Rajshree Polypack Limited (RPPL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to quarter 2 for financial year '26 Conference Call to discuss operational and financial performance for Rajshree Polypack Limited. [Operator Instructions] Please note that this conference is being recorded. Today, we have with us Mr. Ramswaroop Thard, Chairman and Managing Director; Mr. Sunil Sharma, the CFO of the company. I will now hand over the call to the management for their opening remarks, after which we will open the floor for questions. Thank you, and over to you, Ramswaroop, sir.

Thank you, Mahipal. Good evening, everyone, and thank you for joining us today. I'm pleased to welcome all our shareholders, analysts and participants to the Rajshree Polypack Limited earnings call for the second quarter and first half of FY '26. With me today is our CFO, Mr. Sunil Sharma. I hope you all had the chance to go through the investor presentation. Let me begin with a quick overview of our performance. In the first half of the year, we achieved a turnover of INR 168.94 crores, slightly higher than INR 166.98 crores in the same period last year. This translates to a modest growth of 1.17%. Our EBITDA for H1 stood at INR 24.96 crores with margin of 14.78% as compared to INR 24.93 crores last year with a margin of 14.93%. Profit after tax came in at INR 8.71 crores as compared to INR 9.13 crores last year. Overall, the first half has been steady for the business. Coming to the second quarter specifically, our revenue was INR 86.43 crores compared to INR 88.28 crores last year. EBITDA stood at INR 12.89 crores with margin of 14.91%. Profit after tax was INR 4.61 crores compared to INR 5.10 crores in quarter 2 of last year. Quarter 2 has been slightly softer. I would like to talk about it as we progress further. Let me touch upon our domestic and export markets. Exports have been the standout performer for this year up till date. In H1 FY '26, exports grew sharply to INR 35.46 crore, up INR 19.7 crore last year, a strong 79.66% growth. In quarter 2 alone, exports more than doubled to INR 22 crores as compared to INR 10.54 crore last year. However, on the domestic side, we saw a decline. Domestic revenues for H1 were INR 133.48 crore compared to INR 147.24 crores last year. In Q2, domestic sales were INR 64.37 crores, however, lower than INR 77.73 crore in the same quarter last year. Exports in the -- I'll talk about exports. While the tariffs in U.S. has been challenged for many Indian exporters, our exports growth has continued mainly because of strong demand of our packaging product from our existing customers. However, adding new customers in the U.S. has been tough under the current tariff environment. To offset this, we are actively expanding our presence in other regions to reduce market concentration. Presently, we are already exporting to 13 countries, including U.S. On the domestic front, the domestic business continues to be driven by the sale of sheets and thermoform packaging products, mostly through our institutional customers, B2B sales and part of our sales through our distribution network. There are 2 main reasons for the decline in the domestic turnover. Due to lower raw material prices, the sale price had dropped by around 5% to 6% and lower-than-expected offtake from the large institutional customers due to early monsoon as well as extended monsoon. So the demand for products, especially for beverages and dairy was lower as expected in the extensive summers. Product-wise performance, if we talk about for H1 FY '26, injection molded products grew strongly up to 142% from INR 12.97 crores to INR 31.44 crores. Thermoforming packaging products were stable at around INR 100 crores and sheets was lower at INR 36.29 crore as compared to INR 48.88 crore last year. Quarter 2 FY '26 injection moulding revenue grew 176%, reaching INR 18.58 crores. Thermoform packaging product grew modestly to INR 45.84 crores, while sheet sale was at INR 21.1 crore, lower than INR 34 crore as compared to Q2 last year. On the capacities, we have expanded our injection molded capacity by 1,500 metric tonne, taking the total to 4,800 metric tonne per annum on a toll basis. This is largely in response to the growing export demand. At the same time, we are working on domestic markets as well. On the expenses front, COG has improved from 62.75% to 60.26%. Fixed manufacturing costs increased because of Unit 3, which has now just started operation and is in the ramp-up phase. Employees cost increased by around 15%, and the job work expenses rose due to higher injection moulding volumes. I would like to now talk about our joint venture company, Olive Ecopack. Olive Ecopack continues to encourage progresses -- encouraging progresses. We have installed capacity of 7 million units per day and one of the largest producers in the country in this category with installed capacity of 27,000 metric tonne for the coating and 15,000 metric tonne per annum for the packaging products. In H1, we achieved coating production of 1,240 metric tonne and finished goods at 1,244 metric tonne. The utilization is still low, but steadily improving. Financially, Olive recorded INR 19.86 crores of revenue in H1. Q2 revenue was INR 12.05 crores, significantly higher than INR 7.81 crores in Q1. EBITDA for Q2 turned slightly positive to INR 0.05 crore compared to loss of INR 1.73 crore in Q1. We are also seeing good traction from large domestic institutional customers as we are gaining interest from Europe and Middle East. While we have made significant movement in the U.S. as well, the market continues to be challenging due to tariff impact. We are confident of achieving around INR 16 crores to INR 18 crores of revenue in quarter 3 and continuing the journey towards profitability. During the year, both RPPL and Olive participated in several international and domestic exhibitions, including the NRA Show in April, Fine Food Australia, Pack Expo at Las Vegas and Anugha Anutec in Mumbai. These platforms have generated strong interest and our focus now is to convert their interest into higher volume and deeper market penetration. With this, I conclude the business update for the quarter. We would be happy to take your questions. [Operator Instructions]

Sir, so one of the reasons for the relatively low growth on the top line, it is mainly because the prices have come down by, you said 5% to 10%, raw material prices. So the finished products also, the prices would have come down to that extent only?

Yes. So there was a volume growth of 7% and there is a price degrowth of around 5% to 6%.

Okay. Okay. Sir, my second question is, after going through the presentation, where you have given the capacity snapshot of the different process we have extrusion, thermoforming and then the production metrics also for all this. So I have 2 observations, so needed your clarification. One is about the thermoforming production. So if you see the production metrics quarterly trends, so since Q2 FY '23, every second quarter of the financial year, we have been doing on an average from 1,784 metric tonnes to 1,996 metric tonnes in thermoforming. So first of all, I just want to know why there is not much growth there. And second question in that is, in spite this stagnant in the increase in the production, we have been adding the capacity there. If you see the capacity snapshot, every year for the last 3 years, we have been increasing the capacity. So is there anything wrong in the data? Or is there anything -- I'm not able to understand.

No. See, if you see the overall output has gone from 1,784 metric tonne to 1,996 metric tonne. So there has been increment of almost 1,000 metric tone to 1,200 metric tonne in the capacity and -- which we were at 8,770 metric tonne in '23. Now we are at 12,000 metric tonne. So generally, we operate at 70% to 75% of the installed capacity in thermoforming as a segment due to the mold change process because it's a batch process. So if we look into that ratio on 11,000 metric tonne, we are maintaining that same ratio. If you see H1 numbers, we were at 3,587 metric tonne in H1 '23, and now we are at 4,400 metric tonne. So on year-on-year basis, almost we have increased 2,000 metric tonne, and we have a capacity of around 3,500 metric tonne.

Correct. But sir, if you see particularly for the Q2 figures of last 4 years, that is given from '23, I know you've said 1,784 metric tonne, we have gone up to 1,996 metric tonne. But if you see it from FY '24 onwards, there is hardly any much jump. So is there any -- why it's not increasing, 1,938 metric tonne to it is just -- in the last 3 years, we are at 1,996 metric tonne?

If you see this particular quarter, this capacity was mostly added in last, I would say, 12 to 14 months. And we generally have a strong demand in Q1 and Q2.

Okay.

But this particular quarter, especially in part of Q1 and Q2, as explained, was dull on domestic front due to early monsoon and extended monsoon. So the capacities which were added, we are not able to take much advantage of that with respect to what we have added because this -- till '24, we were at 9,270 metric tonne only. And whatever we have added the capacities in last year, mid and in this particular financial year.

Okay. Got it, sir. So what you're saying is because some sales were down due to monsoon being starting early and then extension of that, so whatever the new capacities that were added in H2 of last year and H1 of the current year, so you're saying it is not being fully utilized. Got it. But what my question is from Q2 FY '24, it has been hovering around 1,900 metric tonnes only. So are you saying that for last 3 years, there is not much growth in this?

In thermoforming as a segment, in a few areas, we have grown. In a few of the areas like beverage sector, one of our major customers has -- the sales have gone down due to the issues at their end. So I would say like still for 1, 1.5 years, that particular major sale has been affected due to the less offtake from those customers.

Okay. Got it. So that is mainly because of that one particular customer not uplifting whatever the quantity they had said. So that has affected that is what you are saying.

Yes.

Okay. Sir, similarly, in the same production metrics presentation -- this one slide, the printing as well as the sleeving, if you see for the last 4 years, it has been on the downward trend. So the reasons for it, if you could share something?

Yes. So this thermoforming, which happens, which goes into the printing process and that beverage demand, which has gone down, which is affecting the printing capacity.

Okay. So that is -- so when are we expecting any improvement in their business?

According to our information, they should be able to revive -- they are changing their business strategy and the certain products. So they are expecting it in this particular season, which is going to come from January, February. We hope that they will be able to revive their business.

Okay. But in the meantime, are we not approaching any other new customers for this?

We are approaching. But what happens if we try to approach too many customers and then we are not able to serve them, then it becomes an issue. So we will wait for another quarter or so. And if there is not much revival in that, then we will look for other segments.

Okay. Understood, sir. Understood. Sir, my next question is about the tall manufacturing. I think in the presentation and also in the press release, you mentioned that you have added another 1,500 metric tonne per annum capacity there. So first thing I want to know, I think in your introductory speech, I don't know whether you mentioned how much revenues we have done in Q2 for this?

For injection moulding, we have done revenue of -- Q2 FY '26, we have done a revenue of INR 18.57 crores.

INR 18.57 crores. Okay. Good. So we had done, I think you had mentioned last time, INR 13 crores in Q1.

So that means...

So 31 crores. So that means we should end the year with minimum INR 60 crores to INR 65 crores, whatever you had given. So here, another observation is if you see in Q2 FY '26, we have already done 1,178 metric tonnes of product. Q2 FY '26, correct? So I don't know how much we had done in Q1, but just 1,178 x 4 if I do, so it comes to around INR 4,712. So we actually have around 4,800 metric tonne capacity as on date.

Yes.

Correct? So already, we have reached 90% or so. So the question was, is there any more kind of proposal to add more capacity here? And what is driving this? Is it that we are able to get the customers relatively easy or any other particular reason how -- of all the other segments, this injection moulding, which was started through a tall manufacturing is doing relatively well. So if you could share some insight about that.

Yes. So adding capacity decision will be taken probably because this major sales is coming from exports. And it's going to U.K., Middle East and to the American markets. And further addition in the capacity, of course, we are short in capacity and domestic demand is also good with a few of the customers. And we want to enter into further more segments like IML, we have started, and we wanted to add more category of products. But we will wait for another one quarter, and we'll see what are the declarations on the tariff, which we expect to reverse as per the media news. And once that happens, probably we'll add certain more capacities because this is the segment we can -- where we can add capacities without much of CapEx to be done by the company.

But the operator is in a good financial position to add -- increase the capacity and they have land space and all?

Yes, yes. The space is available at the moment to add at least another 1,000 to 1,200 metric tonne per annum at least in the same space, then probably they will have to look for certain more places, additional space to add further.

Okay. So what we added 1,500 metric tonne, another 1,000 metric tonne to 1,200 metric tonne, you're saying we can add in the same space?

Yes.

And I think in the last call, you had mentioned they are already PAT positive, right?

Yes, yes.

They are already PAT positive. Okay. Can I continue or shall I come back in the queue?

Whichever way. Maybe some others have a question then.

Ramswaroopji, this is Ankit Agrawal. My first question is on injection moulding. What are the kind of margins we are doing there?

In injection moldings, we -- our EBITDA is low at around 11% or so, but also our depreciation and interest are also low because it's not a high CapEx this thing. So around -- on PBT level, we are able to operate at around 7%, 7.5% over there.

Okay. And do we -- are these steady margins? Or do we expect an increase?

As we increase further volumes, probably we will be able to do more further negotiation with the toll manufacturer and also we'll be adding more value-added products, which will help in improving the margin.

Okay. And is it possible to know like how much of the revenues are coming from IML?

IML at the moment is just 5% because we are focusing more on products which are volume-based. And IML, we will take it into second phase once we do further more expansion, as mentioned of another 1,000 metric tonne, 1,200 metric tonne, then probably we will -- in that segment -- in that stage, we will add IML -- more categories of IML product.

Okay. And do we plan to move this in-house or we will keep it outsourced?

We have been successful in this model. So we'd like to continue with this model.

Okay. Understood. And for Olive Ecopak, is the traction slower than what you expected?

It's -- especially from the U.S. markets, the sales what we were expecting due to this tariff, we are not able to convert, although many sampling has been done, rates have been approved by many of the customers. So that particular revenue, what we expected is -- definitely, we are not able to convert that. And in domestic market, also, it was a little slow for 1 or 2 quarters, but now the pickup has happened very well. And we expect to reach 50% of our capacity in next February, March '26, we should be able to achieve at least 50% capacity. And from there, we're beating breakeven at that particular level.

Okay. Breakeven at the PAT level, right, from there?

Yes.

Okay. And 50% would mean like annual revenue would be around INR 90 crores?

Yes, around INR 90 crores to INR 95 crores roughly.

Okay. So right now, we are doing INR 12 crores per quarter. So by the end of this year or early next year, we will do like INR 20 crore to INR 25 crore per quarter?

Yes. So we are expecting INR 16 crores to INR 18 crores in Q3 and around INR 22 crores to INR 24 crores in Q4.

Okay. And the kind of clientele we are getting, are we getting QSRs? Are we getting some other -- can you give some profiling of the client types we are getting?

Yes. At the moment, major sale is coming from distribution channel. There are more than 300 customers across India in the distribution channel. We have added QSR clients also to name them. CCD is -- we have just added CCD last month. And there are 1 or 2 more institutional clients. And the bigger ones, the discussion are on. Validation period or the approval time is definitely longer. And in exports, we are doing with more than 14 customers.

Okay. So is food delivery a big part of it? Or is it disposable cutlery is like a big part?

Both. So food delivery, of course, because there are like -- we are not directly giving to Swiggy and Zepto, but they are going through their distribution or they generally take material from somebody who can supply to their DCs across the country. So they are buying from us and they are clubbing all other variety of product and then delivering to the DCs of Zepto and Swiggy. So definitely, that particular segment is also -- is one of the major segment for our category. Apart from coffee and beverages, food delivery is a major segment.

Okay. So food delivery, QSRs and then it will be like events and functions, right? Like those are the 3 segments. Is it fair to say? Or am I missing something?

You can say events, marriages, travel, airlines, big offices with like 5,000 people or even 1,000 people working in office, everything is through now paper disposables. So these are the major segments, I would say, where the consumption is there.

Okay. Interesting. Okay. And in regards to Orissa, I think there was some update that we did the lease agreement all. So I'm assuming I think our plans were on hold. So this is just the formal part regarding land acquisition, right? We don't have any near-term...

For 9 months to 12 months, we will further keep it on hold. Once we -- once the Olive starts rolling properly, we'll then shift our focus over there.

Okay. And tube laminates, I know we kept it on hold. But is it -- I mean, since we are doing some additions -- capacity addition, are we planning to bring it back, tube laminates?

No. For tube laminates, as I mentioned, like we will have to invest in a specific machine. So we will not prefer to do it from the same set of machines. So that we will do it as we take up the next round of investment, we'll add that particular category of business.

Okay. And barrier packaging, how much was the revenue for Q2?

Barrier packaging, just a minute. Q2 was around INR 17 crores.

Okay. Okay. So that also is like 20%. So 20% is injection moulding, 20% is barrier packaging and then injection moulding and exports are kind of overlapping, right?

Yes, more or less, I would say.

On the results, it's very heartening to see that exports have improved nicely. But coming to the domestic side of business, it's -- I mean, we have actually degrown this quarter. So like, sir, when we dissect the entire like the results, I mean, every category of business like moulding, sleeving, everywhere, there has been a degrowth, right, I mean, Q-o-Q. So you're saying there is a client-related issue, which has led to this. So why is it that in every category, there is a degrowth? I mean can you just throw some light on that?

So I will say like in domestic, we have 2 major categories of revenue stream. One is sheet sale and one is packaging products. So sheet sale is down by around INR 10 crores. Packaging product is stagnant. In terms of revenue, one is because the price have gone down by 6% to 7%, but the volume growth is there by 7%. That particular segment could have done much more better, around INR 8 crores to INR 10 crores of further top line could have added. But as I mentioned that one of the major customer offtake has gone slow. So I will say like packaging products is more or less is growing if we leave one customer aside, we will be -- we would have grown by -- volume growth is still there by 7% in that particular category.

So are we having too much concentration on certain select set of customers? Like what will be the top 10 customer concentration?

That top 10 is around 40%.

Okay. So despite being a small customer, the customer is able to, I mean, materially change the -- I mean, the demand has materially changed our results?

Yes, like, yes, because -- and especially what happens, this demand from the beverage segment is more in quarter 1 and quarter 2. So we see a major impact during this particular quarter because even in past also, if the revenue contribution was more in this particular quarter. So in spite of they going down, we were able to maintain the numbers. So we have grown in the other segment, but this particular customer has -- sales have gone down.

GST cut has also not materially given any boost to the overall business, right, sir? I mean because that cut has been significant right, but in the numbers, I mean, we're not seeing much impact, right? What's your thoughts there?

I think so for our category of business, there is no change as such. Even in the beverage segment, the duties were same. The end product also. Few products have changed a little bit. But otherwise, by and large, the end products in our category were almost in the same GST. There was not much change for them.

And your guidance of 15% to 20% growth still holds? Or like are you having any change there -- planning to change then?

Instead of 15%, 20%, probably we'll be at 8% to 10%, I would say. So we are looking at around INR 350 crores of revenue instead of INR 365 crores, what we were looking at. So INR 350 crores is the number what we are looking at for this particular year.

The only disappointment which as a shareholder, I'm having is like we are a very small company actually. And despite being a small company and then a lot of capacity additions here and there, we are still not able to grow faster. I mean at least keep up to the -- at least -- I mean, most of the peer companies have grown very fast this quarter. And if you see the results of most of these companies that have come out, most of them have reported very decent set of numbers. And second half is going to be better also. So are we in the process of some catch-up for like those -- I mean, what are your thoughts there? I mean can we go a little faster? Like what can you say on that?

Definitely, we are working on all the areas to utilize the capacities to the best possible extent. And that's the reason why we will be holding any further major investment for next 1 year and see how we can efficiently use the existing capacities and improve both the top line and the bottom line from this.

Okay, sir. And sir, the share price is actually tricking down day by day and it's going -- touching new lows. So any chance that -- any chance of doing a buyback or something which can boost the share price to some extent?

This decision will be taken by the Board. So we'll definitely put up this proposal that -- which has come from you. And let's see if -- as the Board takes a decision, we'll let you know.

Okay, sir. And on the JV, you're saying that Q4 will be the quarter where there will be breakeven, right?