. Yeah. Because just rolling on the products, so we are not going for the long-term contract. We will make the long-term contract as and when we will see more clarity from the pricing side and other things. Understood, sir. My second question is regarding our filament capacity. What was the utilization there in first quarter, and how are the interactions with clients going on there, and how should it get ramped up? Yes. The capacity part, we are operating at about 25%-30% capacity at present. And we are working with various brands for POY and FDY and the bottle-to-filament chips. So the more light we throw, I guess. Definitely. So basically, it's a similar story there. So over there as well, we are undergoing a lot of product approval stages with some brands. So that's going to also take a couple of months to ramp up as well. That is very helpful, sir. That's all from me. Thank you. Yeah. Thank you. Next question is from the line of Suresh Damodar Sampada Investments. please go ahead. Hello, sir. Good afternoon. Sir, I just needed a small clarification. Are we approved by Coca-Cola, or is it just one small trial order before we get approval? Yeah. So basically, this is not a small trial order. This is a commercial order that we are going to execute with Coca-Cola very soon. Okay. Okay. Sir, will there be any shortage of raw material going forward from, let's say, next year because there is a flood of demand from next year as the regulations kick in? The regulation will come from the FY25 exactly. Of course, the raw material there might be some shortage of raw material because the raw material will first go to the bottle-to-bottle chips. After fulfilling the demand of the bottle-to-bottle chips, it will be for PSF business. Going forward, it may have some pressure on the raw material availability. But going the growth of the PET business itself, which is growing by about 9%-10%, so every year, about 100,000 tons raw material will also be pumped in the system. Okay. Sir, I just wanted to understand the competitive advantage is that for the mode that we have that no one else will come and do the same business that we do. Is it on the process side? Is it on the sourcing of raw material side? Where do we have that mode that will protect our margins going forward? So definitely, yes. Basically, the first competitive advantage and the most major one is our sourcing capabilities because we are currently capable of sourcing around 500 tons of post-consumer waste every day. That is because we have a very huge network of supply chain that we've built over the years of connecting with small tractors, small kabadiwalas, and small balers in our system. That is one of our big competitive advantages of sourcing the right materials. The second competitive advantage that we have is of operational efficiencies because the kind of process control that we are capable of that we have already set up and because of which we are capable of delivering a very, very superior quality product and with much lesser cost levels if we would compare it to any new player coming up. These are the two competitive advantages which will help us position ourselves much better than any other competitor. Okay, sir. Okay. Thank you. Thank you. Next question is from the line of Akash Jain from MoneyCoast Investments. Please go ahead. Yeah. Thank you. I have a few questions. One is on this, so clearly, this recycled polyester staple fiber business is a little bit of a commodity business, and margins are lower. And we are also dependent on the waves of demand and pricing in the global market. And even the ROC profile of that business is much lower than the new products that we are adding, which are more high-margin and high-ROC products. What we see is even in the latest, in the recent expansion, we have added more capacity in our PSF. So can you please help me understand what is our strategy regarding recycled polyester staple fiber? Do we see that we will expand this part of the business also significantly? Because clearly, this is not as attractive a business as the new parts of the business that we have added now. Yeah. For recycled staple fiber, we are already going to say it is more of a commodity level. But going forward, as the understanding and as the necessity of the circular economy and recyclability, sustainability is creeping in, people are having the greater sense of responsibility towards the environment. And so the demand of the recycled material is increasing, is going. And so we are also having the approvals from some of the global brands for using the recycled PSF in their products. So number one, the trend is going to increase further. And we hopefully we would be able to sell more of the quantity to the brands here. We are getting the better pricing than the general commodity products, number one. Number 2, we are developing some more products, some value-added products like short-cut fiber, which we are pitching in the export market as well as the domestic market where the margins are higher. Number 3, we are going into the white PSF segment, dope-dyed PSF segment where the margins are really higher than the normal commodity product. So that's why. And in case of Warangal, we would be having some added advantage in the form of logistic input as well as output. Are we looking at expanding this part of the business also in the future, or most of the new CapEx will happen in the higher-margin RPET or filament yarn business? Yes. Of course, at present, we are looking for some value-added products. We are focusing on value-added products only. One other question I had was if I look at the difference between the margins for standalone and consolidated, is most of the difference because of the Nepal better pricing and sourcing advantage, or there's also a because my understanding is the revenues from the filament yarn and the bottle-to-bottle is still very low. So is most of the benefit on consolidated margins coming because of sourcing from Nepal? Is that something that we can understand, assume? In fact, basically, you see EBITDA margins in terms of the percentage are higher because the sale has been knocked out. Some sale has been knocked out, and so the base has been quite low from the cost level, number one. Number second, of course, there are some margins from the Nepal business and also some margins from the Warangal business also. Okay. Thank you so much. Requesting all the participants to please restrict to two questions per participant. Next question is from the line of Mitali from Compound 26 Capital. Please go ahead. Hi. A couple of follow-ups from the previous participants. My question is regarding a recent order from Moon Beverages. How long did it take for us to onboard them as customers? You also alluded to it in talks with other potential customers. How long does it generally take to onboard them in terms of completion of technical assessment and social audits? The usual period, Mitali, basically is around 10 months. We've been working with Coca-Cola since 10 months now, since we first started the approval process. That is the usual time you would take with bigger brands like them. Okay. Got it. The next bit is I would like to know about the sourcing of PET scrap that we alluded to before this question. How difficult is it to replicate that network with vendors and scrap dealers to source raw materials if new competitors come in? So basically, it's not just replicating of the network. It's also about having a relationship with those vendors. Since we have been operating in this industry since the past 30 years, we have a very good understanding and a very good relationship with most of our vendors. And that is because of which we are capable of scaling our sourcing operations as well. And that is the important part. Okay. Just a follow-up to that. If more competitors enter this space and increase capacity, do you think the processing spreads will see a declining trend going forward? Sorry. Could you repeat that, please? So we mentioned, right, because of the government rule kicking in, we see margins increasing going forward. But if new competitors keep entering the space and increase capacity, do you think we'll see a declining trend in terms of realization? No. Actually, because of the regulation, the demand is quite high, actually quite high. So we don't think that the supply side will catch up the demand in the coming 4-5 years. Okay. And just one last bit. You alluded in the presentation there was demand pressure due to Chinese dumping. So it's reasonable to assume that some of the supply has been pulled forward. How do you see demand trends for the next few quarters considering some inventory pile-up in the industry? Yeah. In fact, the Government of India has introduced the BIS standard for the yarn and fibers and the textile products. Some of it has been implemented, and some has been postponed for the next quarter. With the implementation of BIS standard, certainly, the dumping from the cheap Chinese material would stop. Okay. Okay. I'll join the case for follow-up. Thank you. Thank you. Next follow-up is from the line of Jignesh Karia from Antique Stock Broking. Please go ahead. Yes. Thank you for the follow-up. So earlier, there was a ban implemented by the government on import of PET bottles, scrap, and flakes as well. And we are using our Nepal facility to import PET flakes and feeding it in the north plant. So are we at the mercy of government for optimum utilization of Nepal facility for our north plant, or can you explain that a little bit in detail? Yeah. The PET flakes which we are producing in Nepal plant is coming to our Indian plant of Ganesha Ecosphere, current company. Government can ban the import of PET flakes, right? Actually, the PET flakes import is not freely available to everyone. It is just the 15% capacity, 15% of our production which we can import from out of India in the form of PET flakes, post PATflakes. So it is under licensing. Okay. There is no cap of 15% of the production, right? Yeah. It is cap. It is cap of 15%. Okay. Understood. Earlier, you mentioned there is a lead time for getting the Starlinger machine. So how much is the lead time now for the Starlinger machine that we order? Yeah. Prashant, I'm here. Yeah. Yeah. Yeah. Yeah. Yeah. Please. Can you repeat the question? Yeah. We use Starlinger machines for making the finished products. There was a big lead time we used to highlight earlier for import of those machines. Has that lead time gone down, or it remains elevated yet? No. It remains at the same level because it is the technology, and they have to get a lot of outsourced components from different partners, their own suppliers, and as well as they have to get some clarities and clarifications from EFSA also, European Food Safety Regulation. So the lead time is still at the same level. So if we plan to add additional capacity in FY25, six months down the line, so we won't be able to do that unless we have yet placed the orders for the machine. So we are in discussion, and I think it is not the right time to disclose what has been planned for the future. Gopalji, you better reply for this. Yeah. Yeah. Yeah. Yeah. Yeah. We are discussing various options and capacity ramp up. But firstly, we were waiting for the ramping up of our existing capacity, so which seems to be on track now. And by the fourth quarter, we will be able to utilize the full production capacity. So now we are thinking it is the right time to move forward for the further capacity expansion. We are discussing at board level. So we will come out with the exact plan once we decide it. No worries. That's great. Just one last question. If you can just help us with the broad-based CapEx numbers in case of brownfield and greenfield expansion, that's all from my end. Yeah. So as we informed to the exchanges, the second line which we are putting in, we are having all the infrastructure and civil work is there, and we are having all the utilities also. So just the machine cost is there, which is around INR 50 crore for this brownfield extension. But for. B2B plant? The B2B plant, yes. I mean, in case we put a B2B greenfield plant, what would have been the CapEx? For the greenfield plant, it depends on the kind of washing infrastructure you are having with you. So if it is for the Chinese infrastructure or it is a very advanced European infrastructure. For the Chinese and the south plant? Yeah. We are having the European facility with us for the washing infrastructure. For the similar kind of infrastructure with the European wash line and the European B2B greenfield line with a capacity of about 25,000 tons, it's about INR 225-250 crore. Okay. That's helpful. Thank you and all the best. Thank you. Thank you very much. Ladies and gentlemen, we'll take that as a last question. I'll hand the conference over to the management for closing comments. Yeah. I would like to thank you everyone for joining us on this call. We hope we have been able to address all your queries. Thanks to Mr. Manish for hosting this call. Have a good day. Thank you. Thank you very much. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.