20 Microns Ltd
NSE:20MICRONS
20 Microns Ltd
NSE:20MICRONS
Price:
161.05 INR
-0.86%
Updated:
May 13, 2024
Section:
Earnings Call Analysis
Summary
Q2-2024
Q2-2024
Company Reports Solid Earnings and Growth Plan
The company reported an encouraging set of numbers and laid out its growth plans. A joint venture (JV) is being formed with a German entity to manufacture construction chemicals and building products. Details on the JV, including capital expenditures, are still under negotiation and will be announced in 6 to 8 weeks. Operating margins improved to 15% this year from the previous 12.5%-13%, and the goal is to sustain and enhance these margins. Revenue growth is expected to remain steady at 15%-18% over the next two years, aligned with the company's internal targets.
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Ladies and gentlemen, good day, and welcome to the 20 Microns Limited Q2 and H1 FY '24 Earnings Conference Call hosted by Ventura Securities Limited. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the call to Tushar from Ventura Securities Limited. Thank you, and over to you, Tushar.
Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities Limited, I welcome you all to 20 Microns Limited Q2 and H1 FY '24 Earnings Conference Call. The company today represented by Mr. Atil Parikh, Chief Executive Officer and Managing Director. I would now like to hand over the call to Mr. Parikh for his opening remarks, post which we can start the question-and-answer session. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. A very warm welcome to the Q2 and H1 FY '24 earnings Conference Call of 20 Microns Limited. I would like to begin by offering a brief overview of our company.
20 Microns Limited is a pioneering and a leading industrial mineral company with a rich experience spanning across 3 decades. We are the front runner in revolutionizing the micronization of various industrial minerals with a systematic approach in India. Our product range includes an area of nonmetallic industrial minerals, the discussion carbonate, talc, Caroline, mika, board, duromite, natural gedoxide and various specialty chemicals and functional additives like mineral-based fertilizer, construction chemicals and many more.
With 9 state-of-the-art manufacturing facilities houses across India, including Gujarat, Rajasthan, Tamil Nadu and Andreades, we have a collective manufacturing capacity of 4 lakhs 15,000 metric tonnes per annum. Additionally, we operate 5 different mines in India, relatively holding a total mining reserve of approximately 169 lakh million tonnes.
Our products are used as building blocks in various different industries, like paints and coatings, rubber, plastics, paper, tires, ceramics, agrochemicals, printing and many more. Currently, we saw a wide-ranging customer base across the world, including 65-plus international countries. We proudly cater to more than 200 of clients, printing a wide area of industrial, which also includes well established companies like Berger Paint, Asian Paints, [indiscernible], L&T, Control Lurolux, Finolex, JK Tyres ExxonMobil and many more.
Now moving on to the financials. Our revenue from operations increased by 6.35% and stood at INR 189 crores in Q3 FY '24, compared to INR 187.78 crores in Q2 FY '23 on account of approaching demand for our products in the underlying industries like paint, rubber, plastics and others, led by extended festive demand and increase in propensity to consume.
Further, our EBITDA increased by 28.25% from INR 233.5 million in Q2 FY '23 to INR 299.4 million in Q2 FY '24, and margins improved from 12.43% to 14.99% in during the period. This impressive performance can be attributed towards sustained commitment to cost efficiencies, resulting in reduced foreign fuel expenses and improved negotiation for freight charges during the period.
The PAT increased by 34.24% and stood at INR 160.54 million in Q2 FY '24, compared to INR 119.6 million in Q2 FY '23. The margins improved to 8.04% from 6.37% during the same period. During H1 FY '24, our exports contributed about 16% of our total sales. Now coming on to our revenue split. The pink industry contributed about 50% of the total revenue, followed by 23% by the plastics and rest by rubber, paper, ceramics and many other allied industries. Further, our subsidiary, 20 Microns Nano, which is engaged in the manufacturing of specialty chemicals and functional additives, has contributed 12% of the total revenue.
One of the key drivers of our future expense is our unwavering commitment to research and development. We invest heavily in fostering a culture of innovation, constantly pushing the boundaries of what is possible. Our dedicated team of 45 to 50 people continued to be focused on innovation by developing a wide range of products in our in-house R&D facility in [indiscernible], which is iron remains unwavering in its commitment to delivering high-quality products and innovative solutions.
Through the ongoing research and development initiatives and close collaboration with both the domestic and international customers, we continue to enhance our product portfolio between those markets. As one of India's leading producers of ultrafine industrial minerals and specialty chemicals, we are expanding our global footprint and diversifying our product mix. We added 61 products in our operation during the financial year FY '23. Further, I would also like to highlight some of our recent developments in terms of technology upgrade, where we have introduced automation across various different functions -- business functions in our company, including attracting materials, creation of purchase orders, wage recording in systems, when the notification for short receipts and material detection, automated payment advices given to our vendor.
Additionally, we have also integrated DRM and HRM systems to efficiently gather data from key specific modules, the sales, finance, quality control, material management sales tracking, executive performance and employee activities, among other critical areas.
In terms of expansion, we have recently expanded into new regions, including the Middle East, which includes Jordan, Egypt, Saudi Arabia, Iraq and Southeast Asia, which is Thailand, Indonesia, Japan, South Korea and Philippines through various distribution agreements. Additionally, we have also restructured our distributor relationships in international markets for the focus on capitalizing on their strength and mitigating their weaknesses, all while optimizing the product portfolios to achieve maximum efficiency.
Moving ahead, we are steadfast in our dedication to executing our strategy with precision, and we hold a strong belief in achieving greater profitability and enhanced cash flow for the fiscal year 2024. To realize this goal, we will pursue in our efforts to improve the efficiency, including periodic upgrades through our machinery and technology. We also accelerate the adoption of digital capabilities and maximize the utilization of data using the expanding growth opportunities within our core markets.
Furthermore, we're confident that our strategic focus and operational excellence will be instrumental in significantly elevating the company's growth, profitability, sustainability and cash generation in the near to medium term. I thank you all for your time, and I'm happy to answer any questions that you may have. Thank you.
Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Divya Daga from Global Securities Private Limited.
Congratulations for a good set of numbers and for margin improvement. I have a couple of questions. My first question is as more than 50% of the revenue of the company comes from paint and coating segment and upcoming plans of Grassim and JSW will be helpful for us. So can you provide that if we are in talk or have -- do we have any contracts with them?
Yes. So with Grassim and JSW, with JSW, we are already an approved vendor. We are already doing some supplies to the company. In terms of Grassim, we have already initiated the trial orders as an approved vendor for them. And with the announcement of their different plants across the country, as they open up, we will be starting to supply to them as well.
Okay. My next question is in H1 FY '23, revenue was INR 374 crores. Then in this H1, we have a revenue of INR 391 crores. That is 4% growth, 4.5 something. So you have given a guidance of 15% to 18% revenue growth for the year. Will we be able to cover this by the next 6 months?
Yes, we will be able to do that. And yes, we'll be showing.
Okay, sir. My last question is this fall in other expenses from INR 54 crores to INR 48 crores in Q2 and from INR 105 crores to INR 94 crores in H1. So is there any major fall in particular head can you state?
Yes. There are 2 heads I would like to define here. One is the power and fuel cost, where the fuel cost has gone down, where we are using bonus oil to manufacture our fuel in both plant. So that has decreased. I think it's an external thing we are dependent on. So because of that, we have a reduction in the fuel cost.
And secondly, our export logistic cost has gone down substantially. So if you look at the COVID times, the rates had drastically increased to normal levels and now they have bought back to the normal levels. And because of that, earlier times, we used to have very high export logistic cost. And we have now in this financial year, we have a substantial reduction as well for these 2 taxes.
Next question comes from Rashida from Nirvana Capital.
Congratulations on a good set of numbers. Yes. I basically wanted to know a little bit about the JV that we intend to -- we did with the German [indiscernible] for manufacturing, construction, chemicals and building products. So any color on what kind of CapEx that we do for this and whether it's going to be a completely new plant or in an existing plant, we can make those products?
So this -- it's too early for us to comment anything on this JV because they're still in the negotiation phase and preparing of the terms and conditions for the JV agreement. So we are still working on the conditions and the kind of investments that would go into the formation of this JV and the manufacturing that we will be doing. So in maybe another 6 to 8 weeks, we will have a clarity on the same and we will be announcing the same in the exchanges.
Got it. No worries. So this company is a very old kind of 100-plus year old organization mostly to construction chemicals and building products or probably the revenues are in millions of euros. So just to get an understanding on if you can give a little bit idea what kind of products do we intend to make or probably, are they going to be the first of which kind of products to be in India or probably is there an export opportunity on the product? Just to get a rough idea, what are you looking in which JV.
Basically, if you look at today's scenario, many of these European companies are willing to enter into India. So definitely, this company has been in business for many years, as you mentioned. And it's a very old known company in Germany. So they decided, since we had a relationship with this company before, we were in discussions of manufacturing certain construction chemicals here in India. So it's a mix of different chemicals that we will be doing.
We are still working on the final aspects of the products that we will be manufacturing here in India, but most of them will be the new age technology products, which I think some of them are doing, some of them are not doing here in India. So once we have a list ready of the different products that we intend to make here, we will definitely be announcing that as well.
Sure. So that will be really helpful. Sir, secondly, on the margin front. As you are that there was a reduction in power and fuel and the freight costs a little bit increased in the gross margin, which has led to this 15% kind of operating margins from around 12.5%, 13% last year. So any rough ballpark guidance on the margin trajectory probably for this year and for the next couple of years, where do we see them heading?
I think this is an optimal figure that we usually work in our organization and in the ecosystem that we work in terms of the industrial mineral segment. So 15% is a nicer margin space we usually look into.
So to maintain these kind of margins will be the task that we will be taking up in the next few quarters and sustain them, and then we will be working on improving them as well.
Sure. And sir, lastly, on the -- when we met, I think you alluded some product that was kind of used in the EV battery space. Can you share a little bit more highlights on what that product, whether are there any potential kind of plant tie-ups or something of that sort that we can do in India or export?
So right now, we are working on that product. So we have not yet completely finished working on the product. So once we have some clarity on that, we will be targeting more of the export markets and the Indian market. But medium markets currently is still in the very nice of the EV and the semiconductor in the battery space. So a lot of projects have been announced. Once we have some clarity from the production happening in India, we will be trying and design the product in that.
[Operator Instructions] Next question comes from Mayo Liman from Profit Mart Securities.
Sir, my first question is what are the revenue increase apart from the Phase II figure?
The increase in the revenue?
Yes, sir. Yes, sir.
Yes, the path has been very good, I think, in the term. So we were -- usually, the demand is usually there until the pre-Diwali season. So we have seen a good growth in the demand from various different sectors in the export markets as well as the domestic markets pick up. And so that is the reason that we have been able to increase the revenue in the quarter 2.
Okay. My second question is what are your expectation from the next quarter, sir?
So quarter 3 and quarter 4 usually are at par with the current trends that we are following. So there might be -- the demands are quite erratic in terms of this financial year, but we try and maintain our revenue growth and our bottom line growth, keeping in consideration the various different market segments that we are a part of.
So we try and balance our portfolios accordingly in terms of the product range that we have to offer in the market within the domestic and the export market. So I think it should look fair enough in the same way that we have seen Q1 and Q2 shape up.
Yes, sir. Sir, my last question is could you please give the revenue breakup of the products? And do you have any plan for the adding new products in the future?
Yes. So we keep continuously innovating and adding more products in our portfolio. Our 20 Microns product revenue mix typically is in the range of 50% for calcium carbonate, about 22% of Colin, about 10% of talc and remaining is all other minerals like quartz, mika, feldspar and other products. And in 20 Microns Nano, we are doing various kinds of opacifier tax auditors, processing needs, mapping agents, geology modifiers.
So as mentioned, they contribute about 12% of the total revenue of 20 Microns. So that's how our product mix is basically bifurcated. Typically, our product mix usually does not change much. It remains in the same percentage year-on-year with an increase in the growth levels that you usually see.
Next question comes from Vivian Gupta from Latin Advisors.
I have about 5, 6 questions, so I'll take 1. Given that stick is the second highest contributor to our revenues and given this whole ESG and recycle trend that is going, do you see any headwinds in the sector demand for 20 Microns?
No, that directly doesn't impact us in a way. So -- but yes, so we don't see like a significant increase in the demand happening for us.
So what kind of, let's say, plastics are being -- are what the end-user client nature with respect to the plastic segment?
So basically, we are into PVC cables. We are into master batch producers. So -- and are into polypropylene, poly treatment and PV is a major plastic segment [indiscernible] in Q2.
Understood, understood. Coming to the second question, what are, let's say, pricing policy or dynamics with the customers? Is it contractual for a 6-month, is it market kind of thing? And what is the reset frequency, if any?
So there is no specific contracts that we usually do with most of our end customers. Yes, for export customers, we are bound with certain contracts for a yearly deal or a 6-month deal, but not for all. It depends on which a distributor or which customers we are engaged with.
In the domestic market, usually, it is more on the typical cycle of the revenues that we usually -- quantities that we are usually doing with them. So we just try and meet those demands, which keep coming the demands are not consistent. The demand keep changing. So that is the reason that we have to continuously work with our customers on a regular basis on a monthly basis to understand the demand that they might have depending on their end demand that they would be having. So that is the reason that in the past, I think 1.5 years, we have been working very closely with the customers due to these rapid demands that keep coming. So there's no fixed contractual system that we have in terms of that.
In terms of pricing, we work on some major heads. If they keep changing, then definitely, we work with our pricing strategies based on that. But it differs again from application to application, it differs from the product group to product group. So it doesn't form one whole systematic approach that we do for the company.
Got it. Understood. And coming to the paint sector or let's say, general customers for you. What is the -- how much of their -- in their P&L, how much is your cost as a paint is INR 100, then 20 Microns cut is INR 5, 5 [indiscernible. What's the overall average with respect to the...
For volume, which you consider in terms of volume, it is anywhere in the range of 20% to 40%, depending on what kind of a paint player manufacturing. Every paint has a different formulation. So depending on what paint we are manufacturing, a low-grade paint being a distemper to a high and premium immersion paint that they are making to any other powder coating to industrial paints that they are making, the formulations are very different. So it is not easy for us to tell you. So every customer, every formulation is very, very different. So there's no fixed base price or a base volume that would go into a certain formulation.
They also keep changing the formulations based upon the market demand. So that is how it works, yes.
And I'm assuming the premium paints have a higher share of Micron. Micron will have a higher share in them?
Well, again, the -- if you go -- if you make a premium paint, the volume which goes into making the premium paint is lower because they use more finer materials, but the price of that particular product will be much higher. So that's how it works.
Got it. And what would be -- any idea on the market share that we have with respect to paint sector?
Again, it's different. Again, it's very different because we only do a certain segment of products when we deal with the paint industry. We don't do all the different products which are there because -- so it's -- we don't have like a perfect market size that we can design in terms of where we stand. Because for every customer, we have a different ratio, where against our competition where we stand.
Any ballpark number you can?
We are trying to work on it to design an accessible market space. So based on that, if we have a number ready with us, we'll definitely share with you in the future calls.
Got it. Next question is that I've been reading your annual report from FY '15. And in the year, there is a long list of new products that have been developed and the company mentioned. So let's say in the last 3 years, whatever new products that we have launched, what is their sales contribution in our overall sales?
So it will not be a very significant contribution. They will be anywhere in the range of between 5% to 6%. Because most of these products which are developed, they would either be developed for 1 or 2 customers or for a particular market segment, a smaller market segment or a specific industry segment.
So again, it will take time for these products to grow into the mainstream markets. So we first do these products with the customers who have demanded these products. Once they work for them, then we share it with the main markets to go forward with.
So usually, in the first few year, which is usually in the range of 5% to 6%, and then it kind of grows in the next 2 to 3 years to bigger size.
And the beta would be around?
Like that would go up to 10%.
Perfect. Understood. And just last couple of questions. So are there any...
I'm sorry to interrupt you, sir. So could you please turn back the queue again for more questions. Next question comes from Rashid Bora from Robo Capital.
So congratulations on the good results. I just wanted, not specifically a guidance, but just your view on revenue going forward in the next 2 to 3 years, say, by FY '26. I mean, you've given some guidance on like 15% to 18% for FY '24. Has that changed? And also for the future?
So that will continue to remain the same. So the goal internally is that with the kind of markets that we are in, in terms of even the turbulent times where we've seen in the past, we continue to be steady at a 15% to 18% growth levels year-on-year, and that is what our internal goals are.
Definitely, with the addition of capacities in the future that we might have, once we win, once we [indiscernible], then we will have a clear picture on where we will further our growth compared to the traditional 15% to 18%. That we expect that at least for the next 2 years, 15% to 18% growth level is the one for us.
[Operator Instructions] Next question comes from Sanjeev Damani from SDK Consulting.
I have not the person who visited you in the last AGM, and congratulations for excellent numbers. And we know that you are very much investor friendly and very transparent with all the investors. So thank you very much for being so good. Sir, we wish your company to be a market leader and main supplier to all the paint industries. Now my -- I would like to understand only one thing that who are our nearest competitor as far as raw materials meant for paint industries are concerned? That is my first question, sir.
So again, when you look at -- no, there are no listed players. There are no listed players in the competition. We have a few international players. And again, when we look at competition, they will be different for each product group.
So for Calian, we have different competition days. For Mulan, we'll have a different competition sales. For talc, we will have a different one. So we'll not have a general competitor across the board like 20 Microns product range that we are offering.
So again, each segment will be differently. So there, we have many new competitors in [indiscernible]. We have few competitors in Taranto. So it again, it differs. So this is not rightly for me to name them, but I think we can take it on a different level than required.
Okay, sir. Now emerging from the discussion that took place in this meeting only, I just want to understand that we have a share in all kinds of paint being manufactured in India. I mean, can you kindly confirm that we have some material to supply for all kinds of paints, whether it is [indiscernible] or whether it is oil based.
I will conclude that to marine paint, we try to automotive coatings, we supply to powder coatings, we supply to industrial paints, we supply to decorative paints. So all paint segments are part of our core group. .
Next question comes from Ukash Patel from Motilal Oswal.
Yes. So I just wanted a broad view about your vision for the company, right? Let's say, today, we are at a particular size, right? So as a company, how do you see this company evolving over a period of next 3 to 5 years?
In what terms are you looking at?
I'm talking in terms of revenue, profit, do we have any internal targets for next 5 years, let's say we want to reach share in 2027 and '28?
Yes. So we have our own target. So as I mentioned to you that we have a target of 15%, 18% year-on-year growth. Now we are working on -- the company started to evaluate potential projects for expansion internally in India and abroad. We are also exploring the potential to add more mines into our additional reserve. We are also looking at potential strategic initiatives and opportunities through various JV collaborations for the growth factor. We are -- so there are some high investment projects, which we are supposed to be looking at now. But with the turbulent conditions in the markets globally, we are taking a cautious approach with that with the JV market dynamics, and so we are keeping looking on this major outlook.
And so we'll have some clarity of thoughts regarding our potential CapEx plan, which will be put into use and which will be contributing to the total revenue growth for the coming 5 years. But that is currently being worked upon right now. So we are just currently going a bit of regular CapEx plans. But with the recent JV, which we've been forming and various other projects which are in the pipeline, discussions are currently ongoing with various people across in India and globally. So as and when these things start shaping up and the disclosures can be made, we will be announcing these things in the funds.
Okay. Okay. Just to follow on to that, let's say, in terms of our existing infrastructure, what level of capacity utilization will we be working back?
So currently, we are our own manufacturing. We are operating at around 85% of our capacities. But we have a model of our own manufacturing, toll manufacturing and contract manufacturing. So these 3 models, if we look at it, then we have enough room available for future growth because what we do is that the regular end of the run of the mill products, which are there, we do it in total and contract manufacturing and all the more advanced technology products more final products, which are there, where we do more of our in-house manufacturing. So that distribution keeps happening every quarter. So that's how we keep on doing and with minimal CapEx that we intend to do.
Okay. Okay. And your own manufacturing will be the major piece, right? Toll manufacturing and contract manufacturing and gas nano?
Yes. Yes, that's right. That's right.
Okay. Just wanted to understand 1 more thing. Let's say, last year, we had H2, which was slower compared to H1, right? So we were at INR 180 crores, INR 190 crores in H1. But H2 was significantly slower, I think 10%, 15% over the last year. So do we see any particular trend like that this year as well? And if there is any seasonality aspect to the business, maybe if you can clarify around that?
Post COVID, we have lost the seasonality so we don't fall into that category anymore. It's kind of even cycle across the year. But yes, as I mentioned before in one of the questions that the market dynamics keep changing. So earlier, we used to have a clarity on a 6-month vision as to how the market is going to behave. But now that 6-month horizon has come down to 2 months, 3 months, so the market keeps changing every month. So it's hard to predict. But yes, we have our internal statistical department, which kind of maps it in a way that we kind of balance our portfolio and try to maintain the H1 as well. So we try to remain stable and try to grow, if possible, in H2 as well.
Understood. Understood. Just 1 final question. We have a debt of close to INR 100 crores as of now, right? Do we have any plans to repay it? Or do we see this going up in the future?
When you look at the debt, total debt components, there are multiple components as a part of that. So if you look at our long-term debt, it is just in the range of INR 8 crores to INR 10 crores so that we will be repaying within the next few months. And apart from that, we have our fixed deposits, which is also part of the overall debt, if you look at it. And we have only discounting that we do with many of the big customers, that is also a significant component as a part of that whole bid cycle.
So they will continue to remain in the way this. But yes, the long-term debt we will be getting mostly in the next months or in the next few quarters.
Okay. Because I was looking at your interest expense. You have an annual interest expense of INR 117 crores to INR 118 crores versus your debt, which is closer to 100 and 708. So I'm assuming the interest cost may, you are incorporating the discounting charges, et cetera, as well. That's why this number is higher, right?
Yes, exactly. Yes, yes, that's right.
Next question comes from Viral Shah from Phillip Capital.
What is the contribution of the export revenue in our business? .
So we usually are in the range of 15% to 16% of our overall revenue is export business.
So are you looking to hire more on the export side?
The mix would continue to remain the same, more towards the domestic market, the same on the export market as well. So the export potential keeps changing with the changing dynamics again. So our main focus in the future, especially in the next 1, 1.5 years, is going to be more of Asia, like Middle East, Southeast Asia, the Indian appointment. So that is good to be in focus because Europe and America, we are not seeing a significant growth happening in terms of the economy and South America, for sure. So these are the areas we are more focused on.
And sir, what is the overall market size of the products that we're milling in?
As I mentioned in the previous question, we don't have a defined market size that we work on because every product, every industry we serve in works very differently. So we only do a certain segment of products and not all the products out of that whole market size. So it's difficult to make a judgment that way.
Okay. So when you do a business with any of our clients, so we consider as a margin as a percentage? Or do we consider an EBITDA for term basis?
Pardon, I didn't get your question.
So on margin, so we consider on a percentage basis or is it on an EBITDA percent basis? .
No, no, it depends how we work on the margins. Again, for every product group that we work in, based on the market demand and the market scenario are margins that works upon. So we don't have a fixed way of working on the margins. Our pricing kind of gets defined by the market conditions.
Next question comes from Janisha, an Individual Investor.
Congratulations on a good set of numbers and showing consistent growth over the last few years. Just have a few questions basically with regard to the margins and the way you are steering the company in the next few years. Just to take you a little back, I think 2019, the company was making EBITDA margin somewhere close to like 14.5%. And subsequent to that, there's been a decline and now it is going back again to that 14%, 15%. Is it being attributed only to this cost improvement? I mean saying the reduction in the cost, how sustainable the margins at 14%, 15% look like? You mentioned about that it's a usual business, but just wanted to get some more color around that.
And second question is with regard to the efforts, which you've been making to accelerate the growth with adding new products and also, the cost savings measures, which you have taken. How do we see the margin trajectory moving in the next 3 years or so with regard to the company?
And lastly, when we look at the return ratio has been improving, especially the return on capital and return on equity, where do we see this business has a potential to stabilize in terms of the return ratios on a 3-year, 3 to 4 years basis?
So now when you look at the margin specifically, the margins usually get driven by the product mix in our scenario. So since we have a larger product group, the contribution of -- so again, depending on the market scenario, if there's a higher demand for the lower value products compared to the higher value products, then definitely, the margins kind of get beaten up. But if there is a stable demand coming in from all different segments of all different industries and an equal contribution, then definitely, the margins within the current growth that we are seeing in the range of 14% to 15%.
And if you look at our global industry average, 14% to 15% is a very stable margin which the global companies in this segment, in this industrial lender space, which operate in from many, many years now, they usually are within this margin practice. In our case, definitely, we are on the growth trajectory, and we want to incorporate more and more value-added products. And that is what our internal goal is that we try to create more cutting-edge technology products, which kind of benefit the customers and their formulations with. So that is where the margins would come into picture.
Now in terms of Nano, which is one of our subsidiaries, we are working on specialty chemicals and functional additives. Now we are working there since many years now to develop many new products for the same kind of industries that we are part of. And now here, we see that there is a significant improvement in the margins, which is possible that, that would only happen when we reach a certain turnover in that particular group because we're currently operating with older machinery mild, which is there is not as per the acquired ratio. And so because of that, we are kind of struggling with some of the raw materials that we are also needing. So we are kind of exercising our way through stabilizing the Nano operations. Once that gets stabilized in a better way, the overall company margins will also kind of improve.
Similarly, we are also expecting a growth in the export market as well, where we see a more higher margin contribution. So once that will also kind of help us in terms of reaching a certain goal that we have, definitely, the overall margin landscape would also improve.
And just another question with regard to your raw material sourcing. I think you had have a trouble and challenging period during the last 2 years when the entire logistics globally went with a buyer how are we now looking at reaping the sourcing strategy for the raw material to ensure that the growth doesn't get suffered as [indiscernible]?
Yes, we are in a much better time right now if we don't see much of a rapid movement happening in terms of the logistics and in terms of the imports that we do. Our procurement department is continuously on the move in terms of getting us the right products at the right time. So I think we are in a much better place than we were 2 years back.
And looking further, we have a great procurement team globally, and we are exploring resources across different parts of the world. And we have access to various different products and raw materials available from various different territories. And so I think we should not be much afraid of the future because I think we know our raw materials and where to source them from. So I think that's -- I think we're clear about it.
And maybe the last question is you mentioned about the CapEx, which is going to happen in the years to come. Could we just give some understanding on the quantity, like what kind of amount which we are going to invest in various projects over the next 2 years or 3 years time?
So we are still working on the same. We have not finalized the plan. Because if we had a plan in place, we would have shared with the investors. So because of the changing market dynamics, as I mentioned to you, we have -- we are continuously reworking these projects from our side to see if we need that at this point of time or should we postpone it to the next year. So that is the reason that we are continuously evaluating and putting it across our board.
And our Board is also actively considering various growth opportunities in both the parent and subsidiary companies. So once we have more clarity on this, we will share with you more detailed updates in due course of time.
But if you can just share some ballpark number, that will be helpful.
We don't have a number. So right now, for the next 6 months to 1 year, we will be just doing the traditional CapEx of INR 10 crores to INR 15 crores that we usually do in terms of upgrading our machineries and bringing in more machinery. So that is something that we would be doing. But the significant amount of CapEx plan, which is there is something that we are still working on. So we'll share with you the updates in due course of time.
And just to confirm, you said 15% to 18% growth. That can -- like for the next few years, at least for next 2, 3 years, can it happen on the current -- I mean kind of you require like an investments in the capacities or the existing facility...
But not with a significant CapEx, we can manage that with minimal CapEx plans in terms of adding basic CapEx that we do year-on-year with addition of new machinery, that can be achieved.
Next question comes from Deepak Bodal from Safe Capital.
So first off, I just wanted to understand on your value added. I mean, in your press release as well, you mentioned about this value-added product along with this construction chemicals and mineral fertilizers have gone a significant interest. So just wanted to understand what is the share of this product right now in terms of revenue mix? And how do we see that going forward? And what's the margin differential, I mean, on your normal product and value-added product?
So right now, the minerals and construction chemicals don't contribute a very significant amount of revenue to the overall top line. We are still in the growing phase. So on construction chemicals, what we do is we have a range of different waterproofing products, which are based on the mineral technology, which a company is relatively new, which no one else was doing in Indian markets. So that was something that was out of the box, and we decided to venture into that.
And we see -- we are taking it quite slowly. We are not spending too much money on in terms of the [indiscernible]. So what we are doing is slowly and certainly working on the Tier 3, Tier 4 markets, and we are trying to build a distribution network in some of the states and then taking it slowly and even into Pan India. So in the next 5, I see this growing at least 5x of what we are today. So that is what we are expecting in both the segments of Mineral Fertilizers and 20 Microns construction chemicals.
Mineral fertilizers, we are basically into manufacturing of mineral-based fertilizers, where we use most of our own members with some external components, which are natural ingredients, and we try and make the mineral cortices which are substitutes for the organic fertilizers and basically used for organic farming.
So our own target is to create a distribution network in the rural parts of the country and more of the pharma segments. and urban landscape as well. And we try and we have to go through a certain licensing process through the government. And so these things take time. And so we are taking it slow and steadily. And so these definitely will be in growth in the next 5 years.
So currently, this is about 1%, 2%, I mean, 1%, 2% of revenue currently managed by this?
yes, exactly.
What is the current reference point? I mean, 5x, I understand. But without a reference point, we'll not understand, right?
Yes. So we currently will be at INR 10 crores revenue right now. So it will grow INR 250 crores maybe in the next 5 years. So that [indiscernible].
That core revenue, I mean, out of -- I mean FY '23, you're talking about or the INR 700 crores?
Yes.
In FY '23?
Yes.
So that we expect to be INR 50 crores in next maybe what, 5 years?
Yes, yes.
Okay. Okay, understood. And my second question revolves around your margins. I mean you mentioned in your press release as well that you maintain current margins that we are doing EBITDA margin for FY '22 to remain in a similar range as the existing with a likely improvement of 50 to 100 basis points. So I just wanted to understand the reference -- yes. So we are just talking about the reference point. I mean just trying to understand what's the reference point here we're talking about.
15% is the reference point, as I mentioned to you. It's a global average. So 15% is the reference point we allude to.
Okay. With the likely improvement of 50 to 100 basis points, I mean, next 1 to 2 years, you expect 50 to 100 basis point improvement over the 15%?
Yes, yes.
Next question comes from Tin Boricha from Joni Capital.
I've been looking at this company for the first time, so maybe my questions may be a little basic. So the first question is on the raw materials. So what kind of raw materials do we have currently reached as the major parts of our raw material? I mean can you like give the price trend of that materials, where are we sourcing from that, et cetera? .
Well, I think I need to give you a brief background then about this because raw materials, basically, we need to source it from the mines for each product that we make, the raw material usually is in the form of the ore and then we grind that to manufacture our products.
So basically, we use a lot of domestic raw materials and we use many imported raw materials also for the same.
Sir, can you name some of them? What are the major raw materials?
So all the raw materials would be the same as the product group that we have, like calcium carbonate, talc, quartz, silica. So these are the same raw materials are the same product group. So there's no definition in that.
So we buy this on the third party. We don't own any mine or anything?
We do have. We do have. We do have 5 mines, as mentioned in the opening remarks. We do have 5 mines in different parts of the country. So we operate our own mines, and we also procure from outside, and we also procure from international resources also. Because some products that you manufacture, you will need to have the access to various different resources from where you can manufacture these products.
Okay. Okay. And sir, you mentioned we had been running at 80%, 85% capacity utilization. So what's the exact capacity we have currently?
85%.
No, no. The capacity in terms of like...
415,000 metrics tonnes.
415,000 metric tonnes. Okay. Okay. Okay. So I have like a couple of more questions, but I believe that will be moved. Basically. If you could just a request from my side, sir, if you can upload the detailed presentation or anything like that on for investors will be very good.
You can get in touch with our Investor Relations people. They have all the presentations available with them. And if you need more information, they will be able to explain the company better to you in a concise way.
Next question comes from Ayush Agarwal from Mittal Analytics.
Congratulations for a good set of numbers. Sir, my first question is on the standalone business. So what kind of capacity utilization do we have there? And what kind of fixed CapEx plan do we have?
I think I mentioned to you that we are working at 85% capacities for the standalone in 20 Microns itself. And since we are working on a mix of own manufacturing, old manufacturing and contract manufacturing, we have sufficient capacity available with us as of now to at least for the next few quarters, that we can be able to manage the growth that we are anticipating. And in that time, we are also in the plans of minimal investment growth plans are there in terms of the CapEx, which we will be incorporating for some of the additional machineries that we will be looking to you.
So sir, given that we will exhaust all of these capacities in the next maybe 1 year. So we not be thinking about the CapEx plan to expand capacities?
Yes. So as I mentioned, we are working on the CapEx plans. And because of the changing market dynamics, we don't have a fixed CapEx plan as of now because every product group that we are part of will require some sort of a CapEx plan to be designed. But we are continuously reworking on that. And once we have a final plan ready with us, we will be sharing more updates with all of you.
But as of now, we don't see any bottleneck happening at least for the next 1.5 years in terms of the capacities.
Understood. Sir, any plans to increase the share of scaling business as I understand the margins are much better there.
Yes. So again, it's a part of the CapEx plan, and that is something that we are working on currently, which is a priority. And so again, since as mentioned before, [indiscernible] is quite a high capital investment project. And we need to keep the future market scenario into consideration.
So looking at that asset, we will be working on a CapEx plan, which is more feasible. And we will be sharing updates with you in some time.
Understood. And sir, similar plans about 20 Microns Nano. What is the utilization there? Any CapEx plans there?
No, we do not require any CapEx there because we are just working right now. We have sufficient capacities in 20 Microns Nano. Our main focus is to increase the product range there and the market penetration there. So that is what the goal is going to be in Nano for the next 2 years. Once we reach a certain market penetration and the top line, then we will be putting more effort into more of investments in Nano. But as of now, we have sufficient capacity there.
Understood. And sir, my question is on our interest cost. It is on a declining trend, but it is still very high. If I just divide the interest cost by debt on our books, it is up while net costs are not so high in India. Any reasons why our India ports are so high? And when can we expect it to go back to 8%, 9%, 10%?
So I think it was addressing one of the earlier questions also, that the debt component includes long-term debt or short-term debt, and our fixed deposits and our only discounting. The only discounting portion, which is there, has a much higher debt -- higher interest rate compared to the regular debt interest rate that we have. And that is the reason that it is showing on a much higher side.
Why do we need that, sir?
That is because we have to service our major customers the bigger customers who have a significant amount of share. So for that, we do the [indiscernible], which has been a typical practice of ours for many years now. And so that is one of the reasons that it is showing on the higher side. Otherwise, our regular debt, which is the long and short-term debt, that definitely is quite low and is still expected to go much further down with the improved ratings and improved financial performance.
The last question for the day comes from Sanjana Mittal from Ratna Traya Capital.
So I'm [indiscernible]. I have basically 3 questions. So first of all, you mentioned that we also import some of the raw materials. So what are these raw materials? And second, we are utilizing our mines at 85% capacity. Then why do you need to import?
Yes. So to address your question, we are importing all different kinds of raw materials from the different countries. We are also utilizing a lot of domestic resources within India, and we're also utilizing some of the resources from our own mines. But we make certain products which are demanded by the end user industries and our end customers, the Indian raw material does not suffice those requirements. And so it is a requirement by the customers that it has -- you have to use a certain kind of raw material product to make those products.
And to get those raw materials, we need to import them from different parts of the world. So we have access to raw materials from different areas. We are currently -- we have our own subsidiaries in Malaysia and in Vietnam, where we procure a lot of calcium carbonate from there and we bring it into India. We have to manufacturing there as well. We also process those materials in India as well. So that is one of the reasons that whenever the Indian raw materials does not suffice the requirements of the market, we will need imported raw materials.
Understood, understood. And is there a percentage led in terms of the cost of these raw materials, import versus domestic?
So basically, we have about 40% of our raw materials is imported and 60% is domestic.
Understood. All right. Second, can you throw some light on the product-wise margin?
Product-wise margins, I will ask my IR team to send it across to you.
And the last question is are leases, which are basically leased from the government, that didn't show in accounting?
Pardon? I didn't get your question.
So basically, we have leased 5 mines. And so where do the lease or the payments show in accounting?
So I've shared it in the opening remarks, the entire reserve that we have for the different mines that we have leased.
Sorry. No, I am not asking about the results. So the rent payment or the lease payments.
There's no rent payment or lease payments for these mines. Basically, how it operates is that you need to pay a royalty on each metric tonne that you mine out of the entire mine. So one -- so that is basically one of the heads of royalty paid that you would have, which is the part of the [indiscernible]. So there's no lease, rent or any rent that you pay to the mine -- for the mine.
Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [indiscernible] conference call service. You may disconnect your lines now. Thank you, and have a good day.