Ester Industries : Transcript of Analysts/Institutional Investor Meet/Con. Call

tax outgo. Moving on to individual businesses, starting with specialty polymers, FY'22 has been a stellar year for the business with revenues and profitability, both registering healthy growth, demand momentum for our marquee product as well as a newly introduced one remain strong. We have seen volume growth of 94% for MB-03 over last year, innovative PBT as well has picked up pace on expected lines following a benign Q3 with volume growth of 14% over FY'24. Both these products continue to see good traction and we are confident of sustaining the momentum in the coming years as well. EBITDA margins during the quarter under review in absolute terms is better than the previous quarter, but lower in percentage terms due to larger denominator effect. Specialty polymer as I had indicated in the past is largely IP protected, which in turn ensures that the business generate and can sustain higher margins. Basis progress during last years, we expect substantially higher sales of MB 03 as well as innovative PBT during FY 23 and onwards Some of our recently introduced products as well are shaping up well and have the potential to do well in years to come. We expect that existing products coupled with new products would help us sustaining the momentum going forward.

Moving onto the film business we have seen yet another solid performance for the year. Overall volume for the year stood at 58,151 metric tons against 56,336 metric tons delivered during FY'21. Realizations for the quarter were relatively better on sequential basis although the same was largely owing to higher raw prices, which was passed through ensuring margin maintenance in absolute terms. In the near to short term, we expect pricing to be volatile, given new capacities likely to hit the market, which may result in margin compression in the near term despite volumes demanding elevated. On long term basis though, we expect the demand supply to remain favorable. The other positive part of our Q4 performance was the improved margins despite lower volumes. We delivered 300 data basis point margin expansion during the quarter on a sequential basis, which was largely owing to better product mix. Reiterating, one of our objectives toward film business was to increase the share of value added products. As of Q4 FY'22 value added product constituted 23% of the overall mix. Our aim, as we have stated earlier, has been to increase the share of high margin product to 30% of the overall product mix and we are well on track towards attaining that. A quick word on our new plan before I move on to engineering plastic business. Our 48,000 ton per annum plant at Telangana is progressing as per schedule and we expect commencement of commercial production by October 2022.

Moving on to our engineering plastics business, as mentioned at the beginning of the call, we have entered into business transfer agreement with Radici Plastics India Private Limited to sell our engineering plastics business in an all-cash clump sale transaction amounting to Rs. 289 crore. The transaction is aligned with our strategy of focusing resources and commitment in segments where we have core competency, and we believe we have an opportunity to create value for our shareholders. The proceeds from the transaction will not only help us further strengthen our balance sheet, but also provide the requisite growth capital for scaling our film and specialty polymer business. Furthermore, the transaction with the global major in the engineering plastic space is also a reflection of our capability in building a business and creating value for stakeholders. As part of the transaction, some of our talented human resources are now with Radici Plastics India Private Limited. We expect closing by July-August 2022. As mentioned earlier, our efforts will now be directed towards building innovative and pathbreaking products in specialty polymer business besides improving

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product mix and film business by increasing the share of value-added products. As far as Q4 performance is concerned, engineering plastics delivered a revenue growth of 9% on a year on year basis. The growth was largely driven by higher sales realization though volume of sales was lower. EBIT margins for the business declined on a year on year basis, largely on expected lines given that Q4 FY'21 was an exceptional quarter for the business with unprecedented margins. Since Q4 FY21, we are witnessing a gradual rationalization of margins, so margins are still at very good levels.

To conclude I would just like to state that we believe that we are well placed to create value for our shareholders. Post the engineering plastic transaction, we will channelize all our energies towards growing the core film and specialty polymer business. Specialty polymer given its innate strength should grow at a good pace over the coming years. Furthermore, as mentioned above earlier, given the IP protection the business enjoys, the margins and profitability are not a concern at all. Our attempts are directed towards enhancing the sales velocity and building new innovative offerings to maintain a healthy product lifeline for the business. As far as film business is concerned, the core underlying demand across domestic and international markets remain strong. Realizations as mentioned earlier, may see some volatility in the short term owing to commissioning of new capacities, but we expect the demand supply dynamics to improve over medium to long term.

We are also working towards further improving the product mix that will help us in sustaining the margins. Lastly, the commissioning of the new plant will help us further scale the business and contribute towards starting a new path for the business. That concludes my opening remarks. I now hand over the floor to Pradeep to walk you through our financial power, thank you.

Pradeep Kumar Rustagi: Good afternoon, everyone. Thank you for joining us today. I will quickly walk you through our financial performance for the quarter and year ended March 31, 2022, post which we can begin the Q and A session.

Starting with the top line, revenues from operations stood at Rs. 388 crore as against Rs. 297 crore reported during Q4 FY'24, that is higher by 31% while on a yearly basis revenue stood at Rs.1,406 crore as against Rs. 992 crore higher by 42%, the growth was well spread out with all businesses witnessing good traction in their revenues. EBITDA for the quarter stood at Rs. 65 crore as against Rs. 60 crore generated during Q4 FY'24 higher by 8% while on the yearly basis the same stood at Rs. 252 crore as against Rs. 244 crore generated during FY'21, higher by 3%, margin in percentage terms though compressed during the period under review mainly due to larger denominator in terms of higher sales value. Finance cost for the quarter stood at Rs. 8.6 crore as against Rs. 5.7 crore out go reported during Q4 FY'24. While on yearly basis the same stood at Rs. 24.9 crore as against Rs. 18.6 crore outgo reported during FY'21. As of March 22 our outstanding interest- bearing term debt, net of free cash stood at Rs. 267 crore while interest bearing working capital liabilities stood at Rs. 88 crore. Interest bearing debt net of free cash is a multiple of EBITDA remained at a comfortable level of 1.06x as of 31st March 2022. The proceeds from the engineering plastic transaction will further strengthen our balance sheet and significantly improve the already healthy level of getting. We will continue to pursue the policy of maintaining debt better than prudent levels. Depreciation for the quarter stood relatively stable at Rs. 9.9 crore while for the year the same stood at Rs. 38.6 crore as against Rs. 35 crore during FY'21. Profit for the quarter stood at Rs. 33 crore as against Rs. 34 crore generated during Q4

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Sachin Kasera:I am saying the consideration that we see have exceeded roughly around 4 times the EBITDA that we reported for the current financial year, so that seems quite low. So is it that you think the current numbers are not sustainable, hence we got a lower evaluation? If you could give some sense, what was the mathematics that went behind the valuation for the transaction.

Arvind Singhania: Yes, so FY'22 was an exceptional year and I can just share with you some numbers about the EBITDA margins over the last 8 years starting from FY 14, in FY 14, our EBITDA was Rs. 4.42 crore at 3.05%, FY'15 was Rs. 8.79 crore at 5.08%, FY 16 was 7.8%, FY'17 was Rs. 10 crore at 7.3%, FY'18 was Rs.8.3 crore at 4.88%, FY'19 was Rs. 2.76 crore at 1.4%, FY'20 was Rs.

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