Earnings Call Transcript - XNSE:HUHTAMAKI 2026-10-30

Speaker 11

Ladies and gentlemen, good day and welcome to the Hutamaki India Limited Q3CY26 Results Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Mishra from ICICI Securities. Thank you, and over to you, sir.

Mohit Mishra, Analyst — ICICI Securities

Yeah. Thanks, Derwin. Good afternoon, everyone. Thank you for joining on Hootamaki India Limited Q3CY26 results conference call. We have the Hootamaki India Management on call, represented by Mr. Kamal Taneja, Managing Director, and Mr. Amit Gupta, CFO. I would now like to invite Mr. Kamal Taneja to initiate with opening remarks, post which we will have a Q&A session. Thank you and over to you sir.

Kamal Taneja, Other

Thank you, Mohit. I hope everybody can hear me. Welcome to the quarter three call. I think as you notice here, we are doing a different format this time. So instead of conference call, we're doing a video call. My request to you would be that if you're asking questions after the call, after the presentation, please put your video on if possible. So, first of all, I'm going to start with the first slide, which is about the disclaimer. As you know, whenever we present something to the investor community, there might be some things that are kind of forward-looking. Again, this is our best estimate on what we are saying. They depend on a lot of external factors, such as the markets, industries, And of course, a lot of things that go within our company as well. So you need to take that into consideration as a risk to what we are saying. The second one, which is very important here, is that we are not seeking any investment advice or solicit any investment from your side. We are just presenting the way it is and how we have seen the quarter go, and partly how we see the market grow in the future as well. So with that, I'm going to start the presentation. This will only take a few minutes, so me and Amit will share this. Before we share with you the financial numbers, we eternally always start every presentation with a safety slide. This is our way of working. So I thought this time I'm also going to share that with you because safety is our foremost priority and it is also our group's zero ambition, zero harm ambition. So, I'm pleased to tell you that in the third quarter, we actually had no incident. So, no first aid, no medical incident, or no lost time. We monitor this through the year. We also look at moving average, moving month average over the last 12 months, and we are also making huge, significant, actually, improvement there. Now, a lot of companies look at just the numbers, just the KPIs, but in Mutamaki, we actually focus on the leading indicators, which actually impact the safety of our co-workers. So we, for example, give a lot of emphasis to things like near-miss reporting. So, we have thousands and thousands of near-miss reporting from very smallest to very high severity impact near-misses, which we record every year and take action on that. And we mainly, you know, focus on preventative safety observations, yeah. So, this is how we work in Kutamaki, when the safety is concerned. Now, Amit will give you the numbers. And I think you've seen our disclosure to the stock exchange as well. We had pretty good month, pretty good, sorry, quarter. As you have seen from the last few quarters, especially since beginning of this year, every quarter we have shown volume growth. So, no difference again. We had a pretty successful run in third quarter as well, despite what you are seeing geopolitically in all the disruptions, supply issues, and sometimes also cost issues. I think we are pretty good in handling that already. In fact, some of our best practices are also shared within the group as well. So, despite all that, you know, we made sure that our customers have uninterrupted supply materials from our side, and also products that we built for them are on time and with the right quality that they've demanded. Because of that, you know, our revenue has grown, as you would have seen, almost 23%, 24%. And that revenue growth is a mixture of inflation or the material inflation passed through that we do to our customers as per our contract with them, but also a very healthy mix with the volume growth as well. I think one thing that you would have noticed is that our reported EBIT was kind of flat compared to third quarter last year. But the third quarter last year, we also had some one-offs, gains, which were not repeated. So if you look at comparable basis, we were almost 18% up year on year for the third quarter. So, if I can summarize that, net sales increased by 23.7% or 24%, EBITDA, EBIT, you know, 1.2% and 0.1% with a caveat that, you know, like to like on a comparable basis, more like 18%. But nevertheless, we still kind of kept it flat or slightly up. You would have also noticed that we actually announced a closure of our factory in Bhatti. So this is a labels plant during the quarter. So it's undergoing that period, two months notice period at the moment. So we back close it in time by tomorrow. It's gone very smoothly and, you know, our customers are okay with that. And we've made sure that there's no, let's say, disruption to the supply to them. So we've essentially moved those volumes to the other two label plants we have in India. So, because of that, there's a charge of 96 million INR, which actually impacts in 19.1% decline that you see on PAT. Again, it's a one-time item, and actually, it is going to improve our efficiency and optimize costs in near future as well. So, with that, I'm going to ask, oh, one more thing, yeah. So, you know, we, in the calls, we always get a lot of questions on Lulu, how we're doing, et cetera. Now, what you see here is that we just recently, actually, it's just last month, we won this three awards from IFKA. So IFKA is the Indian folding carton and flexible packaging award community. And it's kind of neutral with whatever product that we do. So they've actually awarded with this very prestigious three product groups. And you see Omni Loop, this is actually a stand-up pouch for the cocoa powder. Blue Light, which is actually where, it's actually for an expert customer where, you know, the tomato, ketchup, sachet you see in the market. So it has a very high complex barrier aluminum foil and multiple layers of plastic material. So we managed to actually produce a product which is reducing the use of plastic. So instead of three or four barriers, three or four layers of plastic, we went to duplex structure, and we totally eliminated the aluminum foil. So, very good products sustainability-wise, but also cost-wise significant saving for the customer. We also did a very unique label for one of our customers in UK. Again, this is done on a very metallic film. Very unique. And the reason we are not showing the products here is because we didn't have time to actually get the approvals from the customers. So hopefully I'll show you that in our next presentation. But very, very excited, very proud of showcasing this with you guys.

Amit Gupta, CFO

So, all the investors on the call, a very good afternoon to all of you. I would now maybe run through the financials and give you some perspective behind the numbers. As Kamal talked about, you know, we had a great quarter. In fact, you know, we actually recorded a sale of about 748 crores in the quarter, which is almost 24% up versus last year. And this is This is also the highest sale that we have, you know, amongst the different quarters over the period of last couple of years. The good thing about this, the growth that we're demonstrating in this quarter and, you know, also YTD is the fact that we have a very healthy composition of the volume as well as mix and pricing in this growth. You know, on a quarterly basis, our volumes actually were up by about seven percentage points. And if you have to look on a YTD basis, we have actually We actually delivered a 4% volume growth, you know, coming over from, you know, a couple of years where the volume has been stagnant, you know, in this particular year, we have been able to drive a top line with a healthy mix of volume, as well as pricing and mix, all three coming into play. Consequently, you know, the EBITDA margins, which again, as Kamal reflected upon for the quarter have a bit of a one offs with respect to the baseline. But if you look at the nine month period, we actually close nine months at about total EBITDA of about 204 crores, which is almost 10 percentage points of sales are growing by about 25 percentage points. So, you know, against the top line growth for a nine month period of 16%, we're actually growing the bottom line by 25%. Again, a good reflection of, you know, the various productivity initiatives, as well as steering our customers and, you know, the pricing in a very This is a relatively volatile scenario where the RM prices have been fluctuating on almost like weekly if not daily basis. Our EBIT margins, if I have to talk specifically about the quarter, there are one-offs in the last year and those one-offs are primarily related to some employee retirals related, you know, reversals or corrections which happened, which were a help in the last year P&L and are not there in the current year. And that's why the two-period EBITDA margins are not directly comparable. But if I have to, let's say, exclude those and do a comparison on a like-for-like basis, the EBITDA margins actually improve by 18% versus the 1.2% which is reflected here. EBITDA margins, again, from a year-to-date perspective, we were at about 153 crores, up by about 22 percentage points from last year. The 153 crore number that we are reporting here is actually after offsetting close to about 8.8 crore of depreciation, the prior period of depreciation correction that we passed in quarter one, excluding that one-time implication of the depreciation and the one-offs on the retiral fronts are comparable, you know, EBITDA margin growths are much higher as compared to what is reported here. On a quarterly basis, when we are looking at our EBIT margins, again, this has a reflection of the one-timers. Excluding the one-timers, our EBIT margins have actually improved by 18% during the same period. When we look at the overall PAT, you know, while our PAT profit and loss, you know, for the period looks 19% lower as compared to last year, about 30 crores Those courses are 37 crores last year. However, this primarily is on account of the Bhatti restructuring charge that we have posted in this particular quarter. And as Kamal eluded, this particular decision that I have been taken is in the interest of the company and the shareholders because we had a bit of a challenge, operational as well as financial challenge with respect to the Bhatti side. And with this particular action, we are looking at improving the things further. But that particular charge is actually hitting our P&L in this particular quarter, and hence, the profit after tax is looking lower by about 20 percentage points. In spite of this charge, if you have to look at a nine-month profit, we are still growing at about 13 percentage points in a profit after tax, which is a reflection of our healthy margins that we are delivering for the business in a very volatile scenario. Thank you. Our earnings per share have improved by about 13 percentage points for the 9 month ending September 26. And again, this is a reflection of the profits that we have been able to generate along with the healthy top line. So I'll stop here, but I look forward to answering any of the questions which are there going forward.

Kamal Taneja, Other

Thank you, Amit. Like Amit said, you see on the left-hand side, this is actually one of the highest quarter we had in terms of sales. I think one thing I also want to qualify there, if you look at, you know, this is a period when you see a lot of results from some of our customers also in the market, and as you see them, they are all reporting higher, let's say, sales number, but they're also saying that they are seeing a volume decrease. But in our case, we actually also have a volume increase, not decline. So I'm very encouraged by that. On the right hand side, you see EBIT and EBIT margin. Again, like we said, this is after taking into account costs as reported. However, if we did not have those one time costs, we would be looking at upwards of 8% again, which again in our industry is quite a good number. Next one. I think I want to spend a little bit of time, like I always do, on not just financials. But for me, it's important to share with you what we are doing in terms of safety and sustainability. So we have four pillars, like we always talk about. People pillar. This is about safety. Like I said, I think the important thing here is, like I mentioned before, we look at a leading indicator, which also makes sense. That means that we look at things like behavior safety, not because I think it's easy for us to form policies, et cetera, but we want to kind of change our behavior towards safety from the core. So we have a lot of programs that are designed to address that. On climate pillar side, we've been sharing this with you earlier, but we actually started getting gain from the solar captive generation. Thank you very much, everyone, and welcome to the Q&A, and welcome to the Q&A, and welcome to the Q&A. Our delivery of 2030 scope 1 and scope 2 commitments. On the nature pillar, no change from last time. We keep on doing good things on water treatment and reuse. I also shared with you last time in Thaloja, we have a very unique plan for the water recovery, and we're doing rainwater harvesting and whatever groundwater discharge we have. We are trying to kind of recycle that wherever possible. On the product pillar, we've done a lot of, actually, work on that. You know, the IFCA award, for example, you saw that this is all being fed from our innovation team, where they're looking at not only using more recyclable material, more monomaterials, but also reducing the use of materials as well at the same time. And we are doing a lot of work on the source of our material purchase as well. So for example here, one example we do is our three plants, label plants, they are all FSC certified. So I think this is what we wanted to share with you. Thank you. And if you have any further information that you need, please feel free to contact us on the email address on the screen and also to our website. And with that, I thank you, Amit, on behalf of Amit and myself, and also wish you Happy Diwali in advance. Happy to take question.

Speaker 11

Thank you very much. We will now begin the question and answer session. To ask a question, please click on the raise hand icon on your screen. The operator will announce your name when it's your turn. You may unmute your microphone and would prefer if you would start up your camera as well and proceed with your question after introducing yourself and stating your company's name. We request that you please restrict yourselves to a maximum of two questions only. You may rejoin the queue if you have further questions. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Aditya Khaitan. We request you to please accept the prompt on your screen, unmute your audio and video and proceed with your question.

Kamal Taneja, Other

Aditya, you are, I think, muted.

Speaker 11

The current participant seems to have dropped from the queue. We will proceed to the next participant in the queue. Apologies, we have Aditya Khetan with us. Aditya, are we audible to you? You may proceed with your question.

Aditya Khaitan, Analyst — Smith's Institutional Equities

Yeah, thank you, sir. Yeah, thank you, sir, for the opportunity. So my first question is, in this quarter, sir, we have witnessed moderation of margins. How much of this is attributable to higher inventory cost like we had built up in last quarter? And subsequently, are these current margins sustainable going ahead? First question is this, sir. Second question is, sir, when we look at your overall top line over the last three to four quarters, when we look, so three quarters back, like we were hovering at around 600 to 620 crore top line. Now, we are at 750, 770 crore top line. How much of this jump, this 150 to 170 crore jump in top line is attributable to volumes and pricing? If that breakup, if you can give, that could also help. And the third question is like, at what utilization level, sir, we are operating the plant today? And how much of incremental revenue jump we can see if we utilize the plant at full utilization levels? How much incremental top line we can generate? Thank you.

Kamal Taneja, Other

Thank you, Aditya. Three questions, so not two, but I'll answer all three of them. So let me start with the top line first, right? So, a very good question. So, our top line has increased, like we mentioned a few times, because of three factors. So, there's pricing, obviously, because we, in our contracts, we normally have past two of any inflation for the raw materials. The second driver for the top-line growth is actually mix. So I think, Aditya, if you joined our course before, you would have noticed that we always talk about the quality of products. Yeah, so we kind of look at places where we are making less margin, or the complexity is low, or commoditized, etc, etc. So we focus on products which are, let's say, more aligned to our value proposition. So the more products we do like that, obviously, they will carry more value per, let's say, volume of the product. So that's the second one. Third one is actually volume increase. So physically, we are doing, like Amit mentioned, about 7%, let's say, in quarter three, that we did not do for a while. So which I think, so those three are contributing to that. Now, how much of that is, I mean, we can't tell you exactly because of many reasons, but I think you would say almost like one third or something like that. They're close to, like, equal to each other, but not exactly, but I think we are pretty happy, frankly, firstly, with the volume increase, because we haven't done that for a while, as you know, which also brings me to the third question that you had, you know, in terms of utilization, yeah. So, we always say that we have enough capacity available. We are actually making a lot of efforts in becoming more efficient. So, productivity, efficiency, improvement is also top of our operations agenda. What that helps us in doing is to make sure that we have more and more capacity available for future growth. So, at the moment, we see that we do not have any issue, at least for next two to three-year cycle, where we wouldn't need to do any huge investment to meet the market demand or increase in our use. Now, your first question was on the margins, whether it's sustainable or not. Now, what happens is that, so there are two factors here. So firstly, like I said, you know, like to like, the margin is more like 8%, yeah, or EBIT margin, because we had one-offs, which are now repeating. But I think there's also sometimes a delay. So for example, depending on the contracts we have with customers, any raw material price pass-through or cost pass-through does not happen in the same month. Right. So there might be a lag. So sometimes it goes to next month. Sometimes it's immediate. Sometimes it takes a couple of weeks. Yeah. So we experienced some of that in September because the raw material costs actually went up significantly and more aggressively in September and more sudden, which we were unable to pass through in the same month. So we would see the impact of that over the next quarter. But at the same time, so there's a delay, but we also benefit from that sometimes because when the costs go down, we are also late in implementing that. So it's give and take, but it just happened. The timing is such that we had that issue in third quarter. So I hope I answered your question.

Aditya Khaitan, Analyst — Smith's Institutional Equities

Yes, sir. Yes, sir.

Kamal Taneja, Other

Thank you.

Speaker 11

Thank you. Aditya, may we request you to please announce your company name as well?

Aditya Khaitan, Analyst — Smith's Institutional Equities

SMIFS, Institutional Equities.

Speaker 11

Thank you. We will now proceed to the next question. Our next question comes from the line of Ajit Darda. Please accept the prompt on your screen. Unmute your audio and video and proceed with your question.

Ajit Darda, Analyst — Neerzar Enterprises

Hello, am I audible, sir? Yeah, so good evening, all and thanks for the opportunity. Sir, my first question is related to the previous participant only. Sir, as you said, there was a strong volume growth in the previous quarter in. So how much of the volume growth was contributed by high value added products?

Kamal Taneja, Other

I would say the majority of that, because I think that's what we are focusing on. I mean, I can't tell you exactly the split, but usually we are focusing on higher value products.

Ajit Darda, Analyst — Neerzar Enterprises

Okay. So, sir, and my next question is, are you seeing any regulatory changes, particularly around, you know, stricter food packaging requirements, you know, front of pack, Nutritional Labeling and I mean, do you see any growth for our business going forward due to that?

Kamal Taneja, Other

Yeah, so I think you are referring more to the artwork, is that right? Or more on material?

Ajit Darda, Analyst — Neerzar Enterprises

Okay, so only any mandatory recycled plastic content or you know, stricter packaging requirements, any sort of that thing, I mean, labeling things and all.

Kamal Taneja, Other

Right, right. So I think, so our value add comes from a A couple of things. So obviously, like you mentioned, artwork. For example, when you have festive seasons, you have different artwork because there are festive bags, etc. So we work with our customers. That would, in our case, would have happened in the second quarter, not so much in the third quarter because we produce the product, we supply it to our customers who put on their product, etc., etc. So that could have gone already. Unless there's more Christmas coming, but I think Diwali Desherah is now our staple. Now, I think what you also want to know in terms of materials, what the regulations are coming. So, actually there is an existing regulation in the industry for use of recycled plastics, or PCR, plastic content regulation. So, the government actually specifies how much of recycled plastic should be used in our laminate. Now, it depends on different types of laminate. So, let's say ABC or 123. So, for example, if it's a simple monomaterial, there's a larger requirement of recycled plastic, let's say 40% or 30%. And it actually progressively goes up every year. The more complex laminate we have, for example, which requires multiple materials, as an aluminium foil, for example, the regulation right now is about 10% of using recycling. Now, that obviously gives us opportunity. Firstly, in terms of, you know, changing the spec on the job. And also, sometimes the complexity or the technology of doing that may be different, yeah, from, let's say, the laminate, which is made from the virgin plastic. So we do benefit from that. I think what we do benefit even more is through innovation. So, like I mentioned before, is where we try and convince our customers to use our blue loop product, mono material, or go from multi-layer to, let's say, single layer or double layer. I think that's more encouraging for us to see. Yeah, so I think overall it benefits us. I just hope that the regulations were also imposed so we get more benefit, but I'm pretty sure the government knows that and makes sure that they are used more and more in the future. And by the way, this recycled content will also increase in future with the regulation.

Ajit Darda, Analyst — Neerzar Enterprises

So, if regulations get implemented, you know, since we have already capacity, yeah. So, unlike our smaller players, we will be at, you know, at a stage that we can start the production as soon as possible, probably. Right, sir?

Kamal Taneja, Other

Yeah. So, I think all I can say, we are well prepared for that.

Ajit Darda, Analyst — Neerzar Enterprises

Okay, sir, I just have last question. Sir, how much time does, I mean, it's a broader question. How much time does, you know, typically takes to convert a new customer into a commercial client? And probably, you know, existing customers, new orders or expanding existing business? I mean, if you could answer this in a broader way. Yeah. Yeah.

Kamal Taneja, Other

Well, so again, new customers, they always say, right, getting more business from existing customers is always easier and faster. New customers, because, you know, they have to kind of, so the process goes like this, right? So they have a requirement, they develop an artwork, then they work with Dara, they will go through pre-press, we go to and fro to make sure The design is good. Then we propose to them a technology or product or laminate that will suit them. And then there are a lot of trials. And by the time it comes to market, sometimes it can be anything from three months to a couple of years, depending on the complexity. The good news is that we have a very set team which does that day in, day out. Yeah, again, you know, it depends larger customers are take longer because they also have a lot of verification and control and approval process within their system as well. So usually working with the smaller customer regional customers is faster.

Ajit Darda, Analyst — Neerzar Enterprises

Yeah, thank you, sir. And I am equity research analyst at Neerzar enterprises. Yeah, thank you. Thank you.

Speaker 11

Thank you. Our next question comes from N. Modi. We request you to please accept the prompt on your screen, unmute your audio and video, and proceed with your question after announcing your company name as well.

N. Modi, Analyst — Individual Investor

Yes, sir. Good evening. My question is regarding, sir, this land held for disposal. So, what could be the approximately market price for this land, sir?

Operator

Approximately?

Speaker 11

Mr. Amit Gupta, I'm sorry, we are not getting your audio coming through. Pardon? One moment, sir. We're just checking on the audio for the management. Oh, yes. Sir, you are audible now. We request you to please start from the beginning because we missed the entire.

N. Modi, Analyst — Individual Investor

Yeah, my question is regarding this property held for sale. What could be the market price for this property?

Amit Gupta, CFO

Yeah, so thanks for the question, Mr. Modi, this is Amit here. The pricing for the land would be consistent with the prevailing market rate. We don't have a kind of a fixed quotation right now because we are still evaluating different bidders. So I would not be able to give you an exact pricing for that. I'll probably recommend that, you know, if you have, if you would like to connect with us with respect to certain offer, you can drop us a mail and we'll connect you with the right team. I think it will feel speculative.

N. Modi, Analyst — Individual Investor

We said something like that.

Kamal Taneja, Other

Yeah.

N. Modi, Analyst — Individual Investor

Okay, sir. I understand. Okay, sir. The other thing, sir, depreciation, sir, which was not charged in earlier year. So, has it been taken care in income tax assessment, sir? There also we might have claimed less depreciation. So, how we are going to account for that, sir, in income tax assessment?

Amit Gupta, CFO

Yeah, actually, Mr. Moody, there was no challenge with respect to depreciation charge from a tax perspective. As you know, the depreciation calculation for tax purposes and as per the IGAP for the Indian companies and IGAP is different. Hence, the adjustment that we have passed is only with respect to the IGAP. In the under the taxation depreciation, there was no there were no there's no kind of correction that we have done in the current year. So there's no challenge in that.

N. Modi, Analyst — Individual Investor

Okay, thank you.

Speaker 11

Thank you. Our next question comes from Vipul Shah. Request you to please unmute your audio and video and proceed with your question.

Operator

Vipul Shah, we request you to please unmute your audio and video and please proceed.

Speaker 11

We do not seem to be having a response or getting a response from Vipul Shah. We will proceed to the next participant in the queue. Our next question comes from Dinesh Parekh. Please unmute your audio and video by accepting the prompt on your screen and proceed with your question.

Dinesh Parekh, Analyst

Hi. Can you, my, congratulations to you, Mr. Taneja and Mr. Gupta. Very good number. Can you listen to me?

Speaker 11

You are audible, sir.

Dinesh Parekh, Analyst

Not audible? It's audible?

Speaker 11

You are audible.

Dinesh Parekh, Analyst

Yeah, my question is that our PBT margin is 7%. And I think it should be more than 10% because of our Hata Marquis, our latest technology innovation. To get it more than 10%, 12% to 13% PBT, it is very easy for the company. You can increase price by 2-3% or reduce your expenses. Major expenses are salary and wages around 250 crores per year. And other expenses are around 600 crores per year. So if you can reduce your expenditure by 2% to 5% and increase your price to 2% to 3%, we can take our PBT more than 10%, 12% to 13%. Is it possible or not? And second thing, can we use more AI? Because the packaging and flexible packaging and printing industry, AI may be very much useful to us to reduce the cost as well as to increase the productivity. Can we just elaborate in this? Hello?

Speaker 11

Mr. Amit Gupta, we request you to please unmute your mic and proceed. We're not getting your audio coming through.

Amit Gupta, CFO

Thanks for the question, Mr. Parikh. I will probably take the first one which is related to PAT and PBT. So fundamentally, if you look at the progression of our PAT and PBT margins, we have actually grown our PBT from last year to the current year from 117 crores to almost 133 crores. And our constant endeavor has been to improve our profitability, which is why if you look at the choices that we are making from a portfolio selection standpoint as to what we need to cater and whatnot, we are very mindful and choiceful of that. However, increase in prices is not something that we can do at a drop of a hat. You know, our prices are kind of linked to an underlying, you know, commodity situation and there are specified frameworks within which we operate to pass on the price increases and we have been quite successful in passing on the price increases, which are consistent with the cost increases that we have. But beyond that, I think it's not a free flow that we can increase the prices by two to three percentage points. However, we can improve our mix by selling high margin products, which we consistently do and which is what is helping us. Beyond that, even from a standpoint of our overall operating cost base, we have a productivity plan in place, which actually drives productivity year on year. And we are on track with respect to delivering on the targets that we had for the year and reducing, you know, So I think on both accounts, if you look at the progression that we have on the PBT and PAT, it reflects the growth, which is in line with our commitment to grow profitably. And with respect to the operational interventions, with respect to driving productivity, we have a plan in place, which is adding to that.

Dinesh Parekh, Analyst

And regarding AI implementation, sir?

Kamal Taneja, Other

Yeah, yeah. So I'll answer that. So just on the margin, right, 10%, 9%. Mr. Parekh, sometimes that's also a market competitiveness, right? So we need to make sure that our customers value us in what we deliver to them. And our endeavor is always to improve that, like we demonstrated in last few quarters. So every quarter we are improving, yeah. Whether it's 10%, 15%, I think it depends on the market as well. But if you, I feel, if you compare us with some of the published data you see from some of our competitors, we are around there, yeah. But obviously, we can improve. So that's something we need to look at. On the AI front, so, you know, as you know, AI is like a buzzword nowadays, right? Everybody's doing that. So, we also, in our organization, have a lot of initiatives on the use of AI. We have a few projects that we are working on, not just in terms of, you know, improving productivity, but also improving quality, for example, on improving the product that we pass on to AI. to our customers or even our service. So I think they are beginning to have impact. We've just initiated some of these. We're also doing some AI projects, for example, for operations, where we look at productivity improvement, or even safety. Yeah. So those kinds of things are ongoing. Hopefully, once we see some output from them, we will share that with you in one of these calls. Yes.

Dinesh Parekh, Analyst

Thank you. Thank you so much. Thank you so much for illustrating everything. Thank you very much. Thank you.

Speaker 11

Thank you. Our next question comes from Dhru T. Please accept the prompt on your screen, unmute your audio and video and proceed with your question.

Dhru T, Analyst — EGF AMC

Yeah. Hello.

Mohit Mishra, Analyst — ICICI Securities

Uh, am I audible?

Dhru T, Analyst — EGF AMC

Okay. Uh, thank you for the opportunity, sir. Uh, I just have a couple of questions. Um, how much acres of land do we, you know, hold, uh, in the company and any specific areas where we hold those land?

Amit Gupta, CFO

I think from a standpoint of the financial and the balance sheet standpoint, our assets valuations are reflected correctly. From a standpoint of the measurement of the lands, I'm not sure how relevant it would be with respect to determining a performance or asset valuation. And honestly speaking, that information may also be a bit speculative. So we won't be able to share those measurements here, but we have adequate assets to take into consideration our growth aspirations and they are well utilized. So I can maybe stop at that if that helps.

Dhru T, Analyst — EGF AMC

So, actually, the specific direction was towards, you know, held for sale

Kamal Taneja, Other

as such. Actually, there's one in Daman. I don't know what's the price for that. But look, like our job is to make packaging product. We are not looking at, how do you say that, not a real estate kind of company, right? So, I think we do that more. So, you know, sometimes it makes sense for you to have your own land. Sometimes it makes sense for you to lease land. I think we have a pretty good mixture of both at the moment. For example, Daman land used to be our plant in the past, which is up for sale now, but we are in the process at the moment. And so I think for us to tell you how much square foot and how much price, et cetera, would be a non-competitive, you know, we want the bids to come in, et cetera, but obviously, you know, when we do a sale like that, we will disclose that to the market and you will come to know.

Dhru T, Analyst — EGF AMC

So another question is, are there expenses, you know, in this quarter increased to 112 crores compared to 96 crores in the corresponding quarter last year? So what are the key reasons for this increase? And should we expect these expenses to remain elevated in the future?

Amit Gupta, CFO

Yeah, so Dhruv, actually, if you recall, we were actually referring to, you know, one-time helps that we have in the last quarter, which were primarily on account of retirels, valuations, and, you know, some of the reversals there about. And hence, when you're talking about the expenses, they're not like completely comparable. Between the two periods. So, I think that is one adjustment that we have. Plus, we have, you know, if you exclude that from a standpoint of our operating cost purposes, some of the items which are leading to the inflation, they are primarily power and fuel, you know, our CSR expenses, as well as, you know, some of the provisions that we have made, basically for the CSR purposes. So, but all of these are taken into consideration when we determine our pricing to the customer. So, any inflationary hurts which are actually coming in, you know, is something that we factor in from a standpoint of a margin management standpoint. So, two things. One is, there is a baseline which has one-timers which are not going to get repeated. Second, there are inflationary hurts which are linked to Middle East prices, especially power and fuel, which is leading to this particular increase.

Dhru T, Analyst — EGF AMC

Just one last question. So what is your outlook on the gross margins and EBITDA margins over the next two to three quarters?

Kamal Taneja, Other

We don't actually disclose that yet. So we're not going to talk again, you know, it can be anti-conflict fear, etc. Yeah, I think our aspiration is to maintain growth every quarter, every year. And that's what we are working on. We don't disclose our, let's say, focus for the year.

Dhru T, Analyst — EGF AMC

Thank you.

Kamal Taneja, Other

Thank you.

Speaker 11

Thank you. Our next question is from Shivakshi Bhardwaj. Please accept the prompt on your screen. Unmute your audio and video and proceed with your question. Once again, a reminder, we request participants to announce their company names as well.

Shivakshi Bhardwaj, Analyst

Hi. Am I audible?

Speaker 11

You are audible, ma'am.

Shivakshi Bhardwaj, Analyst

Thank you so much. Good evening, everyone. I have a question related to Badhi plant. So I wanted to know, should we be expecting some similar kind of restructuring in other plants as well? Are you like looking at other plants with the same lens? So, should we be expecting something similar in other plants? There's a second part to this question. The Badi plant, of course, was serving some customers. So, I would like to understand how those customers will be served now. And should we be expecting again some additional cost associated to this restructuring, especially within the context of Badi plant?

Kamal Taneja, Other

Okay, maybe I can answer the second question first and then we'll come back to the first one. So, we have three. So, Bhatti is our labels plant. So, we make pressure-sensitive labels. We actually have three plants in our country. So, there's one in Ambarnaath and the other one in Bangalore, apart from Bhatti. Vadi is our smallest plant in terms of output and also number of people working there. And it was not profitable. And we had enough capacity in the other two plants. So from an efficiency point of view, we decided to move those volumes that Vadi was producing to the other two plants. So, that process has already been done. We are already in touch with our customers and that supply chain is going smoothly. So, we are very happy to kind of absorb that in our existing setup and save some money and, you know, be more productive in pressure-sensitive labors. I think your first question was kind of, is that something more we are going to do like that? So, not at the moment. I think, again, you know, if we had to do something like that, we would have done together with Bhatti. I think we feel quite set with this. Again, you know, how markets develop in the future, how the demand develops in the future. No, I think we will take action as and when required either to expand or to contract. So, again, you know, what our deliverable is to for our stakeholders that they get, let's say, growth from us and better value of their stake in our company, and we are always working towards that. So, whatever makes sense, we do that. But at the moment, we are not looking at anything else.

Shivakshi Bhardwaj, Analyst

Yeah, that's really helpful. Thank you so much. I have one more question. Again, it's very broader in a way. Do you also like track some kind of metric to decide what should be the product mix or whatever product mix is going to be that's going to impact the margins and will help the company grow? Is there some kind of metric that you kind of track? Are there some indicators that you can shed some light on?

Kamal Taneja, Other

Yeah, so I think Amit mentioned a few times product mix is something we track because, again, our focus has always been on a higher value product because that's what our value proposition is to our customer. And our customers appreciate, you know, all the innovation, sustainable products, etc. So we always track that. Now, in terms of how much that mix would be or should be, I think it's an evolution, right? And so it depends from season to season. It depends on customer to customer. There are certain kind of products that we are very good at. So we always try to sell that more compared to, let's say, more commoditized products in the industry. Again, you know, we do our best to work with our customer and make sure that we offer them the best value for what they buy from us.

Shivakshi Bhardwaj, Analyst

Thank you so much. I have no more questions. Have a great evening. Thank you. Thank you.

Speaker 11

Thank you. Our next question comes from Sheetal Shah. Please accept the prompt on your screen. Unmute your audio and video and proceed with your question. Sheetal Shah, may we request you to please unmute your audio and video and proceed. Hello, am I audible, sir?

Sheetal Shah, Analyst — RTS

You are audible. Very good evening, sir. RTS, congratulations on delivering excellent revenue and volume growth, sir. Sir, my only question is, sir, what are the tailwinds you aspire for the revenue to sustain this momentum and the margin to increase? And the things what you aspire, are they visible as of now? Yes, sir, you can continue. Thank you.

Kamal Taneja, Other

Let me understand your question. So what you're saying is what would help us in future in the market that would deliver more value.

Sheetal Shah, Analyst — RTS

Yes, yes. What I'm telling you, sir, the tailwind you aspire for the volume to sustain this type of momentum

Operator

and

Sheetal Shah, Analyst — RTS

volume and revenue and the margin to increase. And whatever you are aspiring, are the green shots visible as of now?

Kamal Taneja, Other

Yeah, yeah. I think I will take a shot at this, Samit, if you want to chip in. So I think the biggest tailwind I would expect, Aspire, is the sustainability side, right? So, and it's not just for margin, but also from the environment point of view, from, you know, what we need to do in terms of sustainability in general. I just hope that we had more and more adoption of that. We actually made some strides this year. So far, we are seeing growth there. However, I think I just wish there was more regulatory enforcement on those kind of things and also willingness from our customers to adapt more Even when the products are, let's say, more expensive than what they normally buy, which are more commoditized. So I think that would be one I would call out. The other one is also the innovation. Sustainability is not just from a material point of view, but also using less plastic or less material, doesn't matter plastic or compostable or paper, because we do all of them. Right. However, the less material you use responsibly, I think that's something that we always try and you know it. I just hope our customers appreciate that as well. And the garments actually kind of help us to regulate those kind of things. Amit, do you want to add anything on that? But in terms of tailwinds, I don't see many tailwinds. I think we're working very hard to kind of earn that increase in volumes and also price from our customers. It's not easy. Yeah.

Sheetal Shah, Analyst — RTS

Okay, because after a long time, sir, we have crossed 10% margin last quarter after so many years. And we as an investor hope that this to continue. And this type of volume that we are seeing since last two, three quarters, actually, in the history, four or five years, I had never seen such type of volumes. That's what I was asking. So is it sustainable volume? My earlier participant also questioned this, what we are worried about, Will it continue or not? And whatever tailwind you are aspiring, are they visible as of now, in this quarter or next quarter? Do you think it will be materialized?

Kamal Taneja, Other

First of all, I think there's no tailwind here. There's actually a lot of geopolitical crisis going on, as you know, so it's not easy with the inflation, etc. for us to pass on those costs to our customers, which is understandably because, you know, ultimately it impacts the consumer, right? So you would see maybe, you know, reduction in volume or whatever. That's what our customers are saying. I think they do things, if you say, I don't know, it's tailwind or whatever. I think we are much more focused on our business and me and Amit are hired for the growth. So I think if we don't deliver that, we won't be addressing these calls, I guess. Yeah. I think the second thing, which I think we are doing well is the earning our volume increase, you know, although our customers are reporting, like I said, Flat, let's say, volumes or not so growing volume, but we are growing, which actually shows that we are perhaps gaining market share. And the good thing is that market is still very fragmented. You know, despite we being one of the largest flexible manufacturers, packaging manufacturers in India, we are still less than double digit market share, right? So there's still a lot of scope for us to improve and grow, and that's what we are striving to do.

Sheetal Shah, Analyst — RTS

Okay, sir. Thank you so much and all the best for the future, sir.

Kamal Taneja, Other

And thank you for your support. Thank you.

Speaker 11

Thank you. Our next question comes from Magesh P. Please accept the prompt on your screen, unmute your audio and video, and proceed with your question.

Magesh P, Analyst

Sorry, am I audible now?

Speaker 11

You are audible, sir. You may proceed.

Magesh P, Analyst

Yeah. Yeah. Good evening, sir. Just a couple of questions from my end. And then we are into FMCG, Parma, and other sectors, right? And then where do you see we are doing good in this sectors? And then where do you feel that we have a good bargain power in this sectors for Utamki?

Kamal Taneja, Other

So, the question is which segments we are doing well? Yeah, yeah, yeah. All right. Okay. Yeah, I think, I think we are doing well in most of the segments. I think we, so, so, for us, like I said many times, so we, we focus on the products that we have better value proposition. So, you know, Huttamaki is very well known in the industry in terms of the quality and the innovation we bring, right? So we work with customers who are demanding those kind of volumes and who are working with us to kind of either upscale or upgrade their packaging, for example, or sometimes where they want more reliable supplier, etc. So I would say we do not have any, we have segment agnostic in a sense. Now we can do better, obviously, in some segments, for example, you know, pharma, still a lot of opportunity for us to grow. And there are, you know, more commoditized segments, for example, I don't know, single layer, low complexity, what you're seeing, for example, For example, biscuits, etc. where we are not so competitive because they are less complex where we are not focusing. However, we are still pretty decent supply to that segment as well.

Magesh P, Analyst

Yeah, yeah. And then if you see compared to your peers, right, I'm not directly comparing it, but still they are able to do 17 to 15 to 20% margin in their financials. And if I could match them with the Uta Unki, we are doing around now 6 to 10%. Now, for last few quarters, we are from 8 to 10%, right? And then if you compare to your peers, and then where you see we are as a company, we are lagging, and then where you see they are higher edge compared to the Uta Unki, or where you see that you want to improve to, I'm not expecting to reach 20% to their level, but either 10 to 12 will be a good margin and moving forward. We are not expecting it in the next quarter, but there should be some kind of working towards that, right? So just I want to understand your management perspective on it.

Kamal Taneja, Other

Yeah, yeah, I think, I think, again, you know, I think what you're comparing us against some of these competitors may have a different product mix, you know, not just what we're operating. However, having said that, like the previous caller, our aspiration is always to improve from what we are doing now.

Magesh P, Analyst

Okay. And the last question, compared to the previous quarter, right, and then last quarter, we have around 10% margin, and then this quarter, we had around 8% margin, and then this is most related to the cost inflation, or we are unable to do a bargain compared to the previous quarter, There are any inventory issues just I want to understand that scale of that margin difference.

Amit Gupta, CFO

Oh, sorry, I believe that when you talk about margin, you're talking about EBITDA?

Magesh P, Analyst

Yeah, EBITDA is 8% for this quarter and then last quarter, we had around 10%, right? So just I want to understand in the sense of whether it's on cost inflation or we have a less bargain power in a sales or it's due to the inventory or any other criteria.

Amit Gupta, CFO

So the variation between the EBITDA margins between the purposes primarily a reflection of the timing differences that we have with respect to the cost, inflation and the pricing pass-through. So generally, we have a cycle wherein we establish a particular cost and then we have the price corrections coming in. So there are some timing gaps which Kamal actually explained initially. That sometimes we are slightly behind, sometimes slightly ahead. So while we are actually growing our profit margins in absolute terms versus the last year, between the quarters, you will see a bit of a fluctuation, which is consistent with the way the business cycles operate. So there's no major concern here, but from a standpoint, it is basically a reflection of some of the costs which have come in, let's say, late September, which are going to be recovered into the subsequent months. And hence, you know, there would be between the quarters, there would be some play every quarter. But on a YTD basis, if you look at, you know, our EBITDA margins have gone to 10 percent from a 9.2 percent. So almost 80 basis point improvement on a nine month basis with respect to EBITDA margins.

Magesh P, Analyst

Okay, that's it from my end. And then just wishing you this team, and then I could see a lot of improvement in this last few quarters. Just please carry forward to the coming quarters. And then we would like to see more wrappers while we are having food in Uttamukki packages. Thank you. Thank you.

Speaker 11

Thank you. Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the conference over to Mr. Kamal Taneja, Managing Director, for closing comments.

Kamal Taneja, Other

Thank you. I see there were some questions on the chat box also. Again, we didn't have time to answer them. But please, if you have specific questions, feel free to contact us, like the contacts we flashed earlier. I think if I can summarize how we did in the quarter, as you know, we did well on the growth side. So, the growth is coming not just from the pricing, but also from a better, healthier product mix, as well as the volume increase, which is very encouraging for us to see because we have kind of maintained that for last week quarters now. On the margin side, I think the margin is still healthy. It depends on how you compare that. I do not see any structural change into what we are doing at the moment compared to last quarter or even future quarter. So our aspiration is to make sure that we return more value to our shareholders and frankly also to our customers moving forward. So, we'll always be focused on growth, focused on margin improvement, and if the market holds up, etc., we see that we'll do our best to improve that. Before I go, Amit, any last comments from your side?

Amit Gupta, CFO

No, Kamal, you summarized it well, and I believe that more than words, the numbers speak for themselves. You know, the quarter growth that we are delivering with a healthy top line, with a mix of volume, pricing and mix and the margin improvements is a reflection of the performance. So nothing more to build on that. Thank you everyone for joining the call.

Kamal Taneja, Other

And lastly, like I said earlier, so happy Diwali to everyone who's celebrating, to you, your families and your friends. Thank you.

Speaker 11

Thank you. On behalf of Uttamaki India Limited, that concludes this conference. Thank you all for joining us. You may now disconnect.