LEAP India Limited (LEAPIND) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the DAPDR Ltd. Q2-FY27 Onyx Conscience Call. As a reminder, all participant rights 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 a conscience call, please signal an operator by pressing star with zero on your national phone. Please note that this conscience is being recorded. I now have a conscience who will to miss from your chat rate. Some go with your advisors. Thank you and over to you, ma'am.

Good day, everyone, and welcome to Q2 and H1FI27 earnings call of Leap India Limited. We have a conversation with us with Mr. Rishi Gandhi, the Chief Growth Officer, and Mr. Ahmed Ahmed, the Chief Financial Officer. Please be reminded that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with it as pertaining to the business.

Good morning, everyone, and welcome to Leap India

Limited's earning conference call for the second quarter and first half of FY27. I would like to start with the business overview. For those joining us for the first time, Leap is India's largest on-demand asset tooling Today, we manage a pool of 15.5 million assets valued at over 1,820 crores. We serve about 1,100 plus customers across 11,000 touch points through 27 fulfillment centers. A detailed overview of the business and the industry opportunity is available in our investor presentation. So today, I will focus on what I have changed during this quarter, which is the second quarter. So, one of the most important announcements that I would like to make is the acquisition of Wimprotech and TIPS. The most important development this quarter is our agreement to acquire 100% of the business of Wimprotech and TIPS for an equity value of 142 crores. Both are being acquired through slum sales into newly incorporated wholly owned subsidiaries. Wimprotec into Wimprotec Part Limited, which will be our manufacturing arm, and TIPS into Total Integrated Packaging Solution, that means TIPS, Private Limited, which will be our tooling arm. Wimprotec is into plastic manufacturing providing end-to-end solution and in-house designing, mold making, and production of vacuum foaming and injection molding across its two plants in Puducheri and Kamilari. TIPS is a trade and trade pooling business, predominantly very strong in the automotive sector with an asset pool of 0.25 million trades and trades. Together with a robust customer base of 200 plus, they have reported FY26 revenue at 61.7% at an EBITDA margin of 28% with revenue growing up to 44% CAGR over the last three years. The strategic logic is straightforward. First, it gives us backward integration into plastics, boosting our innovation and building newer capabilities. This will result in reducing our dependence on outside vendors, improving turnaround time, quality control, and cost. Second, it increases our portfolio and leverages our customer base to crosshair. Third, it adds a strong southern footprint that we can scale through our existing network in the west and north. And you understand that 30-40% of the business of automobile is in the south part of the country. On an FY26 procoma basis, the transaction is attractive to revenue, EBITDA, and tax and improves our net debt to EBITDA. We are pleased to announce that we have already signed the BTA on 26th October. The key managerial person will continue to be associated with us, ensuring leadership continuity and a seamless transition. I understand that there has been a lot of questions on GCC expansion. So, we have set up a wholly owned subsidiary in Saudi Arabia and the UAE. The GCC is a natural extension of our platform. Palatization levels are already high, automation and ASRS adoption are rising, and the movement hire model is very well understood. We continue to take a measured phase approach to this market. We are contemplating certain acquisitions also in the GCC market. A stronger balance sheet is the third point that I want to put forward. From our IPO press issue of 480 crores, 360 crores have been used to repay debt. On a post-IPO basis, our debt to equity is about 0.5 and our net debt to EBITDA is about 1.9. I am very happy to announce that in the month of October, India Ratings and Research, a pitch group company, upgraded Leach's long-term rating from A to A+. This is our third upgrade in about three and a half years. We now have a leaner balance sheet, a top-tier short-term rating, and a clear runway to fund the next leg of growth, including value equity opportunities such as this acquisition, while staying disciplined on the leverage. Let me come to the certain performance highlights. I would like to tell you that always when you look at this business, you should compare it over last year. So quarter on quarter, we are not a selling company. So, you cannot compare it with quarter 1 to quarter 2 because this is a seasonal business. So, as compared to last year's quarter 2, we have done 216 crores of turnover. We have grown by 22.5%. We have done 110 crores of EBITDA, which is we have grown by 24.8%. Overall EBITDA for the first half is 52.2. We have given a fat growth of nearly 18 crores, which is a jump of 62% over the last year. Now, if you remove the break cost, the money that we have paid to the bank for paying off the debt, if you remove 6.5 crores of that, actually we have grown our fat by 109%. So, this is a whopping story, and this you will be able to see in our future times to come, like quarter three, quarter four. We have put in around about 417,000, not a lot, of our pallet. So, the people who are asking this question of whether there is growth, since you have 90% of the market, that also comes to rest. We have added 37 new customers. Leith has added 24 new customers, and Teron has added 13 new customers. So, overall, in the first half, we have added 85 new customers. If you look at our NFT business, we have grown by 60% on revenue and around about 28% on our EBITDA. If you look at the outlook, our priorities for the rest of the year are very, very clear, which is deepen penetration with existing customers, keep moving customers from static to movement hire, cross-sell across pallets, containers, and energy, open up new industries, integrate Gimprotech and tips, and build a decency business in a measured way. We will do this with continued discipline on asset utilization, returns on capital, and balance sheet strength. With that, I will hand over to Rishi to take you through the operating and growth updates for the quarter.

Thank you, Mr. Matthew, and a very good morning to all the parties.

I would like to start with business overview. A quick recap of how our growth works. Leap grows on three engines, adding assets to the pool, keeping those assets productive, and moving customers from static hires, where assets sit at one location, to movement hires, where the assets travel across the supply chain and earns at every base. Under night, all three is our network of 11,000 plus touch points, which lets customers hire anyway and they hire anyway. Let me take you through how each of this moves during the quarter. So, in terms of quarter update, acceptance and utilization. So, we closed Ash 1 with 15.5 million assets, combined with 13.8 million a year ago, an addition of 1.7 million. Pallet utilization shoot at 89.3% in line with Q2 FY26. Containment utilization was at 73.7% up from 71.7% and image utilization at 82.3%. As I mentioned on our call last year, we aim to take the pallet utilization to 99.1% range over the coming quarters and we continue to deploy new effects quickly.

In terms of customers and network infrastructure,

we now serve 1,100 plus customers and we are constantly adding back. We have 11,000 plus touchpoints. We also continue to capture network synergies from CHEP integration, where our fulfillment centers were closed to Earth by CHEP facilities. We consolidate with them, closing two facilities and bringing our network to project seven fulfillment centers without any loss of reach.

With regard to movement hire, there is a constant improvement

in movement hire business, and we are converting customers from daily sectors, textile sectors, from static hire to the movement hire, and the journey will continue further. In terms of quick background about WinProtect and fix the new equation, if the Matthew has already covered the strategic rationale, so let me speak to the commercial side. VINPROTEC uses in-house design, mold making, and plastic manufacturing activities. That means faster development of design and mold, customization of various products, shorter turnaround, and better control over the quality and cost. Its trends are container pooling positions, especially in automotive business. The growth opportunity comes from three places. Cross-selling of pallets, crates, containers, and MIT across our 1,100 plus customers, and there, basically, Wimprotect and its groups, they have 200 plus customers, taking their strong southern presence into our western and northern network, and moving into newer industries such as FNCG, electronics, e-mails, and everything, with integrated offering that supports longer contract and higher wallet share. In terms of GCC update, our subsidiaries in Saudi and UAE are well established. We got our licenses. This has been foundation building months. We have got all the approvals and we have been putting our ground infrastructure right from setting of an entity, getting all licenses, getting warehouse infrastructure and hiring two people, customer engagement and regulatory approvals also. At the same time, we are engaging with our prospective customers and building our pipeline. Getting the foundation right now will let us scale faster once we go live. In terms of way forward, our priorities are clear. Deeper movement has, profile palettes, container creates and MSE approaches, larger customer base. See, pulling into newer industry and build the GCC into our next growth market. Every asset we pull replaces single-use packaging, so the growth that brings value for our shareholders also makes supply chain more sustainable. We have the network, the capabilities, and the balance sheet to do this, and I am confident about the role ahead. With that, let me hand over to our CA from Mr. Rajeshama Le to take this to the financial performance. Mr. Rajeshama Le.

Thank you, Rishi, and good afternoon, everyone.

You told the moment a brief word on how our model shows up in the financing. Customers pay for our assets on its own use basis, through allotment, day-rental, and increasingly momentary at least lack of supply chain.

I am sorry to interrupt sir, if you can come closer to the mic.

This gives us a recurring

IOT-like income stream and a long life asset base. Our financial levers are simple. Grow the pool, keep the assets productive, and let operating leverage flow through to earn in our cash. Key financial updates for the quarter. BIMPROTEX and TIPS acquisition. The acquisition of BIMPROTEX and TIPS is valued at an enterprise value of $1,020,000,000 and $400,000,000, respectively. And it is structured as its term sales into only own subsidies of Leaf India. In FY26, Introtec and Tims has revenue of 470 million and 180 million respectively. With respect to IPO profit and leverage, obviously 4,800 million fresh issue, 3,596 million has been used to repay debt and rupees 200 million unmarked for general corporate purposes. On a close IPO basis, debt to equity is about 0.48x, and debt to EBITDA is about 1.9x, compared with 4.4x in H1 FI26. We also hold around 1,100 millionized investments and with India Rating further upgrading our rating to A-plus from stable A for both leap and time, should additionally optimize our cost of borrowing and give us a clear runway to fund the next group leg of growth with respect to quarter 2 effort and 27 performance. Total income for the quarter was Rs. 2,159 million, up 23% year-on-year. With this, access pooling income was Rs. 1,759 million, up 19%, and MSC income was Rs. 393 million, up by 52%. With respect to EBITDA, it was Rs 1,097 million, up 25%, with EBITDA margin at 50.8%, up 91 basis points year-on-year, supported by higher income, cost optimization, and equal synergies. Debt decision was at Rs. 576 million. Finance cost was at Rs. 1215 million, reflecting the benefit of Rs. 3,596 million debt repayments from IEP process. With respect to FACT, FACT was Rs. 178 million, up by 62%, with FACT margin of 8.2%, and cash FACT was Rs. 754 million, up by 26%. As with respect to S1 FY21 performance, for the first half, total income was Rs 4,294 million, up by 26% year on year. EBITDA was Rs 2,239 million, up by 23%, at a margin of 52.1%. Part was Rs 425 million, up by 42%, and cash part was Rs 1,566 million, up by 25%. To sum up, our focus came in the same. Scale the pool, keep the asset productive, and translate operating growth into stronger capital efficiency, now with a stronger balance sheet and broader flow form. With that, I will hand the call back to the moderator for the question and answer session. Thank you.

Thank you.

We will now begin the question and answer session.

Anyone who wishes to ask a question may press star N1 on their touchstone telephone. If you wish to remove yourself from your question queue, you may press star N2. Participants are requested to use handset while asking a question.

Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Krupashankar SJ with Anandesh.

Please go ahead.

Good afternoon, and thank you for the opportunity, and congrats on the number. My first question was on the reusable days. I did see that there was a stark improvement in the reusable days when you compare it from March to September. I just wanted to give some sense around how do you, is there any room for further improvement which you can anticipate over the weekend? You will highlight something in the first quarter wherein the SAP HANA implementation will drive a start reduction. So, just wanted to get an update on the working capital days and how it can shake up over the weekend.

Thanks, Kripa. So, Kripa, if you look at it, we have just bettered our number of days by space, because when we started the year, it was 128 days. Now, our DSO is like 122 days. We really understand that this is not the right place to be there, but as I told you that we have implemented SAP S4HANA, and the bills are going on time, and you can see that whatever we have built, we have started collecting more than that. So, we are very confident as a team that by the end of the year, we will be less than 90 days. So, that is what we are actually working upon. There are certain challenges with customers because very big customers also work on a PO basis. When they work on a PO basis, if they ask for more pallets and if the billing for that month is 1 rupee higher than the PO, then that month we do not get anything and we will have to generate a PO from, say, 360 locations. So, we are talking to those customers in order to get a centralized PO. I think if we are able to sort five or six customers who actually work on the basis of PO, I think we will be able to get it much better below 90 days, but you can take it from me that from 122 days, it will get better to 90 days by the time we end FY27.

Understood. That's very helpful. So, if I were to then accept that our cash flow from operations would be, you know, if you continue the trajectory on the profitability, so cash flow from operations would be more than enough to meet our KPEX requirements for the year. Is that understanding correct?

First, Steve, if you look at the current trend, that situation will come in FY28, but there are certain acquisitions which are on the line in India and also outside of India, which is basically GCC. We believe that we will be having enough and more EBITDA, so that we will be covering whatever we want to put it in our assets. But since it is on the card, I would not like to comment upon it, but we will better it much before than what we have actually given to the shareholders.

So, I was looking at the acquisition cost. Only the capex which we are incurring towards addition of assets, if I'm going to compare it only on that basis, then the cash flow from operations would be more than adequate to meet that requirement. Is that the understanding correct?

Yes, the understanding is correct. If you look at it, so this quarter, we have done a capex of 213 crores, as compared to 201 crores last year, S1. But the growth has been 21%. So you can see that we have put in the same amount of capital, but we have grown by 21%. So, you are absolutely on top that overall, this year, we will be having a capex of 450 crores, and near to that, we are looking at our EBITDA.

The second question would be on the pallet business. While I do appreciate the extent of growth which has come through, the breakup between pallets and containers, the revenue stream for this quarter is not explicitly highlighted in the presentation. Would that number be handy? Can it be shared?

It can be shared, and we will put it on the website. I think the presentation which has been uploaded in the website has that. So, the split is there. So, technically, it is, again, 64% contribution from Alex side, around about 20% to 22% contribution from Otto side, and 14% to 16% contribution from MSE side. So, more or less, the contribution set has not changed that much. But you can look at it that this time, the granular cost has gone overboard, you know, the plastic cost has gone overboard. Automotive sector has done fantastically well. If they have asked for four crates, we have been able to deliver only 1.5 crates to them. Even though we have added 200,000 more crates into the system, but the demand was much more. But we cannot buy a crate at 60% or 70% higher cost, you know. So we are just waiting for the cost to just lower down so that we can gain up in automotive much further.

I understand. So taking that point forward, just wanted to get a sense of how are the lumber prices looking at? While you are given about the granular species for containers, on the lumber side of things, And considering the dollar rates and elevated shipping prices, how is that seen? And on a realization basis, what is the like-to-like realization which has increased in the September quarter?

Krita, I have already told you that one of the biggest risks that we carry in this is the timber cost is continuously fluctuating. That is the reason we created Tinova four years back, and today we have complete control over the timber cost. You can see that in last six years, our cost has not fluctuated more than 2-3% of the overall cost. So, this is a very highly regularized product, and once we have the contract with our suppliers all across the globe, it is actually not CIF, but FOB. Even if the container cost has increased 10 times, that has actually not put too much of debt on our pallet cost, you know. So, if the container cost goes down, they benefit. If the container cost goes up, then we benefit. So, currently, the average cost of a pallet, which is like a 1,750 rupee pallet, is there two or three places we have slightly increased the price, but timber cost more or less is totally under our control. We may have to look at it if the current situation prevails after March 31st, 2027, but currently we are completely under control.

Understood. Last question from my session is by me. Yes. With, yeah, with respect to static and movement higher, I know why it cannot be quantified on a 40 basis, but if you can throw some color around any, any actions or new business buildings you have got on, and how that is, should be the point of all time. Okay, okay.

See, if you look at the movement business, this time, again, we have done around about 720,000 pallet movement, but we were expecting much more higher movement and much more higher revenue. But what has happened? We signed Kanatan Textiles, we signed Zulosa. If you look at that, there is 100% growth on the movement hand, but the base is very small. We were looking at 10 times growth in textile, but the textile industry is only not functioning. They are functioning at 20% of their overall production capacity, you know. So textile industry is not doing well because of the cost of the granule. Plastic good industry is also absolutely hit due to the granule rate fluctuation. So, if you look at the cooling thing, this trays actually travel on our pallets to different automotive components. So, that has also reduced a bit low because of the fluctuation of the plastic prices, and that has actually put a dent into the movement higher. But if you look at Amul and Dairy, Agro, Industrial Boots, they are continuously doing well. So, what quantum jump we were expecting in the second quarter, that has not happened. But at least we are on our numbers and again we have done 720,000 transfer half moments in this quarter. And going forward, I believe that the situation will get corrected and we will be able to hit our numbers of 3.6 million transfer have moment for this year.

Understood. Thank you all for answering my question. Thank you.

Thank you. Thank you. Participants who wish to ask a question may press star and 1. The next question comes in the line of Angad Shaluja with UBS India. Please go ahead.

Yeah. Hi. Am I audible?

Yes.

Yes, Angad.

Yeah. Yeah. Thanks. Good afternoon, sir. Thanks for taking my question. I think first, you know, the question is on the acquisitions that you've done. You know, I think PIPs, you know, seems like a natural extension of the business, so, you know, more understandable. But, you know, Just to understand more on WinProtect, that this is into manufacturing. So, is it that, you know, you see that the cost benefit of having this in-house is much larger than probably having a vendor do this? Or, you know, if you could just, you know, quantify some of the benefits that you think you could derive from this sort of acquisition, given that we've always been more into the pooling part and manufacturing is not as from Forte, you know. Ah, okay.

Good question, Angar, on the acquisition, but you need to understand that, see, I am always a customer, customer guy, but, you know, in India, if you have to do business, there are certain things that need to be in-house. We gain above everybody else because we control the price of timber in the country, and of late, we understood that there is so much of fluctuation, sometimes it is 20%, sometimes it is 70%, And I cannot run to 400 automotive customers to keep changing the rates. Second very important point is Gymprotech is a mold making, a designing, and a plastic converter company. So if you look at any automotive component or for that matter, if they have to move from one destination to another, they come to us, we actually create a prototype, and then we go to this mold making company. They take their own swift time, you know, so they take two to three months by that time. Sometimes we lose the customer or they give it to two, three players and then competition starts. So, if we have an in-house production, we will be able to actually improve our automotive business by at least 600 basis points because we will have somebody who will be able to turn around the things in one week rather than waiting for actually two months. So, again, the mold making will remain with us. What happens that if somebody copies our mold making, even if we have taken IP on that, it's a civil case, you know, and we will keep roaming around the course for next 20 years. So, it is always better that we have something in-house wherein all our intellectual property rights are within the company because this is a very hardcore design and this is our brain and blood and sweat which anybody can copy anytime. So, we want it to be there within ourselves and that is the reason it is a great buy and then we have a 10 to 12% margin, betterment in the margin of the plastic crates that we make. If you give it somewhere outside, they may add a certain margin if we actually make it in-house, then you can see that our ROCE and ROE will dramatically improve in automotive.

Got it. Now, that's good to hear, sir. And my second question is, you know, just continuing from the earlier part, it's been on movement higher, right? So, you mentioned that around this quarter, around 720,000 movement that you've done, was working last quarter around 766. So, Jeff, what would the growth be with the 720,000? What would that be last, same quarter last year?

See, another four-year, five-year trajectory, which I will tell you within India, is that from 500,000, we have actually moved to 700,000. From 1100,000, we went to 2.1 million. Last year, we did 2.8 million. This year, what we have said to the market is that we will do around about 3.6 to 3.7 million. So, having said that, we are currently there at 1.5 million, which is 15 lakh pilots. So, we have said that we will be doing 36 lakh pilots. Our season is just getting started. You need to understand that this is a rainy season, you know. So, second quarter is a rainy quarter, and this is the lowest that we do. Our biggest jump is going to come in December, Jan, 7, March, wherein we contribute 34% to our total sales, because everybody pre-builds, water pre-builds, juice, milk, cola companies, jeera companies, every company will actually pre-build on that, and that is the time when you will see, at least in the last quarter, you will see around about 1 million kind of a moment higher. So, we are very confident that we will be reaching the numbers what we have given to the market.

Great. And just, you know, just one follow-up on that, you know, any environmental, if you can just guide qualitatively, you know, what's the interaction you're seeing on converting, you know, customers from static to movement beyond dairy and textile also, and how are those conversations sort of shaping up?

See, as I said that we have signed 37 new customers. In this, around about six customers are on Momentire. This is again on the bottles and something on Beril. There are three customers which are again being signed on the textile front, and one more company is into the movement of this tower kind of stuff to various geographies. So, I think it is going on well. We have around about 60 companies that we are talking to as far as transfer hire movements are concerned, and we actually follow it on the basis of the sales funnel. See, in one quarter, actually two or three customers could be signed. There is a possibility in one quarter we will sign 20 customers. So it is just based on the trial and the time that it is taking. For example, I told you last time about what we are trying into solar panel. The solar panel, we have tried it, and it is, say, 90% successful, because these pallets actually go into the far lines of the country where solar panels are being fixed. So, we are also looking at introducing an active RFID to be placed on these pallets, so that we can track it through the computers. So, we are, we will be the first company which will be putting an active RFID into any kind of a pallet in the world. So, that thing is also going on. Once that converts, there are 39 new, 39 companies, you know, which are doing this solar panel movement. So, that will be a very big number. So, if we have spread 3.6 million next year, possibly, it could be 7 million, 8 million, you know. So, that is the kind of quantum jump that you will get into a pooling business. And you look at, we signed Sanatana textile and then it was Bilosa. If you look at the textile industry, we are growing by 100%. But it is just from 7,000 movements, we have gone to 8,000 movements. So, this 7,000 actually has to go to around about 200,000. So, that is the kind of growth we are expecting. But since everything has been shut down, there is a certain loss. But I am very confident that, you see, what has happened is that most of the state's villages are being declared as drought. If this drought kind of situation is there, people are going to drink more water, they are going to drink more cola, they are going to drink more juices, and that actually takes up our palate penetration into the market, new palate introduction into the market, and also the cooling from pet to the cola companies.

Thank you. Ladies and gentlemen, if you wish to ask a question, give a press . The next question comes from the line of Viraj Kadam with B-Welt. Please go ahead.

Hi, Raj. Hello. Yes.

Yeah, I wanted to ask, what's the update on the GCC market?

Especially in this world situation, how are you planning for GCC operation?

Thank you, Raj, for asking this question. People have a lot of anxiety about this. Let me tell you that in GCC, we have already touched case with 26 customers, as in the earnings call, Mr. Rishi has already explained that all our necessary licenses are in place. As far as customers are concerned, we are in touch with 26 customers, but suddenly there are two, three better tailwinds that have actually come up in GCC. So, as I have told in my earnings call that there are certain acquisitions that we may do. Now, the situation is that we can give a price to our customer and quickly start the business, But we are waiting that if there is an acquisition proposition in the GCT, then the customer will always choose the lower price. So, we are actually holding ourselves back and we are looking at certain things to happen quickly in next quarter or the other two quarters. And if that is not getting into the cut, we will start to give the price and start our business. So, if you look, we are going very crudely. We are looking at the situation, what is happening in GCC. We have just spent hardly two and a half, three crores into the entire licensing and taking up of the office and putting our people out there and meeting the customers. So, we are trading this very, very cautiously, but in my future times to come, there will be a lot of good news from the GCC market. Thank you.

Thank you so much. Thank you. Thank you.

The next question comes from the line of Neel Luptal Sahu with KM Financial. Please go ahead.

Hi, sir. Good afternoon. Am I audible?

Yes, very much. Neel.

Thank you for the opportunity, and most of my questions have been answered. Just a bookkeeping kind of questions. On the balance sheet, there seems to be a rise in other financial libraries. Can you show some light on what this number is? What is causing the increase?

Rajsham, would you like to take this? Other financial liabilities?

Yeah, since we have raised the primary 480 crore and 2000 crore offer for sale. So, again, that we are unmarked for 112 crore for IPO expenditure. Now, since we are awaiting the invoices from the various consultants and the brokerage firms, So, we have kept

this amount of payable into the current revenue.

Hello.

Who's both?

Hi.

I couldn't hear you completely.

Yeah, I'll just tell you. We have raised around 480 crore as a primary and 2,000 crore offer per sale. We have incurred expenditure of around around 13 crore towards IPO rounds. We have unmarked these expenditures to making the payments of brokerage houses. We are keeping under current liabilities. So, this is stable in this court area.

Understood. Understood. Thank you, sir. And any follow-up, when do we expect, like, the first set of revenues to come in from Delhi? An approximate timeline, given the worldwide situation?

See, yeah, so if you look at the Middle East, we can start the revenue maybe from next month, but we are looking at, as I said, that we are looking at certain companies to go for which already have their operations in GCC, but next quarter we will be definitely showing numbers on GCC front.

All right. Thank you, sir. Those are my questions.

Thank you. Thank you. Participants who wish to ask a question may press star and one.

The next question comes to the line of Hishal Mecca with IIFL Capital. Please go ahead.

My first question is on the Vimprotech acquisition. What I understand is, you know, given that this entity is into manufacturing, you know, the sales would be in the nature of outright sale of, you know, these plastic products, not necessarily pooling. So, do we intend to continue this business of outright sale of plastic packaging products, and would we, you know, kind of grow this business as well? Your thoughts?

See Vishal, first of all, we will see that what is the kind of growth that we are having within Leap. So first of all, like we need 400,000 crates and we today go to three different vendors to actually get it manufactured for us because the automobile and other and the quick commerce growth for utility boxes is really, very high. So, first, we will try to actually utilize their complete potential in order to juice them out for our benefit. And then, out of like 200 customers, we will see that which is the customer wherein we will be able to grow the business. And then, over a period of time, our intent is pooling. So, even after selling that, we will be able to pool those SKUs which is actually going to those customers. For example, I can tell you a very renowned brand of refrigerator. They take the place which comes actually inside the refrigerator on which we keep our products. So currently, it is very, it is very shabbily packed and sent to the customer. We are looking at can we have a kind of a returnable packaging which can be introduced out there. So, it's a good problem to have, and we believe that from there, plastic manufacturing business also, we will derive certain amount of pooling revenue.

Okay. So, this 48, 50 odd crores of revenue that Winprotect does, you know, will that entire revenue accrue to us, or, you know, will it partially be flowing to us through margin improvement, partially through revenue?

I think as far as turnover is concerned, we will be able to take from November because we have signed the BTA only in the month of October. So revenue will come starting November and there will be a definite addition into the EBITDA margins which is there And which will be there in the consolidated balance sheet of East India. But because of the goodwill, we really do not know how much of that will flow to our balance sheet. But I am very sure there will be a very healthy turnover and EBITDA, at least for this financial year, which will come into the business.

And with this acquisition, how much of, you know, manufacturing do we intend to move to Wimprotech? So, for example, if we are adding 1 million assets in our plastic business, how much of that will be captured by Wimprotech and how much, you know, we still rely on third party?

So, currently, it will be 50-50. Currently, they have two lines. Two lines can only take up 50%. Once we see their productivity and the kind of mix that they take out, and we check the strength and all those stuff, on the basis of that, over a period of time, we will continue to improve, and over a period of time, 100% of our production will be in-house.

And, you know, these tip warehouses, they have four warehouses, we intend to keep all of these four or, you know, any overlap there and we want to consolidate there?

No, no, no, we will keep it. They run the business very, very frugally, you know. If I have to calculate the roti of a customer of tips, since they run it in a very frugal manner, they can show a better roti than the moment it comes to leave. Because it is into a very high standard of multinational. So over a period of time, it is a strategic buyout. Smaller company business, which is like one flow, two flow, we will move it to them. Certain businesses, which are consolidating kind of a business, that we will take it from them. So, this will actually come to operate among smaller companies, wherein the distance needs to be covered is smaller, and Leap will do all strategic kind of customers like Bosch, Cummins, Gabriel, and all these companies.

Last question from my end, you know, on the margins brand specifically for this quarter, if I exclude other income, you know, the margin seems to have compressed around a little bit. So, you know, any color on cost pressures this quarter or anything of that sort?

See, you see, nothing of that sort. First of all, you need to understand that this other income is not talking about any interest income or something from the bank which we have deposited or so. This is a part of our business. See, this comprises of something which is known as LEC, lost equipment car. If a customer loses the equipment, they have to pay entire 1750 rupees to us. Then the BBR, Broken Beyond Economic Repair. So, if they break 17 components or 10 components of a pallet, then those components are taken and they are sold into the market, which is technically we get 1750 rupees to full cost, but we take these components and then we sell this. So, these are those kind of other income. This is not the other income wherein always 0.5 to 1.25 percentage of the entire pool will go through LEC and VDR which we actually recover it from the customer. And when we actually sell it to the vendors and the scrap vendors, so this is those other income which actually goes into it. So, this is not any other income from interest cost or so. This is, this is the project of the business only. This is the next school business, which has always been there. Quarter to quarter, it will not be changed. You know, I cannot carry half a truckload, you know, unless and until the BVR is a full truckload, then only I will be able to call for the vendor and give it.

Okay, that's it from my side.

Thank you, and all the best.

Okay. Thank you.

Thanks a lot. Thank you.

Ladies and gentlemen, in order to ensure the management is able to address questions from all participants, please limit your questions to two per participant. The next question comes from the line of Piyang Chen with Hirsch Bridge. Please go ahead.

Congratulations to you and the complete team of Leap on showing the good growth and a fantastic momentum that you've seen in the past two quarters. Would you just like to have your view on the broader macroeconomic factors that would actually help Leap keep the momentum going over the next quarters?

Okay, Priyans, we have been very fortunate that we actually cater to nearly 38 sectors. Even if 3-4 sectors actually do not do well, but then there are other sectors which actually jump in so that our growth is continued. So today, if you look at the crude price going above $120, and that is an effect on the granules, so textile industry, plastic industry, transportation, like they are asking for a 6% price height and all this kind of stuff. But at the same time, say suppose government is declaring most of the villages as a broth village, that means people are going to consume more water, they are going to consume more cola, soft drink, juices, and that is again a sector which we dominate that sector with 100% sugar, you know. So, that is again promulgating our growth. So, normally, the second quarter is a subdued quarter because of rain. But this time, the October heat was so much that we have allotted around about 100,000 ballots starting September 15 to October 15. So, this is the kind of momentum that I am able to see. Industrial goods are doing very, very well. I see quick commerce also doing very well, even though nowadays quick commerce have started going ahead with 3PL in order to reach to the customers faster. So, if you look at our 3PL pallet penetration growth, this quarter, it has actually increased by 355%, but that is a culmination of quick commerce, wherein they are growing very, very rapidly. So, I can tell you that even though there is a fantastic growth in automobile component sector, but we are not able to tap to that sector because the cost of the granule has gone up by 30-50%. So, having said that, still, if you look at our problem, we are having a very good problem that whether we need to grow in pallet, whether we need to grow in automotive, or whether we need to grow in Pairon. In Tehran, we have put in around about 150 machines. So, continuously, India is moving from horizontal racking to vertical racking. So, there is a very natural growth there also. So, currently, if you look at few of the industries, and macroeconomics, if you ask from me, for few of the other industries, because we cater to around about 11 plus customers, and if you add 200 customers more from WinProtect and this, it is like 1,300 customers plus we are catering to today. So, we are looking at all the sectors. For others, there are very sectors, it will be a tough quarter 3 and tough quarter 4. But as far as LEED is concerned, as I said, that we cater to the own 38 sectors, we will continue this momentum and the growth. And LEED is going to be the maximum which actually benefits us with time. Got it. Got it.

No, thank you. Thanks a lot. Thanks a lot to you, and congratulations on seeing you the whole team. I'm okay. I'm good for now.

Thank you.

Thank you. The next question comes to the line of Vikas Jha with BlueSky-Fintech. Please go ahead.

Yeah, hi. Thanks for the opportunity. I just wanted to confirm. I heard Matthews a while ago.

Mr. Vikar, your voice is not coming clear. Could you please use your handset?

I want to ask you sir, that just a while ago I heard him

talking to TVAT, and he said that we are targeting for 980 to 920 quarts for effort and serve in living, which implies close to 25% growth, and he guided for 120% growth in skew and effort and serve. So is this kind of a guidance, please?

We have always said that we will be growing in between 20 to 27% which is our natural organic growth and that is what we have been able to demonstrate. So, this number every time people keep asking, you know, so this is something that we have actually shared with our investors This is like 980, 920 crores of top line and again a 50% editor to that and a pack margin which is under pack of around 90 crores. So, this is what is the guidance that we have given and currently we are on the trend. Second quarter being a bit of lull season for us, you will see much more improvement in what we have said. See, last year, we have done somewhere around about 62 crores, and then we are saying that we will do 90 crores this year, which itself is a kind of 42-44% growth impact. So, we will be able to do much better than and in my previous TV interviews also I said that we will not grow or add by 40% but by 60 to 80%. So, that is the guidance that I can leave you as far as that is concerned. Thank you so much for that. Thank you.

Thank you.

Thank you. The next question comes from the line of Abhishek Chowatari. Hi, sir. Thank you for the opportunity. Sir, could you talk a bit about the capital allocation philosophy of the company? Like, where could we expect the debt levels to be compared to equity, and, like, what could be the capex you would be doing, like, what could be the average capex you would be doing for a rupee of revenue?

Okay. So, if you look at it, we have given a guideline that this year we will be doing around about 450 crores of CAPES overall. So, this year we have done 213 crores in the first half, and this has given us a growth of 21%. So, last year, also, you will see that we have done more or less the same kind of stuff. So, with the same kind of asset base in the first half, we have been able to grow the business by 21%. And that is what is the beauty of polling, that once you put the product into the market, there is a possibility for that financial year, you may get 80 days, 90 days, 240 days rental revenue. But the moment it comes to the next year, you will get 365 days of interpelling. So, that actually improves the entire mathematics of it. So, now, how we look at it is that we have certain amount of orders for pallets also, for crates also, and for machines also. So, we have to pick and choose, you know. So, if we get a fantastic customer, wherein we get a contract of 8 years, we will put a new machine, and we will buy a new machine. If we get a contract only for 2 to 3 years, we will put a refurbished machine, as far as our energy business is concerned. Now, if you look at something which is like our pallet, which is going for a three-year, five-year locking period, we will introduce new pallet into the system. But if it is a kind of a higher and higher seasonal kind of a substance, then we will repair more pallets and then we will put that into the market. So, we will have to make a choice, either the machine or the pallet. Now, if you look at our first quarter, what has happened is that we have done hardly 70-77 crores of capex in that. Even though there was a lot of demand of automotive crates, we actually did not buy new crates because that was actually coming at 60% higher cost than our normal cost because the rate of the granules were every day changing. So, we did not buy those trades in the first quarter. When the prices actually reduced a bit, it came to $90, then we booked it, and then we have introduced 200,000 trades into the system. So, the logic is that we have growth from all segments. So, we have to pick and choose where we need to repair and put the pallets, where we need to introduce the new pallet, do we have to improve our field stock ratio in automotive, or do we need to produce new press, do we need to buy a new machine, or do we need to be ready for this machine. So, this is case-to-case basis. You know, I will not be able to say, because if I say Balco, Balco takes 64 machines. By default, I will have to buy it and put it in Balco because it's a 5-year contract, non-breakable contract. Otherwise, they will have to make good the law. So, I would not like to put a refurbished machine out there. So, this is the basic thesis of our CAPEX. But overall, we said 450 crores, so we will be in and around that. Now, for example, if somebody comes and asks for 300,000 more pallets, you know, soon then there is a possibility we may exceed our CAPEX requirement, but that will be seen in FY27-28 with a greater revenue.

Thank you. Thank you very much. Thank you. Thank you.

The next question comes from the line of Agat Thawani with KF Blue Catfail Advisors. Please go ahead. Thank you for taking my call. Just wanted to understand the business a little better. So, broadly, we are making about 500 rupees of gentle, you know, on a pallet. With 50% EBITDA, that's about 250 rupees for pallet. Right now...

We made 564 rupees. We made 564 rupees. If you look at our previous per pallet yield, it was 1 rupee 46, 48 paisa. Now it has them to 1 rupee 54 paisa. So if you look at 1 rupee 54 paisa, you multiply it by 365 days, we generate on about 562 to 565 rupees per annum. With a 50% of the data, yes. Okay, sir.

So, 555 with a 50% EBITDA, that comes to about 280. And that is at a 0.4 movement higher. And we're trying to understand, if that movement higher goes from 0.4 to 1.4, what will that EBITDA of that per pallet go up to?

It will go up to 80%.

It will go up to 80%.

Yes. Because what happens, the same pallet moves. Because if I have given a pallet to a cola company, they keep it, and they keep giving me the rental model. The moment it gets transferred to somebody else, then we get the transfer hair charger. But the moment it goes to the other customer, they also keep paying me the daily rental. So, it comes on top of this 562 rupees. So, for example, if how you have to look at this business is that if the pallet is say 1750 rupees, region rate 65 rupees per annum. So, then leave a bit aside, we will say that the break-even is 3.1 to 3.2 years. The moment this per pallet yield 1.54 actually goes to 1.62, 1.72, so this will come down to 27 months, this will come down to 24 months, 18 months, 14 months. So that is how the business is that the more you improve, you do not have to go 1.4 times, you know. Even if you come 1 to 1 as a ratio, like we have got 94 lakh pallets. If we do 94 lakh moments, our habitat will be too much, you know. Because the per pallet yield what we were getting previously was X, now it is X plus 2. So we really do not want to reveal all these numbers because if anybody has to do this business, they understand how to actually calculate it. So, what we need to understand of our break-even theme, a 1750 rupees pilot. Currently, the break-evening is, say, 3.1 million. If we just add, last year, we have done 2.8 million movements. This year, we have said that we will do 3.6 to 3.7 million movement. That will take our spur pilot yield from 123.54 PESA to 12.62 PESA, and that will continue to keep increasing.

And margin, 154 to 162 with margin going to?

Which margin you are talking about?

Editor?

Say, that is just an add-on. There is no reduction in margin. Yeah, yeah, the transfer which happens happens on their trust. It just says, you have to just multiply one, one rupee So, this 555 will go to 612 rupees, then 722 rupees. Got it.

And sir, I would please request you to come back in the queue for further questions. I've had just one question answered. The second question I had is on the EBITDA margin on

our standalone was 60% before the CHEP acquisition, and now we are at 50.

Any chances we could go back to that 60%?

See, it is a combination, you know. So, previously, when that thing was there, then we actually improved our business by 200% in Tehran. If you look at Tehran, Tehran is at an adhita of 50%. That has basically pulled down our adhita. So, I am not too much concerned about what it is going to 55% or what it is going to 48%. It should be that the quantum value should be seen. My Adita should be over a period of time much more higher than the Capistan I am making. So that over a period of time company can think about giving dividends or something else like better exposition in the future.

Thank you. Thank you for the opportunity.

So, my question was around the industry. I wanted to understand why is the pallet pooling penetration as a percentage so low in China? China, is there something particular about the country which keeps it low, and what path do you expect India to take?

Okay, so when we are talking about China, we have to take the data from whatever is listed on their government side. If you visit China, they are absolutely 100% palatized. They say that they are 50% palatized. I think you should visit Hongzhou and all these people. They have technologically so much upgraded. Even if when they do the ASRS or they do the robotic movement, the base is the pallet. It could be a kind of a metal pallet which they take. But I really do not concur to the number which is being there on the west side. China is fully palletized.

Okay, and what about the pooling penetration?

That is, I mean, that the pallet, the

pallet is about, palletization is about 50 percent, but the more concerning bit was that the pallet pooling is just 9.5 percent, where India is already.

The pallet pooling is of a much greater extent. It was like five times more than India. I think there are these numbers which are not very right because check was there in China. They were very big in automotive. They were very big in pallet business also. But then, Merchant Group of China, which is a government entity, has bought Lothian. And ultimately, CHEP has sold their business to Lothian, but they hold 10% stake in Lothian China business. So, it was a four or five times bigger, better business than us. Second important point, you need to understand that the entire manufacturing, what happens in China, China is located to the south part of China, to a particular region, you know, and then if you have to come to the other region, the distance is humongous. So distance is so huge that it is good for the company to have their own pooling kind of a circulation. So north does within north and south, China does within south, you know. So, that is the reason you don't get a complete comparison. And India is not like that. India is very densely populated, but the distance is not that much as compared to China. Because anything what is produced in Sakan goes to Virgao, it goes to Chinnai. Anything that is produced by Sundaram partners or Delphi or any other company in Chinnai actually goes to Nasik, it comes to Sandivali and it goes to Virgao also. So, in India, there are only 14 core locations as far as automotive is concerned, and the pooling is a much, much more feasible thing in India as it happens in any other country. And China is not a great comparison to our country because the density of population is actually spread across all regions in India, and so do the manufacturing locations.

So, this is one of the reasons that,

and all the other questions of us getting into more prioritization and all need to be put to rest because, you see, every year we have added, since last seven years, seven, eight years, we have added 700,000 to 800,000 more pallets. This year, when we were starting, everybody was having the question whether we will be able to add 900,000 pallets this year. Now, I can tell you that in September, we have already added net a lot. I am talking about 417,000 pallets. We have signed around about 37 new customers. Last quarter, we have signed 48 new customers. 85 new customers, we have signed in the first half. So, we are very confident that we will surpass this 900,000 number in this financial year also. We will end somewhere at 1 million or 1.2 million. You know, so that is the phase at which India is actually growing. And so is, so is pooling. If you look at automotive, automotive is 100% pooling today. They really do not need any cardboard. So, they are going to go carbon neutral, and we are the champions of carbon neutral in the country. So, if you put something like in the environment calculator, a pooled pallet vis-a-vis a one-way pallet, you will see what is the kind of CO2 imprint you reduce in the atmosphere. So, in India, we do not have this concept of carbon credit. I am very confident government is working towards it, and if it comes in next one to two years, all these people will buy carbon credits from us, and all these will go directly into our pact, which will be a different ballgame altogether. Because we have learned this when we have gone to GCC, because in GCC, you can actually buy and sell carbon credit.

Thank you. Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. I now have the conference over to the management for their closing comments.

So, thank you everyone for joining us today and for your questions. I would like to take more and more questions from you whenever you want to. You can reach to my management team. See, this is a new business, difficult for people to understand. More and more questions that you asked actually challenges us back so that we are also more clear on to what is it that the investors are looking. Overall, I can tell you that we are doing fantastic as far as the companies are concerned. We will grow. We will continue to keep growing by the pace at which we are for the next five years. And acquisitions and mergers are the way forward for our company to go and show the kind of growth that we have shown in last 10 years. I thank everybody for joining. Thank you. Thanks a ton.

Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us and you may now disconnect your lights. Thank you.