Ladies and gentlemen, good day and welcome to the Q1 FY 2022 Results Conference Call For Control Print Limited hosted by Asian Markets Securities 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 the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia from Asian Markets Securities. Thank you, and over to you, sir. Thanks, Mallika. Ladies and gentlemen, good afternoon and welcome all to the Control Print Limited First Quarter FY 2022 Earnings Conference Call hosted by Asian Markets Securities. From the management side, we have with us Mr. Shiva Kabra, Joint Managing Director, and Mr. Rahul Khettry, CFO. I now hand the conference to Rahul for his opening remarks, post which we shall open the floor for question and answer. Over to you, Rahul. Thank you very much, Karan. Welcome everyone to the First Quarter FY 2022 Earnings Conference Call of Control Print. We appreciate your taking out time from your busy schedule to attend the call. Hope you and your loved ones are safe and healthy. Mr. Shiva Kabra, Joint Managing Director, joins me on this call. Let us start with a brief on Control Print, followed by specific analysis of the financials of the current quarter, end with the Q&A session. The detailed presentation has already been put up on our website as well as the investor presentation notifications sent to the exchanges. For those who are probably reviewing the company for the first time, Control Print is in the niche coding and marking segment, which is an oligopolistic market with four major players, three of whom are MNCs, and Control Print is the only Make in India manufacturer. This gives us an advantage to sell our products locally and compete strongly with the other multinational players. We are the only integrated player with capacity to manufacture both printers as well as consumables in India, giving us an advantage to share the benefit with our customers. This also gives confidence to the customers for long-term partnership with Control Print. We have our manufacturing facilities in Nalagarh in the state of Himachal Pradesh for the manufacturing of the printers, and in Guwahati in the state of Assam for the manufacturing of consumables. Both the manufacturing locations are state-of-the-art facility to produce good quality products. All our consumables are manufactured in the Guwahati plant, and in addition to this, we have also started manufacturing some printers in that location. We have a strong sales and service team of 350+ engineers across our 11+ branches, which gives us the advantage to service our customers efficiently and timely, since after-sales service is very critical to ensure that the production lines of our customers continue to function continuously, thereby maintaining customer satisfaction. The 11+ branches across North, South, East, West, and Central India gives us an advantage to be in direct contact with all our customers in a timely manner since our products are critical to their production process. Post-sales of printers, there is a continuous demand for consumables over the life of the printer, which typically lasts for 5-7 years, depending on operating conditions. We have our complete attention on our customers' requirements to ensure that production is never affected and service requests are immediately attended, thereby gaining our customers' confidence. We have an end-to-end SAP ERP system set up which ensures maximum transparency in accounting, sales, and after-sales service as well as total control from raw material planning to ordering of the receivable collection and is integrated with our CRM system, which gives the confidence to the team, the customers, as well as our auditors and investors. We have a widespread customer base catering to multiple industries like pipes and cables, metal, automotive, food and beverages, FMCG, pharma, and we continuously endeavor to customize our products to reach out to other industries to increase our installed base. We have the entire range of products in our portfolio to meet the coding and marking requirement of the industry. The details are elaborated in our company presentation. As of today, the company has an installed base of 14,000+ printers across industries, which enables the sale of consumables across the life cycle of the printer. We are very confident that we have the best-in-class product to meet the requirements of most of the substrates, which gives an additional advantage to the customers to do business with Control Print. With a strong foundation and five pillars, that is man, machine, material, technology, and finance well established to augment our business plan, we are continuously striving for greater heights. Let me give a brief analysis of the financials of quarter one for the financial year 2021/2022. The manufacturing activities in the last quarter of FY 2021, that is the previous quarter, were very strong and most of their industries were pushing the productions to make up the time lost due to the impact of the pandemic. The momentum continued in the month of April 2021, but the eruption of the second wave of COVID once again forced almost all the states to announce lockdowns and restrictions in activities. This has once again affected our economy as a whole and weakened the demand cycle. The production in most of the industries was curtailed in the month of May, and though the lockdown was eased in the month of June, the recovery in production has been slower than expected. In our assessment, the worry about the third wave of COVID is looming and various industries are producing cautiously. These are extraordinary situations when the strength of the company is tested, and we can assure you that Control Print is geared up for any challenge. We are financially stable and robust and will continue to perform in spite of the unforeseen challenges. The stability of Control Print has been reaffirmed by credit rating agency, CRISIL with an A rating after considering the short and the medium-term impact of the COVID pandemic. Our investors can maintain their belief on the company's management for an optimistic future. This quarter, we achieved revenue above INR 50 crores for the fourth consecutive quarter, which makes it sustainable in the long run. We are confident the revenue and profitability levels will increase as the economy stabilizes post the pandemic. We deliver the revenue of INR 64.4 crores in this quarter in spite of the slowdown due to the second wave of COVID. We are not making any year-on-year comparison as the first quarter of the previous year was the peak for the first wave of COVID and more severely affected than the current quarter. Profit before exceptional items is INR 8.69 crores, which was lower than the previous sequential quarter, mostly due to lower sales of consumable as the industrial production was restricted. With the recovery in the industrial production, the consumable revenue will also increase, which will boost the profitability. The company makes a profit after tax at 21.5% and EBITDA at 22.3%, with scope of improvement due to better product mix and new triggering economies of scale. We should continue to maintain EBITDA margins north of 24% on a long-term sustainable basis. Let me brief you on the performance of various divisions, products, and business segments. Printers had a positive demand in spite of a challenging environment, though the installations were delayed. The maintained install base will drive the business in the coming quarter. The company continues to dominate the wood and the pipe sector, and FMCG is picking up. The flagship division, CIJ, witnessed positive demand and will remain strong over the coming quarters. The demand was mainly due to some of the industries where we have a stronghold like pipes, cable, steel, food, FMCG, beverages, and was also encouraging to see growth in some of the upcoming sectors like dairy, pharma, paints, et cetera. New product launches of TIJ, TTO, High- Resolution are very bullish with some good installations, and we are confident they will continue to add value to the company's business plan. We have dedicated managers and teams to drive these verticals with focus on dairy, beverages, biscuits, frozen food, ready-to-eat, pharma, packaging, plywood, lubricants, carton coating, et cetera. These new products should continue to generate traction during these challenging times, which builds confidence on the potential of these products in the coming years. Laser Printer business is growing steadily with positive response from the customers and new opportunities expected in the coming quarters. The face mask division will contribute to the company's revenue, and the second wave of COVID has created additional demand for the mask. The company has strong cash flows, and this has helped us reward the shareholders with a final dividend of INR 4.5 per share, which was approved in yesterday's AGM, thereby taking the total dividend to INR 8.5 per share for the financial year 2021. Control Print retained its position in the list of top 1,000 companies in the stock exchange by market cap on the National Stock Exchange. While the pandemic has impacted the economy as a whole, we hope with the increase in the vaccination population, the worst is behind us and with return to normalcy over the next few months, we hope for similar trend of growth trajectory. Fundamentally, the company remains strong and we are focused on our plan and strategy, and we are confident of the growth potential to deliver positive returns. The floor is now open for questions. Karan. Thank you very much. We will now begin the question and answer session. The first question is from the line of Shweta Jain from ANS Wealth. Please go ahead. Hi, sir. Thank you for giving this opportunity. I'm pretty new to this company, so some of the questions may be repetitive of the questions may have been asked in the previous call, so please apologize me for that. My first question is, sir, if you could throw some light on the industry as to how big the industry is globally and particularly in India. How do you see the industry going ahead? Also, if you could throw some light as to who are the key players, how big is the unorganized sector in this, and what is our market share for this? Shiva, you answer that? You want to take that question or you won't take it? Shiva, you take that. Regarding the industry size, in India, it's a four-player market, essentially. There are three foreign subsidiaries of three global companies that compete along with us. Between the four of us, approximately the revenue size is about between INR 1,050 crores -INR 1,100 crores. The unorganized market would be another 25%-30% of the overall market. Maybe INR 1,500 crores -INR 1,600 crores would be the size of the overall market in India as of right now. Worldwide, depending on how you define it could be between about $4.7 billion-$7 billion. It depends on which products are included exactly in that. Right. Okay. That was the first part of your question. You had asked something about the evolution. If you can just repeat it? Yeah. How do you see the market shaping up in India? Because INR 1,500 crores is still a very small market, right? For us, how do you see in terms of the export opportunity? What is our market share? You want to be unorganized. If you could just throw the light as to how do we see the industry shaping up, because I see INR 1,500 crores is still a very small market size, right? Frankly, the market, of course, for the last one and a half years has been quite stagnant, to be honest, because of the whole pandemic. We are an indirect market, so it really depends on manufacturing growth. If you look at China, for example, they are like as a market, they're more than INR 10,000 crores. They're a pretty big part of the market because they have a lot of manufacturing there. Whereas India, till the GDP per capita reaches about $5,000, normally the organized segment of the market increases faster than the unorganized segments, organized packaging. There's a sort of trend that people used to buy sugar in Gunny bags, now they buy it in packets. People used to make chips from the local bakery. Now they buy from Frito-Lay or packaged chips. Right. The packaged consumer goods sector normally grows faster than the overall market. The same thing is there for the industrial side. You would sort of make bulk steel before, then you start making value-added products, cables, wires, those types of things. They all require more printing. As GDP per capita goes to about $5,000, maybe $5,000, $6,000 per capita, our observation from other countries being that the industry growth is about 2x that of GDP growth. It's slightly difficult to predict because in India, it's the manufacturing growth has been a bit weak over the last few years. It's also going to depend not on overall GDP growth because, of course, if TCS or Infosys and all are driving India's GDP, it doesn't really benefit us particularly. If it's more broad-based, if it's more manufacturing-led, then obviously the market should grow about 2x the pace of GDP. That's the normal way that the market extrapolates till you hit about $5,000-$ 6,000 per capita. After that, till about it reaches about $10,000 per capita, it goes about 1.5x GDP growth. Beyond that point, it's not really about volume growth. It's more about premiumization. People will go from regular chocolate to dark chocolate to single-origin dark chocolate. The total volume you're consuming of products is going up quite slowly. It sort of slows down and goes along with GDP at about $10,000 or $12,000 per capita. Okay. That's sort of where the market is. If you see stuff like Thailand or Indonesia, on a per capita basis, their consumption or the size of the market is much bigger than ours or China. Right. They're at about $ 8,000-$ 12,000 per capita. Indonesia will be about $ 4,000, $ 5,000. It's almost half the size of the Indian market, if not more, even though it's not that big of a country. Right. That's sort of where the market goes. In the end, it's going to depend on the manufacturing growth within India indirectly. Do we see export opportunities for us? We have started in Bangladesh. We've been operating for a few years, and in Sri Lanka also, and even in Nepal also sometimes. We've not focused beyond this area. We were actually looking quite actively at Africa and some other things, but then because of the pandemic, of course, everything sort of gone silent, in all honesty. Okay. Again, because we can't travel, we can't do anything. It's not the main area. We do have a strong market in India. Obviously for us, this is the prize right now because this is where the market is growing. We are very well established. I'll be honest, there's also a certain amount of management bandwidth and energy we have. It's not really about capital right now. It's not really about the products. If we can do it without really making a huge investment in terms of manpower and diverting our attention, we will surely focus on the export market more. The main focus is to grow our business in India and the South Asian countries first. That's the primary focus for us right now. Okay. Can I ask one more question? Mainly because there is a limited amount of management bandwidth, to be honest. Right. Sure. Can I ask one more question when I join back in the queue? Is that okay? I've talked to the moderator, so I can see. Ma'am, I would request you to rejoin the queue for follow-up questions. Okay. I'll join back. Thank you. Thank you. The next question is from the line of Devanshu Sampat from YES Securities. Please go ahead. Good afternoon, sir. Hi, Devanshu. I had a few questions. One is I just wanted to check that the share of traded goods and sales has been on the rise. I presume these are the non-CIJ printers that we are selling. Is there any plan to start manufacturing these or we're going to continue the same way that we are operating right now? Devanshu, we actually manufacture all the non-CIJ printers ourselves. We pretty much manufacture the entire product range. Sometimes we sell a lot of accessories, software, other bits, conveyors and other things that go with our printer. It's not just the printer, but some people want sometimes a full system for traceability or sometimes there's some other equipment that goes along with the printer, like sensors, other things. Those all come as part of our traded goods. That would be it. Sometimes when we launch new models, just in the beginning when the volumes are low, we import those models. It could have gone up or down, but I don't see it being a major factor. Rahul, do you want to revert back on this? Yeah, Devanshu. Mostly we are manufacturing most of our printers unless it's a special printer with the customer's request. The reason I'm asking because the share of your purchase of stock inventory has moved up quite a bit in the last three, four years. I was just wondering. Yeah, those could be some unique printers. Okay. Another point is, 40% of your cost of material consumed is imported, which has been on the rise from roughly around 18% in FY 2013, gradually is on the rise to come to about 40%. I presume this will largely be consumables. It may be printer equipment or components for equipment. Okay. Yeah. Basically, the electronics, Devanshu, which are high-valued and that's what is increasing it. There is a shortage of chips and other things in the market. That's why it slightly increased compared to the previous year. I'm not comparing it to 2013. If you compare it to the previous year, it has increased by a few percentages. That's mostly because of shortages. Yeah, I just want to point out something. Earlier on when we were importing certain goods, some of the suppliers of ours, like say the suppliers for the pumps or the electronics, they had their own distributors in India also and we used to purchase through their distributors. Okay. What happened was, it's actually the same good, but we are buying it from the local partner of whoever, from say AMD or whatever, for example, we're buying from AMD India. As our volumes increased, we found it more cost efficient and better to just import it directly rather than pay the additional overhead costs of getting it through the Indian distributor or subsidiary or whatever arrangement they had out here. We have shifted a lot of the purchase of goods. Unless they're quite low-value items, we now prefer to import them directly. It's not fundamentally changed from a level that it was still imported then, but it was just being routed as a direct purchase in India. Now we are purchasing it directly from the supplier. That could just change up the numbers, but fundamentally it hasn't actually changed. Okay. Just coming to your depreciation for the quarter, from what I remember you saying earlier that we have the investment that we did for the mask business, we thought that the life will be longer, so depreciation should be lower, but again, it moved up. Can you throw some light on this, please? I did mention that the depreciation will be similar to the whole year. Actually don't compare it to Q4 because in Q4 it had an impact of the previous quarter depreciation getting negated. If you compare it to the full year's depreciation of INR 12 crores, then this quarter about INR 3.3 crores should be fine. I think on a yearly basis that INR 12 crores-INR 13 crores is what you should assume the depreciation to remain. Don't compare it to previous quarters. Basically this time INR 3 crores, INR 3.5 crores should have been done with. Yeah. INR 12 crore- INR 13 crore for the year, so maybe INR 3.5 crores for the quarter is what it should be. Okay. Q4 was actually lower. It was not because of some previous quarters. This is last question from my side. Can you tell me what the planned CapEx is for this year? Also what was the INR 7.3 crores CWIP as of 31st March? If you can throw some light on that too. For the current year and the next year, we don't foresee any major CapEx beyond whatever's maintenance, maybe INR 3 crores-INR 5 crores a year this year and the next year. I think we've mentioned it before, but I think we are pretty good to go till we about INR 300 crores-INR 350 crores. We don't need anything. Fundamentally we did a debottlenecking in our Nalagarh factory. It was actually stuck up because COVID. We've expanded that factory because we need to debottleneck our printer production capacity. That's where we spent some money, a few crores on that. Devanshu, that got capitalized as of 30th June, the INR 7 crores that you're seeing as CWIP. This INR 7 crores is towards this debottlenecking effort? Yeah, for the Nalagarh facility that Shiva was talking about. Okay. That got capitalized on 30th June. Got it. Okay. Thank you, sir. All the best. Thank you. Thank you. The next question is from the line of Madhuchanda Dey from MC Research. Please go ahead. Yeah. Hi. Am I audible? I can hear you. Yeah. Hi. I have just a simple question. How has the pickup been in the month of July so far? If you were to compare it with 2019 July, what percentage of 2019 July have you reached so far? Ma'am, to be honest once things opened up in June, we expected that to be a quick recovery, but that was lesser than expected. If I have to talk about July, the first half of July has definitely been a faster recovery and we are seeing some good demand. Comparing it to 2019, I think you'll have to give us the full month of July because second half is always stronger compared to the first half of the month. Right now it might be premature to compare it to July 2019. I understand it's premature, but if you could just give a ballpark indication whether it's 75%, 50%, whatever is your broad sense. We are little higher than that. I think we would be definitely 85%-90%. Okay if we have to compare. Don't compare it to all other industries because our installed base keeps increasing, and what we've installed over the last two years is going to give us benefit in the coming year. Yeah, for us, it's nearing 2019 July, maybe a 10% lower or something. Okay. Any kind of, suppose assuming but not admitting, suppose if the third wave is mild, given your install base, the demand for consumable, et cetera, what kind of ballpark top line are you gunning for in 2022? Like I said, I think Rahul was talking. First I apologize because, of course we would have some sort of a July on July comparison definitely with previous years. Considering, I think this is 20th of July, we don't have an 18 July or 19 July date comparison just available offhand, although it might be there on Rahul's SAP if he pulls it out. As far as the year goes, it's been a strange year for us. A strange two odd years, to be honest now, almost because of the pandemic. I really hope if the economy rebounds, which I'm hoping it will, I think the last few months of the previous financial year were probably a better indication of where the market was or where it would be if it was not affected by the pandemic. Maybe that was a rebound which was more than normal. It's very difficult for us to predict. I think it's just going to depend on where the economy is. If the economy is strong, then I think we should definitely have a very good year. If manufacturing growth is strong. I think May was very down for us because in April we had a lot of spillover orders from March, so we actually had a strong April, and then May was quite muted and June was better than May, but it was still quite dull. July has been quite looking back to normal. It's really difficult to predict and there's a lot of variables because nobody even knows if there's going to be a third wave, how the economy is going to react. So on. I think if the manufacturing growth is strong, we will definitely have a good year. If not, we'll still have a fairly good year because of all the internal work that we've done and the market share gains and so on. In this install base of 14,000+, what is the industrial non-industrial mix? I'm not sure offhand, but overall, our revenue is about 65% industrial to 70% industrial, they've been traditionally, and about 35% FMCG personal care. Well, that is on your historic base. Incrementally, suppose if you were to just take the last 12 months, if you could just give us a sense of what has been the incremental ratio of industrial base. Last year, we had a stronger sale in the packaging segment. That was because the industrial segment was more up and down. It's like a one-year thing, so we don't know if that was a longer-term trend or is it just the industrial production was down, and it will reboot completely. What happened was, again, towards the end, because a lot of stuff like where we sell a lot of things in construction material-based industries, like not only steel, but pipes, cable and wire, but of course wood, and so on. We got a good amount of sales in the last few months, last six months of last year. This quarter was a bit down. The packaging sector is where we've frankly focused on more in the last 15 months because our belief is that it'll get less affected by the pandemic or next waves that are happening. I don't know. It's very difficult to understand how the mix is affected. I think the industrial sector goes down more when demand comes down, and when the demand increases, it shoots up more. Whereas the packaging sector is more consistent. This is my rough reading of the situation. We've had better sales in the packaging sector, but I'm sure that this year will be a good year for the industrial growth if there's no further pandemic-related issues and the economy is supported well by the government. As far as your new generation printer is concerned, this is the last question, ma'am. As far as your new generation printers are concerned, who are the buyers? Again, if you could give us a sense of the rough mix between industrial and packaging. Thermal inkjet is mainly in the packaging sector. It would be mainly food, pharmaceutical, some beverage, and personal care. The high-resolution printers would be a combination of packaging, where they are used for carton coding and stuff. A lot of it goes in the wood sector. I think the thermal transfers is entirely in snack foods. I would say, in fact, most of the new generation printers would be in packaging, would be the majority of that. Packaging, pharmaceutical and related industries. Typically, the cyclicality of your revenue would tend to go down as the share of the new generation printers go up. Is that a correct understanding? If you ask me personally, I don't know. This pandemic was, for me, it was the first time in a lifetime that something like this happened. It's very difficult to say. I think considering that this was such an extreme event, obviously the packaging sector was more resilient because people are still going to buy biscuits and groceries and things like that. Whereas you can put off your consumption of buying washing machines and then all the components that go inside the washing machine, which are printed by us and so on. You're right about that in a way. I think that it's really difficult for us to understand what is the long-term effect of the pandemic, and was this a one-off or will this happen again? Yes. Thanks for patiently answering all my questions, and all the best. Thanks. Thank you. The next question is from the line of Jayesh Gandhi from Harshad H Gandhi Securities. Please go ahead. Hello. Yes. Am I audible, sir? Absolutely. My question is also on the industry only. While the current market size, according to you, is closer to INR 1,500 crores-INR 1,600 odd crores, do we see it going to INR 2,500 crores-INR 2,600 crores in next five years? While our annual report generally says the industry will grow by 10%-15%, do you see that coming supposed to, say, after this year, maybe when everything normalizes, do you see it going to INR 2,500 crores-INR 2,600 crores? Can we increase our market share here? In the past, the market size has doubled about every six, seven years. If you look at, say, 2007 to now, the market size has gone from about INR 400 crores to about INR 1,500 crores or something. Again, like I said, it's a very strange thing because this last 18 months has been very unpredictable. Nobody's exactly sure as to whether there's going to be a third wave or not, and whether there is a permanent damage to the economy or it'll bounce back. I think if the economy continues as what it was before this, then I don't see why the growth will not continue at the rate of 10%-15% a year easily for the next 10, or like I said, all the way till we hit $ 5,000, $6,000 per capita. Mr. Gandhi, also if we do a quick calculation, even if we grow at a CAGR of 11% for the next five years, we will reach INR 2,500 crore. I think that's quite achievable. Like Mr. Shiva said, 10%-15% CAGR is achievable once the economy normalizes. Sir, one more thing. In the first caller's question, you were talking something about per capita income and you were relating our growth with the per capita income. Can you repeat that? Yeah. Basically, as the economy, the per capita GDP goes to about $5,000-$ 6,000 per capita, the coding and marking industry typically grows at about twice that of GDP or twice that of manufacturing growth, if you will. Only beyond $5,000 per capita. No, up to $ 5,000-$ 6,000, it grows at about double that of the GDP. How about beyond that? Say, once we are at $5,000 per capita, how do we grow beyond that? Yeah. Once it hits $5,000-$6,000, it goes at about 1.5x GDP to about $10,000-$11,000. Then post $10,000-$11,000, the experience in other countries has been that it grows at about the same rate as GDP or other manufacturing growth. When I mean GDP, I mean manufacturing growth in all these situations. I get that, sir. Thank you very much and best of luck for future. Thank you. Thank you. The next question is from the line of Kunal from Vallum India Discovery Fund. Please go ahead. Thank you very much for the opportunity. I wanted to understand the potential of these new printers which you have launched. Just want to understand in terms of TTO, TIJ, and high-resolution printers. Want to understand how big could be the market for these printers in terms of units over the next 3- 4 years. In terms of our competitors, how big are they in these products? Yeah, that's my first question. I think that as far as the global market goes, it's more sophisticated than India. In India, the CIJ will be about 65%-70% of the revenue of the overall market, sort of INR 1,500 crores. Say, INR 1,000 crores-INR 1,100 crores. INR 1,000 crores+ will be the CIJ market. Maybe INR 500 crores will be all the other products. Whereas abroad, the CIJ is about 40% of the market of about $7 billion and the rest is other products. We're just expecting that the same trends will follow in India as what they do abroad, because in the end, the bigger companies are very tuned to what the international packaging outlook is, and then they adopt the same guidelines as what their parent companies or the leading companies abroad do in their field. It sort of percolates with a few years gap. The same thing we're expecting here, that as the market goes from INR 1,500 crores-INR 2,500 crores, the CIJ will continue to grow maybe from INR 1,000 crores to, say, INR 1500 crores, INR 1,400 crores or something. As a percentage, it's a non-CIJ market that will grow faster. Maybe instead of the market being 65% or 2/3 CIJ and 1/3 other products, something like 60%-65% CIJ, it'll be maybe more like 55%-56% CIJ and 45%-46% other products. Even their sales mix would be the same, which means that even they would have 65%, 70% CIJ sales, which is what we have. It's similar for all of us, except for I think Markem-Imaje has a very strong TTO sales. Yeah, it could be. We all have our own specialty. Like we're very strong in the thermal inkjet. Markem-Imaje is a bit strong on thermal transfer. Videojet is a bit strong on laser. Yeah, we are the strongest in thermal inkjet and high-resolution printers by a long way. Got it. In terms of the value of these printers, in terms of when you compare it, the cost to the customer for these printers, for the device, as well as in terms of the consumables, what is the difference between these new generation printers and the old CI device and the cost of the consumable which the consumer has to consume? In terms of the consumable which the consumer is going to use for the life of the printer, is it any different? Do these devices require less amount of consumables and at the same time, they have a higher value for the unit, I mean, for the device? Or is it the same ratio? How do you. The device value depends on which configuration you take. It could be lower than CIJ, and it could be higher also. It just really depends on what exactly you want with the printer or the exact specification of the printer you're choosing. As far as the cost per print goes, normally the non-CIJ printers and ISPns are more expensive to run than the CIJ printers. Because of improved reliability, they prefer. That's a thing. There is an important mix-up difference between the CIJ printers in general versus a lot of the non-CIJ printers, and the non-CIJ printers have less service. That's why customers prefer them, because they don't have to rely so much on our service. They feel if there's a breakdown, they can just replace the part themselves or just swap out the printer very easily themselves, and they don't have to rely on us. The consumables revenue is higher in the non-CIJ business, normally on a per print or basic. It also depends on the type of application we are selling in. Service revenue is quite low. Got it. Would it be fair to say that over a lifetime, for the same industry and for the same quantum of usage, for the same application and same quantum, same time of usage, the aggregate revenue from these three new generation printers and a CIJ printer, the new generation printers would have a higher hit, including the device and the consumable and the service? For the same application, yes. What we've seen is that new printers create new applications also. A lot of times, where the CIJ printer is being used, people continue to use the CIJ printer. But in certain industries like pharmaceuticals, say, people for the thermal inkjet printer, and they were not even using any type of printer previously. That's an expansion of the market. In snack foods also, for example, a lot of people were using older printers like ink roll coders, and they shift directly from thermal coders directly to thermal transfer printers. Sometimes it's not necessary that it goes from there to the CIJ and then to the next technology. Sometimes people are swapping. In milk, people, for example, in the dairy industry, they use embossing. If you see your milk product, they use a really cheap roller coder, which the ink sort of spreads. The sort of blueish or violet colored ink. Sometimes they just emboss the pouch. You see some of them go directly to thermal transfer, thermal inkjet. They do not go to CIJ. If it is a swap for swap, where a CIJ was being used and you convert to a non-CIJ, you will get a higher aggregate revenue, normally. It also depends on the volume. If the volume is quite low, the service revenue actually becomes quite important to us for those applications. If the volumes are higher, the consumer's revenue is more important as a driver of the revenue from that printer, the aftermarket business. Where the volume is quite low, because these new generation printers do not really require much service at all. It could be that it's cheaper to run, but in standard applications, which are higher volume, we make more revenue per printer. Got it, sir. Just final question from my end. I wanted to understand, in terms of the technological, is there a possibility that, over the next four or five years, the CIJ printers could go through some sort of technological obsolescence? Do you imagine customers using these technologies, let's say, for the foreseeable 10 years? In terms of your actual installed base of 14,000 printers, how many printers move out of their useful life? In any given year, what is the annual average life? How many printers are out of their useful life every given year? Yeah. I'll just take it up one question at a time because it'll be difficult. In general, from our base, about 7- 10 years is the useful life of our printer. It depends on the age of the base also. If you've sold more printers recently, there's less printers that go into obsolescence. Printers that are between 5- 10 years old, normally, if they have a major breakdown or some new requirement discovered, that's when customers phase them out. Rahul will maybe give you just a better number on that exactly. Yeah. Roughly we have about 15%-17%, which over the period, do get either upgraded or replaced or stuff like that. Whatever our 14,000 installed base that we're talking is about the active printers which are there in the market. Correct. Actually sold printers are close to 20,000 printers, but active printers is 14,000. That obsolescence is taken care of. Yeah. Out of 14,000, you can assume anywhere between 10%-15%, depending on the age and the mix of the printers, will get obsolete every year. Got it, sir. The second part of your question, I missed that out. The first part of your question, I would say. I think let others also ask because. Okay. No, no problem. Come back in the queue. Sure. Thank you very much. Thank you. Thank you. Ladies and gentlemen, please limit your questions to one per participant. Should you have a follow-up question, I would request you to rejoin the queue. The next question is from the line of Siddharth Mehta, an individual investor. Please go ahead. Yes, hi. I understand that we're going through the pandemic and it's a difficult time, so I appreciate your efforts to do whatever is possible. In your investor presentation in the second last slide, one sentence caught my eye, and there it says, "We have some new products that are likely to give us exponential growth." Are there any new products coming in for the pharma industry? That seems to be growing very rapidly. Yeah. Specifically for the pharmaceutical industry, our thermal inkjet range is very comprehensively addressed towards that industry. We've got some solvent inks for our thermal inkjets, which actually work quite well on that specific application. Yeah, we've got a good set of products. We've not actually been able to meet customers too much in the last few months. It's been more of repeat orders from our existing customers or where we had already cases previously. I'm hoping that this could be a pickup for us going forward. That's the first part. As far as all the products that we're talking about, they're also evolutions of them. What's happened is we've not got the full sales benefit of these products, of the new generations of products because of certain reasons. Because of the pandemic, it sort of stalled us a little bit. We are expecting that, because we had a bunch of strong cases before and even now, that we should be able to get, and we've done the groundwork of proving the printers and establishing their performance, and we're quite confident that we should get some larger orders now on these new generation printers. Okay. All right. Do you feel that given that there's so much promise, that it would be worth to maybe strengthen our marketing and sales and get some more aggressive and more capable or experienced people in that department? Actually, we've got a very strong sales team. We actually took some of the time that we had available to us in the first lockdown and even this lockdown, the second surge, we were actually working from home, and we couldn't really travel too much for the field because even customers were unwilling to meet and neither would we want to risk our own team. People, yeah. What happened is we did a lot of stuff like just the groundwork of cleaning databases, contacting customers. Right Updating a lot of information, sort of setting ourselves up for the next few months, hopefully for the coming year. We have been strengthening that up. We've got a very strong system and a good team. We have, I think, totally almost like, Rahul, what's the exact number? We have 140 odd sales people and managers. Yeah. 200 and something engineers, 220 engineers. We actually have a lot of-. Right. People, and our service network is widely being acknowledged by everyone. Yes As being the best in the business right now. Yes. We're very proud of our service team. Yeah. In terms of our sales that you mentioned, what percentage of our profits do you think comes from consumables? Rahul? Yeah, as we've already always maintained that consumables is our main driver for profits. Yeah Our gross margin continues to remain at about 80% on the consumables. No, I mean, of the overall profit, what percentage of the overall profit is from consumables, you think? Generally, we don't have a breakup like that, but yeah, consumable is dominating. It will be more than 50%. Okay. All right. Thank you. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead. Yeah. Namaskar, sir. Thank you for the opportunity. Hi, Saket. I remember you were at the AGM, yes. Yes, sir. I was there. Okay. Yes, sir. Firstly, sir, about this mask division part of the story, how is this unfolding for us in terms of revenue and profitability as this would be the full year and with the second wave also and even now with things about the third one? How have we positioned, I think INR 10 crore-INR 11 crores have been invested in this segment. If you could give some ballpark figure regarding the revenue and the bottom line we are expecting. I think we've recovered most of the cost of this investment. That was our original target, like I said, it was not overall to do it. We did invest some more money recently. That was just to ensure that. Because, of course, it's Control Print, so we had to have all the perfect lab equipment, the best of everything, which is what we've done. At the same time, we also have applied for the FDA and the NIOSH certification. We already have that for the FFPs. The certification process for all of the masks actually costs a lot of money, the auditing and so on. Obviously we want to be absolutely top of the line in whatever we do. That's why we spent some money. Like I said, the idea was not, it's not like the main area of business focus. It was to do it. We were confident we'll recover it. We had some customers where we were initially supposed to export to them across the board, that didn't work out because of the export ban, it's all okay now. No, sir, just what is the understanding now for this year? We have taken depreciation benefits and all, how is this division going to contribute in terms of top line and bottom line? That was my question, sir. I understand what you were trying to explain. Saket this are the factors. To be honest. Yeah. We did it. Obviously, if there is some extra thing, we are always there to support with our CSR and everything, and also, of course, to help cover that. We'll continue selling it, masks on the side. It's not been our focus or our factor in our revenue thinking. It might contribute a few crores. Just to add to what Mr. Shiva is saying, Saket, we would like all of you all to just keep the focus on the coding and marking, which has been our main business, and mask is considered as a bonus. That second wave, obviously, is not predictable. Third wave is also not certain. I can assure that whatever we lose in the coding and marking business with the next wave and the wave after that will be much more than any amount we make up through the mask or anything like that. Yeah. That's right. We don't want. The best health for the country and our employees. Yeah. Even going forward, coding and marking will be our main business segment. Mask, we don't want much focus to be on that. Right. We did other income also for this quarter with the sale of flat. What led to that, sir, and is it a precursor to our investment in Liberty Chemicals also, with the market improving or what kind of indication you can give? With the sale of property? No. See, that facility was not being utilized by us since Nalagarh and Guwahati had already come up over the last 10 years. It was just an asset which was lying around, and we thought that it was better to monetize it. We are making some investments in offices, like we're taking an office in Calcutta. We are looking for some other office space which is on rent. We didn't feel that our Vasai facility was being utilized at all. Yeah. We invest in Nalagarh also. Of course, the whole work got held up because of the COVID pandemic and we had some issues with the completion. It just took much more time than expected because it stopped in between. We're trying to consolidate strategies rather than just spread out and not having any utility of that asset. Yes, sir. Nothing to do with real estate or our cash flows. Correct, sir. And net realizations from this property, sir, how much it was? Most of it was already at written down value, was very low. About INR 3 crores the INR 15 crores is the profit that we made. We can add a few more lakhs. It was less than INR 4 crores, around INR 4 crores. Thank you. The next question is from the line of Rahul Koti, an individual investor. Please go ahead. Hello, sir. Congratulations on your good set of numbers. I have two questions, okay? Beginning with one, I have been tracking, investing in your company for a very long time. A couple of years back, you had done a QIP. Just wanted to know what is the plan with that amount? Is it still lying and do you have any plans for that? Or what is it? We explained it in the previous calls also. QIP was about three years ago, when we had some other business opportunities, and we were looking for investment in some other R&D such laboratory. That hasn't materialized, and the money has been utilized in the company. Wherever it was in excess, we've given it out as dividends to the shareholders. As of now, we have been working debt-free for the last three years, and probably that money is helping us at that time. Okay. You're saying that it has already been utilized, whatever had been raised, right? For business purposes, it was raised maybe for some other growth opportunities. Since that didn't materialize, we are continuing to utilize it in the regular business. Okay. Because as I remember, it was being raised to go abroad and set up something, right? That is not on the table right now as I understand. We did do our research, with the pandemic and everything, we are happy that we didn't go down that route because it could have just wasted money of the company. As of now, when we get an opportunity, we will utilize it because we have available cash flows with the company. It's not that the plan is deferred for cash flows, but we will wait for better times. The second question was on the printer. When you say you have a printer base of more than 13,000, if I remember correctly, previously you had mentioned that there are some printers which were used in the cement industry, which were not using the consumables produced by us. Does this include those printers, or it excludes those printers? We continue to supply in the cement industry. In fact, even in the previous year and the current year, we have been winning some long-term contracts as well as some contracts which we had lost three years back. I am told by my team, even one or two of them have come back in our fold. We do continue to supply actively to the cement industry, and the printers includes those. Yeah. If I remember correctly, when I attended a couple of years back, you mentioned, one of the team members mentioned that they have been using the consumables produced by someone else, like counterfeit consumables. Because of that, in the cement industry, you are facing some headwinds. Just wanted to know whether that is still continuing and whether those number of printers which were affected by this is being counted in this part of 13,000, or is it excluding that? That's what my question was. No. I mentioned that these 13,000, 14,000 printers are active printers. Wherever our consumable is not being used, we are not including it in this number. Wherever, even in the cement industry, our printers are active or we are gaining the install base, that gets included. This includes only the active printers, not the ones which are discontinued. Thank you. The next question is from the line of Shweta Jain from ANS Wealth. Please go ahead. Hi, sir. Just a couple of follow-up questions. One was, I think you mentioned the typical printer life is 5-7 years. Four, 7-10 years. Okay, 7-10 years. What typically happens to the printer after the life cycle? I mean, the spare part, do they come back to us, or they are sold in an unorganized market? Normally these printers, we scrap them, or the customer scraps them. Okay. Because there's a hydraulic segment in it, the electronics normally get outdated, we can only support for that long. The hydraulics and the rest of it, obviously, because they have got ink inside them, these aggressive inks for many years. It sort of wears it out slightly here, almost like a car which is beyond a certain number of kilometers. Understood. Sir, also in terms of consumables, is there an unorganized sector for consumables also? I just want to understand that, once we sell a printer to a client, is the customer bound to take the consumables only from us or he would also have other opportunities? Yeah. There is a large part of the unorganized market is essentially, people who deal in consumables for OEMs, for major OEMs. That's, I'd say, a certain part of the market. Yes, we implemented a RFID chip in our own printer in all the ink bottles. That's why one, I think this was in CIJ printers specifically I'm talking about now, I think it was 2017 or something, maybe. Yeah, in the third quarter. Something like, for three and a half, four years, we've been quite protected, because of that, and it's definitely helped us. Before that, maybe 25%, 30% of our printers used to use pirated or spurious inks. Even one investor did call us for most of the printers we sold in the cement industry also are using spurious ink. Yeah, and those printers weren't protected, and it's not easy to change the architecture of that printer to protect those new printers out there. Okay. We're putting protection in all our new generation printers as and when we redesign the printer. Normally, when we make a model, it could last about 7-8 years. Okay. When we put the RFID chip, so you can't use any other product but our product, is it? Yes. Okay. Also, just want to understand, when a customer is setting up its plant or whatever, at what level do we come in? Are the printers installed as the later stage of the entire plant comes up or from day one do we supply these printers or it is a parallel process? Also, once the printer is installed, how easy or difficult for the customer is to switch from us to our competitor? Yeah. The first part of the thing is normally it depends from customer to customer. There are two types of switches that happen. One is, of course, factories that are built are normally lasting for a pretty long period of time, whereas the printers itself have a life of, like I said, 7- 10 years. Printers do get phased out multiple times in the life of the factory or the production line. Normally, customers also upgrade their production line multiple times within that factory. When it's a project stage, so when I'm setting up a greenfield project or a large brownfield expansion, normally customers then plan the printers, the requirements, everything much in advance. Whereas if it's just a minor expansion, it's just an additional line which is just a copy of the existing things, then people tend to order more towards just a few weeks before the commissioning of the line, not that much in advance. That is specifically regarding this thing. As far as the switching costs go, obviously there is a certain amount of hassle because the operators get used to a certain interface of the printer. The maintenance cycle, and other parameters of each printer are different. It's a bit like switching from an iPhone to an Android to, I don't know, some sort of other phone. It's not that difficult, but it is problematic. Again, for most customers, it's also about stocking multiple types of consumables and fluids in stock versus one type of fluid, or rather one type of ink from one type of supplier. It's about negotiating AMCs, filters, stocking those and spares from multiple suppliers versus one supplier. Most customers tend to prefer one or maximum at the rate two suppliers. A lot of the large customers will have only one supplier in one factory and maybe another supplier in another factory and so on. It's not that you cannot switch, but you won't switch for a small reason. You'll switch if it's sufficiently difficult. Problem with production downtime, you will switch. Reasonable reason to switch. The switching costs are not very small, but they're not huge either. Thank you. The next question is from the line of Namit Mehta from KC Capital. Please go ahead. Hi, Rahul. Hi, Shiva. Congratulations on another good quarter. Just a couple of questions from my side. One, I'm just wondering if you can tell us a little bit about directionally how the order sizes are moving in terms of printers. Are you seeing a lot larger orders now that you've developed more and more recognizability, you are at a larger scale today. Are you seeing that order size change or is it roughly in line with what it used to be? Shiva, please go ahead. Yeah. Normally, what you see is that the frequency of orders increases as you become bigger. Like I said, except for large greenfield or brownfield expansions, customers don't order printers normally in large quantities. They order two, four printers, eight printers, 12 printers at a time, depending on how many lines they have and what their requirements are. Large orders normally happen when something like a dairy, which already has a lot of established lines, and then they decide that they want to start printing on all their lines, and then they say, "Okay, we need 40 printers to go." That, of course, happens. That's mainly because the factories themselves have become bigger. I'll say what you tend to see is that the frequency of orders increases faster most of the time. Even established companies, rather than going for everything in a big bang, they tend to order more frequently, and cover the new application requirements that way. Understood. That's helpful. Can you also help me with the mix between printers and consumables and spares this quarter? If you can just point out whether there's any backward that might be, EBITDA margins are a little bit lower this quarter versus the past year. Sure. On the printer front, we did about 16%-18%. Consumables was 48%-50%, it was on the lower side. Spares and service around 23%-24%. Mask was about 12% this quarter. Got it. Thanks. I guess once the consumable share increases here, you would expect EBITDA- Yeah. Like we've always discussed, once the consumable is anything above 55%, we definitely will have much stronger EBITDA from that. I think that there was just less manufacturing this year, so less overall this quarter. Maybe the ink sales were a bit down because of that. Definitely May and to a lesser extent, June, were quite below expectations. Perfect. Thanks. Just last question on Gir. I know this business at the end of the day is a service business. If you can just talk a little bit as to how different processes and systems you put in place to ensure high quality of service over long periods of time. I know the SAP is one example of that. If you can just talk a little bit more about that. Yeah. I think first we've got a strong training program in place. We've got six levels to assign for each service engineer for us. When you join, you have to pass three levels within six months. Unfortunately, if you fail one level, you have to leave if you don't cross all three levels within six months. That's the first part, so that each engineer has to be up to a certain basic speed, where they can take care of 80%+ of all the breakdown calls within a six-month period. The most important part of our customer satisfaction is our training program. After that, of course, the engineer's gains become slower. We also have a brush-up test once every year to make sure that the engineer has not lost knowledge. Also regular training, so if there are new models, new printers that they're not comfortable on, they get that new knowledge, and it's integrated into our testing procedure. That happens every year for every engineer for that level. The senior engineers go on to a Level 4, Level 5, Level 6 training. That's the core behind our customer satisfaction and our service team. Of course, the SAP is there to control every aspect of the service, the returns, the parts movement. Of course, if people enter all sorts of data, like the printer, the number of breakdown calls, the repeat analysis. We get a lot of data. If we know that the same printer's broken down again within 30 days of a breakdown call, it sends an alert, and then the senior manager is supposed to look into it and find out. We have those types of processes and tickets in place. I'll say the fundamental benefit is two things. One is the training, and the second is that we have a very widespread service network. I think we have something like 240 or 250 engineers across India, and we're not too far from the customer in almost any part of the country. The service time, it also makes the engineer's life much more comfortable because almost all his calls are local calls. I think that widespread reach combined with strong training, which is not easy to do when you have a distributed service network, I think that combination is the part that really enables us to provide a high quality of service. Of course, beyond that, we have an inside sales team and a service team which call up the customers randomly. They follow up to make sure that the customer is satisfied, take feedback from the customer, and so on. Of course, from a technical viewpoint also, like I said, we have some alerts to make sure that if the number of technical failures in a printer is more than expected, then it gets alerted, and then all the way down from our service manager, a national service manager, to our national sales and service head, and then even to me. There are multiple escalations that will happen in that particular process. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead. Yes, sir. Thank you for the opportunity again. Sir, I was talking about this Videojet case part of the story. That is done and dusted, or anything more? We have done some provisions earlier. Hello. Yeah. No, the status quo on the case, we've already explained whatever we explained previously. The courts in Mumbai are not very active. It's all working through virtual. As of now, there is no further update on that front. We have done our provisions and all, I think so. We have given guarantee as per the court's direction. We've already given a guarantee, a bank guarantee to the court. Right, sir. Sir, one of the participants did spoke about this. The main threat with this industry part, sir, business can grow depending upon the growth in the industrial segment and all, but other than that, in the hindsight, what other technological advancement or things can change wherein this CIJ printers, which are the dominant printers, God forbid, they become redundant with the phase of technology. Just wanted that question to be answered, sir. I think we already explained, even right now, if you look at it, we have a suite of products. Like I said, abroad, the market is already more mature. When we're talking of that $7 billion market size abroad, we will see that CIJ is only about 40% of that in its overall size. 67%. We're expecting the same gradual evolution to take place in India also, and we're seeing that CIJ must have been 80% of the market, I think five years, six years ago, maybe more than that. The same thing will happen here. It's a gradual change that will happen, and the market is evolving. CIJ is not going to go anywhere because for many applications, it is superior to any other printer out there. For some applications, specific printers are superior, and we see as the customers become more mature, they'll go for more of a mix of products depending on the application and the line. Of course. Very correct, sir. In the AGM yesterday, sir, you told about this payment of royalty for Internet of Things off- site printers. What is the aspect behind it, and how much is the royalty that we are paying? I think we are unable to launch the product, but you will be launching something this year. We have to understand, not royalty that we pay our partners, KBA-Metronic, and we are just saying that the Internet of Things is built in some of our new printers. That's all we are saying. We've been unable to launch some of our new models because of the pandemic. It's a bit stuck up. We're also having a shortage of chips right now, so we are focusing on the existing models rather than the new models that we don't have. Correct. Sir, how differentiated are they, sir? When you are speaking about it, what are the key differentiation on this product? How are they different from the ones? They will be catering to the same industry, I think so. Yeah. It's a next generation model. Suppose you had a printer before, you had to connect it with a serial cable to your computer. LAN cable, yeah. it's LAN cable. Yeah, with the LAN, now it's wireless or it's Bluetooth, maybe it's faster, it's duplex printing. It's the same type of thing fundamentally. You're still printing, whatever, three lines on a bottle of water that's passing by and so on. Right. It's a bit smaller, a bit faster, with a touch screen and all those types of benefits that are there. Right. It's not a huge benefit. There are some improvements everywhere, less cleaning, a little bit less maintenance cycle, and so on. It's an upgrade over the old printer. It's not a change. Correct, sir. It's an optimization process. Sir, Board has been very kind and has been very liberal, in fact, sir, with the dividend distribution. I think the dividend distribution policy will also come in the annual. Sir, with the changes in the taxation, this is creating a more of a higher taxation at the recipient side, and you being also the largest shareholder, is also facing the same. Sir, have the board looked also in terms of buyback as one of the more way of giving the cash back and also creating more value for the shareholders with increased market capitalization for the organization? Strategy, the board will decide as and when things come up. We can't answer market-sensitive questions. Thank you. The next question is from the line of Shweta Jain from ANS Wealth. Please go ahead. Hi, sir. Thank you. Just a few couple of follow-up questions. One was in terms of strategy, how do we see ourselves in next five years, in terms of revenue, and what are the key steps that would lead us there? If you could just throw some light on it, sir. I think, Shweta, looking at the medium term, I think we've got a strong suite of products. Like I said, we also have one, two printers, which we are phasing in and changing one of our core models in the CIJ. Our focus is essentially to be as efficient as possible over the next few years. In fact, the pandemic actually got at a very inopportune time for us because it sort of actually took our momentum away at a time when we were growing faster and capturing a bit more market share. What happens is when the customers have less time to meet you face-to-face, the tendency is to just go with the repeat orders on the existing equipment that you have. If the market is more back to normal and there's less issues, then again, I'm expecting that considering the edge we have in certain products, especially with the high-resolution printers and the TIJ printer, that we can gain strong market share there. In the CIJ, we have been doing well. Overall, I think if we can do that, we can have a strong growth. Our focus is more on increasing our market share. Like I said, again, our industry doesn't allow for large market share swings, unless somebody's got some really major issue that happens to them. It's about grinding out that 1%-2% market share gain every year for the next five years. Of course, like I said, the overall market size is something we can't predict because it's going to depend on the overall industrial growth in India. Thank you. I would now like to hand the conference over to Mr. Karan Bhatelia for closing comments. Thank you, Rahul. Thank you, Shiva, for answering all the queries. With this, we conclude the call. Any closing remarks you want to make, Rahul, Shiva? I just wanted to thank everyone for coming. We really appreciate your time. I think for the second surge to take everyone by surprise, and the most important thing is that it is absolutely safe and sound. I think that is the most important lesson from the pandemic. That is my sincere thanks to everyone for dedicating their time to this also. Thank you, everybody, and the best of luck. Thank you. Thank you. With this, we conclude the call. Thank you. Welcome.