Earnings Call Transcript - XNSE:ESTER 2026-11-05

Kartikeyan, Moderator

Good afternoon, ladies and gentlemen. I am Kartikeyan, moderator for the conference call. Welcome to Ester Industries Q2 and H1 FY27 conference call. As a reminder, all participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation controls. To donate assistance during the conference call, please signal an operator by pressing star, then zero on a touchstone telephone. Please note, this conference is recorded. I would now like to hand over the floor to Mr. Amit Sharma from AdFactors PR. Thank you, Anuvat Eswar.

Amit Sharma, Head of Investor Relations

Thank you, Karthikeyan. Good afternoon, everybody, and a very warm welcome to the earnings call of Esther Industries Limited for the second quarter and half year ended, 30th September, 2026. On the call today, we have Mr. Vaibhav Shah. The management will take us through the operational and financial performance for the quarter and half year, following which we will open the floor for the question and answer session. Before we begin, please note that this conference may contain forward-looking statements about the company, which are based on the company's beliefs, opinions, and expectations as of today. These statements are not a guarantee of future performance and are subject to risks and uncertainties. I now request Mr. Bababja to take us through the company's performance. Thank you and over to you, sir.

Vaibhav Jha, CEO

Thank you, Amit. Good afternoon, everyone, and thank you for joining us today. I will take you through the industry environment and the key business development during the quarter, following which we will talk, walk you through the financial performance. Let me begin with the industry landscape. The operating environment for the Bopit film industry remained stable during the quarter to FY27, and the improvement witnessed in quarter one FY27 continued through the quarter gone by. We continue to see better demand across both domestic and export markets in India. The increasing adoption of polyester films in flexible packaging is being supported by favorable regulatory developments. The plastic waste management rules, which mandate 10% post-consumer recycled content in flexible packaging, are encouraging brand owners to increasingly adopt Polyester films with recycled content. To comply with this mandatory requirement, the brand owners are shifting from other substrates to polyester films with recycled content. On the export front, Indian manufacturers continue to benefit from new opportunities across the international markets that emerged due to the war in West Asia and disturbance in the Middle East. During the quarter, exports contributed approximately 37% of our revenue, balance coming in from the domestic market. The United States was particularly encouraging for us during the quarter. The tariff-related disruptions that affected trade between India and the U.S. during the previous financial years have largely been resolved, and our exports to the U.S. have revived. Majority of the exports that we make to U.S. are of vast products across Bopit films and speciality polymers. Trade tariff now imposed on exports originating from India is comparable to trade tariffs imposed on other exporting countries. Coming to the cost environment, disruptions in crude oil supplies and volatility in crude prices arising from the ongoing geopolitical situation in West Asia and Middle East have resulted in higher petrochemical prices. Consequently, our Key raw materials PT and MEG have also witnessed significant increase in prices. We have been able to pass on this increase to customers through improved realizations. This is reflected in the performance of our films business where revenue increased by 39.6% during the quarter against the volume growth of 13.9%. However, the increase in raw material and freight costs coupled with longer transit times has resulted in higher working capital requirements. This has particularly impacted our receivables and inventory levels, which Pradeepji will explain in greater detail. Looking ahead. We expect the industry environment to remain stable over medium to long term. New capacity additions have been relatively moderate compared to the demand growth. Global prices have remained firm and the increasing adoption of BOPIT and recycled content polyester films continues to provide structural growth opportunities. While industry cycles will continue to influence the business, our strategic focus remains on increasing the contribution of value-added and specialty products. We believe this transition will improve the quality of our earnings and provide greater resilience across industry cycles. Moving to the business performance, let me begin with our poly-strips and segment. We witnessed a healthy improvement in performance in the segment during the quarter over the corresponding This is the beginning quarter last year. Consolidated film sales volume increased by 13.9% year-on-year to 24,291 metric tons in quarter 2 FY27, compared with 21,329 metric tons in the corresponding quarter last year. For the first half, consolidated film sales volume increased by 8.3% to 46,412 metric tons. In value terms, film segment revenue, including RPET and CHIPS, grew by 39.6% year-on-year to Rs. 414.5 crores during Q2 FY27. For H1 FY27, revenue increased by 38.7% to Rs. 813.9 crores. The higher growth in revenue compared to volume reflects the improved realizations, the pass-through of the increased feedstock cost, and a better product mix. More importantly, the Segment delivered an EBIT of Rs. 34.5 crores during the quarter compared to an EBIT loss of Rs. 6.2 crores in quarter to FY26. The EBIT margin stood at 8.3%. For the first half, the segment EBIT improved significantly to Rs. 73.6 crores with an EBIT margin of 9% compared with Rs. 0.8 crore in H1 FY26. An important contributor to this improvement has been consistent increase in proportion of the value added and specialty film portfolio. During Q2 FY27, sales of value added in speciality films increased to 6,200 metric tons, accounting for approximately 26% of our total film volumes, compared with 4,927 metric tons, or 23%, in the corresponding quarter last year. The volume of VAS products registered a significant growth of 25.8%. I must mention that we clocked highest ever volume of 12,568 metric tons of VAS products during H1 FY27, representing approximately 27% of total film volume, compared with 10,107 metric ton in H1 FY26, registering a healthy growth of 24.3%. We are targeting to increase the share of value-added in specialty sims to approximately 35% by quarter four FY27, and further to around 50 to 60% over next two to three years. This remains a key strategic priority for us. As proportion of differentiated products increases, our ability to compete will increasingly be driven by differentiated product offerings addressing varied application requirements and customer qualifications rather than pricing alone. We will continue to invest in product development, customer approvals, and capabilities to serve more specialized applications. Coming to our ARPET business, we continue to witness healthy growth during the quarter. RPET sales volume increased by 37.4% year-on-year to 1,437 metric tons in quarter to FY27, while revenue grew by 51% to Rs.18.4 crore. For H1 FY27, volumes increased by 27.7% to... 2,831 metric terms, where revenue grew by 36.7% to 35.8 crores. We currently have an installed RPET capacity of 28,000 metric tons per annum across our Sittarganch and Hyderabad facilities. Major share of the production of RPET is consumed captively for production of Bopet films with recycled content. Our primary strategic objective in RPET is to use recycled PET as a feedstock for our own recycled content for Bopet films. Therefore, the overall strategic value of this business extends beyond the external revenue generated from standalone RPET sales. The strategic investment in installing two arcuate extruders is now bearing healthy fruit. Our integrated recycling capabilities position us well to address the growing demand for the sustainable packaging solutions and help our customers meet their recycle content requirements. Coming to polyester chips, sales during the first half stood at 496 metric tons, generating revenue of approximately Rs. 5.3 crores. There were no external chip sales to third parties during Q2. Moving to Esther FilmTech, our wholly-owned subsidiary, we continue to witness a meaningful improvement in its operating and financial performance. During Q2 FY27, sales volume stood at 10,306 metric tons, broadly in line with the corresponding quarter last year. However, total income increased by 40.5% year-on-year to Rs. 168.2 crores due to increase per unit realization consequent to increase in stock prices. EBITDA increased significantly to Rs. 16.9 crores compared with Rs. 4 crores in Q2 FY26 with the EBITDA margin improving to 10%. The company also reported a profit after tax of Rs. 2.2 crores compared with a loss of Rs. 10.3 crores in the corresponding quarter last year. For H1 FY27, total income grew by 50.5% to Rs. 327.8 crores, while EBITDA stood at Rs. 36.4 crores with a margin of 11.1%. Profit after taxes was Rs. 6.9 crores compared with a loss of Rs. 26.8 crores in H1 FY26. Capacity utilization during the first half improved to 85.3% compared with 78.4% in the corresponding period last year. The improvement has been supported by higher exports including of vast products, enhanced capacity utilization, better margins across both domestic and international markets, and an increasing contribution from value added and specialty firms. Usage of ARPET and another recycled material has also contributed to improved bottom line. Sorry. Importantly, Esther Fimtech has now reported profitability in every quarter since Q4 FY26. We remain focused on sustaining this improvement through better capacity utilization, operational efficiencies, and an enhanced product mix. Now coming to our specialty polymers business. This segment witnessed a decline in volumes and revenue during the quarter, primarily due to demand erosion in one of our marquee high-margin specialty products. Sales volume stood at 711 metric tons in Q2 FY27 compared with 1,161 metric tons in the corresponding quarter last year. Revenue declined by 49% to Rs. 29.3 crores from Rs. 57.4 crores. Within the segment, specialty product volume stood at 418 metric tons compared with 1059 metric tons last year. However, our value-added product portfolio continued to perform well with volumes increasing by 187% to 293 metric tons. Despite the decline in revenue, the business continued to maintain a healthy profitability profile. Segment EBIT stood at Rs. 9.9 crores with an EBIT margin of 33.9% compared with 37% in Q2 F526. For H1FY27, revenue stood at Rs.62 crores, down 41% year-on-year, while EBIT was Rs.24.7 crores with a margin of 39.9%. We acknowledge the near-term demand challenges in one of our key specialty products. However, we remain confident about the recovery potential of this business. We have a strong pipeline of new products, and one of these products is currently awaiting customer approval. Following a marginal Capital expenditure, we expect this product along with other new products in our development pipeline to partially compensate for the lost volumes and margins in the coming months. We expect a large part of this recovery to materialize during the last quarter of FY27 and into the next financial year. Our medium-term ambition remains unchanged. We continue to target approximately 25% CAGR in specialty polymer revenue over the next three to five years, taking FY27 as the base year. Now, I would like to talk about Elite, our 50-50 joint venture with Loop Industries, which represents an important step in our journey towards building a circular economy platform. The project continues to progress through the engineering phase. The front-end engineering design study has been completed, and Toyo Engineering India has been appointed for detailed engineering. Land acquisition is expected to be completed by Q4 FY27. The facility being established in Gujarat is targeted to commence commercial operations during the last quarter of calendar year 2028. The plant will use Loop Industries' proprietary chemical recycling technology to convert polyester textile waste into recycled dimethyl teraphthalate or RDMT and recycled monoethylene glycol or RMEG. These will subsequently be polymerized to manufacture approximately 45,000 metric tons per annum of recycled polyester chips. This technology will enable the recycling of difficult-to-recycle polyester textile waste and support the development of a true textile-to-textile circular economy. On the commercial front, we have already secured encouraging validation from global customers. Nike has signed on as an anchor customer for the facility through a multi-year opt-take agreement. In addition, Loop Industries has secured a letter of intent from another leading global sports and athletic brand for potential opt-take of up to 15,000 metric tons per annum of Loop PET fiber-grade resin under a multi-year commercial framework. These commitments ensure that a significant portion of the planned capacity is covered well ahead of commencement of commercial production. We believe this early customer validation reinforces the potential of the project and the growing demand for sustainable recycled polyester solutions among global brands. It is also important to highlight that any additional debt requirement for elite will remain at the joint venture level and will not be consolidated with Esther Industries. With that, I would now like to hand over the call to Pradeepji to take you through the financial performance for the quarter and the half year.

Pradeep Rustagi

Thank you, Weber, and good afternoon, everyone. Let me take you through the financial performance of the company for Q2 FY27 and H1 FY27. Beginning with the stand-alone performance. Stand-alone total income for Q2 FY27 increased by 38.9% year-on-year to Rs. 365.8 crores, compared with 263.3 crores in Q2 FY26. For H1 FY27, the total income grew by 30.1% to Rs. 713.5 crores. Stand-alone EBITDA, including other non-operating income, more than doubled year-on-year to Rs. 28.6 crores during the quarter, with EBITDA margin improving by approximately 250 basis points to 7.8%, compared with 5.3% in the corresponding quarter last year. For the first half, EBITDA increased by 49.2% to Rs.68.6 crores with EBITDA margin improving to 9.6% from 8.4% in H1 FY26. Profit after tax turned positive at Rs. 6.1 crores during Q2 FY27 compared with the loss of Rs. 4.8 crores in the corresponding quarter last year. For H1 FY27, the PAT increased more than four-fold to Rs. 20.6 crores from Rs. 4.8 crores in H1 FY26. Other non-operating income during the quarter stood at Rs. 5.7 crores compared with Rs. 3.3 crores in Q2 FY26. Increase was primarily on account of higher interest earned on fixed deposits created out of fresh equity rates. Overall, the standalone business delivered a healthy improvement across revenue, operating profitability, and bottom line. Coming to Esther FilmTech, our wholly owned subsidiary. As Weber mentioned earlier, the company continued to demonstrate a significant improvement in its operating performance. Total income increased by 40.5% year-on-year to Rs. 168.2 crores during Q2 FY27, while EBITDA stood at Rs. 16.9 crores with an EBITDA margin of 10%. The company reported a profit after tax of 2.2 crores against loss of Rs. 10.3 crores in Q2 FY26. For H1 FY27, total income increased by 50.5% to Rs. 327.8 crores. EBITDA stood at Rs. 36.4 crores with a margin of 11.1%, while PAT was Rs. 6.9 crores compared with a loss of Rs. 26.8 crores in the corresponding period last year. Improvement reflects higher exports, better realizations, improved production efficiency, and a better product mix. Coming to consolidated performance of the company. Consolidated total income for Q2 FY27 increased by 25.7% year-on-year to Rs.449 crores, compared with Rs.357.2 crores in Q2 FY26. For H1 FY27, consolidated total income grew by 26.5% to Rs.891 crores. Consolidated EBITDA increased significantly by 160% year-on-year to Rs.45.1 crores during the quarter compared with Rs.17.3 crores in Q2 FY26. EBITDA margin expanded by approximately 510 basis points to 10% compared with 4.9% in the corresponding quarter last year. For the first half, EBITDA increased by 124.6% to Rs. 104 crores while EBITDA margin improved to 11.7% from 6.6% in H1 FY26. Profit after tax for Q2 FY27 stood at Rs. 7.8 crores compared with a loss of 15.8 crores in the corresponding quarter last year. For H1 FY27, the company reported a PAT of 26.5 crores against a loss of 22.9 crores in H1 FY26, representing an improvement of approximately Rs. 49 crores. Earnings per share stood at Rs 0.75 for the quarter and Rs 2.57 for the first half. Improvement in consolidated profitability was primarily driven by robust performance of the polyester film segment, supported by higher volumes, better realizations, improved capacity utilization, and increasing contribution from value-added and specialty films. I would also like to briefly address the sequential movement in our financial performance. Consolidated EBITDA for Q2 FY27 stood at Rs. 45.1 crores compared with 58.9 crores in Q1 FY27. At the segment level, EBIT in polyester film moderated to 34.5 crores from Rs. 39.1 crores in the previous quarter. Similarly, especially polymers EBIT declined to Rs. 9.9 crores from 14.8 crores primarily due to lower volumes discussed earlier. Other income was also lower during Q2 at approximately 5.2 crores as the previous quarter had benefited from certain one-time foreign exchange and investment gains. However, on a year-on-year basis, the improvement has been broad-based with all businesses contributing to overall improvement in profitability and polyester films remaining the principal contributor. Coming to balance sheet and cash flow, As of 30th September 26, shareholders' equity stood at Rs.887.6 crores compared with Rs.782.7 crores as of March 26. Company maintained cash and bank balance of 180.4 crores along with liquid investments of 47.9 crores taking the combined liquidity position to approximately 228.3 crores. A portion of these funds remain earmarked towards our equity contribution to elite project with Rs. 7.1 crore invested in this joint venture during the first half. Coming to working capital, the increase in crude oil and petrochemical prices together with higher freight costs and longer transit times has resulted in higher requirement of working capital for sustaining enhanced operations. Trade receivables increased to 264.3 crores as of 3rd September 26 from Rs. 184.9 crores as of March 26. Similarly, inventories increased to 245.2 crores from Rs. 208.7 crores. These increases were partly offset by higher trade payables, resulting in an increase in networking capital by Rs. 66.7 crores during the first half. These were partly funded through short-term bank borrowings of Rs.51.7 crores. On the debt front, On a consolidated basis, we repaid term loans of 53.5 crores during H1 FY27 against our full year repayment target of approximately Rs 100 crores. During the same period, we also raised fresh term loan of Rs 18.9 crores. Consequently, total borrowings stood at Rs 748.8 crores as of September 26 compared with Rs 729 crores as of March 26. On our overall objective of gradually reducing debt during the financial remains unchanged, we also expect working capital requirements to ease as the raw metal prices and freight environment stabilizes. But for increased requirement of working capital, we would have seen reduction in debt during H1 FI 27. Capital expenditure and cash flow. Coming to capital expenditure, the company incurred capex of 15.1 crores during the first half of FY27. Going forward, apart from routine sustenance and maintenance capex and the marginal capital expenditure required for new specialty polymer product, we are not planning any major capital expenditure. Cash profit before tax and depreciation for H1 FY27 stood at 69.7 crore. During the period, the company also paid a dividend of Rs. 2.5 crore. To conclude, we have delivered a profitable first half, with a meaningful improvement in operating performance, profitability, and cash generation. Our focus for the second half will remain on improving working capital efficiency, maintaining operating profitability, and continuing with our planned debt reduction. With this, I conclude our opening remarks, and I request the moderator to open the call for Q&A. Thank you.

Kartikeyan, Moderator

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star and 1 on a telephone keypad and wait for your turn to ask a question. If you would like to withdraw a request, you may do so by pressing star and 1 again. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Mahesh Palani from Gokwata. Please go ahead.

Operator

Tomaya Solani, please go ahead with your questions. The line is unmuted.

Kartikeyan, Moderator

Sir, there seems to be no response. We'll move on to the next question. The next question comes from the line of Vishal Balada from Valerium Advisors.

Vishal Balada, Analyst — Valerium Advisors

Hello. Yes, am I? Hi, sir. Congratulations on great YOY growth. So, my first question is that your polyester film segment has witnessed a significant turnaround, like the EBIT margins have improved from negative 2.1% in Q2 last year to 8.3% in this quarter. So, how should we look at the sustainability of these margins going forward, particularly considering the volatility in raw material prices and the cyclical nature of the film industry?

Vaibhav Jha, CEO

Right, so thank you. See, over a medium term, when I say medium term, next two to three years, there are many tailwinds for the Bopet film industry, especially in India. So, in terms of addressing the question on cyclicity, the demand is growing in between 8 to 10 percent year on year. Right now, the demand in India is around 900,000 to 950,000 tons a year. So, 8 percent of that will be something like 70 to 80,000 tons a year. So, to absorb this, two new lines need to be put in every year. But what we have seen is that over the last one year, there was no addition. And we anticipate that in next two years, there is going to be only two or maximum three new additions, which means that the capacity addition is going to trail the demand growth. So we expect that for next eight to ten quarters, the overcapacity situation should not recur. So that is one. Second is that... The second is that, overall, there is a lot of background noise from your side, sir, if you can mute it.

Vishal Balada, Analyst — Valerium Advisors

Sorry, yeah.

Vaibhav Jha, CEO

Yeah, all right. So the second thing is around the pricing. So right now, other than the demand-supply balance, which has improved quite a bit for this sector, there is a... A support that we are getting right now in terms of multiple opportunities which have opened up for us globally. Because of India being the one which is not affected by war and there are issues in the Gulf capacities, on top of it is our push to specialize our offering. So as you have seen that there is a healthy growth, almost 25% growth in our specialty sales. So even if the cyclicity plays out after 8 to 10 years, the way we are seeing things unfolding, by the time cyclicity clicks in, comes in, we should have become a specialty film producer with, you know, 50 to 60 percent of volume being shared by specialty and commodity becoming a minor share. So that is kind of giving resilience to our business. On the raw material side, this business is such that There is a raw material pass-through, which is very well demonstrated in the last two quarters, wherein though the raw material prices increased, we were able to pass that on to our customers, and that reflects in our revenue, and the EBITDA, if you see, has only improved and not reduced. So we are kind of insulated as such from the raw material volatility in prices.

Operator

Right, sir.

Vishal Balada, Analyst — Valerium Advisors

So, another question is that you have outlined an ambitious target of increasing the share of valued products in the polyester film segment to be around 35% by the quarter four of this year and around 60% in the next two to three years. So, what are the key challenges in achieving this transition and how much of an incremental improvement in segment margins could this product mix shift quotientially deliver?

Vaibhav Jha, CEO

So, in terms of the challenges, the biggest challenge is the approvals that we need from our customer. That is the thing which kind of delays us and delays the realization of VAS. But when we look at the pipeline, It's a very healthy and robust pipeline, so in terms of the opportunity that we have tapped in, right, wherein the products are at different stages of approval at our customer end, we are extremely confident that in next two to three years, we should hit 50 to 60% specialization. In terms of margins, I think, see, what this will ensure is that we are in respectable teams as far as EBITDA is concerned. So, and on a sustainable basis. So, in fact, our internal target is to bring it to a sustainable 15 percent EBITDA margin kind of profile, and for this to happen, we need to hit 50 to 60 percent, especially at a film share.

Vishal Balada, Analyst — Valerium Advisors

Mm-hmm. Right. So, last question from my end. So, with the ELITE project targeting commercial product operation, by end of last quarter of calendar year 28, if I'm not wrong, and a significant portion of this planned capacity already receiving, you know, customer commitments, Could you elaborate on the project's expected capital requirements, the funding structure, and targeted returns? And also, like, how should investors look at the potential contribution of this project to the consolidated earnings once the operations are commercialized?

Pradeep Rustagi

So, first I will address the consolidation part. It is a 50-50 JV, so the consolidation would not be line by line. Only the bottom line of the JV company will be consolidated with a stress bottom line. So, it is not going to affect the top line and the expenses. The bottom line will be affected to the extent of contribution made by the JV, 50% of the contribution made by the JV. So, that's the consolidation part. Coming to the project economics that has already been disclosed, but I will repeat it. The project is now going to be for 45,000 metric tons of polyester chips with capital outlay of about 1,200 to 1,400 crores, and the EBITDA margins are going to be very healthy. I would say in the range of 40 to 45 percent, and with the majority of the volume pre-sold before the commencement of the commercial production. So to that extent, the sales is not a concern area for the elite project.

Vishal Balada, Analyst — Valerium Advisors

Okay, sir. Makes sense. Thank you so much for the opportunity and patiently answering my questions. And all the best for the future, sir. Thank you.

Kartikeyan, Moderator

Thank you. We have the next question from Ravi Nanda, an individual investor. Please go ahead.

Ravi Nanda, Analyst — Individual Investor

Hello, sir. Sir, I have a question on loop industry. I have heard the call of loop industries in that they said that they are in financial trouble. That's why the product size has been reduced. End. In future also, it is difficult that they will be able to put equity or debt for the project. So in case they fail, what is the plan B of the extended risk industry?

Pradeep Rustagi

So, number one, the elite project doesn't require any debt from loop industries. The elite project needs only equity contribution. What we understand, we have been interacting on daily basis from loop, they have commitments from the private equity firms subject to certain milestones, and these milestones are being achieved. So one of the milestones was related to financial closure, et cetera, for the ELITE project. We are glad to inform that we have received, in principle, approval for the TUM loan that ELITE was looking forward to from a very reputed public sector bank. And there is a process which will be completed in the next three to four months, and after that we will have the final sanction. And LOOP has the commitment from the private equity for the equity contribution. They may not have the funds today, but they have firm commitments from the private equity partners.

Ravi Nanda, Analyst — Individual Investor

But the project is getting rid of LOOP?

Pradeep Rustagi

No, project is not getting delayed. In India, the acquisition of land is a very tricky area, and the state where we are acquiring land is Gujarat, where there is a shortage of land, but we have been able to put it together, and in the first quarter, calendar 27, we would be having the possession of the land.

Ravi Nanda, Analyst — Individual Investor

So, sir, you said that we should not worry about the equity contribution from Luke. So, there is no need for a plan B. And on specialty polymer, you said that you have a new product. So, I am watching this company from 2008. They always, on the investor presentation, they said that they have 15 to 19 products, but we are only stuck in two or three products that we sell. So, it is a risk. If we have 10 to 15 products, then this kind of revenue drop, we will not see. And on a new product, we said that in fourth quarter. So, please elevate on that product also.

Vaibhav Jha, CEO

Yeah, so you're absolutely right, you know, that if a business relies on two products, then there are risks. So, which is why a couple of years back, we started working on accelerating the go-to market for the products which we had. And so what, if you look at the value-added products, right, which we have in our list, That has seen a very impressive growth year on year, and this is going to accelerate even faster in the next calendar year. And all of these are new products, all of these are new customers. So as of now, if you look at the number of products that we are selling, we are selling close to seven to eight different kind of products, from two to three products that we were doing two years back. And from a customer base of 6 to 7, we have increased it to around 15, 16 number of customers. So this shows that we have worked in this area, and a lot of... This product that we are talking about is about to get mature in terms of approval. So we are expecting that sometime in next quarter, it should start ramping up. And you would see volume and contribution coming in from this class of products. Actually, it's a couple of products, but a single class of products where a minor tweaking was required and we got delayed because we required a capex. Investment to get those tweaking, which should be over in this current quarter. So next quarter, we're expecting this sales and product to ramp up. Not only this, there is a very healthy pipeline of customer projects. Across value-added product as well as high-speciality product, and we are working with 27 customers at different stages of product approval lifecycle on eight to nine different products. Which are going to mature in the next calendar year, and all of them are likely to mature over the next six to eight quarters. So, I think we are going to see consistent increase in volume and contribution going forward, and that is why in our investor call, we said that we are very confident of 25% CAGR in this business.

Pradeep Rustagi

So, just to supplement what we have told, if you look in terms of quantity, the two marquee products are contributing only close to 50 to 55 percent. Balance sales in volumetric terms is coming from the other products that have been launched and made successful. So, it's not, in terms of margin, yes, these marquee products have a very huge share, but in terms of quantity, there are other products which we are selling to the tune of 40 to 45 percent every quarter.

Ravi Nanda, Analyst — Individual Investor

Answers that one product that got different tuned, any chance that in future ever will come back?

Vaibhav Jha, CEO

Yeah, so, see this product, per se, There is demand erosion, but we have innovated on that product, but the innovation product is being considered as a new product by our customer, so it is going through a full approval life cycle, and this is a very cutting-edge product application where it goes in, so typical gestation period is anywhere between one and a half to two years. So, any forward movement in terms of commercial sales, we will be seeing over next six to eight quarters, not immediately.

Operator

Okay, okay.

Vaibhav Jha, CEO

Thank you, sir.

Kartikeyan, Moderator

Thank you. We have the next question from the line of Mr. Surendra, an individual investor. Please go ahead with the question.

Surendra, Analyst — Individual Investor

Hello.

Kartikeyan, Moderator

Hello. Good afternoon, sir.

Vaibhav Jha, CEO

Good afternoon.

Surendra, Analyst — Individual Investor

Sir, I will speak in Hindi. Thank you, everyone, and welcome to the call of E-Lite, and welcome to the call of E-Lite, and welcome to the call of E-Lite.

Pradeep Rustagi

Let's see, the land we are acquiring is in the beginning of the call. It's just right that we approached GIDC, but our size of land did not get to the private industrial park, and it was very late, so we got to the aggregator route, and this activity was in the middle of last calendar, in July 25th. The number of pieces, you can see, there is no salary, when you have such a big piece of land, there is no salary, there is no salary, there is no salary, there is no salary, there is no salary. So, we have multiple levels of engagement, we have to talk about it, and then we have a lot of owners. So, time is left in India, if you can see, if you can see the acquisition of land, other than industrial park developed by government, the rest of the time is left. And we have probably ambitious target that we will complete September and October 26th, but now it feels like January and February is complete.

Surendra, Analyst — Individual Investor

But sir, do you hear any news about this area that you are going to take there?

Pradeep Rustagi

Sir, Dhej, Bhrouj and where we are all in a 50 km vicinity. It's not far away. This is why we call it because it is a prominent area. If I tell you that the land is in ABC Village, then you will not understand. So we call it Dhej.

Surendra, Analyst — Individual Investor

Sir, one question was, the ELITE project, which we are going to be R-DNP and R-A-M-E, when Polyester's industry started, you remember that Orca and Bomber Dying were manufactured in DNP. And because of superiority of PTA, you are thinking that both plants and Bombay Dying are closed in production today. So I wanted to know that, are DMT superior? Is it equal to PTA or something like that? Good morning, everyone, and welcome to the call.

Pradeep Rustagi

Sir, Dekhijay, हम लोग RDMT बनाके polymerize कर रहे हैं, हम RDMT को बेच नहीं रहे हैं. In terms of quality, there is no difference between the RDMT और PTA. Even, आपकी knowledge के लिए में बबताओ, even Esther के अंदर हम 2001 तक DMT से ही chips और film बनाते थे. सरफ क्या होता है कि जब आप यह जो recycling का process methanol से करते हैं, So instead of PTA, you get DMT, because DMT में जब प्रोसेस करते हैं, तो उसमें बाई प्रोड़क्ट मेशनल निकल जाता है. बनाने में भी लगता है और रिप्रोसेस करेंगे तब भी निकलेगा. तो in terms of quality, there is not going to be any change, and DMT हम बेच नहीं रहे हैं, हम captive consume करेंगे.

Surendra, Analyst — Individual Investor

Sir, a last question is, our recycling plant is 8,000 tons, and the other one that we have put in the plant is about 7,000 tons. Now, recycling is a big industry. As you can understand, the norm is used. Good morning, everyone. So, sir, we have a plan for other places. In Gujarat, we have a plan for other places, or in the central side, I can say that Nagpur or something like that. I mean, that side, eastern side. Like that. So that in the future, our captive congestion will be remain competitive, accessible.

Vaibhav Jha, CEO

Right. So, as you rightly said, our main objective, our extruders, was captive demand, and now our capacity of 30,000 tons is sufficient for our internal consumption. Good morning, everyone, and welcome to the call. So, now we know this technology very well. We are very well embedded into the ecosystem. So, it's just a matter of expanding these capacities. And for that, we have enough available land in Hyderabad. So, our first choice obviously will be Hyderabad and not some other location. And anyway, the land you are telling me is that it will be joint venture. It will not be a Esther. So, that's a very separate land. And will not be in usual usage of ESTA. Thank you, sir.

Kartikeyan, Moderator

Thank you. We have the next question from the line of Amit Kumar from Determined Investments. Please go ahead.

Amit Kumar, Analyst — Determined Investments

Yeah, thank you so much. This is Amit Kumar from Determined Investments, actually. Just one sort of follow-up on, you know, the specialty polymer, you know, the loss of, you know, business that you have seen. It's quite surprising, at least this is, you know, beyond my understanding, because, you know, being a sort of specialty product and, you know, the customer would also be sort of using it, you know, within their operations, within their business. So, what has actually happened here? Have they, I mean, it's highly unlikely that, you know, the... Have they sort of changed the, you know, chemical process that they're using or have they sort of found an alternate, you know, supplier? I just wanted to understand that this is generally not, you know, the way we see speciality chemical, you know, business, you know, operate that, you know, one fine day, the customer basically decides to, you know, just, you know, shut consumption of a particular, you know, product.

Vaibhav Jha, CEO

Right. So, like you're rightly saying, there has been a technology change, process change at the customer's end. And therefore, they have gone for a completely different chemistry. And therefore, there has been a loss of market at the largest customer of this product. There are other customers also where it is still being used, but the largest one there, there has been a demand erosion.

Amit Kumar, Analyst — Determined Investments

Oh, understood. That's the question.

Kartikeyan, Moderator

Thank you. Thank you. We have a next question from the line of Vipak from Cabro Capital. Please go ahead.

Operator

Hello. Hello. Hello. Hello.

Vipul Rastogi, Analyst — Cabro Capital

Am I audible?

Operator

Yes, sir.

Vipul Rastogi, Analyst — Cabro Capital

Hello. Namaste, Rastogi Saab and Vaibhav Ji. Namaskar, Namaskar, Deepakir. So my question is regarding, if we look at the Q1 and Q2 numbers on a sequential basis, on the stand alone, the Adita margin has dropped from 11.5 to 7.8 percent and from 13.3 to 10 percent. That is number one. So, I want to understand the reason for the same, and against the backdrop of any imports from China and their involution policy, and also the anti-dumping duty, if it has taken effect, what are the spreads, if we typically look, say, for a 12 micron film? And the underlying pet chip and, you know, pet melt prices. Please. Thank you.

Vaibhav Jha, CEO

Right. So, see, our specialty polymer business is located within the EIL, Khatima, right? And because of challenges on profitability there, we have seen a drop in the EBITDA. of the EIL. On coming to your ADD and the Chinese import, so government has announced, DGTR has announced, not government, but DGTR has recommended ADD on the imports from China and couple of other countries. So we are expecting government to notify it by end of December. So, once that comes in, it will help the margins. And as far as the imports are considered from China, right now, because of the war situation, the logistics costs are very high. The product costs in general are very high across industries, across the world. So, we have had a relief in terms of the pricing, but we need to observe if this pattern will continue after the war. But looks like that it should be better than the... Scenario that we see, that we saw last financial year.

Pradeep Rustagi

So, Deepakji, as you would have seen from the results of Q1 FY27 and Q2 FY27, the film business has remained almost stable. It is the drop is being, you know, if you compare with Q1, mainly coming because of the performance of specialty polymer, which has taken a hit for the regions where I have already explained.

Vipul Rastogi, Analyst — Cabro Capital

Rastubi ji, what is the current spread you are seeing vis-a-vis pet chips and pet melt?

Vaibhav Jha, CEO

Chips and melt? Or you want to film?

Vipul Rastogi, Analyst — Cabro Capital

No, no, no, no, versus the film, basically.

Vaibhav Jha, CEO

Yeah, yeah, right. So see, right now, we are seeing around 27, 28 in that range.

Vipul Rastogi, Analyst — Cabro Capital

And how is that behaving now in this quarter? Because I see that Reliance has typically reduced the melt prices quite a bit, even though over the last, now since the election has happened, the price of crude itself has fallen from 115 to 95 as we speak. But otherwise, how the spread has been in the month of October so far?

Pradeep Rustagi

So, I tell you, so the current drop in crude is yet to be seen in the prices of PT MEG, which will be affecting the price that will be declared on Saturday or on 16th. So, the current price is based on the crude before this fall, number one. Number two, the prices that Reliance declares, both for PT and MEG, are based on the international prices. You know, there's an index which is followed by the industry, including Reliance, and this is which they declare the price. Yes, because of the pressure on the textile, last week they did not increase the price much. So, that's the reason the price is yet about, if you look at reliance melt, it is hovering between 122 and 116. We may see a drop as the prices come on Saturday or on 16th, basically the drop in the crude oil. That is yet to be seen.

Vipul Rastogi, Analyst — Cabro Capital

Okay. I really like the increased focus which you are planning to have on the value-added products, you know, over the next 2-3 years. And, but there, what kind of spread we are basically targeting, Rostoviji?

Vaibhav Jha, CEO

So, the spread in speciality are very different for different products, different customers. There is no standard pricing because these are very customized to each customer. So, these spreads could be anywhere between 50 rupees to 150, 200 rupees.

Vipul Rastogi, Analyst — Cabro Capital

Excellent. Okay. Okay. I have one more question basically regarding what is the current gross and net debt, and also how much of our equity contribution we have made in the Loo project so far. Thank you.

Pradeep Rustagi

So, so far we have invested about 25 crores, 25 crores in the elite as equity from our side and 25 crores from loop. So the total amount invested as equity in elite is 50 crores, 50 percent each by loop and after industries. Coming to the debt position, just give me a minute.

Kartikeyan, Moderator

Thank you very much.

Vishal Balada, Analyst — Valerium Advisors

750 crore.

Pradeep Rustagi

750 crore is the interest bearing debt, but that doesn't take into account the cash reserves or cash that is sitting in the balance sheet. So that's the gross debt, 750 crore, including working capital and term debt. So the term debt is about 480 crore and 270 crore is the working capital debt.

Vipul Rastogi, Analyst — Cabro Capital

Thank you so much and wish you all the very best and wish you happy Diwali. Thank you. Thank you.

Pradeep Rustagi

Thank you.

Vipul Rastogi, Analyst — Cabro Capital

Thank you.

Kartikeyan, Moderator

We have the next question from the line of Saakit Kapoor from Kapoor and Company. Please go ahead.

Saket Kapoor, Analyst — Kapoor & Co.

Yeah. Namaskar, Babaji. Namaskar, Dr. Bishab. Thank you, sir. Firstly, for an elaborate discussion. Firstly, very specifically, the opening remark. You have asked the question, sir. My point of concern, or rather, which we as investors are looking at, the first thing, the debt part of the story. Sir, our and other are all technical businesses, and there was time when we did make very strong earnings and even distributed rupees 5 as dividend, if I'm not wrong, 3-4 years, and we were at the super cycle. Thank you, sir. So, at the end of the day, the investing community or investors are looking at the profitability part of the story, and now this is a new security polymer which was not at all expected, because this was a niche area, very high margin, we were expecting some expanded volume ahead. Thank you. I hope I'll be able to convey.

Vaibhav Jha, CEO

Right, right. So, Kapoor Sahib, आपे जो कह रहे हैं, हम समझ पा रहे हैं, तो यह है कि अगर आप EBITDA लेविल पे देखें, तो EBITDA लेविल पे हमारी जो specialization की strategy है, उसका impact दिख रहा है. अगर specific film volume की बात करें, तो उसमें हमको काफी success मिली है. Thank you. Now, the EBITDA के नीचे जो आप कह रहे हैं कि जो interest है, working capital है, वो बड़ी हुई है, जैसे हम interest cost देना पड़ रहा है, जिसकी वज़े से bottom line और cash flow पे pressure है. But, if you look at the last two years, we have seen the last expansion of Hyderabad, which has been controlled by Capex. Hardly, we are doing some year-on-year paypacks. The paypacks are doing such projects in which there is a very attractive way back. Otherwise, we are not doing a paypacks in commodity. Unfortunately, we got stuck in a cycle, commodity cycle with the new investment in Hyderabad, but otherwise, if you see, we should be having a very, very good control over debt in next one to two years as we keep on repaying our debts. So, going forward, as we specialize, our double-digit debita will become better and debt will become less. So, the results are definitely going to come, and what we are doing is a very attractive return project. We are not saying that. We are not saying that. We are saying that global customers have a very attractive margin with our contracts. So overall, the things are looking to shape very well going forward.

Pradeep Rustagi

So, there's one more important thing. What has happened that we have been repaying our debt as per schedule, and it's a significant amount. But what has happened, because of the increase in the working capital, the working capital borrowings have increased, which is reflecting in the debt. Secondly, the foreign currency debt that we were repaying, it was not getting, you know, demonstrated because the rupee depreciated against dollar and euro. So, the liability stayed there, but the repayment has been there, and once this working capital cycle comes back to normal level, you will see a significant reduction. So our objective has always been to work within the prudent debt limits. We realize that it is marginally higher than the prudent level, but very soon we are working very hard to see that it is broad under prudent limits.

Saket Kapoor, Analyst — Kapoor & Co.

Mr. Sir, now our net debt to EBITDA number has not worked out.

Pradeep Rustagi

Mr. Now our net debt to EBITDA, if we do an invalid EBITDA, it will be close to 3.253. Yes, net debt. 600. 200 crore EBITDA.

Saket Kapoor, Analyst — Kapoor & Co.

2 years down the line, with the type of value-added share that going up, what should we be looking at net debt to EBITDA number?

Pradeep Rustagi

Our target is to keep between 2 and 2.25, that is the target. It is very difficult to fix the timeline, but that's the objective we are working with.

Saket Kapoor, Analyst — Kapoor & Co.

Okay, I'm just taking into account our industry profile, is it right to carry such a high debt to 2 to 2.5?

Pradeep Rustagi

So, 2 to 2.5 is reasonable and prudent, I would say. Very very prudent and very reasonable.

Vaibhav Jha, CEO

Because we have tightened our belts on the new capex within Ascha, and at the same time we are repaying the debt. So, long-term debt will decrease your term loans progressively. Second thing is that working capital, as Pradir Ji said, is now big because the prices of raw material and finished goods both are at a very high level. It has increased by the prices of raw material and finished goods have increased by 50%. So, that has put stress on the working capital. So, now when this comes, the crude oil is down to 75-80 levels which you are probably looking at. So, all these factors going forward are going to lead to reduction in our debt, while our EBITDA

Saket Kapoor, Analyst — Kapoor & Co.

improves, absolute number for the EBITDA will improve from there. Sir, when we look at the cash flow part, we find that for the first half, we have paid income tax net of refund to the tune of 9 crores. So, can you, Sadirji, Taurabhai, you have to tell us what is the advanced tax payment we have made?

Pradeep Rustagi

I'll tell you, the advance test, which we did on June, just a minute, just a minute, hold on for a minute. 15 June, we had 3.09 crore, and 15 September, we had 4 crore, advanced tax, self-assessment tax.

Saket Kapoor, Analyst — Kapoor & Co.

Okay, 3 or 4, so 7 crore is what we have, 7.09 crore or something we have.

Pradeep Rustagi

Yes, yes, yes, 7.09.

Saket Kapoor, Analyst — Kapoor & Co.

And that is setting in the 45% of what the tax liability was.

Pradeep Rustagi

Yeah, 45% of the estimated profit, taxable profit.

Saket Kapoor, Analyst — Kapoor & Co.

Okay. So lastly, on the specialty polymer part, and I joined the queue, I think, so taking long time. But, sir, ag specialty polymer ka kya reshape ho gaya hai business model, and what we used to post earlier at the higher margins, and the revenue, how will this number shape up? And secondly, tak H2 ka kya anklang karna chahiyye in terms of? Both the film segment, which is very volatile, but still, as per your understanding, what should be factoring or modeling going for H2 from now, from here?

Vaibhav Jha, CEO

So, I think in terms of film, we expect that overall, if you look at H2, both quarters put together, we should be able to achieve similar or slightly better results compared to the first half, what we have achieved. On specialty polymers also, because of the new businesses that we are expecting to mature across. If you have two or three products which are in very advanced stages of pipeline and are likely to mature in 10th Jan to March timeline, we should be able to do slightly better in specialty polymer also compared to first half.

Saket Kapoor, Analyst — Kapoor & Co.

Okay, sir. Because the gap is there, sir, I think, to 105, the revenue for last year H1, which is down to 52 crores, and I'm talking about the specific parameter. So, sir, this becomes a tall task, and there is a permanent rigid in the, I think, to the customer profile, which has changed now. So, this 180 number, and I think, too, last year, 59 crore profitability would be a tough target to meet for this year, definitely.

Vaibhav Jha, CEO

Yes, you are right. So this is going to make it difficult to reach that level in this financial year. But from here on this financial year as a base, we are extremely confident that given the pipeline which is going to mature, we should be able to grow at 25% year on year from now on.

Pradeep Rustagi

This one.

Saket Kapoor, Analyst — Kapoor & Co.

Correct, correct. But the way the bottom line be impacted and there is a change in the, so taking into account the H2 should be better than what H1 security polymer has been because of the product part and other aspects which you just mentioned correctly. That should be a fair understanding. Bye. Okay, sir. Thank you very much, sir. Thank you very much, sir. Thank you.

Kartikeyan, Moderator

Participants, if you have a question, please press star and one on a telephone keypad. Next, we have a follow-up question from Ravi Nanda and this investor. Please go ahead.

Pradeep Rustagi

So, as we responded in the earlier query, they have the commitments from the private equity. As we achieve certain milestones, like acquisition of land and tie-up of debt, etc., they would receive the money from the private equity, which will be inducted as equity in the LEED project. So, please realize they are a R&D company or sort of a technology company. They don't have a regular revenue stream. And they have to follow the U.S. gap, wherein, as on the date of the report, they have to state the, you know, the obligation that they have and the money that they have in hand. This is which they say that the going concern could be ended out, but this has been coming out since last 4-5 quarters, but they are continuing. So we don't foresee any problem. On that front.

Ravi Nanda, Analyst — Individual Investor

In the fourth quarter, we are getting a product from the 4th quarter. It means that you can make it. Or is it not a commoditized? The potential is. The potential is.

Vaibhav Jha, CEO

The potential is that companies like Nike and other very reputed brands I have signed commercial contracts with us. I'm taking it in the fourth quarter.

Ravi Nanda, Analyst — Individual Investor

Sorry, sir. That's the new product in the fourth quarter.

Vaibhav Jha, CEO

Oh, sorry. I thought you were asking about LA. Oh, I'm sorry. Yeah, yeah, so... Specialty Polymer is a new product that is likely when it matures, it is likely to, in terms of volume, give us almost 200 tons per month of volume, but it will take some time to reach there, right? Six to nine months to reach there, but you will start seeing the impact in the volume starting from next quarter.

Ravi Nanda, Analyst — Individual Investor

Have you developed this product? Have you been patented or anything?

Vaibhav Jha, CEO

No, so now the product we have developed is not patented, but it is patentable, but we are not doing patent because of certain reasons, but it is not something that many people can make. Okay, so this will not be high margin. So this will be mid-margin, this will come in WAP, this won't replace. The high margin volumes contribution, this will be at lower margins, but the volumes are high. Just as I have told you, if you add these 2-3 products, it will be 200 tons per month.

Ravi Nanda, Analyst — Individual Investor

Okay, sir, first of all, LMC03 and E-Strike product, MB-06, MB-03.

Vaibhav Jha, CEO

Right, so in that product, we got a lot of success. We have added one new customer in LMC03, and MB-06 also has a lot of advanced stages. Approvals in international customers. So, but these high-speciality products, they get a lot of gestation period. So, we are doing a lot of work, but we have capacity on today's date. So, why not leverage that and also improve the cash flow by working on the value-added products, where volume is higher, margins are medium and gestation period is shorter. That is the logic behind going for these products.

Ravi Nanda, Analyst — Individual Investor

Thank you, sir.

Vaibhav Jha, CEO

So these value-added products have margins much higher than the commodity products, but also lower than the high-margin products that we have been focusing on so far.

Ravi Nanda, Analyst — Individual Investor

Okay, sir. Thank you, sir.

Kartikeyan, Moderator

Thank you. Next, we have a follow-up question from Saket Kapoor, from Kapoor & Company. Please go ahead.

Saket Kapoor, Analyst — Kapoor & Co.

Yes, sir. Just a small suggestion from my team. We have forward. I hope I am audible right now, so follow. Yes, sir. Sir, when we are coming up with our results, if we can arrange the press release and the investor presentation part also simultaneously within a span of, say, an hour or two. That would suffice, and the phone calls scheduled for the next day, post-market hours, and not giving us a more than this 48-hour gap, and we should also try to come up with our reserves, say, with 20-25 working days for the month and ending of the quarter. These two are the suggestions. We are doing all other things. We can fall in a different league in the list of companies also. If we can practice these two aspects, I guess, from above or above.

Pradeep Rustagi

We take note of your suggestion. We internally have this target. There are a few constraints which, you know, sort of don't let us achieve our stated objective or target. But we keep this in mind.

Saket Kapoor, Analyst — Kapoor & Co.

Yes sir, the first release document of investor presentation.

Pradeep Rustagi

The first release and PPT we are trying to do one-on-one. We are trying to do one-on-one. Yes sir,

Saket Kapoor, Analyst — Kapoor & Co.

because the numbers of both of you are reading and reading and reading, it is very clear that you can do one-on-one. Yes sir, thank you.

Operator

Thank you.

Kartikeyan, Moderator

There are no further questions. Now, I hand over the floor to VibevG for closing comments.

Vaibhav Jha, CEO

With this, I would like to conclude our presentation. We remain focused on strengthening our core business, improving operational efficiencies, expanding our value-added product portfolio, and pursuing the long-term opportunities in specialty polymers and sustainable recycling. I would like to take this opportunity to thank our shareholders, investors, analysts, and other stakeholders for your continued trust, confidence, and support. My sincere thanks also go to our employees and business partners for their dedication and contribution. As we celebrate the festive season, I wish you and your families a very happy, prosperous, and safe Diwali. Thank you for your time and participation. We look forward to continuing our engagement with you. Thank you, and happy Diwali.

Kartikeyan, Moderator

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using DUSABA's conference call service. You may disconnect your lines now. Thank you. Now a pleasant day.