Borosil Ltd
NSE:BOROLTD
Earnings Call Analysis
Summary
Q2-2024
Borosil Limited reported a consolidated revenue growth of 15.4%, reaching INR 62.6 crores in the first half of FY '24 over the prior year. EBITDA increased to INR 81.1 crores, despite a slight compression in EBITDA margin from 14.6% to 14.4%. Profit before tax fell to INR 41.3 crores versus INR 59.8 crores, and profit after tax dropped to INR 29.9 crores from INR 44.7 crores, impacted by one-time expenses and investment in new operations. The Consumer business saw sales rise by 14.8% to INR 411.2 crores, with opalware brand Larah's sales jumping 26%. A softening of direct costs helped improve the Consumer business EBITDA margin to 16.6% from 13.8% last year. Sales in the Scientific Products division grew by 16.8% to INR 151.4 crores, bolstered by new acquisitions like Gold Scientific. The company continues to innovate with new product launches such as air fryers and cookware.
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Ladies and gentlemen, good day, and welcome to Borosil Limited Q2 FY '24 Earnings Conference Call hosted by Monarch Networth Capital. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Rahul Dani from Monarch Networth Capital. Thank you, and over to you, sir.
Good afternoon, everyone. On behalf of Monarch Networth Capital, we're delighted to host the senior management of Borosil Limited. Representative are Mr. Shreevar Kheruka, Vice Chairman; MD, and CEO; Mr. Rajesh Kumar Chaudhary, Whole Time Director; Anand Sultania, CFO; and Mr. Balesh Taratadi, Vice President, Investor Relation. We will start the call with opening remarks from Mr. Shreevar, and then move to Q&A. Thank you, and over to you, Shreevar.
Thanks, Rahul and Monarch for arranging this call. Good afternoon to everyone of you. The Borosil team is like to be communicating with all our investors once [indiscernible]. Borosil Limited Board approved the company's financial results of Q2 and H1 FY '24 on November 8. [indiscernible] and an updated presentation has been sent to the stock exchanges and have also been uploaded to the company's website.
Our consolidated revenue from operations during the first half was INR 62.6 crores as against INR 487.6 crores. That is a growth of 15.4% over the same period last year. During the half year, the company achieved a consolidated EBITDA, that is before exceptional and onetime items of INR 81.1 crores as against [ INR 71.4 crores ]last year. The EBITDA margin was 14.4% as against 14.6% in the corresponding period in the previous year. Profit before tax during the first half was INR 41.3 crores as against INR 59.8 crores in the first half last year. Last year, during the first half, we had an insurance claim, resulting in an exceptional gain of INR 5.1 crores, whereas this year, we had a onetime expense of INR 2.8 crores towards due diligence expenses of acquisition opportunities.
Also, the investment income is lower by about INR 2.8 crores during this year versus last year as compared -- and also depreciation and finance costs are higher by about INR 20.3 crores, primarily due to the new Opel furnace being commissioned during Q4 FY '23.
During the first half FY '24, Borosil recorded a consolidated profit after tax of INR 29.9 crores as compared to INR 44.7 crores during the same period last year. Coming to our business side performance, Borosil Consumer business comprising glassware products and non-glassware products under the brand of Borosil and is opalware range other brand Larah started with a strong performance of the sales of INR 411.2 crores as against INR 358 crores during the same period last year. That is a growth of 14.8% over H1 FY '23.
Here, I would like to highlight that the sales and growth for H1 FY '24 compared to H1 FY '23 should be interpreted in the context of Diwali festival being postponed by 1 month this year. Sales of glassware products remained flat at INR 88.1 crores as against INR 87.6 crores in H1 FY '23. Non-glassware products grew by 13.9% to reach a turnover of INR 165.1 crores during H1 FY '24. We saw good growth across all our ranges and all channels. Non-glassware sales of the Borosil brand now comprise about 65% of revenue. Our opalware brand Larah achieved sales of INR 158 crores in H1 FY '24, a growth of 26% over last year.
Both in the Consumer business over the past few years has been substantially derisked from being primarily in 1 category that is microwavable glass products, and we have built successfully 3 strong pillars, which provide a concrete platform for future sustainable growth. Each of the 3 verticals of glassware and non-glassware and opalware have achieved reasonable size, and we are confident to grow all these further as penetration and frequency of use in these categories grow.
We continue to introduce new products and designs for everyday use in storing, preparing, cooking, heating and serving. Our recent introductions include air fryers, hard ionized pressure cookers, opalware lunch boxes and storage containers, cooking, gas stoves, chopping boards and entire for chopping. The EBITDA margin for the Consumer business was 16.6% as against 13.8% during the first half of last year. We have seen a softening of direct costs, including fuel and raw material prices throughout the first half. We continue to observe rises in the margin as sales rise, and we have operating leverage kicking.
There was the risk to raise customer awareness and increase brand presence, the customer, we will continue to invest in marketing for both Larah and Borosil. Right now, our main goal is to grow our brand franchise. It is upgrading and converting customers from plastic, [indiscernible] and steel to glass storage and opalware as well as bringing more people in the category of microwaves. We keep bringing in new items to broaden our selection including portable high-grade steel products and home appliances.
We also established Borosil and Larah as a go-to brand in the contemporary indication for everyday storage preparation, cooking, heating and serving needs. Moving on to the Scientific Products division, net sales during this first half of FY '24 were INR 151.4 crores, which is a growth of 16.8% over the same period last year. This includes sales of INR 15.6 crores from the recently acquired cross [indiscernible] chemistry business of Go Scientific of about 5 months. Our Scientific products business comprised 4 product ranges now, laboratory glassware, laboratory instrumentation and under the brand LabQuest, [indiscernible] in glass packaging for pharma customers under the brand Klass Pack and the recently acquired process chemistry business.
During H1 FY '24, lab glassware sales were INR 88.2 crores is a growth of 6% over last year. Labs [indiscernible] instrumentation was INR 12.5 crores that is a growth of 14.7%. However, Klass Pack has a slight de-growth of 0.7% with the sale of INR 35.2 crores and gold Scientific as already mentioned, was around INR 15.6 crores.
We have identified several strategies to drive long-term sustainable growth in our Scientific division. The government's initiative to procure through the government e-marketplace is gaining momentum. This channel mitigates receivables risk and could potentially stream by order processing directly from the Government agencies to Borosil. The expansion into new product categories leverage high expertise in lab glassware and provide cross-selling opportunities. The company is actively expanding its customer base, and we are looking to go into new industries such as food, which have not been traditionally our customers before.
Additionally, we are also establishing an OEM business line to supply critical items to some customers. With these initiatives, Borosil is well positioned to maintain its dominant position in the domestic market. Furthermore, the company is also experiencing healthy export sales growth of lab glass products as well as wired. In lab instrumentation, Borosil Technologies is committed to expanding its product offerings and customer base. Recent advancements include the introduction of a mini pilot lab reactor, bottle top dispense or as well as assets and a range of products catering to nutrition and environment sectors.
In leveraging its established customer relationship in the lab glassware business, Borosil to enhance customer penetration for latest products. Additionally, the team's recent launch of process system is opened as to new customer segments, including API and [indiscernible] drug manufacturers as well as chemical producers.
In the Pharma Packaging business, while we successfully gain through new customer acquisitions, our Q1 results reflected a decrease in revenue on a year-on-year basis from a few existing clients. However, Q2 have grown by 22.8% on a sequential basis. This is a promising sign we believe going forward, we'll be able to maintain this momentum. However, if you look at the entire half 1, we are still slightly lower this year versus last year in the pharma packaging space.
Through Klass Pack limited subsidiary. The business purchased 94.73% of the shares in Gold Scientific in FY '24. With this transaction, Borosil Scientific business will benefit from multiple synergies, it will expand our current product line by adding complementary products that can benefit from our strong sales and distribution network as well as our brand. This is the combination of both of the R&D capabilities as well as Borosil Scientific, specialized large clearing talent will allow the company to provide its clients top notch goods that are created and manufactured in India.
Deeper market penetration entry new markets, improved product offering and an inventive range of products will allow us to benefit and drive synergies from the merged company. EBITDA margin for scientific products during H1 FY '24 was 9.4%, which is a successful decline as compared to 16% in H1 FY '23. This is mainly driven by the losses we have had in LabQuest as well as in Borosil Scientific. And the reasons are slightly different. In the case of LabQuest, we've been investing in growing our technical team and R&D expenses are more than proportionate than the increase of revenues. It's a very nascent business. We are a young company, and therefore, it will lose some money as we go through the investment phase. However, as the company grows, glassware and the product increases, these expenses will normalize and it may take another 1 or 2 years for this to happen.
The cost of total [indiscernible] also reduced as a percentage as we scale the business. In gold Scientific, margins have declined because of lower sales and higher fixed costs. However, it's the first 5 months that we acquired the business. There are many synergies that are yet to be put into place. And there will be times they will take some time for the culture adoption to also happen. So we expect much better results going forward.
As far as cash tax enter, EBITDA margin has declined in this year compared to last year, primarily on to again to lower sales during the period. The gross profit was also going to increase in direct costs that could not be passed on to customers. However, we see the situation has improved in Q2 compared to Q1, and we should see even better Q3. And we are speaking with many customers who have potentially large order volumes and we hope this should kick in, in the next quarter or 2.
Coming to CapEx, the new [indiscernible] pressure facility of [indiscernible] 25 [indiscernible] in Q4 is estimated to be commissioned in Q4 FY '24 in the early part of Q4 FY '24. Coming to other corporate action. In previous communications, we detailed our intention to reorganize the company's operations in 2 distinct entities, which were both trade-ins the stock exchange through a comprehensive arrangement scheme. The appointed date for the scheme is April 2022, we are very pleased to inform you that there are NCLD Mumbai Meng, while its order has sanctioned the composite scheme on second November 2023, and we have received a certified copy of this order on November 6, 2023. As a next step, we need to file because by copy of NCLD [indiscernible] with our registered companies to make the scheme effective, and we believe listing or worse scientific will happen sometime in the month of January 2024.
We continue to be very optimistic about both the consumer and scientific businesses, medium-term prospects. Even though there may be occasionally slow growth along with cautious consumer behavior, we expect strong growth in our industry due to positive long-term tailwinds. Our main priority will be expanding our customer base, launching cutting-edge new items and streamlining our supply chain as well as marketing channels. We will continue to make investments to bolster our brands feasibility. To guarantee steady growth in the scientific sector, we intend to leverage our dominant position in lab glassware. Our goal to increase our power packaging offering through glassware and support the growth of instrumentation industries to LabQuest mainly import substitution, and we endeavor to get double-digit revenue growth for this business in the medium term.
With that, I'd like to throw the floor open to questions. Thank you.
[Operator Instructions] The first question is from the line of Rahul Dani from Moarch Networth Capital.
Shreevar, thank you for your detailed explanation on the [indiscernible] numbers. If you were just having to consumer, Diwali has been shifted this year. So how do you see the overall demand trends? I believe in today's interview seeing some slowdown you're seeing some kind of slowdown. So just wanted to get some understanding on how do you see the demand conditions in the consumer side of the business? And how do you see the margin staying in this division?
Yes. So look, when I say it slow down, frankly, we had given last couple of years, we had expected the growth to be higher than what we are seeing. So that's -- in that context, I would say there is a slowdown compared to expectations. However, I think we've done fairly well if we look at even the first 6 months, we have had a growth of roughly 15%, 16% on the consumer side of the business. And if I look at what's happening in the market with other listed players, we may be slightly better off than them. That being said, there is definitely even at Diwali time, there's been the momentum has been not as expected. And it's hard to really know what the reason is. But I see that there is some pressure on sales. Maybe it's the pay the market a lot more opportunity available for customers to buy many more goods than in the last couple of years because of forward supply chain were in trouble. So now that's gone away. So maybe that's what it is. I'm not quite sure. Margins, I don't see margins will continue improving as we have -- I already mentioned operating leverage as it started kicking in and as we grow our sales, even though at a slightly lower pace than what we had internally thought that operating leverage will continue to kick in and margins will keep growing. So I'm not so concerned on margin exactly.
Sure. And just on your opalware division, what kind of capacity utilization have you reached? And also the earning sales also setup on your capacity for opalware. So do you see enough demand for opalware? Or do you see some kind of pricing pressure to also to come in opalware?
Well, I mean as far as our capacity utilization is concerned on the opalware side of the business are -- I think we'd be closer to 75%, 80% now. okay, which is quite good. And we hope that we can come -- you really -- the business are making a lot of profit in the last 20% of sales. So we hope we can achieve that in the coming year, which is -- I mean, even this number is quite good because we doubled the capacity in the last year. So as we close the year, if we are -- if we achieve 75% even, I think that would be very attractive from a performance perspective. And I hope we can do that for this year. And next year, we should tend closer to the 100% level.
As far as competition is concerned, I'm not -- the there's obviously competition. But I'm not sure that the pricing is coming from other opalware players or whether it's coming from other product categories, such as like I said, both China, [indiscernible], I think the pricing pressure is there across all categories and not specific to any 1 player that you may have mentioned here.
New capacity. I think whatever they have some of which has already been announced a while ago, and I don't think there's any new further overhead, which is [indiscernible] assumption.
Sure. Just a last question from my side. In the Scientific division, our profitability has improved. How do you see this for the year for the full year? What kind of margins can you expect in this Scientific division?
In the Scientific division, there are basically 3 drags of profit there. One has been black west and that is mainly more investment-driven. And that, okay, to put it out of the way, when we say that of a new CapEx on a consumer side, we're spending INR 200 crores, INR 300 crores, INR 400 crores on CapEx. And then that is going to be a gross block. In the Scientific division, that's not the case. We are putting in the same kind of thought process in new product except we're not putting it in plant and machinery, you're putting it in a way of people and knowledge. So it doesn't show you can't [indiscernible] rise after the CapEx, but the fact is that building capability which is the same thing like putting up a new furnace you're building capability.
But unfortunately, the outage standard side that you have to write it off. So that is a drag on the P&L for sure in the short term as far as last question is concerned. However, on the flip side, when you get through that period and you are able to leverage that knowledge you build and you're able to sell those products at some scale create margins look very good because you have no [indiscernible] loss. So you have return on capital are looking very interesting. So that is 1 big track for growth of our profit margin there on the Scientific side. The other one, like I said, before the gold Scientific we acquired the company. There are certain challenges in terms of cultural integration and in terms of, let's say, improving sales, driving synergies, which I think will take some time, which is the case with any acquisition. And as in the initial period has also dragged our profit down.
And on classified tracking there, it's more a business issue which we need to resolve for, which is lower pharma packaging demand. So out of 3, 2 issues that were in our control. Pharma packaging, the market is not really good in our control. So the first to issue, I think, will help us rebound in the ease, let's say, whatever our steady state margins where we should be able to really surpass them. In the next, I don't know about next 6 months, but definitely in the next 18 months, I think that should happen. Scientific business is something which is a very attractive business from a cash flow and from a steady-state return on capital employed perspective, disruption is also lower. So it's a very good defensive business, and we will continue growing that business to the best we can. And I think the margin profile, like I said, will bounce back to the norm if -- are higher than the norm once these 2 issues that are highlighted, how to control.
The next question is from the line of Priyank from Vallum Capital.
And many congratulations for scaling up the opalware side of your capacity. If you can highlight how has been the growth in the market within domestic and exports? How has been the growth over there? And which channel you have seen the most aggression coming up with your new sales, new capacity getting consumed.
Look, I think for us, we are primarily a domestic player. Of course, we have exports, and we do sell in various markets globally. But I would say 90% of our revenues comes from domestic. So while we are trying to scale up [indiscernible] business. The numbers are not as big as we are discussing at the moment. But on the domestic side, we have seen growth actually across virtually all channels whether it's trade or large format retail. Large format detail was very badly impacted for many years, last 3, 4 years. So right from COVID then some changes in the industry with the leading players shutting down or going into bankruptcy. So we see some bounce back there. I even e-commerce, of course, has been strong.
So I would say it's fairly broad-based growth on the opalware side, and that's the reason we have been able to consume some lot of our capacity that we have a reasonable amount of capacity that we've added. Also, I would say it's driven -- we've introduced some new products, which have also helped. So overall, I'm quite satisfied. Like I said, the market has been a little bit better. I think it would have been -- it would have just given us a little bit extra hedge, but unfortunately, that's not the case yet. But we are always here to continue trying. And I'm sure we will be able to consume in that capacity in the next, like I said before, by next year.
Perfect. Sir, our ground channel do you suggest that a market leader also has a large capacity or utilized, and they have been aggressive in modern trade. But when you say the competition and consumer having more choices available now, have you seen any significant change in the industry competitive landscape as well as if you can a little more on the price changes between [indiscernible] China, Mandarin are they hurting more on industry [indiscernible] then having more supply is having a higher competition or there is no change as such.
We look at the margins, there may be something plus/minus in some specific markets or in some specific product. But broadly, I don't see any substantial changes in the industry itself. Yes, I do believe that this year, there has been higher unorganized players in general in the -- in all spaces. And therefore, there has been competition more from our organized sector. That's my belief. I don't have any data, frankly, to back it, but this anecdotal kind of point I'm sharing with you. And that has been more of a challenge versus our direct competitors doing anything on pricing. I don't believe that they're all very, I would say, responsible players and they're all very organized, and I believe that they continue acting in that fashion. So I don't see that as a stress at the moment.
Perfect. And sir, just on the clarification, when you say your capacity is 84 tonnes per day is roughly to 30,000 tonnes. This shouldn't be a name credit capacity, right? How much of the capacity or the production that we can have at the optimal level? If you can help us with that.
About 80% of that. 80% of that.
80% would be an optimal level.
Yes.
And in the existing plant, do we have any further space to add further any furnace one-month bill comes or a shutdown or maintenance, we will have to move for a greenfield, right? In case we want to add a further capacity?
So in the same plant, our third furnace for porositicate glasses coming. So that is already coming at the same plant. And that also, we are putting up 25 tonne per day plant. We can increase this to 42 tons, okay, in the same plant. But yes, beyond that third furnace to put a fourth one, we have to -- if the time cost of that, and then we have to be at a different location. There's lag available. There is lag available. We could also buy put it there. But even strategically, we may wish to put it somewhere else.
Right. And that's applicable for opalware division also?
That's right. Because yes, the opalware and the glass the glass press ware both in Jaipur.
Got it. Sir, if you can help us how much would be our used sales within the opalware category? And how many new designs do we generally come up in a year, if you can help us on the opalware side.
I'm sorry, I don't understand what this new sales mean?
I'm saying a non- dinner set, which is that would be a place which are sold in a stand-alone basis. I mean new packages, which are also getting sold. Do we have any segment sales over there?
I don't think we have anything -- anything of any nature like that. That's -- I mean we could be selling white wear, which is I don't know that [indiscernible] lose ware but white ware sold, which is just without a design, but it's sold in copper packaging and everything. So I'm not sure what you mean lose ware. But we are selling, I would say, even white ware are very low for us, mainly we're serving dinners sets per se.
Got it. And how many designs we plan to introduce every year?
There is no -- I mean, it depends on customer feedback, but we have, I would say, at least 20, 30 designs every 6 months come out at least, maybe more.
Got it. Got it. Got it. And just last question on how has been the Diwali change while we have been into this month, if you can help us with that.
So I believe all address the point that [indiscernible], I mean you look at the , if you look at the first 2 quarters and sales have been more or less in line that maybe there's been some bump-up for Diwali. But I can't say it's been a bumper Diwali can I say it's been a disaster. So it's okay. I obviously not saying that number with you.
The next question is from the line of from [indiscernible] Capital.
Yes. This is [indiscernible] from [indiscernible]. Nice to see the ramp-up that's happening in the opalware. My question is on the balance sheet front. First being, the investment, there is a markdown of around INR 4 crores compared to March. And there is also an expansion in the working capital. So if you could help us understand what is that -- is it seasonal? Or what is it? Yes.
As far as working capital is very clear, it's a seasonal thing because end of September would be the highest level of working capitalized and that also is mostly inventory, frankly. At the end of September, inventory would be at the highest point because Diwali is in November. So there's no -- if you compare September to September last year, there would be some change, but not that material. Coming to the markdown, let my CFO answer this question.
The markdown of the investment and is temporary, I think that.
Sorry for the interruption, sir. Can you please come closer to the speaker, your voice is very low.
Am I audible now?
Yes, little [indiscernible].
Can you hear me now?
Yes, sir.
Markdown on the investment is a temporary markdown in real estate fund, basically, where we had invested maybe about 7, 8 years back, and we use this markdown to grow in the next 3 to [ 5 ] years.
Okay. So you will see a mark up again is what you mean?
Yes. I mean I think we have spoken to the fund manager. I think it's contributing in nature, and they should again be able to mark up basically this by the end of this year.
Okay. Okay. And this other current assets has gone up from INR 33 crores to INR 58 crores. What is leading to this increase compared to March?
This is primarily on account of our GST credit because we have done a lot of CapEx now, and we have accumulated a lot of GST credit. It's primarily because of that.
Okay. Okay. And how do we see the debt on the books currently and going forward post the demerger, how will the debt be on the Consumer side of the business and the Pharma side of the business?
So the overall debt on the business as on 30th September is about INR 215 crores, and we have about INR 90 crores of cash. So net debt is about INR 125 crores. The borrowing will be primarily on the Consumer business.
Okay. Okay. And so -- and on the CapEx front, how are we placed for this year and the next year on the Consumer side?
I think most of our CapEx is done this year. I think maybe about INR 30 crores, INR 40 crores is left for this year because of the modulated funds. And next year, as far as the project is concerned, we don't have any CapEx. It will be all the [indiscernible] CapEx.
Maintenance CapEx, Okay, okay. So that would be roughly equal to the depreciation amount.
Broadly.
Broadly. Okay, fine. Got it. Okay. So now we did around INR 150 crore purchase of plant in [indiscernible] and another INR 30 crores, INR 40 crores will be spent in the current year. And we paid around INR 20 to INR 23 crores for the -- towards the purchase [indiscernible] acquisition. And the entire payment is done, right, for the acquisition?
Yes.
Okay. There's nothing for the appendix. Okay, okay. Okay. So then our debt should be then -- should be the peak number, right, [ INR 215 crores ]?
I don't think that we need to take further debt.
Okay. Okay. From at least a 1-year perspective, this should be the number.
[Operator Instructions] The next question is from the line of Manav Vijay from De Financial Consultant.
Yes. Sir, I just want to ask you, first of all, if you can tell us, so of the roughly [ INR 190 crores ] of CWIP, that is standing in books as of now. So some, I believe, would be for the presser, which you already mentioned will become operational in quarter 4. If I were correctly, sir, pressware was roughly INR 100 crores of CapEx. Rest is INR 90 crores stands for what?
Okay. Again, yes. So the overall CWIP basically 1 is your as [indiscernible] you rightly said. And then there is a -- which is a 6.5 megawatt solar project that we are doing in the state of Rajasthan. So that CapEx is around INR 40 crores. So that is also something which is a part of the CWIP, and that has been just being commissioned as you see.
Okay. And this 6.5 megawatt will help you to have what kind of savings in your power cost?
Or maybe approximately about maybe INR 6 crores, INR 7 crores a year.
INR 6 crores, INR 7 crores a year. Okay. And this press were will become operational in quarter 4? What about the Bolia CapEx when that will become operational?
Yes. So the project will be commissioned from there in January 2024, and this is where we will capitalize this entire project once the commercial production is increased.
That's the same.
Yes. [indiscernible].
Okay. And QB project anyways as of now is on a back burner?
That's right.
That's right.
Okay. Perfect. My next question is, sir, as of now, on a roughly INR 650 crores to INR 660 crores of gross block, we are doing -- so we have roughly around INR 64 crores kind of a depreciation, which is actually 10%. Now within this year, another INR 200 crores will get added to the gross block. So that -- so we move probably INR 850 crores, INR 860 crores. So next year, would be around INR 90 crores of depreciation? Would that be a safe number to work with?
No, sorry, how have you [indiscernible] at the INR 90 crore number?
So basically, as of now, we have around INR 660 crores of gross block okay? Approximately INR 200 crores will get added to the gross block in this year. That takes up to around INR 850 crores to INR 860 crores. We have INR 16 crores of depreciation in this quarter. On an annual basis, it becomes INR 64 crores. So approximately 10% of your current gross block?
Yes.
Now when you add INR 200 crores further to it, so 10% depreciation on that as well for the next year. So INR 85 crores to INR 90 crores, is that a safe number to work for depreciation?
Yes, you can assume the number are broadly.
You're right.
Yes. Okay. Perfect. And the last question, sir, if you can also tell us the tax rate for this year and next year?
There is 25% tax rate for this year are for next year.
The next question is from the line of Aditi Bhatted from Nivesh.
Congratulations for the set results in quarter 2. Sir, I wanted to understand in the class par division, we have already completed the capacity expansion, the investment in the capacity expansion. And we don't see any further demand from domestic markets in [indiscernible] -- is it are we targeting or demand for the same?
Yes. Look, export sales have been going quite well in glassware. Unfortunately, they've been hit in by the domestic reduction in sales. So domestic market for injectables has slowed down. In fact, 2 of our main customers have had challenges, 1 with U.S. FDA kind of issues. And the other hand, move the product to DPCO products, which means that they want to a lower cost option. And that's the reason we've had some reversals there. So we are looking at other customers, and we continue to kind of try and find alternative usage for our product, both domestically and exports. And yes, unfortunately, we've done a lot of CapEx, but our capacity utilization is very, very low [indiscernible].
So sir, from the current facility, what would be the capacity utilization for class part? Are you utilizing completely or even that [indiscernible].
No, no. We I see the CapEx is already deployed. So now the capacity has gone up and we would be biting less than 50% of our capacity at the moment.
That's including your CapEx, right?
Yes. Maybe around [ 40 ] on over.
Yes, that's the issue. Okay. Okay. Okay. I got it. And how do you see the growth market for open there because we are targeting demand for Opera from Gorup in other areas also. So do we see -- so is it in line with our expectations?
Yes. Yes. So exports, as I already mentioned earlier, it's roughly 10% of our business and it's growing at the same rate as the domestic business, meaning that 10% share has been protected. And we have been focusing more on domestic market in principle because we get higher realization there. But exports also, we've been trying to grow our brand in the Middle East. We got good traction there and in some parts of Europe. As you mentioned, we are selling as an OEM. And the [indiscernible] margin is growing well, but I can't say that we are looking to sell or a or a large care for capacity. It will be in the range of 10%, maybe to 15% only make.
The next question is from the line of Hitesh from Kosa Capital.
Sir, could you give some more details on what is happening in Gold Scientific. When do we expect the integration to be complete and by when do you see breakeven? And also what is the steady-state margin that probably we can have from this vertical?
[indiscernible] Scientific and we acquired the company end of April, early May. It's been about 5 months or 6 months that we acquire the business. There are many things that we need to put in there for example, SAP, we have deployed SAP there to get the information flow to be on a daily basis. There are things which are that there are basic things in terms of the sales processes, the production processes, all of it takes time moving from 1 culture to another culture or it just takes its own time. A lot of training is being done to the people. So my view is integration will be over 6 more months to get this into the same kind of setup that we have here at Borosil. As far as the margin profile is actually quite attractive. So if you see the gross margins are good, -- the problem is that there is a lot of -- the leverage we need to get in terms of the product and selling, there's a lot of opportunity, which is not being captured yet. For example, the sales team doesn't exist in the east of the country. We want to expand sales as even in the south of the country, we need to improve our sales in Hyderabad. It's a market where there is a lot of potential.
So on all fronts, whether it be sales, whether it be operations, whether it be procurement even there are challenges, which we are addressing. But we have to take the team along. There's a training aspect associated with this. There's a culture aspect associated with it. So I think 6 months is what it will take.
Margin profile, I've had to benchmark, it would be similar to our lab glassware business in terms of relatively good margins, high margins, but at the moment, we don't see them because of the -- they are operating at a much lower level of efficiency than I compared to what we are used to. And we'll get there. It's just we have to go through this time.
Sure. Got it. So it's an order book-driven business, right, where you will have requirements from the clients and then there would be an execution phase [indiscernible] what is the current capability that you have, what is the scale that it can [indiscernible]? And what is the current order book that this division has?
We acquired the company at about INR 50 crores roughly of revenue, INR 50 crores, INR 55 crores, I can't opt the exact number, but in that range, okay? And I think with the current capacity, we should be able to do more than INR 100 crores. At the moment, we are doing hardly INR 5 crores a month. So we have a long way to go.
Got it. Got it. And sir, the next 1 is on the pharma packaging because I think this is 1 vertical where we have been on an investment mode, right, since you acquired there are a lot of process issues which we got corrected, then we had some low-margin clients which we weed out. And right now, the scale that we see is actually the lowest post-COVID is the lower scale that we have. So I mean what are the challenges that you are facing in this business? And when can we really see a big turnaround that we spoke about when we initially acquired this business we.
So if you see the journey of this business, we acquired it again with a turnover of some INR 28 crores, INR 30 crores, if I remember correctly. We scaled all the way up to INR 110 crores within 4 years of acquiring it. And then in the last 2 years, 1.5 years, actually, so we obviously, in order to scale it up, we invested in CapEx, we invested in better equipment, a lot of camera inspections so to match the needs of our customers, automation and so on. We definitely had a setback in the last 12, 18 months, and it's not grown in the way that we had expected it to grow. So I think there was some miscalculation there from our side.
As far as the future is concerned, like I already mentioned earlier in this call, exports have been doing very well. It's unfortunately that effort has been hidden because domestic sales have declined, and therefore, the export growth has not been visible. So we do see good potential in the exports at very nice margins. And that exports will hopefully lead the way. The second is, even on the domestic side, there have been 3, 4, 5 large customers that have onboarded us. Obviously, whenever customers start, they start with small volumes and it picks up. It's just -- it's a painfully slow process, and we're going through that process at the moment. But I do expect that we should come back to -- firstly, the first target is to come back to at least the level of scale we were 1.5 years ago and then to go past.
I think we are in it for a couple of years at least in this journey.
The margins that our competitor makes over here about 20%, 25%, that is still doable according to you?
Or so they have a lot of benefit on sourcing. The tubes, okay? So they may be a -- we would be about 5% lower than that.
Correct. And no update on the tubing facility that we thought we would be having right?
Yes, the -- we have -- there's a lot going on at the moment in terms of scaling up all these acquisitions with are opalware furnace to with our Borosil furnace coming in. So we decided that we should first stabilize our current whatever capital already we have deployed before taking further capital calls. So probably, this will get delayed by 12 months or so further.
Okay, sure. Sir, and lastly, on Borosil technologies because that is 1 segment where we have been ramping our team quite aggressively. And I'm sure that, as you rightly mentioned in the opening remarks, this to scale up your technical expertise where you're building new products. Do you see -- do you think that you already have that base now where probably there will not be a further investment needed on the people front? And we should at least have that benefit of scale in our numbers going forward.
Yes. Well, I think we -- this year itself sometime in Q3 or maybe Q4, I expect to break even in that business. And that is something that I believe that once we achieve that as the first kind of, let's say -- let's say there's a next step in our journey. And even currently, there are many, many new products being developed over there. And each product may not have a huge potential, but all of them put together, do our large potential. And therefore, the whole idea of them is that once you break even, then the journey should be aggressive growth from there because you kind of covered your fixed expenses. And now it's a question of the marginal costing. But the selling prices are -- the gross margins are attractive in the business. So therefore, once the fixed costs are covered operating leverage is large. So this should kick in from next year. And I'm very bullish on this. And it's all import substitution Government of India also is through its research labs and all our procure a lot of these products. So as we go more for making India, we have a national edge here. So maybe from next year, you start seeing some benefit from this.
Right. So those 80% less gross margins, which you used to speak about when you incubated this division, that remains even with these new product developments that we have done and and the margin profile should be as good as a lab there that we have.
-- in fact -- so look, gross margins to [ 70 to 80 ] [indiscernible] of our products would have, okay? Some are lower, of course, but the potential is there. And it's a question of how that value proposition for the customer. how do we kind of build that tweak that. So we -- I believe at least that this business has better margins than even on labs. If we can scale it. The question is, can we scale it? And I hope the answer is yes.
[Operator Instructions] There are no further questions. I would now like to hand the conference over to management for closing comments.
Well, thank you all for your interest and all the questions that you asked, and I will look forward to seeing you in the next call. Thank you.
On behalf of Moarch Networth Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.