Ester Industries (NSE:ESTER) Q2 2027 Earnings Call

0:00 Good afternoon, ladies and gentlemen. I'm Kartik Ein, moderator for the conference call. Welcome to Ester Industries Q2 and H1 FY twenty twenty seven Conference Call. As a reminder, all participants will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note, this conference is recorded. I would now like to hand over the floor to Mr. Amit Sharma from AdFactors PR. Thank you, and over to you, sir. Thank you, Kartik, again. Good afternoon, everybody, and a very warm welcome to the earnings call of ESTER Industries Limited for the second quarter and half year ended 09/30/2026.

0:54 On the call today, we have Mr. Vaibhav Jha, Chief Executive Officer and Pradeep Rastagi, Executive Director, Corporate Affairs of the company. The management will take us through the operational and financial performance for the quarter and half year, following which we will open the floor for the question and answer session. Before we begin, please note that this conference may contain forward looking statements about the company, which are based on the company's beliefs, opinions and expectations as of today. These statements are not a guarantee of future performance and are subject to risks and uncertainties. I now request Mr. Babav Jha to take us through the company's performance. Thank you, and over to you, sir.

1:41 Thank you, Amit. Good afternoon, everyone, and thank you for joining us today. I will take you through the industry environment and the key business developments during the quarter, following which Pradeep Ji will walk you through the financial performance. Let me begin with the industry landscape. The operating environment for the BOPET film industry remained stable during the quarter two FY twenty twenty seven, and the improvement witnessed in quarter one FY twenty twenty seven continued through the quarter gone by. We continue to see better demand across both domestic and export markets. In India, the increasing adoption of polyester films in flexible packaging is being supported by favorable regulatory developments.

2:27 The plastic waste management rules, which mandate 10% post consumer recycled content flexible packaging are encouraging brand owners to increasingly adopt polyester films with recycled content. To comply with this mandatory requirement, the brand owners are shifting from other substrates to polyester films with recycled content. On the export front, Indian manufacturers continue to benefit from new opportunities across the international markets that emerged due to the war in West Asia and disturbance in Middle East. During the quarter, exports contributed approximately 37% of our revenue, balance coming in from the domestic market. The United States was particularly encouraging for us during the quarter. The tariff related disruptions that affected trade between India and The U. S.

3:16 During the previous financial years have largely been resolved and our exports to The U. S. Have revived. Majority of the exports that we make to U. S. Are of vast products across BOPIS films and specialty polymers. Trade tariffs now imposed on exports originating from India is comparable to trade tariffs imposed on other exporting countries. Coming to the cost environment, disruptions in crude oil supplies and volatility in crude prices arising from the ongoing geopolitical situation in West Asia and Middle East have resulted in higher petrochemical prices. Consequently, our key raw materials, PT and MEG, have also witnessed significant increase in prices. We have been able to pass on this increase to customers through improved realizations.

4:01 This is reflected in the performance of our films business where revenue increased by 39.6 during the quarter against a volume growth of 13.9%. However, the increase in raw material and freight costs, coupled with longer transit times, has resulted in higher working capital requirements. This has particularly impacted our receivables and inventory levels, which Pradeep Ji will explain in greater detail. Looking ahead, we expect the industry environment to remain stable over medium to long term. New capacity additions have been relatively moderate compared to the demand growth. Global prices have remained firm and the increasing adoption of BOPET and recycled content polyester films continues to provide structural growth opportunities. While industry cycles will continue to influence the business, our strategic focus remains on increasing the contribution of value added and specialty products.

4:53 We believe this transition will improve the quality of our earnings and provide greater resilience across industry cycles. Moving to the business performance, let me begin with our Polystyrene segment. We witnessed a healthy improvement in performance in the segment during the quarter over the corresponding quarter last year. Consolidated film sales volume increased by 13.9% year on year to 24,291 metric tons in quarter two FY twenty twenty seven compared with 21,329 metric tons in the corresponding quarter last year. For the first half, consolidated film sales volume increased by 8.3% to 46,412 metric tons. In value terms, film segment revenue, including ARPET and chips, grew by 39.6% year on year to INR 4 and 14.5 crores during quarter two FY twenty twenty seven.

5:47 For H1 FY twenty twenty seven, revenue increased by 38.7% to INR 8 and 13.9 crore. The higher growth in revenue compared to volume reflects the improved realization, the pass through of the increased feedstock cost and a better product mix. More importantly, the segment delivered an EBIT of INR 34.5 crores during the quarter compared to an EBIT loss of INR 6.2 crores in quarter two FY twenty twenty six. The EBIT margin stood at 8.3%. For the first half, the segment EBIT improved significantly to INR 73.6 crores with an EBIT margin of 9% compared with INR 0.8 crore in H1 FY twenty twenty six. An important contributor to this improvement has been consistent increase in proportion of the value added and specialty films portfolio.

6:37 During Q2 FY twenty seven, sales of value added and specialty films increased to 6,200 metric tons, accounting for approximately 26% of our total film volumes compared with four four thousand nine hundred and twenty seven metric tons or 23% in the corresponding quarter last year. The volume of vast products registered a significant growth of 25.8%. I must mention that we clocked highest ever volume of 12,568 metric tons of vast products during h one FY twenty seven, representing approximately 27% of total film volume compared with 10,107 metric ton in h one FY twenty six, registering a healthy growth of 24.3%.

7:22 We are targeting to increase the share of value added in specialty films to approximately 35% by quarter four FY twenty seven and further to around 50% to 60% over next two to three years. This remains a key strategic priority for us. As proportion of differentiated products increases, our ability to compete will increasingly be driven by differentiated product offerings addressing varied application requirement and customer qualifications rather than pricing alone. We will continue to invest in product development, customer approvals and capabilities to serve more specialized applications. Coming to our RPET business, we continue to witness healthy growth during the quarter. RPEC sales volume increased by 37.4% year on year to fourteen thirty seven metric tons in quarter two FY twenty twenty seven, while revenue grew by 51% to INR 18.4 crore. For h one FY twenty seven, volumes increased by 27.7% to 2,831 metric tons, while revenue grew by 36.7% to 35.8 crores.

8:29 We currently have an installed ARPET capacity of 28,000 metric tons per annum across our Sittagarhganj and Hyderabad facilities. Major share of the production of ARPET is consumed captively for production of BOPET films with recycled content. Our primary strategic objective in ARPET is to use recycled PET as a feedstock for our own recycled content for BOPET films. Therefore, the overall strategic value of this business extends beyond the external revenue generated from stand alone RPET sales. The strategic investment in installing two RPET extruders is now bearing healthy fruits. Our integrated recycling capabilities position us well to address the growing demand for the sustainable packaging solutions and help our customers meet their recycled content requirements.

9:14 Coming to polystyrene chips. Sales during the first half stood at four ninety six metric tons, generating revenue of approximately INR 5.3 crores. There were no external chip sales to third parties during Q2. Moving to Ester Film Tech, our wholly owned subsidiary, we continue to witness a meaningful improvement in its operating and financial performance. During Q2 FY twenty twenty seven, sales volume stood at 10,306 metric tons, broadly in line with the corresponding quarter last year. However, total income increased by 40.5% year on year to INR 168.2 crores due to increase per unit realization consequent to increase in feedstock prices. EBITDA increased significantly to INR 16.9 crores compared with INR 4 crores in Q2 FY twenty twenty six with the EBITDA margin improving to 10%.

10:10 The company also reported a profit after tax of rupees 2.2 crores compared with a loss of rupees 10.3 crores in the corresponding last quarter corresponding quarter last year. For h one FY twenty seven, total income grew by 50.5% to rupees $3.27.8 crores, while EBITDA stood at rupees 36.4 crore with a margin of 11.1%. Profit after taxes was rupees 6.9 crores compared with a loss of INR 26.8 crores in H1 FY twenty six. Capacity utilization during the first half improved to 85.3% compared with 78.4% in the corresponding period last year. The improvement has been supported by higher exports, including our vast products, enhanced capacity utilizations, better margins across both domestic and international markets, and an increasing contribution from value added and specialty films.

11:04 Usage of ARPAT and another recycled material has also contributed to improved bottom line. Sorry. Importantly, Ester Fintech has now reported profitability in every quarter since q four FY twenty six. We remain focused on sustaining this improvement through better capacity utilization, operational efficiencies, and an enhanced product mix. Now coming to our Specialty Polymers business. This segment witnessed a decline in volumes and revenue during the quarter, primarily due to demand erosion in one of our marquee high margin specialty products. Sales volumes stood at seven eleven metric tons in Q2 FY 'twenty seven compared with eleven sixty one metric tons in the corresponding quarter last year. Revenue declined by 49% to INR 29.3 crores from INR 57.4 crores. Within the segment, specialty product volume stood at four eighteen metric ton compared with ten fifty nine metric tons last year. However, our value added product portfolio continued to perform well with volumes increasing by 187% to two ninety three metric tons.

12:14 Despite the decline in revenue, the business continued to maintain a healthy profitability profile. Segment EBIT stood at INR 9.9 crores with an EBIT margin of 33.9% compared with 37% in Q2 FY twenty twenty six. For H1 FY twenty twenty seven, revenue stood at INR crores, down 41% year on year, while EBIT was INR24.7 crores with a margin of 39.9%. We acknowledge the near term demand challenges in one of our key specialty products. However, we remain confident about the recovery potential of this business. We have a strong pipeline of new products, and one of these products is currently awaiting customer approval. Following a marginal capital expenditure, we expect this product along with other new products in our development pipeline to partially compensate for the lost volumes and margins in the coming months. We expect a large part of this recovery to materialize during the last quarter of FY twenty twenty seven and into the next financial year.

13:17 Our medium term ambition remains unchanged. We continue to target approximately 25% CAGR in specialty polymer revenue over the next three to five years, taking FY twenty seven as the base year. Now I would like to talk about Elite, our fifty fifty joint venture with Loop Industries, which represents an important step in our journey towards building a circular economy platform. The project continues to progress through the engineering phase. The front end engineering design study has been completed, and Toyo Engineering India has been appointed for detailed engineering. Land acquisition is expected to be completed by q four FY twenty seven. The facility being established in Gujarat is targeted to commence commercial operations during the last quarter of calendar year two thousand twenty eight. The plant will use Loop Industries proprietary chemical recycling technology to convert polyester textile waste into recycled dimethyl terephthalate or RDMT and recycle monoethylene glycol or RMEG.

14:16 These will subsequently be polymerized to manufacture approximately 45,000 metric tons per annum of recycled polyester chips. This technology will enable the recycling of difficult to recycle polyester textile waste and support the development of a true textile to textile circular economy. On the commercial front, we have already secured encouraging validation from global customers. Nike has signed on as an anchor customer for the facility through a multiyear offtake agreement. In addition, Loop Industries has secured a letter of intent from another leading global sports and athletic brand for potential uptake of up to 15,000 metric tons per annum of loop PET fiber grade resin under a multiyear commercial framework. These commitments ensure that a significant portion of the planned capacity is covered well ahead of commencement commercial production. We believe this early customer validation reinforces the potential of the project and the growing demand for sustainable recycled polyester solutions among global brands.

15:18 It is also important to highlight that any additional debt requirement for Elite will remain at the joint venture level and will not be consolidated with Ester Industries. With that, I would now like to hand over the call to Pradeep Ji to take you through the financial performance for the quarter and the half year. Thank you, Vaibhav, and good afternoon, everyone. Let me take you through the financial performance of the company for Q2 FY twenty twenty seven and H1 FY twenty twenty seven, beginning with the stand alone performance. Stand alone total income for Q2 FY twenty twenty seven increased by 38.9% year on year to INR 365.8 crores compared with INR 263.3 crores in Q2 FY twenty twenty six. For H1 FY27, the total income grew by 30.1% to INR713.5 crores.

16:11 Stand alone EBITDA, including other non operating income, more than doubled year on year to INR28.6 crores during the quarter with EBITDA margin improving by approximately two fifty basis points to 7.8% compared with 5.3% in the corresponding quarter last year. For the first half, EBITDA increased by 49.2% to INR68.6 crores with EBITDA margin improving to 9.6 from 8.4% in H1 FY twenty twenty six. Profit after tax turned positive at INR 6.1 crores during Q2 FY twenty twenty seven compared with a loss of INR 4.8 crores in the corresponding quarter last year. For H1 FY twenty twenty seven, the PAT increased more than fourfold to INR 20.6 crores from INR 4.8 crores in H1 FY twenty twenty six.

17:05 Other non operating income during the quarter stood at INR 5.7 crores compared with INR 3.3 crores in Q2 FY twenty twenty six. Increase was primarily on account of higher interest earned on fixed deposits created out of fresh equity days. Overall, the stand alone business delivered a healthy improvement across revenue, operating profitability and bottom line. Coming to Ester FilmTech, our wholly owned subsidiary. As Weber mentioned earlier, the company continued to demonstrate a significant improvement in its operating performance. Total income increased by 40.5% year on year to INR168.2 crores from Q2 during Q2 FY twenty twenty seven, while EBITDA stood at INR16.9 crores with an EBITDA margin of 10%.

17:53 The company reported a profit after tax of INR 2.2 crores against a loss of INR 10.3 crores in Q2 FY twenty twenty six. For H1 FY twenty twenty seven, total income increased by 50.5% to INR327.8 crores. EBITDA stood at INR36.4 crores with a margin of 11.1, while PAT was INR6.9 crores compared with a loss of INR26.8 crores in the corresponding period last year. Improvement reflects higher exports, better realizations, improved production efficiency and a better product mix. Coming to consolidated performance of the company. Consolidated total income for Q2 FY twenty twenty seven increased by 25.7% year on year to INR449 crores compared with INR357.2 crores in Q2 FY twenty twenty six. For H1 FY twenty twenty seven, consolidated total income grew by 26.5% to INR891 crores.

18:56 Consolidated EBITDA increased significantly by 160 year on year to INR 45.1 crores during the quarter compared with INR 17.3 crores in Q2 FY twenty twenty six. EBITDA margin expanded by approximately five ten basis points to 10% compared with 4.9% in the corresponding quarter last year. For the first half, EBITDA increased by 124.6% to INR104 crores, while EBITDA margin improved to 11.7% from 6% in H1 FY twenty twenty six. Profit after tax for Q2 FY twenty twenty seven stood at INR27.8 crores compared with a loss of INR15.8 crores in the corresponding quarter last year. For H1 FY twenty twenty seven, the company reported a PAT of INR26.5 crores against the loss of INR22.9 crores in H1 FY twenty twenty six, representing an improvement of approximately INR49 crores.

20:01 Earnings per share stood at INR 0.75 for the quarter and INR 2.57 for the first half. Improvement in consolidated profitability was primarily driven by robust performance of the Polysophilm segment supported by higher volumes, better realizations, improved capacity utilization and increasing contribution from value added and specialty films. I would also like to briefly address the sequential movement in our financial performance. Consolidated EBITDA for Q2 FY twenty twenty seven stood at INR45.1 crores compared with INR58.9 crores in Q1 FY twenty twenty seven. At the segment level, EBIT in polyester film moderated to INR34.5 0.5 crores from INR 39.1 crores in the previous quarter. Similarly, Specialty Polymers EBIT declined to INR 9.9 crores from INR 14.8 crores primarily due to lower volumes discussed earlier.

20:57 Other income was also lower during Q2 at approximately INR 5.2 crores as the previous quarter had benefited from certain one time foreign exchange and investment gains. However, on a year on year basis, the improvement has been broad based with all businesses contributing to overall improvement in profitability and polyester films remaining the principal contributor. Coming to balance sheet and cash flow. As of 09/30/2026, shareholders' equity stood at INR887.6 crores compared with INR782.7 crores as of March 26. Company maintained cash and bank balance of INR180.4 crores along with liquid investments of INR47.9 crores taking the combined liquidity position to approximately INR228.3 crores.

21:48 A portion of these funds remain earmarked towards our equity contribution to Elite project with INR 7.1 crore invested in this joint venture during the first half. Coming to working capital, the increase in crude oil and petrochemical prices together with higher freight costs and longer transit times has resulted in higher requirement of working capital for sustaining enhanced operations. Trade receivables increased to INR 264.3 crores as of September 26 from INR 184.9 crores as of March 26. Similarly, inventories increased to INR 245.2 crores from INR 208.7 crores. These increases were partly offset by higher trade payables, resulting in an increase in net working capital by INR 66.7 crores during the first half.

22:40 This was partly funded through short term bank borrowings of INR51.7 crores. On the debt front, on consolidated basis, we repaid term loans of INR53.5 crores during H1 FY twenty twenty seven against our full year repayment target of approximately INR100 crores. During the same period, we also raised fresh term loan of INR18.9 crores. Consequently, total borrowings stood at INR748.8 crores as of September 26 compared with INR $7.29 crores as of March 26. On our overall objective of gradually reducing debt during the financial remains unchanged. We also expect working capital requirements to ease as the raw material prices and freight environment stabilizes.

23:27 But for increased requirement of working capital, we would have seen reduction in debt during H1 FY twenty twenty seven. Capital expenditure and cash flow. Coming to capital expenditure, the company incurred CapEx of INR 15.1 crores during the first half of FY twenty twenty seven. Going forward, apart from routine sustenance and maintenance CapEx and the marginal capital expenditure required for new specialty polymer product, we are not planning any major capital expenditure. Cash profit before tax and depreciation for H1 FY twenty twenty seven stood at INR 69.7 crore. During the period, the company also paid a dividend of INR 2.5 crore. To conclude, we have delivered a profitable first half with a meaningful improvement in operating performance, profitability and cash generation.

24:18 Our focus for the second half will remain on improving working capital efficiency, maintaining operating profitability and continuing with our planned debt reduction. With this, I conclude our opening remarks, and I request the moderator to open the call for Q and A. Thank you. Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. And wait for your turn to ask a question. If you would like to withdraw your request, you may do so by pressing star and one again. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Mahesh Polani from GoQuarter.

25:12 Please go ahead. Kumar Soulani, please go ahead with your question. The line is unmuted. Sir, there seems to be no response. You move on to the next question. Next question comes from the line of Vishal Balada from Valerium Advisors. Hello? Yes. Hi, sir. Congratulations on great Y o Y growth. So my first question is that your Polyester Film segment has witnessed a significant turnaround, like the EBIT margins have improved from negative 2.1% in Q2 last year to 8.3% in this quarter.

26:04 So how should we look at the sustainability of these margins going forward, particularly considering the volatility in raw material prices and the cyclical nature of the film industry? Right. So thank you. The overall medium term, when I say medium term next two to three years, there are many tailwinds for the BOPET film industry, especially in India. So in terms of addressing the question on cyclic city, the demand is growing in between eight to 10% year on year. Right now, the demand in India is around 900,000 to 950,000 tons a year.

26:50 So 8% of that will be something like 70 to 80,000 tons a year. So to absorb this, two new lines need to be put in every year. But what we have seen is that over last one year, there was no addition. And we anticipate that in next two years, there is going to be only two or maximum three new additions. So which means that the capacity addition is going to trail the demand growth. So we expect that for next eight to ten quarters, the overcapacity situation should not recur. So that is one. Second is that second is that, overall, there is lot of background noise from your side, sir. If you can mute it.

27:43 Sorry. Yeah. Yeah. Yeah. Alright. So the second thing is around the pricing. So right now, other than the demand supply balance, which has improved quite a bit for this sector, there is support that we are getting right now in terms of multiple opportunities which have opened up for us globally because of India being the one which is not affected by war and there are issues in The Gulf capacities. On top of it is our push to specialize our offering. So as you have seen that there's a healthy growth, almost 25% growth in these... Our specialty sales. So even if the Cyclicity plays out after eight to ten years, the way we are seeing things unfolding, by the time Cyclicity clicks in... Comes in, we should have become a specialty film producer with, you know, 50 to 60% of volume being shared by specialty and commodity becoming a minor share.

28:51 So that is kind of giving resilience to our our business. On the raw material side, this business is such that there is a raw material pass through, which is very well demonstrated in the last two quarters, wherein though the raw material prices increased, we were able to pass that on to our customers, and that reflects in our revenue. And the EBITDA, if you see, has only improved and not reduced. So we are kind of insulated as such from the raw material volatility in prices. Right, sir.

29:37 Also, another question is that you have outlined and ambitious target target of increasing the share of value added products in the polyesterton segment to be around 35% by the quarter four of this year and around 60% in the next two to three years. So what are the key challenges in achieving this transition? And how much of incremental improvement in segment margins could this product mix shift potentially deliver? So in terms of the challenges, the biggest challenge is the approvals that we need from our customer. That is the thing which kind of delays us and delays the realization of that. But when we look at the pipeline, it's a very healthy and robust pipeline.

30:25 So in terms of the opportunity that we have tapped in, right, wherein the products are at different stages of approval at our customer end, we are extremely confident that in next two to three years, we should hit 50 to 60% specialization. On... In terms of margins, I think... See, we... This... What this will ensure is that we are in respectable teams as far as EBITDA is concerned. So... And and on a sustainable basis. So fact, our internal target is to bring it to a sustainable 15% EBITDA margin kind of profile. And for this to happen, we need to hit 50 to 60% specialty film share. Right.

31:11 So last question from my end. So with the Elite project targeting commercial product operation by end of last quarter of calendar year twenty twenty eight, if I'm not wrong. And the significant portion of this planned capacity already receiving customer commitments. Could you elaborate on the project's expected capital requirements, the funding structure and targeted returns? And also like how should investors look at the potential contribution of this project to the consolidated earnings once the operations are commercialized? So first, will address the consolidation part.

31:58 It is a fifty fifty JV. So the consolidation would not be line by line, Only the bottom line of the the JV company will be consolidated with Ester's bottom line. So it is not going to affect the top line and the expenses. The bottom line will be affected to the extent of contribution made by the JV, 50% of the contribution made by the JV. So that's the consolidation part. Coming to the project economics, that has already been disclosed, but I will repeat it. The project is now going to be for 45,000 metric tons of polyester chips with capital outlay of about INR 1,200 crores to INR 1,400 crores. And the EBITDA margins are going to be very healthy, I would say, in the range of 40% to 45%.

32:52 And with majority of the volume prefold before the commencement of the commercial production, So to that extent, the sales is not a concern area for the Elite project. Okay, sir. Makes sense. Thank you so much for the opportunity and patiently answering my questions, and all the best for the future, sir. Thanks. Thank you. We have the next question from Ravi Nanda, an individual investor. Please go ahead. Hello, sir. Sir, I have a question on Loop industry. I have heard the control of Loop industry in that they said that they are in financial trouble. That's why the project size has been reduced.

33:38 And in future also, are... Is it difficult that they will put... Able to put equity or debt for the project? So in case they fail, what is the plan b of ESTER Industries? So number one, the the Elite project doesn't require any debt from Loop Industries. They only... The Elite project needs only equity contribution. What we understand, we have been interacting very on daily basis from Loop. They have commitments from the private equity firms subject to certain milestones. And these milestones are being achieved. So one of the milestone was related to financial closure, etcetera, for the Elite project. We are glad to inform that we have received in principle approval for the term loan that Elite was looking forward to from a very reputed public sector bank.

34:36 And there is a process which will be completed in the next three to four months. And after that, we will have the final sanction. And loop is has the commitment from the private equity for the equity contribution. They may not have the funds today, but they have fund commitment from the private equity partners. But the project is getting delayed off loop? No. Project is not getting delayed. The the... In India, the acquisition of land is a very tricky area, and the the where we are acquiring land is Gujarat, where there's a shortage of land, but we have been able to put it together. And in the first quarter, calendar twenty seven, we would be having the position of the land. So, sir, you said that we should not worry about the equity contribution from Luxor. There is no need for plan b.

35:29 Absolutely. And, and on specialty polymer, You said that you have a new product. So I am watching this company from 2008. They always... On the investor presentation, they said that they have 15 to 19 product patent and work, but we are only starting two or three products that we sell. So it is a risk. If we have 10 to 15 products, then this kind of revenue drop, we will not see. And on on a new product, you said that in fourth quarter. So please elaborate on that product also. Yeah. So you're absolutely right. You know, that if a business relies on two products, then there are risks. So... Which is why a couple of years back, we started working on accelerating the go to market for the products which we had.

36:23 And so what... If you look at the value added products, right, which we have in our list, that has seen a very impressive growth year on year. And this is going to accelerate even faster in the next calendar year. And all of these are new products. All all of these are new customers. So as of now, if you look at the number of products that we are selling, we are selling close to seven to eight different kind of products from two to three products that we were doing two years back. And from a customer base of six to seven, we have increased it to around 15, 16 number of customers. So this shows that we have worked in this area, and lot of this product that we are talking about is about to get mature in terms of approval.

37:16 So we are expecting that in sometime in next quarter, it should start ramping up, and you would see volume and contribution coming in from this class of products. Actually, it's couple of products, but a single class of products where a minor tweaking was required, and we got delayed because it required a CapEx investment to get those tweaking, which should be over in this current quarter. So next quarter, we are expecting this sales and product to ramp up. Not only this, there is a very healthy pipeline of customer projects across value added product as well as high specialty product, and we are working with 27 customers at different stages of product life cycle approve... Product approval life cycle on eight to nine different products, which are going to mature in the next calendar year, and all of them are likely to mature over the next six to eight quarters.

38:21 So I think we are going to see consistent increase in volume and contribution going forward. And that is why in our investor call, we said that we are very confident of 25% CAGR in this business from... Starting from this calendar year as a base. I mean, taking this calendar year as a base. This financial year as a base. Sorry. So just to supplement what we have told, if you look at the the... In terms of quantity, the two marquee products are contributing only close to 50 to 55%. Balance sales in volumetric comes... From the other products that have been launched and made successful. Successful.

39:07 So it's not the... In terms of margin, yes, these marquee products have a very huge share. But in terms of quantity, there are other products which we are selling into the tune of 40 to 45% every quarter. And, sir, that one product that got different tune, any chance that in future it will come back? Yeah. So see this product, per se, there are demand... There is demand erosion, but we have innovated on that product. But the innovation product is being considered as a new product by our customer. So it is going through a full approval life cycle. And this is a very cutting edge product application where it goes in. So typical gestation period is anywhere between one and a half to two years.

39:57 So any forward movement in terms of commercial sales, we will be seeing over next six to eight quarters, not immediately. Okay. Okay. Thank you, sir. Thank you. We have the next question from the line of Mr. Surendra, an individual investor. Please go ahead with your question. Hello? Hello? Good afternoon, sir. Good afternoon. Sir, I'll be speaking Hindi. Private industrial partner aggregator route activity sometime middle of last calendar, July 25 number of PCs each salary acquisition of land other than industrial park developed by

41:39 government. But it's time. And ambitious target September, October 26 complete. PPA, the or killed the IBMT, is it with equal to PTA or something like that? Yeah.

43:10 Quality problem. RDMT In terms of quality, there is no difference between the r d m... DMT or PTA. Even for after knowledge even Ester 2001 So instead of PTA, you get DMT because DMT process byproduct So in terms of quality, there is not going to be any change. And DMTM captive consume Sir, last question. Recycling is a big industry.

44:11 Subject nouns. We use what I am, but real. Plan central side may... I can show that Nagpur or something like that. I'm I'm in the... That's right. Eastern side. Like, that's... So that's... In future, our... If two condition will be even competitive, acceptable. Right. So as you rightly said, main objective captive demand capacity sufficient internal consumption captive requirement to now we know this technology very well. We are very well embedded into the ecosystem.

45:15 So it's just a matter of expanding these capacities. Enough available land in Hyderabad. So our first choice, obviously, will be Hyderabad and not some other location. And anyway, to land up, but that was joint venture I mean, so that's a very separate land will not be in usual usage of ESTER. Thank you, sir.

46:05 Thank you. We have the next question from the line of Amit Kumar from Investments. Please go ahead. Yes. Thank you so much. This is Amit Kumar from Determined Investments, actually. Just one sort of follow-up on, you know, the specialty polymer, you know, the loss of, you know, business that you have seen. And it's quite surprising. I think this is, you know, beyond my understanding because, you know, being a sort of specialty product and, you know, the customer would also be sort of using it, you know, within their operations, within their business. So what has actually happened here? Have have they... I mean, it's highly unlikely that, you know, the... Have they sort of changed the, you know, chemical process that they're using, or have they sort of found an alternate, you know, supplier?

46:56 I just wanted to understand that this is generally not, you know, the way we see specialty chemical, you know, business, you know, operate that, you know, one fine day, the customer basically decides to, you know, just, you know, shut consumption of a particular, you know, product. So like you're rightly saying, there has been a technology change... Process change at the customer's end, and therefore, they have gone for a completely different chemistry. And therefore, there has been loss of market at the largest customer of this product. There are other customers also where it is still being used, but the largest one there, there has been a demand erosion.

47:49 Okay. Okay. Understood. That's it, Raj. Thank you. Yeah. Yeah. Thank you. We have the next question from the line of Deepak from Capro Capital. Please go ahead. Hello. Hello. Am audible? Yes. Yes, sir. Hello. Namaste, Rasulghisa and Vayabhadji. Namaste, Deepak. Namaste. And sir, my question is regarding, if we look at the Q1 and Q2 numbers on a sequential basis, on the stand alone, the EBITDA margin has dropped from 11.5% to 7.8% and from 13.3% to 10%.

48:35 That is number one. So I want to understand the reason for the same. And against the backdrop of any imports from China and their involution policy and also the antidumping duty if it has taken effect, what I have been the spreads if we typically look, say, for a 12 micron film, and the underlying PET chip and, know, PET melt prices, please. Thank you. Right. So, see, in our specialty polymer business is located within the EIL, Kadima. Right? And because of challenges on profitability there, we have seen a drop in the EBITDA of DEIL.

49:27 On coming to your ADD and the Chinese import, so government has announced... DGTR has announced... Not government, but DGTR has recommended ADD on the imports from China and couple of other countries in September May,. So we are expecting government to notify it by end of December. So once that comes in, it will help the margins. And as far as the imports are considered from China, right now, because of the worst situation, the logistics costs are very high. The product costs in general are very high across industries across the world. So we have had a relief in terms of the pricing, but we need to observe if this pattern will continue after the war.

50:24 But looks like that there should... It should be better than the scenario that we see... That we saw last financial year. So, Deepak, as you would have seen from the results of q one FY twenty seven and q two FY twenty seven, the film business has remained almost stable. It is the the drop is being, you know, if you compare with the q one, mainly coming because of the performance of specialty polymer, which has taken a hit as for the regions where I've already explained. So we need what is the current spread you are seeing vis a vis pet chips and pet milk? Chips and milk? Or you want... No. No. Versus versus versus the versus the film, basically.

51:12 Yeah. Yeah. Right. So see, right now, we are seeing around 27, 28 in that range. 32%. Yeah. Okay. How is that behaving now in this quarter? Because I see that Reliance has typically reduced the melt prices quite a bit, even though over the last now since the election has happened, I mean, the price of crude itself has fallen from 115 to 95 as we speak. But otherwise, how the spread has been in the month of October so far? So I tell you, so the current drop in crude is yet to be seen in the prices of PD MEG, which will be affecting the price that will be declared on Saturday or on sixteenth.

52:00 So the current price is based on the crude before this fall, number one. Number two, prices that Reliance declares both for PT and MEG are based on the international prices. You know, in... There's an index which the... Which is followed by the industry, including Reliance, and this is which they declared the price. Yes. Because of the pressure on the textile, last week, they did not increase the price much. So that's the reason the price is at about if you look at the enlargement, it's about 100 it is hovering between $120 to $116 We may see a drop as the prices come on Saturday or on '16 basically drop in the crude oil. That is yet to be seen.

52:48 Okay. I really like the increased focus which you are planning to have on the value added products over the next two, three years. And... But there, what kind of spread we are basically targeting, Rust Ovisi? So the spread in specialty are very different for different product, different customer. There's no standard pricing because these are very customized to each customer. So these spreads could be anywhere between 50 rupees to $152,100 rupees. Excellent. Okay. Excellent. Okay. I have one more question basically regarding what is the current gross and net debt. And also, how much of our equity contribution we have made in the loop project so far?

53:36 Thank you. So so far, we have invested about 25 crores. 25. 25 crores in the Elite as equity from our side and 25 crores from LOOP. So the total amount invested in as equity in Elite is 50 crores, 50% each by Loop and Ester Industries. Coming to the debt position, just give me a minute. $8.01... I'll just just just give me a minute. No issues. No issues. $7,750 crore. 750 crore is the interest bearing debt, but that doesn't take into account the the cash results or cash that that is sitting in the balance sheet.

54:26 So that's the gross debt, $7.50 crore, including working capital and term debt. So the term debt is about $4.80 crore, and $2.70 crore is the working capital debt. Thank you so much, and wish you all the very best. Wish you happy Diwali. Thank you. Thank you, Rupul. Thank you. We have the next question from the line of Saket Kapoor from Kapoor and Company. Please go ahead. You, sir, firstly for an elaborate discussion. Firstly, very specifically the opening remarks.

55:12 After one, I said, what with the bank already did, so not many questions. Sir, my point of concern or rather, which we as investors are looking at the question on the debt part of the story. Sir, our and other are all cyclical businesses. And there was time when we did make a very strong earnings and even distributed INR 5 as dividend, if I'm not wrong, three, four years when we were at the super cycle. Think is that we'll fill fill CapEx. Margins, profitability, bottom line business So at the end of the day, investor... Investing community or investors are looking at the probability part of the story. Specifically polymer which was not at all expected because this was a niche area, very high margin. We were expecting some expanded volume ahead.

56:24 Bottom So line real metrics, real truck customer to be to be very crude about it, but I hope that I've been able to convey. Right. Right. So So 80, 90% of our efforts in the company is to specialize as soon as possible.

57:24 And that is why we keep talking about, you know, specialty films share or specialty polymer growth Now the EBITDA interest working capital interest cost bottom line or cash flow pressure. But large expansion. Hardly year on year CapEx. Otherwise, commodity may will be CapEx.

58:13 Unfortunately, we got stuck in a cycle, commodity cycle with the new investment in Hyderabad. But otherwise, if you see, we should be having a very, very good control over debt in next one to two years as we keep on repaying our debt default So going forward, specialized double digit EBITDA or better better or debt come So the results are definitely going to come and project attractive returns project and attractiveness global customers attractive margins contracts conclude So overall, the things are looking to shape very well going forward.

59:16 Strategically, there's one more important thing. What has happened that we have been repaying our debt as per schedule, and it's a significant amount. But what has happened because of the increase in the working capital, the working capital borrowings have increased, which is reflecting in the debt. Secondly, the foreign currency debt that we were repaying, it is... It was not getting, you know, demonstrated because the the rupee depreciated against dollar and euro. So the liabilities stayed there, but the repayment has been there. And once this working capital cycle comes back to normal level, you will see a significant reduction. So our objective has always been to work within the prudent debt limits. We realize that it is marginally higher than the prudent level, but very soon, we are working very hard to see that it is brought under prudent limits.

1:00:10 Sir, net debt to EBITDA number have not worked out. So if you have the number Net debt to EBITDA close to three. Got 3.25 or three k. Debt. Net debt. I'm sorry.. Three to 3.25. Two years down the line with the type of value added Yuklimka share that going up and we are saying 50% reserve above your opneka, what should we be looking at net debt to EBITDA number?

1:00:58 Target between two and two point two five. That is the target. It is very difficult to fix the timeline, but that's the objective we are working with. Okay. And sir, taking into account industry profile, yes. It's not high debt code, two to 2.5. Debt Two to 2.5 is reasonable and prudent, I would say. Very, very prudent and very additional CapEx system, we have tightened our base on the new CapEx within ESTER. And at the same time, we are repaying the debt. So long term debt term loan progressively. And second thing is the working capital the prices of raw material and finished good both are at a very high level. It has increased by the prices of raw material and finished good have increased by 50%.

1:01:54 So that has put stress on the working capital. So now when this comes, the crude oil is down to 75, 80 levels, which pressure the working capital Mhmm. So all these factors going forward are going to lead to reduction in our debt. And that's that's improve this. While our EBITDA improved. Absolute number for the EBITDA will will improve from there. Well, when we look at the cash flow part, we find that the... For the first half, we have paid income tax net of refund to to the tune of INR 9 crores. So can you, Sadhguru, what is the advanced tax payment we have made?

1:02:40 Because it's not a steady answer. I'll I'll I'll tell you. The advanced test only first, Pankaj June It's just a minute. Just a minute. On for a minute. Pankaj June 3.09 crore or Pandra Okay.. Because the 7 crore is what we have. 7 to 9 or something. Yes. Yes. Yes. 7.09. And that is setting would be 45 percent of what the tax liability was? Yeah. Anurag and I have 45% of the estimated profit... Taxable profit. Okay. Sir, lastly, the specialty polymer part, and I joined the QIC, so it's taking long time.

1:03:26 But, sir, specific polymer, reshape business model and what we used to post earlier at the higher margin and the and the revenue. How will this number shift up? And secondly, sir, h two in terms of both the film segment, which is very volatile, but still, as per your understanding, what should be, factoring or modeling going for H2 from now... From here? So I think in terms of film, we expect that overall, if you look at H2, both quarters put together, we should be able to achieve similar or slightly better results compared to the first half, what we have achieved.

1:04:12 On specialty polymers also, because of the new businesses that we are expecting to mature across two or three products, which are in very advanced stages of pipeline and are likely to mature in January 10 to March time line, we should be able to do slightly better in specialty polymer also compared to first half. Okay, sir. Because the gap is there, sir, think, 105, the revenue for last year H1, which is down down to INR 62 crores. And the... I'm talking about the strategic polymer there. So this this will become a tall task. And and does there is a permanent rigid in the, I think, to the customer profile, which has changed now? So this INR 180 number and I think to last year, 59 crore profitability would be a tough target to meet for this year, definitely?

1:05:07 Yes. So... Yes. You are right. So this is going to make it difficult to reach that level in this financial year. But from here on, this financial year as a base, we are extremely confident that given the pipeline which is going to mature, we should be able to grow at 25% year on year from now on. One. INR 105 crore revenue record in the first half of last year, with my EBITDA to 36 crore. 62 crore but 25 crore So the EBIT percentage is is being sustained. It is the the drop in the sales, which is resulting into drop in in absolute terms.

1:05:59 The drop in EBIT is not as much as in the sales. Correct. Correct. Correct. But the way the bottom line we impacted OJRE and there is a change in the... So taking into account, the the h two should be better than what h one security polymer has been because of the product part and other aspect, which you just... You you mentioned correct. That should be fair fair understanding. Right. Right. Okay, sir. Team courses should be or. Thank you.

1:06:52 Next, we have a follow-up question from Ravi Nanda, a leading investor. Please go ahead. As a growing concern, we will maintain delisting equity component As as we responded in the earlier query, they have the commitments from the private equity. As we achieve certain milestones like acquisition of land and tie up of debt, etcetera, they would receive the money from the private equity, which will be inducted as equity in the REIT project.

1:07:41 So please realize they are a they are a R and D company or sort of a technology company. They don't have a regular revenue stream, And they have to follow The US GAAP, wherein as on the date of the report, they have to state the, you know, the obligation that they have and the money that they have in hand. This is which they say that the the going concern could be ended out. But this has been coming out since last four, five quarters, but they are continuing. So we don't foresee any problem on that front. Potential companies like Nike and, you know, other very reputed brands have signed commercial contracts with us two years ago. Fourth quarter Sorry.

1:08:45 Sorry, sir. What was the fourth quarter product Sorry. I I I thought you're asking about Elite. It's why I'm not sorry. Yeah. Yeah. So specialty polymer product that is likely when it matures, it is likely to, in terms of volume, give us almost 200 tons per month of, volume. But it will take some time to reach there. Right? Six to nine months to reach there. But you will start seeing the impact in the volume starting from next quarter. Product developed but patentable but co patent because of certain other reasons. But it it... It's not something that many people can make.

1:09:38 Okay. The high margin So this will be mid margin. This this won't replace the high margin volumes contribution. This will be at lower margins, but the volumes are high. Products per month Okay. L m... L m c zero three or mistake m b zero six m b zero three. Your product Right. Right. So both both product maybe We have added one new customer in l m c zero three or m b zero six maybe advanced stages approvals in international customers.

1:10:31 So... But high specialty products gestation period capacity, utilize capacity So why not leverage that and also improve the cash flow by working on the value added product? Now volume margins medium or gestation period shorter. That is the logic behind, going for these, products. Thank you, sir. So so these value added products have margins much higher than the commodity products, but also lower than the high margin products that we have been focusing on so far. Okay, sir. Thank you. Thanks.

1:11:18 Thank you. Next, we have a follow-up question from Saket Kapoor from Kapoor and Company. Please go ahead. Yes, sir. Just a small suggestion from my side with Ester. I hope I'm audible right now, sir. Hello? Yes. Yes, sir. Sir, when we are coming up with our results, if if we can arrange the press release and the investor presentation part also simultaneously within the span of, say, an hour or two, that will suffice in the phone call scheduled for the next day in post market hours and not giving us a... More than this forty eight hour gap. And and trying... We should also try to come up with our results, say, with twenty, twenty five working days for the month and ending of the quarter, sir. These two other suggestions, since we are doing all all other things, we can fall in a different league in the list of companies also. If we can practice these two aspects, sir, either from above or not. We take note of your suggestion.

1:12:16 We internally have this target. There are few constraints which, you know, sort of don't let us achieve our stated objective or target, but we keep this in mind. Thank you. There are no further questions. Now I hand over the floor to Vai Baghdi for closing comments.

1:13:12 With this, I would like to conclude our presentation. We remain focused on strengthening our core business, improving operational efficiencies, expanding our value added product portfolio and pursuing the long term opportunities in strategic polymers and sustainable recycling. I would like to take this opportunity to thank our shareholders, investor analysts and other stakeholders for your continued trust, confidence and support. My sincere thanks also go to our employees and business partners for their dedication and contribution. As we celebrate the festive season, I wish you and your families a very happy, prosperous and safe Diwali. Thank you for your time and participation. We look forward to continuing our engagement with you. Thank you, and happy Diwali. Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Dusseba's conference call service.

1:14:04 You may disconnect your lines now. Thank you, and have a pleasant day.