Ladies and gentlemen, good day and welcome to Control Print Limited earnings conference call hosted by Asian Market Securities Limited. As a reminder, all participants line 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 Market Securities. Thank you, and over to you, sir. Thanks, Bilal. Ladies and gentlemen, good afternoon, welcome all to the Control Print Limited 2Q FY 2022 earnings conference call hosted by Asian Markets Securities Limited. 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 Mr. Rahul for his opening remarks, then we can open the floor for Q&A. Over to you, Rahul. Thank you. Thank you, Karan. Welcome everyone to the second 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 in the investor presentation notification on the exchanges for this call. 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 capability 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 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 printers, and in Guwahati, in the state of Assam, for the manufacturing of consumables. Both the manufacturing locations are state-of-the-art facilities 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 the customers continue to function continuously, thereby maintaining customer satisfaction. The 11+ branches across North, South, East, West, and Central India gives us the advantage to be in direct contact with all our customers in a timely manner since our products are critical to their production process. Post sale of printers, there is a continuous demand for consumables over the life of the printer, which typically lasts for five to seven years, depending on operating conditions. We have our complete attention on our customers' requirements to ensure their production is never affected and service requests are attended immediately, thereby gaining our customer confidence. We have an end-to-end ERP system set up which ensures maximum transparency in accounting, sales, and after-sales service, as well as total control from raw material planning and ordering to receivable collections, 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, et cetera, 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 requirements in 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 sales of consumables across the life cycle of the printer. We are very confident that we have the best-in-class products 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 confident, continuously striving for greater heights. Sorry. Let me give a brief analysis of the financials of Q2 financial year 2021/2022. The manufacturing activities in Q2 was encouraging and gives an indication of the recovery of the Indian economy. The Index of Industrial Production, the IIP, has also shown an upward trend in the last few months due to increased production across industries. With the decline in the COVID infection rate and the increased vaccination, the fear of the third wave is much diminished, and the mood of the nation as well as the industries is optimistic for a quick bounce back for higher growth expectations. There was a strong traction witnessed both for consumables as well as printers as the companies were increasing production as well as capacity. 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 also been reaffirmed by credit rating agency CRISIL with an A rating after considering the short and medium-term impact of the COVID pandemic. Our investors can maintain their belief on the company's management for an optimistic future. This quarter's performance delivered an all-round growth in revenue and margins and volume growth. We achieved the highest quarterly revenue of INR 62.72 crores with year-on-year growth in revenue of 18.2%. Also, sequential growth in revenue of 15.3%. The reason for growth in revenue was due to good traction in consumables as the industrial production across most of the industries increased, though it is not comparable as Q2 of previous year was partially affected by lockdown. The profit before exceptional items increased 32% year-on-year, increased 36% for the half-year, and increased 38% sequentially. The profit before tax increased 30% year-on-year and 80% for half-year. The EBITDA increased 23% year-on-year and 31% for half-year and witnessed highest quarterly EBITDA. The working capital days improved significantly by 21 days quarter-on-quarter and 30 days half-yearly due to better inventory management and receivables recovery. The company maintained healthy margins with profit before exceptional items at 18.9% and EBITDA at 25.5%, with further scope of improvement due to better product mix and higher revenues triggering economies of scale. We should continue to maintain the 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 slightly delayed. The increased install base will drive the business in the coming quarters. The company received a large repeat order from the dairy segment. We have received Pan-India success in the sugar segment with key customers for the upcoming sugar season. The flagship division, CIJ, witnessed traction with growth of 15.5% in half year as the production of the customers was increasing. The growth was mainly due to improved production of some of the industries where we have a stronghold, like dairy, healthcare, food, cable and wire, agrochemical, and was also encouraging to see growth in some of the upcoming sectors like pharma, paints, and wood. New product launches of CIJ, TTO, and Hi-Res are showing good traction and with some good installation in the past few months. We have dedicated managers and teams to drive these verticals with focus on dairy, beverages, bakery, frozen food, ready-to-eat, pharma, packaging, plywood, lubricants, and coating. These new products continue to grow every quarter, which builds confidence on the potential of these products in the coming years. Laser printers business is growing steadily as product technology has improved and a new team is driving the business. This has yielded good dividends with positive response from customers and new opportunities expected in the coming quarters. Service revenue has also shown good growth in value terms, which contributes towards profitability. Our strategy to separate verticals for key account and OEM business for focused approach is showing encouraging results and should yield good quantum of business. LCP business reported an increase in the previous two quarters with some revival in cement accounts and Pan India supplies in sugar industry. We are changing our focus to non-LCP business and some new applications, and the team is confident of generating business in the coming quarters. The company has strong cash flow, and the trend is expected to continue. Control Print retains its position in the list of top 1,000 companies on the stock exchange by market cap on the National Stock Exchange. While the pandemic retreats and with the increase in the vaccination population, will result in robust growth of the economy and we hope for similar trend of growth trajectory. Fundamentally and inherently, the company remains strong, and we are focused on our plans and strategies as we are confident of the growth potential to drive positive results. The floor is now open for questions. Thank you. Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask any question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may please press star and two. Participants are requested to use handset while asking a question. To ask a question, you may please press star and one. We have our first question from the line of Gaurav Shah from Harshad Gandhi Securities. Please go ahead. Hi. First of all, congratulations on the good set of numbers. I have a couple of questions. First is with respect to the EBITDA margin. Do you think that the EBITDA margin of around 25% this quarter is sustainable, especially with the energy prices going up recently? My second question would be with respect to the sales growth. Do you think we can achieve growth of around 25%-30% going forward with the manufacturing picking up in India? Thank you for the question. Yes, I've mentioned in my presentation also that EBITDA margin above 24% is definitely sustainable. We have always maintained this stance. I think anything between 24%-28% is what we have previously also given the guidance that it is achievable on a sustainable basis. I have a follow-up question on that. Do we enjoy any pricing power with our customer? How much inventory we maintain with respect of consumables? Sorry, I didn't follow you. Do we enjoy any pricing power with our customer? See, we generally usually have long-term contracts with our customers, and our product is such that we don't really get into quarterly discussions on pricing with our customers. It's mostly on a long-term basis. Of course, if there are certain abnormal situations like right now, the freight has substantially gone up and certain commodity prices have also increased. We are approaching our customers for price increase. Over the next couple of quarters, we should see better price realization. Okay. The second question on sales growth. Sales growth, definitely, I think anything in double-digit is possible. High teens is what we have always maintained, that we can grow anything between 15%-20%. With, as you said, that industrial production picking up, we are very confident that this is possible in the second half of the year. Are we winning any market share from our competitors? Yes, we do believe that. We have been gaining competitor accounts also. Last year we gained some market share, but the results of this year for our competitors is not yet published on public domain. We don't have the real figures. Our internal assessment does make us believe that we should gain market share in the previous financial year. Okay. Thanks a lot, and all the best. Thanks. Thank you. A reminder to the participant to ask a question, you may please press star and one. The next question is from the line of Swechha Jain from ANS Wealth. Please go ahead. Hi, sir. Thank you for giving this opportunity. I have few questions. My first question is, would you be able to give us the revenue breakup in terms of the printers and consumables separately? Yes. Should I give that or you have more questions to ask? I have more questions. I'll give this and then you can ask more. For this quarter, our printers breakup would be about 18%-19%. Our consumables is 51%-52%. Spares and service would be about 23%-24%, and about 6%-7% other margin. Okay. Sir, my next question is, like you said, you just guided to the earlier participant's question that we are looking at a sales growth of 15%-20%. Sir, what I understand is the market size, the whole overall industry size is just limited to INR 1,300-1,500 crores. Am I correct, sir? As of now, it is as you know, it's growing for the industry. Right. We hope in a couple of years they should touch 2,000. With that, I just want to understand, even if it's an INR 2,000 crore kind of an industry over next four to five years. Do you think at some point in time our revenue growth would be capped at particular level? If not, then if you could just give me some sense that how would our revenues grow over next five to seven years, given that the industry still remains like an INR 1,500 crore or INR 2,000 crore kind of an industry. Just wanted to understand how overall revenue would grow. Our assessment is that the industry should continue to grow strongly, this should hit INR 2,000-3,000 crores in the five years that you're saying, maybe INR 2,000 in a couple of years. Control Print, like we've maintained, is going trying for the market share of 25%, which today is at about 19%-20%. With a growing industry and our market share increasing, we should be in a strong position five years down the line. As of now, we are putting an immediate target to reach INR 300 crores in the next couple of years, thereafter we'll go for the INR 400 mark. From Control Print's point of view, I think maybe we can hit INR 400 crores in maybe four to five years. Right. Sir, I have two more questions. Can I ask them or should I join the queue? I think one more and then maybe you can join. Okay, sure. I'll do that. Just wanted to understand with respect to the mask division, what are we looking at? I mean, do we plan to grow the mask division or if you could give some color to this, sir. On the mask division we've already made our investments and the machines are already in place. We have our raw material and certifications also. Though we started the mask division in the pandemic as a more sort of CSR activity. I'll actually answer that question, if that's fine. Yeah, please. I mean, for us it's not a strategic thing right now. It's there. What is there is there, if I may ask you. Okay. You know how it goes, it goes, but it's not the focus. Okay that's- Right. 90% is if you get, you know. Okay. No further CapEx or anything on the mask division, right? No. We did some this year that was only to get our certifications for the NIOSH and the FDA. That is only because we do it as a company we just take everything. Like I said, it's not strategic to us. Okay. Sir, I have two, three more questions but I'll just join back the queue. Thank you so much. Thank you very much. The next question is from the line of Devanshu Sampat from Yes Securities. Please go ahead. Hi. Good evening, sir. Good evening, Devanshu. Just a few questions from my side. One is, it's great to see the working capital situation and the tightening of the same. Can you throw some light on what initiatives you have taken and whether this is something that is sustainable? Devanshu, I think Rahul might answer that better. I'll just give that to him. Devanshu like we've been discussing that inventory is the main working capital part which we've been focusing on and we have been able to work on better inventory management in spite of higher revenues. We have mentioned previously also that there is a minimum critical amount of inventory which needs to be kept to service our customers as well as with the range of printers increasing, the SKUs increase for us. Now with increased sales, we don't need to keep adding up to the inventory and we feel that even further increase in sales we might be able to hold on to maybe the inventory levels. That advantage we will keep gaining as the sales increase. On the receivables front also we've tightened it up a little bit in terms of approaching our customers faster and putting some pressure for them to release our payments on the due dates. As I had mentioned previously also we were not very bad off in terms of receivables so that slight improvement there but the major betterment has come from inventory side. Okay. Get that. Just continuing with the question that the previous participant was asking you, right? I was just thinking about this myself. Maybe you can give me your view on this. While the coding and marking business is chugging along, right? It's INR 1,200 crore, INR 1,300 crore kind of business which you're expecting it to reach INR 2,000 crore. It's also fair to assume that it's not an easy business to replicate, right? Because you need a considerable support staff and network which is required. Now that we have this in place, are we thinking about anything beyond this category, beyond coding and marking to leverage on this network that we have? Any thoughts and plans over here? Yeah. If I take that question. The market itself is growing at about in 10%-12% a year compounded like if you look at it over a longer period. It might have been a little bit faster earlier. Of course, like the last two years are very tricky to predict because of the whole COVID situation. The market has not really grown I feel in the last two years. It's been quite up and down for us since March of 2020. Overall we're related to manufacturing growth. As manufacturing grows there will be a coding and marking growth and obviously the second thing which Rahul explained same for us is that whether we're able to grow our market share in conjunction with the market growth. Now what we've seen is that for which I've mentioned some things because as you get about $5,000-$6,000 per capita GDP the coding and marking market grows about 2 x the manufacturing growth rate. It slows down to about one and a half times till it reach about $10,000, $12,000 and after that the growth is more in services not really in manufactured goods. At that point of time it sort of tails the GDP growth. Like you said there is a fair positive cash flow business without really much reinvestments required. If you're talking from that angle, the profitability versus the free cash flow is quite similar. No, basically what I'm getting at is expanding your market size, right? Like, okay, you have coding and marking. The target is to get from, we were about 18.5% pre-COVID, if I take March 2020, if that's correct, Rahul. We're targeting 25%. Now, the thing is, it's very difficult to predict what happened in the last few, so much time, because first our competitors are more for I mean, they do file on the ROC. We've not got the results recently, at the same time, it's been a little bit up and down for everyone. It's very difficult to read what's happening in the last so many months. I'll say, since the pandemic began. Obviously the idea is to grow the market share and like you said, beyond that, how we leverage our network. We do have a very strong network. We do have some potential thoughts on what we could do, but when we have something very concrete, we'll get back to you on this. That's what I'd say. In the meantime, the idea would be to run our business efficiently and definitely focus on growing our coding and marking market share, and that's where our focus is. We were looking at some geographical expansion that's sort of gone very silent because of the COVID. We couldn't travel. We couldn't really move it forward. Maybe in the coming financial year, we'll look at that again. We were looking at certain other countries, but we are continuously looking at new products and opportunities which are allied to what we do. Sure. I was basically asking you a big picture question like, maybe from a 3 to 5-year perspective, you're thinking about possibly any other industrial products that we can get into outside of the coding and marking. That's what I was trying to get at. With the intersection of digital printing and the packaging industry, and obviously what the type of printers and the manufacturing technology and know-how we have is very related to the digital printing industry. That's a very wide range because even your billboard printers are digital printers. Even your home office printers, your laser printers and inkjet printers are digital printers, for example. You have specialized applications, especially textiles and other things. There are certain applications which fit in quite strongly with what we do. I won't really talk about that till we have something concrete out on the table. That's one area. Of course, we are totally linked with the packaging industry, because in the end of the day, that's the customers we sell to. We sell to companies- Sure who package their products or organized packaging. Those are the two areas, the adjacencies which are very close to us. The option is geographical expansion or to get into these two sectors if we can think of the right options and the options to take out. Sure. Devanshu, just to add to that, we are just keeping our eyes and ears open, and if there's anything concrete we'll update. At the same time, I'll just say that if any of you feel that there is a new opportunity, please do reach out to us. Sure. For inorganic options. This is just the last question from my side. Over the last 18 months, of course, the markets have been fairly favorable. They moved up quite a bit, and if you notice, Control Print's valuations have been still in the low to mid-teens band. Relatively, for a business that we are and steady business earning the good return ratios and good balance sheet and everything. Just wonder if the management is thinking about sending out some signal to the market, either a buyback or some management looking at increasing stake. Any thoughts about this, especially considering that we're generating about INR 30 crore, INR 35 crore of cash each year with no major cash requirement, as you said, to take us to the targeted revenue figure. Any thoughts on this? Devanshu Sampat, these are price-sensitive discussions, and we're not doing it on this call. Once the board takes a decision, we will inform the markets. Yeah, I think we have also increased our dividend consistently, we are, I don't know what the percentage would be, but we do have some sort of a dividend policy, distribution policy in place that complies with the rules. The idea would be to make sure that if we don't find any opportunity in front of us that cannot be available, then I think we would definitely reward shareholders, I can assure you of that. If we find growth opportunities available, whether inorganic or like I said, in adjacencies, and we have a definite plan which we also can look at, then we will also look at that. That's my answer to you. At the moment, there's absolutely nothing concrete. That would be something that the directors would take that call on, if that situation came and we have cash which we cannot deploy effectively. Thank you very much. The next question is from the line of Shalabh Agarwal from Snowball Capital. Please go ahead. Good evening, sir. Good evening. My first question is, we acquired a small company a couple of months back. With very small acquisition that we did, we acquired 80% or so. Can you just give us some sense on why this acquisition was made? Were they making inks for us? Because it seems they are making inks for other brands also. Some insights into that will be helpful. Shiva, you take that? Yeah, sure. If you break up the industry structure, there's 4 organized players. That's us, and of course, Videojet. Right Printing Sciences and Markem-Imaje. The four of us combined about between INR 1,100 crore-INR 1,200 crore, depending on what their latest numbers are. Correct. The rest of the industry is about INR 300 crore-INR 400 crore. INR 1,500 crore-INR 1,600 crore industry. It's about 20%-25% of the industry is in that, what we call unorganized segment. Sure. Essentially, the biggest company in the unorganized segment was a company called Jet Inks. They ran into some issues during the COVID time, and the CEO of that company quit because of some differences with the investor of that company. I won't get into the exact reason, essentially he quit and he started his own business. Because he knows this area, it's an area which we are not really present in. You can say it's a more price-sensitive area, we have taken the option to sort of launch a second brand which is targeted at that segment of the market. It's totally disconnected. Control Print is only like a manufacturing partner for this company. We own it. We are the owner of it, and we're a manufacturing partner, it's not part of the Control Print network, if you get what I'm saying. It's more targeted at a slightly different segment of the market is what I'll say, which we couldn't get into, without either lowering our service quality levels and our pricing levels and so on and so forth. Sometimes the customers are a little bit more price sensitive and who have higher service requirements and so on, or more of that. Sure customers we have who are more 24/7, what they care about is that they just want reliability, one, two, and three. All the other questions come in. The Jet Inks brand will now be owned by Control Print? No. Jet Inks was the company that he was the CEO of, and he separated and started this new company called ICIPL. Okay. We have no connection with Jet Inks. It was just that he was the ex-CEO, he has knowledge of this market. We wouldn't do it if we didn't have a competent manager in place. That's what I'll say. It's a different market slightly. Oh, okay. This CEO will work along with us, right? Yeah. He's the CEO of that ICIPL now. Okay. He was the ex-CEO of Jet Inks, because that opportunity was there and he needs growth capital, and it was fitting into us. Of course, we have synergies because we already have all the technologies in place to manufacture printers. Okay. For us, it's a. Okay It's a marginal investment to just make a printer, which is for that market. Is this new company which has been acquired, are they also servicing other brands for consumers? Because that is what says. Other brands including us. They are partly pirates, and they have like Now what we're doing is we are sort of moving them to their own brand of printers, separate from a Control Print brand, is what I'll say. Suppose they were selling under the name of, I don't know, Samsung. Now they start a new brand called Galaxy or something. That's like that company is Galaxy or like Huawei versus Honor. They've run those two separate companies. We are like Huawei, and that's HONOR. Thank you very much. Is that clear? Do you understand? Shall we go ahead for the next question? Yeah. Yeah. Thank you. In the interest of time and fairness to all participants, please restrict your question to two per participant. A reminder for the participant, to ask a question you may please press star one. The next question is from the line of Jayesh Gandhi from Harshad Gandhi Securities. Please go ahead. Congratulations on good set of numbers, and thank you for taking my question. Thanks. Sir, I have a couple of questions. The first is the tax advantage which we are enjoying. Can you just help me out in understanding until how many years are we eligible till that? I mean, 16%-18% tax on the income. Until what years will we enjoy it? Currently it is up till 2025 for our Guwahati facility that we set up. It was a 10-year tax advantage. On the cash flow, if we have to say that the MAT credit can be carried forward for 15 years after 2025. Maybe it can go up till 2040, depending on how much MAT credit we accumulate. As of now, I feel that we should cross about INR 100 crore of cash credit by 2025. The MAT credit right now, it's only going to kick in after 2025. Till 2025, there's no question. It is purely paid on MAT basis. After 2025, we will get the MAT credit advantage on the cash flow, which can be for another 15 years, up till 2040. Okay, I got it. There is one line item, which is finance cost in our profit and loss account. While we don't have any debt, neither short-term or long-term, can you just help me out in understanding what is that? This is the latest that Ind AS 116 has come up with, wherein whatever is on rental basis, if it is more than one-year lease, then you have to assume it as your deemed asset and have a depreciation on it and an interest cost. Basically, the rental income, if you will see our previous, maybe a year or two years earlier, you will find that there is a rental cost that we were paying for our offices across the country, and that now has lowered and transformed into higher depreciation and some amount of interest. It's like you calculate the present value of the next five years' rental and account for it. It's the Ind AS 116, which is slightly more confusing. I don't know why they've gone into it. I got it. One last question, sir. While you said that you are expecting your sales to reach by, say, INR 400 crore in next four to five years, what kind of a CapEx will we require here? I believe up to INR 300 crores we should be comfortable. Beyond that, we will have to make some CapEx, which will be decided at that point of time. Up till 2.5 Years, we still should be able to manage without major CapEx. Beyond that, we'll have to evaluate. Okay. Thank you. Thank you, sir, and the best of luck for future. Thank you. Thank you very much. The next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead. Namaskar, sir. Thank you for the opportunity. Sir, firstly, if I could sum up, sir. Earlier in the call, sir, we were looking for that direction wherein we could be more confident of this being a linear trend going forward. Do you feel that the pillars on the ground give us that confirmation that the highest turnover that we posted on a quarterly basis, the base can be now moved up, and this is not one-off quarters? Yeah, I strongly believe that this is not our best, and there is definitely scope of further increase. Okay, sir. Even at the current install base, we should do better. Things have improved, but some of the industries where we have a strong installed base is still not at optimum, and we hope to see improvement in the second half. Sir, you spoke about this dairy business part in sugar. Out of the total pie, sir, what percentage would we be catering to them, sir, the dairy and the sugar business as of now? See, honestly, sugar is seasonal. It is only from November to March, that 4, 5 months that the industry runs. I mentioned it because now we are in October, and maybe the next 4, 5 months, we should get some additional revenues from that sector. Again, it is not a big pie, but next couple of quarters, it will be some additional revenues coming in. Dairy is definitely growing for us. Right now, it is not a very significant chunk, but as I have mentioned in all the previous calls, it is catching up and it has good growth potential. Right now, it will still be in single digits for sure. Higher single digits? No, not very high, but it will be like that. Okay. No issues, sir. When I look at the clientele profile, Mr. Rahul, I found all the marquee names. In spite of that, sir, then why are the trade receivables part so higher? These people like JK Tyre, Cipla, Indian Oil, there also the cycle is so elongated that we have to wait. Just some understanding on the same. I really don't understand when we always question the receivables. Currently, our receivables in coding and marking business is at 67 days, which I don't think is something which should raise an eyebrow because generally the terms, even with the bigger players, is 45-60 days. Once we consider the transit time from Guwahati to some of the locations, it is 10-15 days. People only start counting after it receives in their factory and the ERP system books the bill. I think 67 days is a good pan-India base receivable days. Right, sir. One more question. It can come down by a few days, but it's not going to come down to 35 days. Okay, sir. What I felt is that it is a necessary component, so we can never look for a cash and carry mode here. That was my understanding, given it is the need, because without that, the production lines and all things would not proceed. We can't command that kind of urgency in that sense. Depending upon this being a key component. We can command the model that you're mentioning, but we like to be cordial with our customers, and because it's a long-term partnership, if we will over-pressurize them to gain some additional cash flows, we might lose the customer to our competitors. I don't think that's a prudent strategy. We would like to continue with slight credit terms. It always helps in the long-term sustainability. Our cash flows are not stressed, so we don't need to really disrupt things. Thank you very much, sir. The next question is from the line of Anish Jobalia from Banyan Capital Advisors. Please go ahead. Good evening, sir. Thank you for the opportunity to speak with you, and congratulations for the highest quarterly revenue as well as robust margins. I would like to keep my questions related to the margins. Now, as for presentation, we had a favorable product mix in this quarter. Hence, is there any reason which could help to understand the gross margin decline on year-on-year as well as basis? Just could you repeat the last few words, the gross margin? Yeah. Just if you could help to understand why the gross margin declined on a year-on-year as well as a sequential basis. Despite the favorable product mix. There's a slight drop. I do agree with you. Gross margins, there is a slight drop, but that is mostly because some of the components globally, you know that there is a shortage of the semiconductors, and a lot of electronic components are affected because of that, and an increase in the global freight rate. These two components have definitely affected us. The prices have gone up, which I've mentioned that we are now starting to discuss with our customers to pass on a marginal price increase. We haven't previously done it for the last couple of years, but now it's a scenario where we would like to approach the customers since it's a global trend. Fantastic. Sir, this problem is likely to get corrected in H2, and because of which our margins are only going to get better say versus H1. Sorry, your voice is breaking. Your voice is breaking, sir. Are you able to hear me now? Hello. Yeah, I can hear you now. Okay. Thank you. I just want to check, sir, that can we say that these problems are getting corrected, say in H2, because of which the gross margins will actually revert to a higher potential than what we did in this quarter. Operating leverage also is likely to play in our favor because of that, the margins will be better in H2. Is that the right expectation? My view is that, I think, Rahul and me hopeful that we should do better sales in the second half than we did in the first half because we were badly affected in Q1. Yeah even all the way through July, I'd say. We are hoping for an increase in sales in the second half. I have to be honest, as far as this issue of the components and the shortage we are facing on the microprocessors, it's only becoming worse right now for us to get all our semiconductors in place. We are paying a lot of premium to actually just make sure that our production doesn't stop. I don't see things changing for another three, four months. I don't know what's happening exactly. We're getting it, we have to pay more money for everything. Yeah. Adding to what Shiva is saying, right now the market is very volatile, and getting components is our first priority. We have got some things lined up, and it should not affect us as such in terms of supplies, but it has to be very closely monitored, and price is highly fluctuating. At least for the next six months, we might have to still pay a slightly higher prices, and we're not sure if gross margins can improve. Okay. Maybe next year will be better visibility. Fantastic. Yeah. There are some freight costs, I think maybe Rahul might say that. I think also that has also affected us. Not hugely, but to some extent. Yeah. Freight, both for sea freights and air freights have drastically gone up, which again, we are in discussion with our customers. Oh, fantastic. I'm sorry to interrupt, Anish. Would you like to come back in the queue? Okay, sure. Thank you. The next question is from the line of Jatin Khemani from Alpha Capital. Please go ahead. Hello, sir. Congrats for a good set of numbers. While my most of the questions have been answered, just one question. What is our capacity utilization currently, and what will be the peak revenue at 100% utilization? At our printer factory in Nalagarh, we will be about 75%-80%. In our Guwahati facility, we'll still be at about 50%- 55%. Peak, according to us, should cross INR 300 crore. Beyond that, we will have to look at more CapEx. Sure, sir. Given we have good balance sheet, good as in debt free and low needs. My suggestion would be we should, as in we are giving good dividend. We are maintaining around INR 50 million dividend payout. Still, my suggestion would be, given the market price where it is, we should consider a buyback and all. We will let the board know of your suggestion. Thank you. Thank you. Thank you, sir. Thank you, and all the best. Thank you very much. We have a next question from the line of Swechha Jain from ANS Wealth. Please go ahead. Hi, sir. Sir, I wanted to understand with respect to the printers that we sell. You said the life cycle is typically five to seven years. Wanted to understand what specifically happens to the printer at the end of the life cycle. Second, does the customer has a choice to go back and install some other printer or it has to be our printer? One was that. Second, I also wanted to understand that, typically, when is the demand created for our printers? Does it usually happen when a greenfield expansion takes place? Even when a brownfield expansion is taken by a customer, our printers also play a role at that point in time. Should I take those questions? Yeah. Sure. Just the first part, as far as the life cycle of the printer goes, normally it is more than five to seven years. It's a bit longer than that. You could say the working life of a printer will be 10, 12 years. What happens, some of the biggest customers, except maybe there's some industries like chemicals and fertilizers and of course cement and stuff, where generally the life is short because the atmosphere is difficult. What happens is normally after five to seven years, a lot of prime customers, they tend to upgrade their printers because for them, absolute line reliability is critical. Most of the time, we give them some sort of discount when they change from our existing printer to an upgraded printer. In most cases, we refurbish the existing printer and then try to sell it. Which we've not been successful in, but we are now trying to refurbish some of those printers and sell them as a sort of cheaper option for some of the customers who could be more sensitive. That's the first question I hope I answered. The second was, I think you were asking about where do we print. Yeah, of course, in the end, all printers would have to be scrapped and broken down and recycled. Obviously, if they come back to us, we do recycle them. What is it called? The authorized recycling thing, the e-waste and all that. We have all of that in place. Right. There was one other element to your question. If you can repeat the end part. Yeah. The last part was, when is the demand generated for our printers? Is it typically at a greenfield expansion or even when a customer? Any new- does a brownfield expansion? Yes. Any new manufacturing line requires a printer. Each line, because you're printing on the production line itself. Most customers, what they do is they set up a factory, especially nowadays, they acquire extra space. With the view they'll set up, say five or six production lines. As and when demand keeps increasing, they've already got the space to keep adding more sheds and more printers. The brownfield expansion will continue for some time to come. Of course, greenfield is obviously always going to require printers. Yes. Both of those, as long as there's any manufacturing capacity increase, will require more additional printers for that. Both would cause a pinpoint. Just to add, Shiva, also on existing products which were not being printed earlier are now getting into printing. Even our existing factory can have a response. Yeah, that is actually a big source of demand for us because in India, they still have moved from unorganized packaging to organized packaging. In organized packaging, there's a move towards from pre-printed or older technology still towards digital technology. That's all. Right. Okay. I just need two more data points. If you could help me with the number of printers that we sold in Q2 and the revenue from the MaaS segment. I think you did mention this number, I kind of missed it out. Yeah. I think 20% of the revenue was approx. from printers. I think about 2%- 3% approximately is from the MaaS. Okay. Yeah. The number of printers Printers, yeah. Maybe if you wanted the MaaS slightly more, then 3%, but whatever it is, that's about it. Right. The quantity of printers was about 750 +. About 750, 775 printers. Thank you very much. Quite similar to the Q2 numbers, Q1 numbers. Thank you very much. In the interest of time and fairness to all participants, please restrict your question to one per participant. The next question is from the line of Shalabh Agarwal from Snowball Capital. Please go ahead. Thank you for giving the opportunity again. Just circling back to my earlier discussion, Mr. Kabra. This acquisition, is there any risk of any confusion getting created in the minds of our customers where we are selling a premium product, but we are kind of also backing a product which is into a market which has its own dynamics and it's probably not that premium? I think that the way we are positioning it is that it is a quality manufactured product, obviously through us. Okay. In the end, the sales and service is totally different. It's your choice. If you want the best, come to Control Print, and if you want a good product which is a bit more reasonably priced overall in terms of service and price, fluids and everything, that's an option for sure you can say that. Okay. There is always a chance, but there's a clear pricing gap between the two of us. It's clear to everyone. Sure. Is there anything more that we are looking to invest in this company going ahead? Will it require more investment from our side to really scale that business? Right now it's in a loss-making phase as it grows, because I don't know if you all know our business very well. Till you don't hit a certain number of printers installed, the costs are significantly higher than your revenues. Right. I think it will continue to lose money till, I don't know, some amount of base is created, at least. It might not require the same amount of cost as, say, Control Print, because we already have the manufacturing facility and the logistics and all the other stuff. Relatively, the investment is more marginal for that company. For ICIPL for a subsidiary. Yeah, there is surely an investment phase, and it is going to continuously lose money for I don't know how. What about Rahul? I don't think it will require anything large that we should be worried about. It's not something significant which needs for us to inform the investors. Yes, if there's a small requirement, we will definitely fill the gap. Sure. sir, lastly. As of now, they're getting their own bank finance also, so they should be self-sustaining. Okay. Mr. Agarwal, please come back in the queue. Sure, I'll be back. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead. Yes, sir. Sir, with the economy picking up, any update on the real estate part of our subsidiary, Liberty Chemicals? Sir, in addition to that, from the OCI part also, other comprehensive income, we have seen this time a loss. Markets have remained buoyant over this quarter. If you could explain or throw some light on the same. I'll just give the first answer. Mr. Kabra himself is looking at the entire real estate thing, and he's not here today. To my knowledge, there's no real movement in the whole Chandivali land plot. There's some litigation we're trying to get rid of this quarter, and the thing is the whole court system has stopped, frankly, at least for non-urgent cases, for the last 18, 20 months. That's not really moved one way or the other. Maybe I think now things, I think hearings might start again, and courts might go back to normal. Maybe some movement there. As far as the OCI goes, Rahul might give you a better reply on that. Saket ji, on the OCI also for this quarter, it's a very small amount that could depend on how our portfolio played out towards the end of the quarter. The amount is small, but I would request you to look at half year where we are INR 2.63 crores positive. Quarter, I'm not too sure, but half yearly we're still- Sir, actually, why I dwell on it was that our portfolio stock selection is we are beating the market in all terms. When I looked at the portfolio in March, when the annual accounts were there. That was a surprising part because the market had moved up significantly, so there should have been significant gains in that way. That was my reason. Even on a- [crosstalk] Half yearly we've done gains, Saket, in half yearly. Yes, sir, I've seen it. Most of the gain, according to me, had come in March 2021 itself, where we were You know the figures. Since this is mark-to-market, you can't have the same thing growing at that rate every quarter. See, the last year it was a big gain, which was already mark-to-market. You have to see it from March to September, again, we have gained. Of course, again, it's a market thing which you know better than me. Is the list available for us, sir? We've been increasing our exposure in this market. Of course, again, this is a board of directors thing, and Mr. Kabra looks at it specifically, but I don't think we've had too much churn in our portfolio that we've been doing. Maybe some things gain, and then they're sort of stagnant, and so on. You have to compare it, Saket ji, mark-to-market. You can't compare it from last year because we've already marked it in the books up till March. Correct. Now it's only March to September. Correct. Whatever, these are the figures that are there. These are audited figures, so they have been done away. Sir, a small point more, sir. We paid income tax. Mr. Kapoor, I am sorry to interrupt you. Yeah. Income tax also got INR 4.5 crores. Attributable for this year only or prepaid item also? No, no. It's always for this year. I didn't get the question. Okay. Sir, I was asking that for the first half, our income tax payment is to the tune of INR 4.45 crore. Is this entire amount attributable to this year's performance only, or does this have any other tax paid which was due for earlier years, any assessment and all? No, if it was earlier year, it goes into prior period. It would not come into current tax. Okay. INR 4 crores is for current year. Current year. That gives an indication. Thank you, sir. Yes. Thank you very much. The next question is from the line of Anish Jobalia from Banyan Capital Advisors. Please go ahead. Yeah. Hi. Thank you, sir, again, for the opportunity. My question around margins, I could not complete last time. If I were to again think from the longer-term perspective, and you are already confident of reaching, say, INR 400 crores of revenue in the next five years. Plus, Rahul sir has been saying that the sustainable margins are 24%-28% range. It would be very helpful to understand from you that how should we think about the margin trajectory going forward, given that the revenues are on an increasing trend. Can we expect that the margins also will be an increasing trend along with that? Because our incremental contribution is from higher margin products, like the new products that we have, like CIJ, TTO, et cetera. Plus there is also an operating leverage potential. How should we think about, say, over the next 5 years, what can our margins be in the base case, like in a realistic scenario? My belief is that the margins should increase as sales increase. Both slightly at the gross margin level. Don't look at it over one quarter, two quarters. Sure. I mean, yeah If you look at the last three, four years, profile. Absolutely. It will slightly increase as we get more leverage and more fluids, more consumables in service business as compared to printer business. As far as the EBITDA, or rather the SG&A, we would expect a higher operating leverage there because we already have a full team of manpower and factories and a lot of other expenses have been already included. Sure. For a bigger jump in EBITDA margins. Of course, because of fluctuations that happen right now with the whole COVID situation and whatever the knock-on effects in terms of cost of parts and freight and all this. There can be, of course, changes from quarter-to-quarter. We're too small a company to frankly evaluate in bit much of a very quarterly basis, I think. Sure. I mean, if we were to think about your margins maybe to INR 400 crores, would it be possible to pencil it down to a narrower range to think about considering your business plan? As of now, the visibility is this 24%-28%, which I mentioned is sustainable even with increased revenues. As of now, things are very dynamic and keep changing. If things improve more than that, we will be happy to. Sure. I understand, but even with 28%, is it more realistic to assume that when we reach INR 400 crore, our margins will be closer to that, or it will be still in a very broad range of 24%-28%? Why is it such a broad range that you are looking at? There are not too many factors that kind of impact our margins, given that we are a high gross margin business. It's always based on product mix. If the consumable portion, like you said, the higher profitability sells more in a particular quarter, you will find it closer to the higher band of 28%. If the printers sell more, it will be on the lower band. I think 24%-28% is not a very large band considering that there will be change in product mix quarter-to-quarter. Even on the long-term basis, I think we are inching up towards the higher percentage. It all depends how much our consumables are sold based on the industrial production. We're confident if the higher the consumable, we'll be closer to 28%. Okay, fantastic. Thank you, sir, for sharing your thoughts. Thank you very much. The next question is from the line of Shalabh Agarwal from Snowball Capital. Please go ahead. Thank you for giving the opportunity again. Sir, at the industry level, are we witnessing, because Rahul had mentioned that there has been a cost increase because various factors, at the industry level, are we witnessing our MNC competitors increasing prices of their products in the market? I think in the last 18 months, nobody's really done too much of anything because of everyone has been preoccupied with just ensuring their supply chains and their service and the safety of people. I wouldn't say like right now there's been a change. Now, people will all have to employ the strategy because if our costs have increased, I assume, I won't say it, but I assume that there might have been a similar effect for our competitors. Sure. If they are not manufacturing here, then their costs would have probably gone up higher compared to us, right? Normally, they're importing primarily from China. I don't know offhand. We've not tracked them very close in the last 18 months, and we've not got the data from the ROC either. It's difficult to say because everyone has their own transfer pricing policies also. Sure. That's a little of a hidden mix. We don't get a straight naked cost and cost-plus pricing, so it's difficult to say. At the ground level, the prices are still competitive. If they have gone, maybe they're taking an extra hit because their costs would have gone up more than ours. They're able to get better pricing, but still competitive. I think so far everyone's not really changed pricing much in the last, I don't know, 16, 18 months or something. 18+ months now, is what I'd say. Sure. These MNC players, they have this global tie-ups with big FMCG companies as in if their supply is placed at a global level and then distributed to different factories. How does it happen? Normally they do have some preferred supplier tie-ups in some cases. There are some companies like Coke and Nestlé or P&G who do have that. It's not like when it comes to big operation like India- Right Everyone wants their own local service and support and whoever they are most comfortable with. There are a lot of companies like Unilever or Pepsi or so on, where we supply a lot of printers there, even though they do have some sort of a tie-up. In the end, I mean, it's not a monopolistic thing. It's like a preferred supplier arrangement, preferred could depend on what the local factory manager prefers. In the end, everyone will go for whatever they think is their best supplier. There are loads of companies like Ferrero and so on, who do have some Lactalis, who do have technically a tie-up, they are using our printers largely. I think sometimes those things matter, I wouldn't say it's In the end, if everything works smoothly, nobody cares, is what I'd say. In general, Indian pricing frankly, is much lower than the global pricing arrangements. Even the local companies like to ignore those arrangements, because if they give the global pricing here, they won't have any sales. Obviously we sell at X, and they are selling at X, and the global agreement is 2.5X, then why would they buy that? Thank you very much. The next question is from the line of Sunil Patel, an Individual Investor. Please go ahead. Mr. Patel, please go ahead with your question. As there is no response from Patel, we'll move on to the next question. That is from the line of Saket Kapoor from Kapoor Company. Please go ahead. Yeah. Rahul, you told about this non-LCP business. I missed that link. What were you trying to convey? That more trust will be there, or lesser trust will be there on the non-LCP business? I missed the point completely. No, there'll be more trust, because as you know that cement has been diminishing for us, so there has been some revival, and we've got back some customers. That team is still now trying to promote some new products in the steel segment. The sugar is what they have only developed. The team which was more focused on the cement side is now putting their energies on sugar as well as some steel. If you open up a new product, it gives a good revenue. That has shown some green shoots at this time. Thank you very much. The next question is from the line of Karan Bhatelia from Asian Markets Securities. Please go ahead. Hi, thank you for your possibility. Rahul, you keep mentioning about the new launches, CIJ, TTO, Hi-Res. It's good quarters that we've had in the portfolio. To date, what contribution to the total volumes or revenue has it become? Just a ballpark number, can you help? These are inching up, and now they should be definitely in double-digit, closing into about 15%-17% in that range. Great. Yeah. We have good hope from them even in the future. Right. Just last bit on the depreciation policy. We were hinting to deplete the MaaS project by this year. Incremental INR 1.5 crores per quarter depreciation, correct? We're going to keep the MaaS project ahead as well? Yeah, I think a couple of years more it will require. This INR 4 crores of quarterly run rate stands, right? Yeah, at least for the next one year also. Okay. That's it. I think we don't have any other further questions. Any closing comments, Rahul or Shiva you want to make? I think, yeah. First, thanks for everyone to spend a lot of time and effort taking our call, especially in this busy season. Happy Diwali, safe Diwali to all of you. As far as we are concerned, I think things are now coming back on track. It's been a bit of a difficult 18 months or so. It seems things are normalizing. I don't want to say anything because last time we said the same thing, and we all know what happened with the second wave and so on. I hope that if there's no COVID, then the market goes back to normal and we are able to capitalize on strong product portfolio and the strong team and strategy that we've created, which we didn't get to really take in place before COVID disrupted us. I'm really hoping for a positive 18-month period, by then I think a lot of people will have questions as to what's next or are you going to do a buyback and stuff? I think at that point of time, those questions will become more relevant as to what the next steps should be to move to the next level from INR 400 crore, INR 500 crore to the next size. Yes. Thank you everybody for your participation in this busy earning season. Karan tells us there are 10 calls which are today between 4:00 and 5:00. Thank you all for giving the importance to Control Print, and wish you all a happy and a safe Diwali. Thank you. Thanks, Karan. Thank you very much. Thank you management of the Control Print. Thank you. Thank you. Participant on behalf of Asian Market Securities. That concludes this conference call. Thank you for joining us, and you may now disconnect your lines.