Ester Industries Ltd. — Call Transcript 2022

Nov 23, 2022

Date: 23rd November, 2022

BSE Limited (BSE)	National Stock Exchange of India Limited (NSE)
Department of Corporate services	Exchange Plaza,
Phirojee Jeejeebhoy Towers	Plot no. C/1, G Block,
Dalal Street, Mumbai –400023	Bandra-Kurla Complex,
	Bandra (E), Mumbai –400051
Scrip Code: 500136	Symbol: ESTER

Subject: Transcripts of Earning call held on 16 th November 2022

Dear Sir

In continuation of our letter dated 16 th November 2022 regarding Audio recording of Earnings call for Investors and Analysts and pursuant to Regulation 30 (6) of the SEBI (Listing Obligations and Disclosure Requirements) 2015, the transcripts is enclosed herewith and available on the website of the company at the following link-

https://www.esterindustries.com/node/1124

Please take same on your records.

Thanking You

Yours Faithfully

For Ester Industries Limited

Diwaker Dinesh Head-Legal & Company Secretary

Ester Industries Limited Q2 H1 FY23 Earnings Conference Call Transcript November 16, 2022

Moderator:	Ladies and gentlemen, good day, and welcome to Ester Industries LimitedQ2 H1 FY'23 Earnings Conference Call.
	Please note that this conference is being recorded.
	I now hand the conference over to Mr. Gavin Desa from CDR India. Thankyou, and over to you, sir.
Gavin Desa:	Thank you. Good day, everyone, and a warm welcome to Ester IndustriesQ2 and H1 FY'23 Analyst and Investor Conference Call.
	We have with us today is Mr. Pradeep Kumar Rustagi, Executive Director,Corporate Affairs; and Mr. Girish Behal, Business Head.
	We will begin this call with opening remarks from the Management, followingwhich we will have the floor open for interactive Q&A session.
	Before we begin, I would like to point out that some statements made intoday's discussion may be forward-looking in nature and a note to this effectwas sent to you in the invite earlier.
	I would now like to invite Mr. Pradeep Kumar Rustagi to make his openingremarks. Over to you, Pradeep.
Pradeep Rustagi:	Thank you, Gavin, and thank you, everyone, for joining us today. I will beginthe call with a brief overview of the businesses, followed by walk-through offinancial performance for the quarter and half year under review.
	We have had a good first half wherein both Films and Specialty Polymersreported good volumes of sales, resulting in higher revenue growth. In termsof profitability, our results for the quarter have been mixed. While the Filmbusiness performance was muted due to commissioning of new capacities,inflationary pressure on cost of conversion and operations and a challengingmacroeconomic environment, we are happy with the growth of our highmargin Specialty Polymer business.
	Let me elaborate on the performance of each business segment.
:	So starting with the Specialty Polymer business, Specialty Polymer businesshad a stellar run with Q2 registering higher sales and EBIT in terms ofabsolute terms till today. Improved performance, both in terms of revenueand profitability was driven by volume with better product mix as well as

higher sales value. We continue to see good traction for our marquee products mainly MB03 and Innovative PBT. Sales of our lead and established offering, MB03 were in line with the quarterly run rate at 423 metric tons. Innovative PBT witnessed considerable traction with sales volume of 605 metric tons for the quarter, higher by 25% on a sequential basis and more than double on a year-on-year basis. Overall volumes for the business are higher by 15.3% compared to Q1 FY'23. While on a yearon-year basis, we had a growth of about 41%. This business, as we have discussed before, is one whose cornerstone is innovation and a portfolio of patented products with largely unique value propositions. We continue to enhance our capabilities through fresh investment and focus on development of new innovative products.

EBIT for the quarter stood at Rs. 23 crore as against Rs.17 crore generated during Q2 FY'22, higher by 36%. Margins for the quarter in terms of percentage moderated in comparison with the corresponding quarter last year and stood at 32%. The selling prices are linked to the movement of input prices. While it is possible that in the near term, demand may be impacted by inflationary in the global markets, especially U.S., in the long term, we remain extremely bullish about this business, which is the patented expanding product portfolio. We have some exciting new products in the pipeline, which are expected to start getting commercialized in the first half of calendar year '23.

: Moving on to the Film business. Growth in revenue was mainly driven by increase in feedstock prices leading to higher per-unit realization. While sales are marginally higher on a year-on-year basis, on a sequential basis, though we have seen some moderation owing to benign margins. The addition of new capacities in India have resulted demand-supply imbalance with the supply exceeding demand. This, in turn, has resulted in pressure on margins. Another reason for lower operating performance is inflationary pressure resulting in higher cost of conversion and operations, especially power and fuel, and logistics stores.

: The demand-supply imbalance in India, global slowdown & macro environment is expected to see the industry continue to face challenges in the near term.

We expect the situation to normalize in medium to long term and expect the margins to improve as growth in demand is expected to continue at the rate of 11% to 13% per annum domestically, and 6%, to 6.5% per annum globally. We continue to increase our focus on enhancing proportion of value-added products, which will help mitigate the cyclical nature of business. We remain positive about the business in medium to long term. Furthermore, the commission of new units in Telangana, that is estimated to have low cost of conversion and operations due to a state-of-art manufacturing facility, should also help us scale up our business and improve profitability profile of the business.

Moving on to Engineering Plastic business. Q2 represented the last quarter for us, consequent to transfer of Engineering Plastic business as a going concern on slump sale basis to Radici Plastic India Private Limited on 15 September '22. The prospects of this business, therefore, are not relevant to the discussion. The sale of Engineering Plastic business has happened at the right time as margins that peaked in June '21 have started to normalize. Proceeds from the slump sale have enabled the company to improve its liquidity position and further strengthen the leveraging, as

demonstrated by net debt-EBITDA multiple of 0.23x as at 30th September '22. Surplus liquidity of about Rs.207 crore generated through sale of business has been invested in safe and secure financial instruments.

The transaction has not only enabled the company to further strengthen its balance sheet but will also provide the requisite growth capital for scaling of the core business of the company, namely Polyester Films and Specialty Polymers. Transaction with Radici Plastics is also a reflection of Ester's ability to build a business and create value.

: We are confident of the long-term growth outlook for both our businesses. Commissioning of our new units will help to further strengthen our competitive position as new unit will turn out to be low cost operations. Our strong balance sheet offers comfort and is supportive of our growth plans.

That concludes our remarks about the business. I will now walk you through financial performance for the quarter and half year ended September 30, '22, post of which we can begin the Q&A session.

Starting with the top line, revenues on the continuing operations is stood at Rs.304 crore as against Rs.259 crore reported during Q2 FY'22, that is higher by 17.4%. Revenues from discontinued operations of Engineering Plastic business, it stood at Rs.58 crore as Rs.74 crore reported during Q2 FY'22, lower by 21%. On a half-yearly basis, revenue from continuing operations stood at Rs.629 crore as against Rs.519 crore, higher by about 21%. This improvement is driven by both Film and Specialty Polymer businesses.

On a half-year basis, revenue from discontinued operations of VC business, stood at Rs.136 crore as against Rs.133 crore reported during H1 FY'22, marginally higher by 2%. EBITDA for the quarter from continued operations stood at Rs.30 crore as against Rs.41 crore generated during Q2 FY'22. EBITDA for the H1 FY'23 from continued operations stood at Rs.92 crore as against Rs.83 crore generated during H1 FY'22.

During Q2 FY'23, moderation in profitability of film business was partially made good by a strong performance of Specialty Polymer business. From disposal of discontinued business, company earned profit before tax of Rs.148 crore and profit after tax of Rs.114 crore. Thus, Company, as a whole, earned profit before tax of Rs.168 crore and PAT of Rs.127 crore as against PBT of Rs.44 crore and PAT of Rs.33 crore earned during Q2 FY'22. PAT for the H1 FY'23 stood at Rs.169 crore as against Rs.71 crore earned during H1 FY'22.

: As of September 30, '22, outstanding interest bearing debt, stood at Rs.294 crore. Debt net of cash and liquid investment stood at Rs.50 crore, which is 0.23x -- for the current financial year. We expect our interest outgo net of returns on liquid investments would be significantly lower than current levels going forward. We remain committed towards maintaining a strong balance sheet that is supportive of our growth initiatives.

That brings me to the end of our opening remarks. We would now like to open the floor for questions. Thank you.

Moderator: The first question is from the line of Deepan Shankar from Trustline PMS.

Deepan Shankar:	Sir, firstly, I wanted to understand how have been the BOPET pricesbehaving over October and November so far.
Pradeep Rustagi:	So we'll share with you the numbers for the commodity film, which is 12-micron corona In October, the prices were in the range of Rs.104 to Rs.105.and in November, it has reduced to about Rs.97, Rs.98.
Deepan Shankar:	So over medium term, what will be the outlook? And what would be the driverfor BOPET films prices, sir?
Pradeep Rustagi:	So as the demand improves, because the demand is continuously growingat about 11% to 13% domestically and overseas, it is growing at about --globally at about 6% to 6.5%. There will be continuous growth in demand.And as the macroeconomic situation also improves, we should seeimprovement in the performance. And therefore, we are confident andpositive about the performance of the business in the medium to long term.
Deepan Shankar:	Are we expecting strong supply growth coming up in -- over the next 2, 3years?
Girish Behal:	Yes, I will answer. I think just to add on what Preedap just said, earlier, lastfew quarters, the ocean freights were running very high which werebecoming an obstacle for being competitive in many of the export markets.Freight rate levels are normalizing now, so which is making many moremarkets, very, very competitive from supply in India. So that is going to addto the demand prospects for the industry. Few lines have also got tied up toa large extent. I think 2 or 3 more lines that are expected in the next financialyear, probably looking at the demand prospects and opening up the globaleconomies and ocean freight normalization, the medium to looks to be betterthan what you're having correctly.
Moderator:	The next question is from the line of Gaurav Lohia from Bowhead India Fund.Please go ahead
Gaurav Lohia:	Sir, in terms of metric ton, can you please quantify what kind of demand isthere. You said that the demand is growing at 11% to 13%, but if you canquantify in metric tons? And similarly, for capacities, what kind of capacitieswere there as of September-end or as of today, what kind of capacities wereadded in the last 6-months? And what kind of capacity addition would bethere in the next 12 months?
Girish Behal:	Yes. I think the demand -- the first question is regarding demand. You'retalking -- I think you're talking about the demand in India. So let's say, thedemand in India is around anywhere between 50,000 to 60,000 tons permonth. And, if you look at some capacities, which are added in last 6 monthsor so, from, let's say, April till now. So, probably, I think 4 lines got started.And we think that over the next 12 months, maybe 3 to 4 lines may getadded.
Gaurav Lohia:	A line of how many tons, sir?
Girish Behal:	Let's simply take a thumb rule a line of, let's say, 3,000 tons per month.
Gaurav Lohia:	And what was the industry capacity as on today or what is the industrycapacity as on today?

Girish Behal:	I think industry capacity as of today could be around anywhere around80,000 tons per month.
Pradeep Rustagi:	So 10 lakhs, 1 million tons per annum.
Gaurav Lohia:	So that's substantial. And this includes -- these 12 lines include our Capexalso, right, which is coming up in.
Girish Behal:	Yes, these lines – correct. All the numbers that I'm saying, that includes ourline
Gaurav Lohia:	Okay. Understood. And sir, you mentioned about the price being or comingdown from Rs.104 to Rs.97, but can you give a gross value addition per kgfor last quarter and what it is right now?
Pradeep Rustagi:	Last quarter, in 12 micron corona, we had value addition, which is sellingprice minus raw material cost of about Rs.28, Rs.29 a kg. And currently, it isplus of Rs.20 in the month of November.
Girish Behal:	I think it would be in the range of Rs.20 to Rs.25.
Gaurav Lohia:	And sir, I understand that it's difficult to the moment in the specialty businessnow because of the global trends, but on the longer run, let's say, 1 or 2years, what kind of revenue and margins we can do over there? And if youcan give some further details on the product side, MB-03 right now, you saidit's 423 metric ton per quarter, right? But next 1 or 2 years, what kind ofproduct or the size of the market and the size of this product could be, let'ssay, in FY'25? Then similarly for innovative PBT or MB07, MB06 andLMC03?
Pradeep Rustagi:	So in the current year FY'23, we expect to do a volume of about 1,200 to1,300 tons of MB03 and about 1,400 to 1,500 tons of innovative PBT. Giventhe current situation that is prevailing in the world, I think at this point in time,it will not be right on our part to give you an indication of what the volumescould be in the financial year ended March '24 or '25, but it would definitelybe better than March '23, that is for sure.
Gaurav Lohia:	Let's say, if the world is in a normalized, if we live in a normalized world,what kind of potential is there for these products, MB03 and innovative PVTor any other major product we have in Specialty polymer line.
Pradeep Rustagi:	So we can be sort of we can look at a growth of about more than 25% to30% in the top line of Specialty Polymer in each of the following years, andlet's say, March '24 and '25. So we can look at if we were to give it a broadrange of growth that we can see in the revenue, anything between 25% to35% is the revenue growth that we can easily target, and we are confidentof doing, provided the situation comes back to normal in terms of theeconomic environment.
Gaurav Lohia:	And margins, EBIT margins would be north of 35%?
Pradeep Rustagi:	As we have been maintaining and as is evident from the results that are onthe table, we can easily expect EBIT margins, earnings before interest taxof about plus of 30% to 33%. So anything between 33% to 37%
Gaurav Lohia:	This is before unallocable, right?

Pradeep Rustagi:	Yes, it is based on the direct expenses, yes. The common expenses are notdeductive from it. These are as per the segmental results that are drawn interms of accounting standards, prevailing accounting standards.
Gaurav Lohia:	Understood. And the last question, sir, the cash we got from the deal, aboutRs.200 crore. Have we decided whether we are going to distribute it or youwould be think we are thinking about other Capex once this Capex comes
Pradeep Rustagi:	So we have certain amounts of Capex already drawn for the financial year'23 and '24. And instead of raising loan, we would rather use these funds.And therefore, as of now, these are retained in the business to meet thecapital expenditure requirement of the company.
Gaurav Lohia:	So the Capex would pertain to what?
Pradeep Rustagi:	These are for debottlenecking, efficiency improvement. So there is certaininvestment in capacity for value-added and Specialty product in polyesterfilm. So efficiency improvement, value-added and specialty productenhancement, etc.
Gaurav Lohia:	Understood. And how much Capex you're looking at?
Pradeep Rustagi:	We are looking at close to Rs.200 crore of expenditure between -- by March'24.
Gaurav Lohia:	By March '24. This is over and above the Capex that we have undertaken,right?
Pradeep Rustagi:	No, this is the Capex that is undertaken. It doesn't take into account anyfresh capital expenditure. This was the capital expenditure approved for the2 financial years ended March, 24.
Moderator:	The next question is from the line of Alpesh Lad from Dolat Capital. Pleasego ahead.
Alpesh Lad:	Actually, I wanted to get a broader view on the Specialty Polymer business.And specifically, I wanted to ask that, is there any slowdown in the approvalprocess for the new products that we have launched in the Specialty Polymerbusiness?
Pradeep Rustagi:	As we have taken in our presentation in the near term, following 1 or 2quarters, because of the inflationary trend in U.S., there could be somepressure on the volumes and therefore, the top line and bottom line ofSpecialty Polymer. But as the situation improves, we should very soon bebouncing back to the normal levels, and then we should have an increasingtrend going forward.
Alpesh Lad:	There is no slowdown in any approval process for the products side?
Pradeep Rustagi:	On the new products, there are products under development. There areproducts at various stages of approval. Those are progressing at the rightpace, and we should be coming out with new products in the first half of thecalendar year '23. By June or September '23, we should be coming out withnew products as well.

Alpesh Lad:	In specifically, the polyester film business, in other companies as well, wehave witnessed some demand slowdown from an end-user industries likeTextile. So have our product demand has also been hampered because ofthe same during the quarter?
Girish Behal:	I think we are not much present for polyester film for textiles. So that is notthe segment we operate in. But yes, the textile market in general is affected.so the films requirement in textile market is affected, so which is impactingthe total film demand on an overall basis in India.
Alpesh Lad:	Okay. And my last question is now we have seen a higher revenue fromSpecialty Polymer business in this quarter. So like, at what level are weexpecting this revenue to stabilize or the percentage of revenue fromSpecialty Polymer business to stabilize out of our total revenue?
Girish Behal:	I think the way – I would rather answer the way to be in line with what Mr.Rustagi has answered in the previous question, that at least a 25% to 30%revenue growth is something that what we can look forward in times to come.
Alpesh Lad:	Right.
Girish Behal:	In a normalized scenario, yes.
Moderator:	The next question is from the line of Jatin Damania from Kotak Securities.
Jatin Damania:	So sir, I just wanted to check that you said that the current monthly demandon BOPET is around 50,000 to 60,000 tons with an installed capacity of80,000 tons. Now with a couple of lines we have already seen came up inFY'23 and another 3, 4 lines coming in. So don't you think that it could beimmense pressure on the supply side in the medium term, which can weighon the overall margins of the business?
Girish Behal:	I think, let me just rephrase what I said earlier. I mentioned the last 6 months,I think, 4 to 5 lines have started, which let's say, from April to, let's say,October, we are talking about. And the previous question was how manynew lines are expected in the next 12 months? Again, 3, 4 new lines are alsoexpected in the next 12 months or so. That change, yes, this capacity hasput some pressure because many of the export markets, which were notavailable to Indian producers because of higher ocean freight, that is nowavailable. So, ocean freights have come crashing down. So at least many ofthe markets which is available to Indian producers. And we are also happythat despite textile slowdown, but overall, other consumption sectors forpolyester films are doing well. So we are very optimistic about the future ofthe business.
Jatin Damania:	That's true. But if you look at the globally, because of the inflation, definitely,the demand is not doing that good. And given the current spread I don't dowe think that this current spread that you mentioned of plus Rs.20, Rs.25,its sustainable in the near to medium term, or probably we can see spreadscoming down to around Rs.10 to Rs.15 for the overall packaging business.
Girish Behal:	Yes. I think we expect the spreads to improve in coming times. While we aretalking about the global market and probably recession worry, we have to bemindfulofthehigherenergycostacrosstheboard,whichareintrupting/hurting the overseas producer more. So we see a reasonably goodopportunity for Indian producers.

Jatin Damania:	Sir, can you help us in understanding the breakup of spreads in terms ofyour BOPET and your Specialty business?
Pradeep Rustagi:	Both are two different business products. So there's no rationale in drawinga comparison between margins of Specialty Polymer and Films business.
Jatin Damania:	No, sir, I totally agree. But if you say that your Specialty business willcontinue to you are likely to maintain 25%, 30%. So just looking at in termsof the EBITDA contribution that can come from the Specialty over a longerperiod of time as compared to the BOPET, where we might see a marginpressure.
Pradeep Rustagi:	So we told you that in the Specialty Polymer business, the EBIT margins,earnings before interest is expected to be in the range of 32% to 37% of thesales revenue. So that's the kind of margins because there is no competition.It is just that as the volume picks up the top line and the bottom line improvesin Specialty Polymer. In Film, the margins are more market-driven. But we'llcontinue to work on value-added and Specialty Products and our proportionof value-added and Specialty Products is going up quarter by quarter. Weare currently at about 24%, out of the total sales of polyester films. 24% is inthe form of by terms of quantity, in the form of value-added and specialtyproducts.
Girish Behal	I think one more thing which could be the new line is expected to start, thatis also going to add a lot of new volume available that will help the profitabilityin the company.
Jatin Damania:	And sir, last bit on the Capex, sir, of the Rs.200 crore, how much we havealready spent?
Pradeep Rustagi:	it is already -- none out of that has been spent. It is kept in the liquidinvestment. So we have not yet used any funds out of the sale proceeds ofEngineering Plastic segment.
Moderator:	The next question is from the line of Pratap Makwana from Forbes MarshallPrivate Limited.
Pratap Makwana:	My first question, the revenue compensation of the sold plastic business,can we expect it will be revenue compensation will be there in from the Q3onwards? So we can see that Q3 will be now the sold plastic business saleopportunity, which has been lost will be compensated from the higher topline from Q3 onwards?
	And in addition to that, what is the additional revenue we expect from theTelangana plant, which is which is coming upoperational from theDecember. So how much revenue will be additionally available on top ofthat?
Pradeep Rustagi:	So going by the current scenario, we don't I mean, it would not be possibleto make good the lost revenue of Engineering Plastic business in Q3 and Q4of the current financial year. So next year onwards, we may be able tocompensate the loss of revenue by increased revenue from segment films& Specialty Polymer business.

	As far as Telengana operations are concerned, we expect to generaterevenue of about Rs. 600 crore once the capacity utilization reaches almostthe optimum level.
Pratap Makwana:	My second question, so '21-'22 was the Rs.1,400 crore, how much yourexpectations on the top line growth for '20 to '22?
Pradeep Rustagi:	Yes. So if we exclude the Engineering Plastics, we should be closing theyear anything between Rs.1,200 crore to Rs.1,250 crore.
Pratap Makwana:	Can we expect dividend yield as now company is now rich in case? Andregularly, there are two dividends. One is the interim and full. So can weexpect the interim dividend, which is the pending for '21-'22 will be availablefor shareholders?
Pradeep Rustagi:	We have a dividend payout policy, which has been very well drafted by theBoard of Directors. We will stick to the policy and distribute dividends interms of provision of that policy.
Pratap Makwana:	And any effect on attrition on a similar kind of industry, so people areswitching on and leveraging the opportunity, that is yielding any negativepart on the operational side?
Girish Behal:	No, I think that's not a concern that we have.
Moderator:	The next question is from the line of Saket Kapoor from Kapoor & Company.
Saket Kapoor:	Sir, firstly, if you could outline what has actually happened in the filmbusiness, wherein whether this is a lower demand scenario that has led tomargin squeeze or the raw material pass-on lag effect is there. so if youcould delve more the reason special for the film business performance goingdown?
Girish Behal:	I think in the previous set of questions, we explained about some slowdownsin the textile market and some slowdowns in the global market. Plus on topof that, there's some capacity expansion, which has resulted into animbalance in the demand-supply equation that has put pressure on thespreads.
Pradeep Rustagi:	Saket, so the raw material cost has not gone up since June '22. So there isno question of passing on the increased raw material costs. It is just thereasons that Girish has just now explained, which are the lower performancecan be attributed to these reasons.
Saket Kapoor:	Okay. And sir, how has the raw material market been have fared for thisquarter, if we give the breakup for this effect and MEG prices.
Pradeep Rustagi:	Yes. So if you look at the September quarter, the PTA was about Rs.79 akg, MEG was Rs.51 and the raw material cost was Rs.85. In the month ofOctober, the same is in the range of Rs.81 to Rs.82. And in November, it isRs.77 to Rs.78.
Saket Kapoor:	Okay. And what has been the price range for both PTA and MEG postSeptember quarter?
Pradeep Rustagi:	Yes. PTA in November, it is Rs.72. Currently, it is at Rs.72. MEG is at Rs.44a kg.

Saket Kapoor:	Okay. So there is a significant decline in MEG prices.
Pradeep Rustagi:	Yes. So yes, MEG and PTA, both prices have declined in the last 7 to 8months. In June, it was Rs.87 down to Rs.72 for PTA, MEG was Rs. 57,down to Rs.44, Rs.45 in the month of November.
Saket Kapoor:	Sir, then what explains this cost of material consumed increased quarter-onquarter from Rs.188 crore to Rs.192 crore, it is mainly because of theSpecialty Polymer that this thing has happened or
Pradeep Rustagi:	So you are comparing this quarter to which quarter?
Saket Kapoor:	I'm comparing Q-o-Q. Sir, June '22 our revenue was Rs.324 crore and theraw material consumption was Rs.188 crore. September, revenue is Rs.304crore and the raw material consumption is Rs.192 crore.
Pradeep Rustagi:	So it is not a case of the revenue is down because the selling prices havereduced.
Saket Kapoor:	Correct, sir. And the raw material consumption has gone up.
Pradeep Rustagi:	Raw material is almost the same. The volumes in Specialty Polymer hasincreased. So for Film business the keyraw materials are PTA, MEG. InSpecialty Polymers, there are other products also.
Saket Kapoor:	Right, sir. And sir, also for this quarter, there was a lower employee benefitexpense booked for this quarter.
Pradeep Rustagi:	So what happened that we have we generally created a provision for sharingour profit with the Executive Directors. That has not been provision has notbeen made in this quarter, looking at the lower performance. That's thereason there is a lesser burden on account of salary wages in this quarter.No provision has been created for commission payable to the ExecutiveDirectors, the whole-time Directors.
Saket Kapoor:	So that is temporarily only, post third quarter numbers, we can again get.
Pradeep Rustagi:	Everything will depend on the profit that we generate.
Saket Kapoor:	Right, sir. Now, coming to the percentage of value-added in business, whathas been the percentage of tonnage term for this quarter as well as for firsthalf? And sir, overall, for the debt, which we are also, sir, please provide thecost of fund and how with the increase in the repo rate, that is going to affectour finance costs.
Pradeep Rustagi:	Yes. So, out of the 15,000 tons that we have sold of polyester film in thequarter ended September '22, about 3,500 tons have been sold in the formof value-added and specialty products, which is 23% of the total volume. Andin terms of value, it is contributing to 35% of the value of Polyester Filmbusiness.
Saket Kapoor:	Okay. And going ahead also, that we are looking for this band, only 22% to23%, or we are looking to enhance it further?

Girish Behal:	The steps that we have taken, we have committed an investment forenhancing the volume of the products. We are putting some offline and othercapacities to be able to broaden our offering. And going forward, of course,the new capacity in Hyderabad plant, that could come in, probably that maynot have similar levels of the product mix. But let's say, our existing facility,the share will keep on growing. We have committed a sizable capacityexpansion for enhancing this portfolio.
Saket Kapoor:	Okay. Sir, for value addition what kind of Capex have we envisaged for theexisting line?
Girish Behal:	So for the enhancing Specialty Films, so probably, we have committedadditional Capex in the coating and metalizing machines.
Saket Kapoor:	Any amount that you would like to say? How much?
Girish Behal:	I think it will be in the circle of about I think all assets put together, it will beclose of close to about Rs. 40-odd crore.
Saket Kapoor:	And sir, for the new greenfield plant, Girish sir, you were mentioning thatwe will not have the same product profile there. So any reason, sir, why itwill be only commoditized film that we'll start with, or if you could give somemore color which aspects are you going to cater from the new facility?
Girish Behal:	I think that the new line is especially design line. There also our strategy ofserving specialty film would continue to play. But the movement the linestarts in the specialty portfolio will not come from Day 1. So there are alsothere are plans for building a specialty portfolio from that plant as well.
Saket Kapoor:	Okay. But sir, taking this into account, the current environment, would wetake a number of time for us to ramp up the capacity, or how will the rampingup will happen so going since they are seeing a drop in demand. How do wesee the commercialization coming up, sir? And what is the event base weare working with?
Girish Behal:	I think, let's say, we are talking about in today's scenario where there is arecession fear across the globe, that may have some minor impact on theramp-up, but that would not be significant.
Pradeep Rustagi:	I would just like to add, Saket, you said drop in demand. There is no drop indemand. It says that the additional capacities are available. We are notseeing contraction in demand.
Saket Kapoor:	Right, so to reach the optimum level for the new plant, will take longer time.So this understanding is correct, sir?
Girish Behal:	There could be a minor issue, but we don't expect any significant change inthe ramp-up time, which we have envisaged.
Saket Kapoor:	And sir, the per kg margin, you were mentioning some figures, Girish sir, Imissed that. What are we seeing that to increase going ahead because ofthe lower raw material prices?
Saket Kapoor:	Okay. So Rs.20, Rs.25, you mentioned, I missed – there was a drop in theline.

Girish Behal:	Yes, Rs.20, Rs.25 is that spread probably that is happening as of now. Butthen the way we expect things, the spread levels to improve going forward.
Saket Kapoor:	What was the spread for the first half, sir?
Girish Behal:	I don't have the numbers.
Pradeep Rustagi:	Yes, I have the number. The first june quarter, it was very good. It was plusof Rs.50. In September quarter, it dropped to about Rs.28 or Rs.29.
Saket Kapoor:	And last year, average, sir, do you have it?
Pradeep Rustagi:	Last year, I have quarter-by-quarter, not the – so if we talk of 12 microncorona, June '21 was about Rs.36, September was about Rs.36. Decemberwas very good at Rs.46. And March, it improved to about Rs.55, Rs.56.
Saket Kapoor:	My one question was unanswered about the debt part, sir. The cost of fundhas gone up, sir?
Pradeep Rustagi:	Yes. Yes. The debt the cost of debt in Ester Industries has gone up becausethe reverse repo rate has increased, 140 basis points is the increase. Butour increase is not 140 basis points, it's close to 100 basis points. But on anet outflow basis, we should see less burden on the P&L because we havethis value of about Rs.200 odd crore. which will generate some income. Andtherefore, net outflow on account of finance interest expenses would belesser in the following quarter.
Moderator:	The next question is from the line of Ravi Nagda, an individual investor.
Ravi Nagda:	Sir, my question is about Specialty products. You said from most someproducts, which are in the patent will start contributing. So, what are yourproducts? Can you give details of the products?
Girish Behal:	I think in the initial remark, we mentioned about MB03, IQPBT and MD07.So there's a long list of products that we do there.
Ravi Nagda:	But some time back, you had said LMC03, that could be the -- product. Andwe're still not seeing
Pradeep Rustagi:	That is also a product under development, yes.
Ravi Nagda:	Under development or it is approved?
Pradeep Rustagi:	It was approved. See, the volume offtake has to begin in a big way becauseof the inflationary pressure in the U.S., there is some slowdown in the takeoff.
Moderator:	The next question is from the line of Miraj, an individual Investor.
Miraj:	Sir, the sales in this quarter are a little bit less. So in the next quarter, couldit be lower or is it showing some growth?
Pradeep Rustagi:	It would be difficult to share the number at this point in time. But it could belower than the September '22 quarter.

Miraj:	Okay, sir and this Telangana plant, in December by when will it earlier, youhad mentioned that it will start in October. So now it will start in December,right?
Pradeep Rustagi:	So the operation at the Telangana plant will start in December so its impacton revenue will be seen from the March quarter. We would have started theplant earlier, but there is an external matter. We have not gotten the powerconnection yet. The state government is yet to provide that. Once, that isavailable, we are ready to go with the commercial production. From our side,we have completed all aspects of the commissioning and trial production,etc.
Miraj:	So, it's revenue will start coming in from Q1 FY'24, right?
Pradeep Rustagi:	Fourth quarter of FY'23, you can assume.
Moderator:	The next question is from the line of Ravi Nagdha. an individual investor.
Ravi Nagdha:	Sir, this LMC03 will it be a game changing new product in Specialty Polymer,whose volumes have been very good? Something that you are introducingnext year.
Pradeep Rustagi:	There are many products in various stages. A few have been approved bythe customers, few are in the process of being approved. And all theproducts that we are talking about are getting developed. They are going toadd to the profitability of the business. So each one is going to have goodmargins, and we expect to maintain EBIT margins of more than 32%, 35%going forward as well. So each product that will get developed or that will getcommercialized will add to the performance of the business.
Ravi Nagdha:	And sir, and this Spcialty Polymer business is concentrated in the U.S. so itis very risky as it is in a single country. So are we trying to target China,Europe, so do some sales there?
Girish Behal:	Our current Specialty Polymer business is there in the U.S., is it also therein China, it is also there in Europe to some extent. And we are focusing onall the geographies because we are working on various products variousconcepts, which are promising, let's say, which can offer a potential ofthousands of tons of one particular product in all the categories that we areworking on. And we are focusing on all the geographies. We are not onlyfocusing on U.S.
Ravi Nagdha:	And sir, that product called LMC03, the use of that is to make the finalproduct recyclable, right?
Girish Behal:	LMC, yes, it removes, let's say, a binding component with the polyestercomponent to make the entire product recyclable as it is.
Ravi Nagdha:	That product has been approved. So, what is the reason that the sales havenot been started yet?
Girish Behal:	There are -- because there are various steps of qualification involved in eachof the products. So it is taking time, and it is at different stages of approvalat different customers.
Ravi Nagdha:	So sir, what is a realistic timeline for that to approve?

Girish Behal:	I think it's very difficult to clarify an exact timeline because each project andeach customer and each company is different. So what we can say at thisstage, at least the product and the approval process is moving well. Andthere are certain concerns related to the global economic scenario, probablythis may put some weight on the entire progress. But we remain optimisticabout the future, which these products are offering.
Pradeep Rustagi:	We have been maintaining that so from the let's say, by June of '22 - '23,the first half of the calendar year next, we should see immediate traction inthe Specialty Polymer business.
Ravi Nagdha:	And from this all MB06, 07, all of these, all products?
Pradeep Rustagi:	The other products, the existing products also.
Moderator:	Thank you. Ladies and gentlemen, this was the last question for today. Iwould now like to hand the conference over to the Management for closingcomments.
Pradeep Rustagi:	Thank you so much for participating in the earnings call. We look forward tomeet you all next quarter in the month of January or February early Februaryor late January. Thank you