© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the Borosil Limited Q4 FY '23 Earnings Conference Call hosted by Monarch Networth Capital. [Operator Instructions] Please note that this 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.
Yes, hi. Thank you, Seema. Good afternoon, everyone. On behalf of Monarch Networth Capital, we welcome you to the Q4 FY '23 Conference Call of Borosil Limited. We are delighted to have the senior management of Borosil represented by Mr. Shreevar Kheruka, Managing Director and CEO; Mr. Anand Sultania, CFO; Mr. Rajesh Kumar Chaudhary, Whole-Time Director; and Mr. Swadhin Padia, General Accounts Manager.
I will hand over the call to the management for the opening remarks. Thank you, and over to you, Shreevar.
So thanks, Rahul, and Monarch's team for hosting this call. I wish everyone a good afternoon. Borosil Limited's Board approved the company's financial results for Q4 and FY '23, the year, on May 22, 2023. Our results and an updated presentation has been sent to the stock exchanges and have also been uploaded on the company's website.
We are pleased that Borosil has achieved a milestone in its journey last year. Consolidated revenues from operations crossed INR 1,000 crore mark for the very first time as we closed the year ended March 31, 2023, with consolidated revenue of INR 1,027 crores. This represents a healthy growth of 22.3% over the previous year.
I would like to recognize and thank the great work put in by all members of the Borosil team. And of course, all our stakeholders, including our customers and suppliers and our shareholders, not only for the last year, but in the years prior, too, that has enabled building our very strong foundation and an execution of a robust strategy that has brought us to this milestone. I'm proud of what the team has achieved. And frankly, we have just begun. There is a lot that lies ahead, and we are very energized for that.
During FY '23, consolidated EBITDA, that is before exceptional and onetime items, including investment income, was INR 138.3 crores as against INR 168.2 crores in the previous year. The EBITDA margin contracted from 20% in FY '22 to 13.5% during FY '23. The income from investments was INR 1.9 crores in FY '23 as against INR 13.7 crores during the previous year.
I will elaborate on the reasons for the decline in operational margins as we discuss the performance of each business division. I can briefly mention now, however, that part of the decline is attributable specifically to the context of the year -- financial year '23, and we expect to see a bounce-back to healthier margins in the current year, that is FY '24. Profit before tax, again, before exceptional and onetime items, during FY '23 was INR 96.7 crores as compared to INR 133.2 crores during FY '22. Consolidated PAT during FY '23 was INR 90.2 crores versus INR 85.2 crores in FY '22.
As we have already discussed in the previous quarters, the exceptional and onetime items pertaining primarily to a provision for a loss of property from the fire and flood in the previous year. And receipt of insurance claims and gains on sale of noncore real estate properties in FY '23 are the main differences. Full details are available in the notes accompanying our accounts over the last few quarters.
Average operating capital employed in the business, that is capital employed without the work in progress and -- without capital work in progress and investments, was INR 558.2 crores.
During FY '23, the company earned an operating profit, again, before exceptional and one-time items and before income from investments, of INR 97.1 crores, translating into an annualized operating ROCE of 17.4%. The ROCE is expected to increase in FY '24 and beyond with improved profitability as well as ramping up of sales from capacities added during the year, namely the furnace -- the second furnace at Jaipur for Larah, which was commissioned during the 1st week of January 2023.
Coming to our business-wise performance. Borosil's Consumer business, comprising glassware products and non-glassware products under the brand Borosil and its opalware range under the brand Larah, recorded sales of INR 741.8 crores, a growth of 29.5% over FY '22. Sales of glassware products grew by 21.9%, recording sales of INR 178 crores during the year.
Storage products, which have seen some decline during COVID, grew handsomely as workplaces and educational institutions opened up fully. Our non-glassware range turned in a second consecutive year of high growth. During FY '23, it grew at 46.2%, delivering sales of INR 303.2 crores during this period. We saw good growth across all our ranges and all our channels.
Non-glassware sales of the Borosil brand now comprise about 62% of revenue. Our strategy to extend the Borosil brand beyond microwavable products to service various kitchen and serving needs of the Indian household has played out well. It's also a strong testament to the equity of the Borosil brand.
Our opalware brand, Larah, achieved sales of INR 260.6 crores, a growth of 18.7% over FY '22. Although it's important to say here that the growth was constrained owing to nonavailability of product during the peak season. That was owing to the repair or the rebuild of the furnace as well as a delay in the start-up of the new production line.
During the year, several new SKUs were introduced under Borosil. Many of these, such as cooktops, cookware accessories and storage jars, have seen good traction. Our digital marketing initiatives have seen improved efficiency and effectiveness. Organic reach in FY '23 was 76 million, and over 155 influencers uploaded content on Instagram and YouTube. Content is available across various buckets, such as how to, tips, recipe hacks, healthy recipes, fitness tips, et cetera.
On the field, our decision-making system implementation has enabled database decisions resulting in more cross-selling and up-selling across our channels. Improved productivity has also enabled the team to increase outlet reach. And we now service well over 20,000 retailers in our network.
The EBITDA margin for consumer products was 11.4% as compared to 16.4% in FY '22. The decline in EBITDA margin was driven in part by inflation in cost of materials as well as power and fuel expenses. We had already discussed this during the last call. I can quickly reiterate the reasons. Our product mix has been changing in favor of our non-glassware range of products. Non-glassware, excluding Larah, comprises 62% of sales, and they have a slightly lower gross margin than the traditional glass range.
However, as I mentioned before, our focus is on return on capital employed. While the drop in EBITDA margins of the non-glassware range is lower, we have not invested in manufacturing facilities for this range. We can, therefore, earn an acceptable ROCE from the non-glassware range. And frankly, I would say it's more than acceptable. It's a good ROCE, and there are many other benefits which are not quantifiable by this range.
The company increased marketing expenses behind both its brands, Borosil and Larah, to increase consumer mind share and grow the brand digitally. The brands have been actively promoted through influencer marketing campaigns to improve the customer engagement across all categories. Our brand partnerships with Indian Olympic Association and Haryana Steelers have given significant brand upliftment in the hydration category of bottles and glass.
The third point on the reason for the decrease in margin is that in Larah, we, as you're aware, we expanded capacity from 42 to 84 tonnes per day by putting up an additional furnace. There was some delay in implementing the expansion into global supply chain issues, which were beyond our control. At the same time, the older furnace had to go to rebuild in October 2022.
Consequently as well, the company could not service a lot of Larah's requirements until the end of quarter 3 FY '23 through our internal production. In order to ensure continued availability of brand Larah in the market, the company took a decision to procure wide products and introduced these in the market with Larah designs and branding. The company obviously suffered significantly on margin in this activity.
Moving on to the Scientific Products division. Net sales during FY '23 were INR 285.3 crores, and that is a growth of roughly 7% over FY '22. Our Scientific Product business comprises 3 product ranges: lab glassware, lab instrumentation under the brand LabQuest and primary glass packaging for pharma customers under the brand Klass Pack.
During FY '23, lab glassware recorded a sales of INR 187.2 crores, which is a very healthy growth of 20% over the previous period, driven by pharmaceutical and -- and this growth was driven by pharmaceutical and institute-based sectors. Borosil maintained its market share of close to 65% in the organized lab glassware market in the country and is estimated to be a number of times the size of the next largest player.
We continue to add more customers and expand the range of solutions being offered to existing customers. We also are developing an OEM business line for supply of critical items to our customers while maintaining the margins in the business. We expect to retain our dominant position in the domestic market, and we also see a good traction in export sales of lab glass products and vials. The -- as part of our strategy to provide a wider range of -- sorry, just moving to the next point. The instrumentation business under LabQuest grew by 20.3% in FY '23 to achieve sales of INR 25.6 crores. We estimate the current addressable market for LabQuest to be about INR 270 crores and growing at 10% to 12%.
The market is quite fragmented with no player enjoying dominance. We're still at the early stages of development of a range of offerings in this business vertical and, therefore, can expand the current addressable market much beyond INR 270 crores.
We will focus on increasing the range of solutions that we offer and, at the same time, expanding our customer base. Recent products developed and introduced by the Borosil Technologies team includes pilot lab reactors, bottle-top dispensers for hazardous acids and products in the nutrition and environment categories. We will leverage our existing customer relationships in the lab glassware business to increase the customer penetration for LabQuest.
In the context of COVID, Klass Pack had 2 very strong years in FY '21 and '22, growing by 36% and 62%, respectively. During FY '23, therefore, we were against a very high base. Sales for Klass Pack were impacted for the year as COVID demand dropped off substantially and were INR 72.5 crores. That is a decline of 19% as compared to FY '22.
Almost 18% of the sales in FY '22 was relating to [ wires ] for COVID drugs. And obviously, as you all know, this has gone away completely. However, the silver lining for Klass Pack is that export sales grew by about 36%, and Klass Pack continue to add new customers overseas.
As part of our strategy to provide a wider range of solutions to our lab glassware customers and to consolidate upon our leadership position in the industry, we have acquired 90.17% of Goel Scientific Glass Works Limited from the majority shareholder of the company. This company has expertise in design, fabrication and installation of industrial glass process system and laboratory glassware at its 2 manufacturing facilities at Vadodara, and it's one of the leading exporters of process system components to various countries in the world.
The company has a team of expert glassblowers. They still are manufacturing borosilicate glass vessels up to a capacity of 500 liters. Its products are widely used in the R&D and production departments of pharmaceutical, defense, agricultural research and chemical industries. It has built strong relationships with key domestic as well as international OEMs.
During the year ended March '23, it had a turnover of about INR 66 crores. However, to be clear, this acquisition happened post April 1, and therefore, the accounts do not reflect any revenue or profit from this acquisition. Borosil's SIP business will derive several synergies with this acquisition. It will add a complementary product portfolio to Borosil's existing range that can leverage Borosil's brand and strong sales and distribution networks.
Borosil's R&D capabilities, together with Goel Scientific's specialized glassblowing skills, will enable the company to provide the customers with world-class products that are made in India. The combined operations are expected to provide deeper market penetration, entry into new markets, enhanced product offering as well as a larger and innovative range of products.
Overall EBITDA margin for scientific products during FY '23 was 18.1% as compared to 22.6% in FY '22. Margins in scientific glassware has shown some improvement in line with the growth of the business. The drop in the [ dividend EBITDA ] is on account of 2 reasons. One is the lower margins -- I would say, the higher product development costs in the LabQuest business and the lower margins in the Klass Pack business.
In LabQuest, more than proportionate cost increases have been attributed owing to higher staff costs for research and development as we've been scaling dramatically the technical team. The main reason we're investing in the future to develop new products, to ensure that we can address a larger market that's currently addressed.
Borosil Technologies is still a nascent business. And the subsidiary is in the investment phase and, therefore, is currently incurring losses as a result of all these investments in R&D. As this business scale, these costs will get normalized, and we expect that this may take somewhere in the range of 1 to 3 years. The cost of production will also reduce as a percentage as we scale the business. So while the business is suffering losses, we believe it's very good investments for future growth and profit.
In Klass Pack, EBITDA margins declined as compared to last year, owing to lower sales during the period. And additionally, gross profit was low. It was steep increase in cost of materials and power that could not be passed on to customers. We also had higher process rejection as we continue to raise the bar on specifications and automated camera-based quality control and implement further automation, such as development of online printing. These initiatives are expected to improve productivity after the initial [ constituting ] trials and stabilization of the system.
Coming to balance sheet. As of March 31, the company had a net cash reserve of about INR 90.4 crores. During Q4, the company commissioned a new furnace for glass production under Larah. We now -- we have an operating capacity of 84 tonnes per day, which at full capacity utilization could service an annual turnover of about 440 crores for the Larah brand.
The new borosilicate pressure facility of 25 tonnes per day in Jaipur is estimated to be commissioned as planned in Q2 of FY '24. Over the last year or so, we have shared plans of CapEx investments for enhancement of production capacity to reduce reliance on unpredictable supply chains in a changing geopolitical environment. Some of the projects have been implemented and underway. We anticipate that FY '24 may entail an overall outlay of INR 200 crores. This is a part of the total CapEx which has already been shared with you all. The key projects include the new pressure furnace, the solar path to reduce our electricity cost in the Consumer division as well as capacity enhancement for the Scientific business and investments to make new products in LabQuest.
Coming to our business outlook, we continue to remain very optimistic about the medium-term opportunity in the Consumer business. There may be intermittent periods of modest growth with some conservatism by consumers. However, longer-term tailwinds are expected to support strong growth in our categories. We will focus on innovating new product offerings, customer experiences and efficiency across our go-to-market channels as well as in our supply chain and investing in reinforcing our brand equity.
In the Scientific business, we will leverage our leadership position in lab glassware to deliver steady growth and, at the same time, provide platform for growth of the instrumentation business under LabQuest and primary packaging under the Klass Pack. The acquisition of Goel Scientific normally adds about INR 66 crores to the revenue base, but also brings us the new customer relationships in India and overseas.
In the midterm, for this business, we expect revenue to grow in the double digits, although it's early to share the CAGR growth, at least until we see, let's say, some action on the ground. And maybe in the second half of this year, we can share our projections of growth of CAGR for Goel Scientific as well as ROCE for Goel Scientific in a more defined manner.
Borosil is committed to implementing a structured program for ESG. High-priority areas include management of waste, water, greenhouse gas emissions and energy as well as recyclable materials for packaging and data and customer privacy. Over the next few quarters, we will disclose quantifiable targets and transparently report our performance [ in ESG ].
We had earlier announced plans to restructure the business of the company to 2 separate listed entities via a composite scheme of arrangement. The scheme has received approvals from equity shareholders and creditors and has filed an appeal as first process with the [ CRT ] for approval of the scheme. The petition has been admitted for a final hearing. The appointed date for the scheme is 1st April 2022, and we anticipate at this moment that the entire process should be completed by August 2023. We will keep you informed on the progress in this regard.
Sorry for the lengthy remarks, but with that, I would like to throw the floor open to questions.
[Operator Instructions] We take our first question from the line of Mr. Rahul Dani.
Congratulations, Shreevar, on the strong set of numbers in Q4 and congrats on the Goel acquisition as well. Shreevar, just if you could throw some light on the Goel acquisition, what would be the addressable market size it would cater to? And how quickly can we integrate this to Borosil's standard?
Yes, Rahul, that's a good question. As far as the addressable market, my -- our initial estimate is that it's about INR 1,500 crores globally as our market size. And I would say in India, the market is growing disproportionately because of higher R&D spends in India across pharmaceutical and defense and even the -- so pharmaceutical includes the APIs in those sectors.
So we -- I think we acquired this business with the anticipation that we should be able to double the revenues. The question is, in what period? Could it be 4 years? I think 4 years, we should be able to double. Can we do it in 3 years? That will be probably better, let's say, a stretch target, but maybe we could manage that.
As far as Goel, Goel is a smaller company, so it does not have many of the systems and processes as Borosil does. And in order to manage the business, we have to put in a lot of those systems and processes. And that also includes upgrading the -- or training of talent, which are already residing within the organization. And that's something that we already started. For example, we have implemented SAP there within a couple of months of acquisition. It's early stages, but I think this gives more transparent access to data.
So then the sales team integration, the sourcing integration, all of this is likely to be 6 months at least, but the benefit is it's very close. In Vadodara, it's very close to our plant in Bharuch. The customers are fairly common, so people know us. The team is very good of Goel, and there's a wide acceptance of us that we can add value to that organization. So as with any acquisition, there will -- it will take some time for integration, but I believe it's a very, very strong -- there's a very strong chance of success for us.
Yes, sure. That's great. On the Consumer division, we have performed exceedingly well in terms of our top line growth. How do you see the growth going forward with the new furnace also coming on stream? And also, once we backward integrate into the Borosil Glass, so what kind of growth do you envisage in this division?
Okay. So look, frankly, as already shared earlier, that typically the -- when you start a new furnace, it's like a step, we just double our capacity. But it's not possible to double the sales on day 1. So we had given a general target that in 2 to 3 years, we should be able to sell the production of the furnace. Obviously, our internal target is to sell it faster.
As I see it, while the market has shown some signs of slowdown in the last few months, I think with inflation having dramatically gone away across the board, I do believe that this year, we should end up selling at least 60%, 70%, 80% of that new production line. And by next year, we should sell the entire amount. And that would, therefore, be able to justify the capital that we invest in there. And there are many channels that we have not been able to service before.
Okay, another point is in the past, with just one furnace, we could not have a premiumization play. Now in Larah, we have added new product ranges at a premium price, 15%, 20% more premium. Of course, they have high quality.
So those are things we can do, and we can build that part of the business out. So there will be many synergies with the second furnace. Obviously, the -- like I said before, with any high CapEx, the first year is always a bit painful because you've spent the CapEx, your OCs dropped and you -- until you achieve a high degree of capacity utilization, but we are well aware of that, and we're in that period now. So we have to grind through it.
The next question from the line of Aditi Bhatted from Niveshaay.
Sir, I wanted to just have a clarity on the CapEx thing. So you already mentioned that one of the consumer base facility will be the pressure facility will be operational by quarter 2, right? So could you please specify for the backward integration of the tubing furnace also, which was kept on hold until the last quarter?
Yes, I know. Frankly, this has been -- because I mean I'm not at liberty to disclose all the activities happening there. But there are some other developments which I could share maybe by next quarter. There's unfortunate delay there. But we are very much committed on the -- on having the tubing production, and I'm sure that, that will happen. Although that's not factored in the INR 200 crores of CapEx that I shared that will happen this year.
Okay. Okay, got it. Next question is regarding the [ vials and installed ] CapEx. Is it coming -- is it in line with our plan?
Yes, frankly, it's absolutely in line. I think we would have finished -- we have already committed the CapEx. We are waiting for deliveries of the equipment. And whatever is getting delivered will be installed by the end of this year and which is as per the earlier projected numbers.
Okay. Okay. And the new capacity of opalware, could you specify the percentage of the capacity utilization for this month for the last quarter?
Last quarter...
Because I believe it was operational for only a month or so during the last quarter, right?
No, no, we started in Jan. We started in Jan, so it's almost 3 entire months. 1st week of Jan, it started. But I'm -- just give me 1 second to look at it. I'll just come back to you. If you have any other question, I'll answer that. And in the meantime...
No, I just wanted to see like if we can achieve around 80% to 90% utilization in the current year.
70 crores last quarter. So look, as far as the sales are concerned, I just checked, we would have achieved about 30%, 35% capacity utilization in the last quarter of the new furnace. But obviously, keep in mind, Jan to March is always the lowest month -- Jan to April, I would say, are lowest. And the -- when you start production in 1st week of January, it also takes a little bit of time to stabilize, so there are some operating losses. So I would -- I think 80%, maybe a stretch, but I already indicated that 60%, 70%, I think we should achieve that kind of capacity utilization. That's our initial estimate, understanding current orders and current outlook.
We take the next question from the line of [ Jesse Walia ] from [indiscernible].
Shreevar, the Consumer Glassware business has been reporting lackluster numbers in the last few quarters, but in this quarter also, the growth -- Y-o-Y growth in sales is only some [ 8% ]. I believe you took some price cuts in December, but still the growth doesn't seem to have come back to, let's say, 15%, 20% kind of number which you always aim for. So what's the reason for that?
Yes, Jesse, you're right. The -- actually, we did take some price cuts. The issue is, frankly, that we -- the price increase there has been significant over the last 2 years, and very frankly, the product is outpriced in many areas. And I believe that with our new -- our own production coming, we will be able to offer a significant price advantage to customers. And we will definitely get that market back, enable -- to enable switching from plastic to glass, which is really the main challenge.
And if I have to outlay -- outline a challenge for the organization in our Consumer division, this is specifically the #1 challenge we have, and how we perform on this when our new production comes will really drive a lot of our, let's say, profitability. So this is a key space to watch out for. And you're right, it's a concern point at the moment for us also.
Got it. So with this new [ bigger ] manufacturing facility coming online in third quarter, how much further price cut can you take?
I think another 15%, 20% is something we can reduce, without compromising ROCE target of 24%.
On the manufacturing investment?
Yes.
Got it. Got it. And also, how have the exports grown in the Scientific division in FY '23?
Yes. That, actually, I didn't mention the percentage, but I think a growth of more than 40%...
50%.
Almost 50% growth in exports inside of the division. So very, very good growth.
Is it because of the low base? Or even if you adjust the rate...
I mean, frankly, it was a low base, but -- so I -- but I think our Scientific division out of INR 285 crores, INR 50 crores is export stuff, including glassware.
Got it. What was the export number in FY '20?
I believe it was INR 32 crores, INR 33 crores, if I'm not mistaken.
Okay. Got it. And how was the...
You mean FY '22, right? FY '22 -- what's the FY '22?
No. FY '20. I thought FY '20 would be...
FY '22, both come down. It would be maybe INR 10 crores to INR 15 crores. So I don't want to say anything which is wrong, so I'll come back to you on that, but I know FY '22 was INR 32 crores and FY '23 was INR 50 crores.
Got it. Got it. And what's the prognosis for exports in FY '24?
I mean I don't think we'll go 50% as we did last year, but I think high double-digits, high teens is something we should aim for.
Got it. Got it. And what's the outlook for Klasspack? In the opening remarks, you mentioned you're making further quality investments into [indiscernible]. I believe this was done earlier as well, where you improved the quality systems of the company. So why this second round of investments for quality?
Yes. So we have 2 plants in Klasspack, plant 1, plant 2. So plant 2, we had done it earlier, and now we are doing it in plant 1 also, okay? So that was the main reason. And the thing is that earlier, there were customers who were able to accept a certain level of quality. I'm not saying the quality is bad. I'm just saying now it's -- pharma -- really we should call it pharma plus, okay? And now everybody wants pharma plus. So in order to give pharma plus to everybody, we have to upgrade the quality specs, which we have now done in both the plants.
But frankly, the entire pharma market, and I'm sure you've seen this in the various reports of pharma companies, whether it's Sun Pharma or any other large player, are struggling with the export sales to the U.S. with various issues. And we are -- because we supply to them, we are directly impacted. So I think Klasspack is likely to still see a tough period until those issues are sorted. And from our discussions with pharma companies, they expect things to improve towards the end of this calendar year. But these are all hypotheses.
Like I said -- but Klasspack will improve disproportionately because of the export sales -- export of -- because of the quality improvement, we will be able to dramatically increase exports in Klasspack as well and that comes with much better margins. So we're really focusing on how to ramp up sales there in that business. And we're getting good results. That will be a drag, I think, on our Scientific division in this year as well.
So what kind of growth rate do you think is possible at Klasspack for FY '24?
I think maybe 10%, 12%.
FY '20, total export was...
FY '20, our export sales for [ Scientific was 17% ], 1-7.
Now [ 50% ]...
Which is now [ 50% ].
Got it. And this -- the export number includes Klasspack as well?
Yes, that's right. That's right.
The next question is from the line of [ Disha Said ] from [indiscernible].
[indiscernible], I wanted to say that how we are expanding our retailer network? Currently, we are at around 20,000. So where are we going more into tier 1? Or we are expanding more into tiers. If you can -- tier 2, 3, if you can throw some light?
Frankly, we are not -- wherever there is, let's call it, holes or gaps in the market, of course we're adding retailers. But our main strategy is more cross-selling and up-selling, which means the 20,000 retail counters that we have, [ 22,000 ] whatever the number is, the goal here is to [indiscernible] 6 separate product ranges. And these 20,000 retail outlets do not all of them stock all our product ranges.
So our first goal is to increase the penetration of more product ranges across these existing outlets. And second is that within each product range, they should have more SKUs. So frankly, that's more the focus rather than increasing the number. Obviously, the number will increase organically, but we are not having some very aggressive scheme to increase the absolute number of retail outlets.
So more plan to increase the depth of the retailer, rather than...
Exactly. Exactly.
I see. And sir, on Glassware, which are the main top-selling product for us, because it is growing very [indiscernible].
Sorry. Sorry, could you...
In non-Glassware, which are the top-selling products because they are growing very -- at a very high growth rate.
So look, our general range of flasks, I don't want to specifically call out any specifically, but I can tell you our flasks have done very well. Our OTGs, our sandwich makers, then our steel serving items. So frankly, it's been a very, I would say, widespread growth. It's not that any 1 item has contributed like, say, disproportionately large absolute numbers to the growth, and that's what gives me a lot of confidence. It's not a -- it's not like a one-hit wonder. It's a very broad-based growth, and it's not just growth in 1 channel. It's also growth across channels. So not only is there -- or the non-Glassware products are doing well across the board in terms of the SKUs, but also across the channels. So it's surely a sustainable growth.
Okay. And sir, the [indiscernible] which we achieved this year, what can we expect in coming 2 years considering our new Larah capacity and the new furnace capacity which are helping our pricing [indiscernible]?
Frankly, that's a good question. We have always projected a 20% kind of growth number year-on-year.
For Consumer?
Yes, for Consumer. I guess your question is for Consumer, so I'll just report to that. So the 20% growth is something that we have projected. Would we like it to be 25%? would we like it to be 30%? Yes, absolutely. So we would like that we hit the 30s -- in the 30s for the next couple of years. But for the sake of your projections, I think to be on the safe side -- because anything that goes wrong in 1 month also dramatically impacts the growth.
What I was just thinking, we would reduce prices of our glassware products, so that would not impact the estimated growth. That way, I was just asking...
No, I don't think -- because our volume growth has to be much more than the reduction number. So for example, if you reduced price by 15%, volume growth has to be at least 35%, 45% in terms of quantity, then only it makes sense to reduce the volume, but -- the price by 15%. So I would still stick to that number, between 20% and 30%.
Sure, sure. And sir, one more question on -- this is a little long term. So once we are done with the CapEx for FY '24, and we believe there will be no major CapEx going forward, what do you plan -- with the cash flow, would you plan to reward the shareholders or any other plans in that regard?
Right now, we are in [ T20 ] mode. So I can't plan for a test right now. So I, frankly, don't have an answer to that question. I just -- I want to focus on executing for this year, and the team is totally focused on that. This year and next year are very critical for us that we absorb all these large CapEx we have done. And really, we have not thought of what happens the year after. So I'm not going to be able to answer your question at this stage. It depends on the opportunities. It depends on how we do in the next couple of years, only then can I...
Okay. So you're open to the inorganic acquisition too?
Yes, absolutely. In general, I believe shareholders will be -- if our profits go up, then automatically shareholders are rewarded one way or the other. So that's the way we can reward them. And if we just focus on that, then -- we have seen in the last 10 years, as we have grown, more and more opportunities have just popped up, which one -- which you could never anticipate. So I expect the same thing will happen, but -- so I don't want to get defocused. Let's just focus on the next 2 years on implementation of the CapEx and then achieving full capacity of [indiscernible].
Sure, sure. And sir, just the last one. And a few years back, we had this AIF of real estate, which is, I think, sold now. So any other noncore assets left to sold? Or we are clear with that...
About INR 20 crores is there, which, frankly, these are legacy investments and will be sold in -- due for the next year or 2, I think we should be able to liquidate all it. I don't think anything -- there's nothing stretched. I don't think there's anything -- any trouble, that we should recover everything, yes.
The next question is from the line of Mr. Manav Vijay from Deep Financial Consultants.
So now because of the fact that this year our Larah becomes operational, the second furnace. And you have mentioned it multiple times in the earlier calls that the operating leverage from, I would say, from that furnace is very high if you run that furnace at around 70% [ capital ], let's say, 100% utilization. Now this year, you are saying that you will run that furnace around 70%. If you -- so if you happen to do that, in that case, the margins for this year, FY '24, would be, let's say, what you have done in this year of around 14% to 15%? Or are you a bit close to FY '22 margins of around 17%?
I think we should cross FY '22 margins.
Okay. Fair enough. This is helpful. Second, sir, regarding this -- so regarding the acquisition that you have done of Goel Scientific. So I just wanted to understand the synergy of this business with actually a BTL. Now because of the fact that you are developing equipment and actually instruments in that part of the business and Goel Scientific actually provides solutions rather than products. So if you can just talk about the synergy because I believe that you have been talking about expanding BTL for quite some time. And considering that Goel requires a lot of equipment as well apart from the blown glass that those guys make, so what is the synergy between these 2 parts of the business?
So that's a good question. Look, as far as Goel is concerned, they have traditionally been supplying products, and actually, they've been trying to do solutions. They've done some solution, but mostly products. Now just to explain it for -- in layman language. Imagine you have a reactor in which you're having a chemical reaction of, say, 20 liters or 50 liters. You need to see the reaction. Therefore, it's a glass vessel, and there are many, many different glass components.
Now when you -- the particular scientist or the production guy who's overseeing this, is also monitoring the pressure, is monitoring temperature, is monitoring the flow. So there are various things they are monitoring of that reaction. What Goel has been doing is supplying the glassware. What BTL is very good at, automation and the whole -- the process control -- PLC, the process logic control system.
So by marrying the 2, the PLC and the glass, then you provide a solution, okay, where you can go to the end customer and say, look, you want to do this particular reaction? You want to purify nitric acid or you want to -- there's bromine recovery and there's many other processes, that you want to do this? We have a full solution for you, where not only will you get the components, you would also get the control systems to control this whole process, and that is the big synergy. And then you play alongside the global players because no one in India is doing this. There are a few global majors such as QVF which -- Radleys, another company. These 2 companies do this, and there are a couple of others also, but there are maybe 3 or 4 guys globally. And they sell their products at very, very nice premiums because they give the whole solution. No one in India does it and we'll be the first, so that's really the main synergy if we can achieve it.
So sir, in that case, so the INR 270 crore addressable market that you talked about in BTL and the INR 1,500 crores market that you talked about in Goel, how these 2 markets expand for you?
Yes. So frankly -- so the INR 270 crores is different. They're going to tool the process system part of it. The [indiscernible] processes system globally. Today Goel has it around INR 66 crores, okay? I believe we can address it. If we are able to marry these 2, then the entire INR 1,500 crores global market becomes accessible to us, okay? And that would enable -- and given the cost of production of these products, especially the blown ware 50-liter -- sorry, 500-liter flask and so on, it is highly manual in nature. Our costs are definitely better or lower than what anyone else in the globe can do, including in China.
So therefore, we should be able to then grab a disproportionate share of that market. Obviously, it's a long -- it's also easy. It's not a cost-driven market. The market is driven more from your credibility and from -- customer references always take a long time. So if [indiscernible] by just -- by putting this together in the next 3 months, then that INR 1,500 crore market, we'll get 50% market share, and we can grow Goel from INR 66 crores to INR 700 crores, as anyone [indiscernible]. But I'm saying in principle, that entire market gets addressable globally, but it will take time to actually address it because, like I said, people have to be confident. And typically, they have to be dependent on an Indian supplier that if something breaks, we have to make sure the supply chain is able to service that and the whole equipment is not shut down because of some small breaking in some corner of unit. So we have to solve all these problems, but in principle, that becomes addressable for us.
Okay. And sir, like the way you had picked up...
I'm sorry to interrupt you Mr. Manav, may we request you to join the question queue, sir, as we are several participants waiting for their turn. [Operator Instructions] We'll have the question from the line of Lokesh Maru from Nippon India Mutual Fund.
Congratulations, sir, on healthy set of numbers this quarter. My question is more on the fastest-moving categories within segment that we work in, that is Larah. So 2 questions on that site. Number one, what kind of -- on the new furnace that we have just started to work on, what kind of a sustainable or steady state ROCE do we envisage and at what margin, would that be? That is first question.
And second question is, we have seen quite some bit of moderation when we talk about the Kitchen category. There are no barriers just when we talk about Kitchenware that the industry [indiscernible] or so in last quarter. So what is the kind of demand momentum that you have researched or that you have seen on ground [indiscernible] just last quarter or in the month of April and May?
So look, as far as giving you April and May, I think it's not correct for me to give you any current numbers. I can tell you that Kitchenware, one of our strengths of Borosil is the fact that we have highly diversified in our product range. So yes, there is some slackness of demand in general. We have seen this in the last quarter also in some categories, but other categories more than made up for it. So our diversity of product allows us to kind of hedge even in 1 -- any 1 category is low. So I'm not too worried, and whatever growth number -- so I'm saying that I don't expect there should be much change in our projected growth numbers in spite of any one part of the market being a little bit weaker than anticipated. And coming to the first question on Larah, we've always indicated that our ROCE, our target is between 18 -- I mean 18% to 24%, we would like to hit the 24% ROCE number. And that, I think, our expansion should allow us to do that once we hit a certain level of capacity utilization, which while we are sure of doing it next year, we hope that we can do it in this year itself. So margins, operating leverage has already been discussed. And the second one is will give us at least 3% to 4% operating leverage. So that's the answer to that.
And what is our -- for Larah per se, what is our salience of e-com versus GT assets?
I'm sorry, I don't share that number. We don't share our channel numbers.
It is...
I'm sorry to interrupt you Mr. Maru. May we request you to join the question queue, sir. [Operator Instructions] The next question is from the line of Mr. [indiscernible] from [indiscernible].
Good afternoon to all. Am I audible?
Yes, please.
Great. My question is regarding the Consumer Glassware division. And this is in context with the impending backward integration facility that will come in, in Q2. So currently, we are at around INR 40 crore, INR 45 crore quarterly sales run rate. If we remain at the same run rate, theoretically, let's say, we clock INR 45 crores, INR 50 crores for the next 4 quarters, even after the furnace comes in, what sort of margins can we clock in this segment then versus the current steady-state of pre-furnace?
You're talking about glassware, I guess?
Yes. Yes, yes. So just to give you some context. If we remove -- if you assume 28% as Larah margins and 5% to 7% as non-glass margins, we get to around 12% to 15% Consumer Glass steady-state margins. Is this a fair estimate? And where can this 12% to 15% grow at the same top line after the...
I would say the Glassware margins should be similar to Larah margins in the [ furnace ]. So in that range. I mean we -- maybe plus-minus 5% of that. It's already -- and it will -- a lot of it will depend. And again, I repeatedly said this, and I think some [indiscernible] asked this question before, that our glassware production capacity is going to be almost 3 to 4x of our current sales in terms of tonnage. Therefore, in order to have a healthy margin, the capacity utilization is the key driver. If I was to project 100%, they're just -- theoretically, 100% capacity utilization. Then, the Glassware margin would at least be same as Larah, if not better even, okay?
But -- and the key question and the key challenge for us is can we increase that particular Glassware sale by 3 to 4x. If we achieve that, then that would mean a dramatic improvement in our blended margins of the Consumer division, and that's really the best [ feeling ], that we can do it. But whether we can do it or not is -- this question will only be answered over the next, I would say, 18 months.
So I'm just trying to understand, have you done any internal math or have you done any calculations around -- basically, if the -- do you have a breakeven capacity, basically, what it has to utilize to breakeven for that furnace?
Yes. Breakeven we will definitely achieve. The breakeven will not be an issue. We will achieve breakeven virtually from day 1 itself. That is not a concern for us.
Okay. So basically, inventory losses is not a concern affecting gross margins?
Yes. Yes, yes. I don't think it is.
Okay. And my next question is -- and again, it's linked to the same thing. In FY '24 and '25, on your Consumer Glass segment, what sort of utilizations are you building it? Like -- and again, this is linked to the [indiscernible] which you can reach 100% utilization, like what drives this and [indiscernible]?
It's impossible to answer this question because we are building out our teams and obviously, we would like to achieve that 100% utilization in 2 to 3 years, okay? So if you assume 1st September '24, just for the sake of argument that we start our production -- sorry, 1st September '23 as we start our production, I think if we can achieve full utilization in the year '25, '26, that would be a very good achievement. So first year 40%, second year 70% and third year, 100%. This is -- I mean this is just one way to -- but it's very theoretical at this point.
And it depends on the NPD that we do. It depends on how we improve our export sales, that would play a big role in this -- initially at least, how we improve our channel coverage, what pricing we offer our customers to switch from plastic to glass. So these are big questions which are unanswered. And it's -- this is, like I said, the #1 challenge for our Consumer division.
Got it, sir. And 1 last data-related question. In the last quarter, what was the incremental sales and the incremental operating cost from the new Larah furnace? I'm just trying to understand how much that...
Got it. Hard to answer this question, right off the bat. We can discuss it offline separately.
Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Great. Well, I -- thanks to all for your healthy participation in this call, the earnings call. Just to wind up or to round up, I am very, very excited about what's happened in the last year. While margins have fallen, I think the long-term story is very much intact. There are clear attributable reasons for the decrease in margins, both on Consumer and Scientific side. We are building a business for decades and not for quarters, so -- and not even for years. So I'm not so worried about that, and I expect that with our team, we are on the right path. That's my personal assessment, and we will continue doing what we do. I'm sure we'll make lots of mistakes along the way, so please bear with us.
But overall, I think we will achieve our objectives. That is a ROCE which is in excess of 20%, somewhere around 24%, and Scientific division growth of 10% to 12% and Consumer division growth of about 20% over the long term -- medium to long term. So thank you for all your support, and see you next quarter.
Thank you. On behalf of Monarch Networth Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.