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Satia Industries Ltd
NSE:SATIA
Satia Industries Ltd
NSE:SATIA
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Earnings Call Transcript
Transcript
Other Earnings Calls
Ladies and gentlemen, good day, and welcome to Satia Industries Limited Q3 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from EY IR. Thank you, and over to you, sir.
Good afternoon, everyone. On behalf of Satia Industries Limited, my pleasure to welcome all of you to this company's Q3 FY '23 conference call. You would have already received the Q3 FY '23 results and investor presentation, which has already been uploaded on the exchanges and on the company's website.
To discuss the company's business performance in the quarter gone by, we have with us today Mr. R.K. Bhandari, who is the Joint Managing Director; and Mr. Rachit Nagpal, the Chief Financial Officer of the company.
Before we proceed to the call, a disclaimer, please do note that anything said on this call that may be interactional in our collaterals, which reflects the outlook for the future, or which can be construed as forward-looking statement must be viewed in conjunction with the risks company faces, and these risks may not be updated from time to time. More details are provided at the end of the investor presentation and other filings that can be found on the company's website at www.satiagroup.com. Should you have any queries or any further information during this call, you can reach out us at the mailing address mentioning the company collaterals.
With that said, I'd now like to hand over the call to Rachit Nagpal. Thank you, and over to you, Rachit.
Thank you, Diwakar ji. Very good afternoon. On behalf of Satia Industries, I welcome you all to our quarter 3 and 9 months financial year '23 earnings call. And I hope New Year 2023 is going great for all of you.
As you are aware, our company is an agro and wood-based paper pulp producing company and is fully backward integrated. Our locational advantage in the wheat belt of India continues to ensure year around availability of raw material. We are happy to announce a strong set of quarterly numbers, the second consecutive quarter of improvement in EBITDA margins, which is in line with our guidance stated earlier. Healthy pricing scenario and our cost-cutting measures like the caustic soda recovery, drive clean, and green energy production capabilities are the key reasons for the steady increase in the margins.
Coming to our numbers, we have reported highest ever sales and EBITDA during quarter 3 financial year '23. The revenue from operations has increased by 125% at INR 4,868 million. For 9 months financial year '23, revenue from operations grew by 129% to INR 13,631 million. Our continued efforts and focus on our profitability have shown fruitful results with improvement in our EBITDA margins for the second consecutive quarter. For quarter 3 financial year '23, we reported EBITDA of INR 1,102 million and margins of 23%, which are now near to all-time high quarterly margins of 27%. Strong volumes, better pricing, high operational efficiencies are the key factors for the improvement. For 9 months financial year '23, our EBITDA was INR 2,725 million, a growth of 118%. EBITDA margins were 20%. We expect these margins to sustain if prices remain at current levels, which we believe so. PAT for the quarter was INR 648 million, a growth of 124%. For 9 months financial year '23, PAT grew by 105% to INR 1,459 million.
Our current order book is of over 30,000 tonnes, and these would be executed in quarter 4 and thereafter. Such orders provide solid revenue visibility to us and help us to effectively steer through the volatility in the prices, if any. We continue to improve capacity utilization from our PM4, which started operations from Feb '22, almost a year back. We expect it to improve further in the next year, along with our backward integrated extension of wood pulping, which would come onboard by the end of this financial year '23.
We are keenly looking forward to our plans of entering cutlery business in the next financial year with the installation and commissioning of 8 machines for making different products in the business. The paper industry continues to be in limelight due to broad growth factors like national education policy, which we have been hearing since more than a year. We believe these have long legs of growth and we haven't even scratched the surface.
The new education policy '23 is expected to bring significant changes to the way education is imparted in India. It is emphasizing the importance of teaching a wider range of subjects, including arts, sports, vocational skills, in addition to traditional academic subjects, and aims to provide education to all. This is opening more and new avenues for growth for our segment of writing and printing paper.
We are happy to announce that Board has announced 20% interim dividend.
With this, I thank you once again for joining in and listening to me patiently. We can now request the moderator to move towards the question-and-answer session. Thank you.
[Operator Instructions] The first question is from the line of Rahul Kanwar from AB Advisors.
First question would be if you were to give me sales volume for this quarter, last quarter and Q3 FY '22, please, if that is possible?
Will you please repeat the question?
Yes. Sir, I need the sales volume for this quarter, last quarter, and for Q3 FY '22, if possible.
Yes. This quarter, we sold almost 53,000 tonnes of paper. And last quarter, we sold 51,500 tonnes of paper. And last year, overall sale was 1 lakh 43,700 tonnes. So this year, total tonnage should be anywhere around 2 lakh 10,000 tonnes.
Okay. And what would be our outlook for the paper prices for next quarter and this quarter?
Yes. Paper prices, as Mr. Rachit told, we have an order book of almost 30,000 tonnes. So maybe in this last quarter, we may be having a price rise of further 5% to 6% over the last quarter. And then maybe almost similar prices in the next quarter. So for the next 2 quarters, we look very good.
Yes. Okay. Understood. Sir, I have one more question, if I can squeeze in. So are you thinking of any cost reduction like power, fuel, chemicals, and others maybe?
Yes, we told in our last call also, now we have 2 boilers, 1 we are running on rice husk. The other is being run on the rice straw. Rice husk price is anywhere between INR 8,000 to INR 9,000 a tonne, which we use almost 500 tonnes per day. So we are converting that boiler. We are rather putting up a new boiler, which will be, again, running on rice straw only. The price of rice straw fuel is almost INR 2,000 a tonne, which is almost 1/4 of the rice husk price as of today. So that will be one major cost cutting that will come in the next financial year, yes.
Next question is from the line of Yogansh Jeswani from Mittal Analytics.
Just a couple of questions. So you have talked about this in past, but if you could just share more details on the pulping capacity in terms of how much cost savings are we expecting on EBITDA per tonne basis? And will this start accruing from Q1 itself once the plant gets commissioned in Q4? Or will the ramp-up take time and it will be increased gradually?
Yes, part of the wood pulping capacity will start in the last month of this quarter and rest, as you rightly said, will ramp up in the first quarter. So today, if we look at our pulp percentage, we are almost using 50% of straw pulp and 30% of wood pulp, and we use almost 10% to 15% of waste paper pulp also. So that pulp cost is almost INR 5,000 to INR 6,000 higher than the wood pulping cost, number one. That we will be replacing 100%, number one. And number two, we are using wood pulp because of low strength waste paper pulp, which is to the tune of 8% to 10%. So this will be reduced to almost 5%. So cost of this pulp is also almost more than 40% to 50% higher than the in-house wood pulp, and looking to the international prices of the imported softwood, hardwood pulp. So definitely, it is going to affect the overall costing and EBITDA margin in the times to come, yes.
Okay. And sir, could you quantify it simplistically in terms of -- because for me to make that calculation, I would still have to think about what kind of yield comes out from pulp. So if you could just give a simplified number, even a broad-based number -- I do understand pulp numbers will be...
Yes. If we look at our raw material cost of material consumed, it comes anywhere around 49%. So once we are fully operational with this wood pulping cost, we may come near 42% to 43%.
Okay. That's helpful. Second question is on the capacity side. So after the PM4 coming, our capacity is almost 2 lakh 5,000 tonnes, right? And this year, we are expecting to close the year with 2 lakh 10,000 tonnes. So in a way, we are more than 100% utilized. So going forward, what is our expansion plans? Are we thinking of any other capacity expansion other than the cutlery, which I'm guessing is a very, very small amount. Given our total size and scale, cutlery will be a very small portion. So any other growth?
Yes, we started PM4 in February. And if I look at the average speed of the machine that we achieved in this year, the average speed of the machine starting from February till date is 900 meters per minute, while this machine is designed to run at 1,000 meter to maybe even 1,100-meter per minute. So number one, 10% increase, we are expecting from PM4 more by taking this machine to over 1,000 meters per minute, which we are already running as of date. Average was 900, but we are running at 1,025 meter as on date. So once that average comes for the whole year, so the production is -- if the grammage of the paper remains the same, average grammage remains the same, so we should be ending up almost 9% to 10% higher in production on that machine itself, number one.
And number two, management is working on a plan to increase the speed of PM3 also, modernizing PM3 and increasing its speed from present 650 meters to 725 meters per minute. This project will be taken up in the next 2 financial years. So it will start -- maybe take off in the mid of next financial year and end up being finalized in the next financial year. So these are the 2 immediate plans. PM4 will be effective in the next year itself and PM3 upgradation will start giving result in the next to next financial year, yes.
Understood. Last call you mentioned that we did touch 1,100 meter per minute in PM4, or was it again the guidance? I might be mistaken.
So 1,100 meter is the ultimate design that they have given, it can go safely up to 1,100 meters. But we haven't so far touched 1,100 meters. We have now gone to our peak of 1,025 meters per minute only. The full French team was there for 7, 10 days to do whatever needs to be done on this machine after returning of more than 1 year. So this time we received again 1,025 meters. So that was the peak we have achieved so far.
Okay, sir. And one last question, and then I'll get back in the queue. Can you share what are the current realizations in the market for writing and printing paper?
Current realization is anywhere near INR 88,000 to INR 90,000 a tonne. Since we are now executing the highest realization orders that we got in the last one quarter, in the last 3, 4 months, so our realization would be 5% to 6%, 7% higher than this in the last quarter. Otherwise, you can...
And do you see these realizations to stay firm at these levels? Or are we now seeing some sign of slowdown there?
Presently, for next 3 to 4 months, maybe up to June, the things seem very, very stable. But after June, we have to see how does this new education policy take up and what kind of response we get from the market. Maybe till then we can keep our fingers crossed, yes.
The next question is from the line of Manjul Shah from AMA Services Private Limited.
Sir, congratulations for a great set of results. Sir, a few quick questions. Sir, mentioning that we will be doing 2 lakh 10,000 tonnes by FY '23. So what would be a sustainable growth rate for FY '24 and FY '25? That was my first question. Second, as you mentioned that in CapEx, we are planning to -- so basically, for PM4, we are planning to increase the speed of the machine from 900 meters to 1,000 and 1,100 meters per minute. And in PM3, we will plan of upgradation in FY '24, so that the result will be received in FY '25. So apart from these 2 things, are we planning any more CapEx in a new machine right now or any CapEx in the cutlery segment? So that was my second question. And the third question was regarding what was the capacity utilization till 9 months? And what would be the normal depreciation run rate quarter wise. So yes. So these are my 4 questions, sir.
Yes. Depreciation, I think I'll request Rachit to clear afterwards. So as far as the growth level that we target. So I think 7% to 8% increase in the numbers, volume of production is likely to be sustained under all circumstances, because of increase in speed of PM4, number one, in the next financial year, and next to next financial year with the coming up of modernization of PM3.
So the CapEx in cutlery, as we had told in the last call also, won't be more than INR 10 crores to INR 15 crores because infrastructure is already in place. We have already placed order for 6 machines. Two machines have been dispatched today already, 2 are already installed. So 4 machines should be running in a month or so. and next 4 machines should be here in the first quarter of the next year. And the numbers from cutlery segment should start coming from next financial year if everything goes well.
So CapEx, presently, management doesn't have any plan to go in for any new machine, but definitely 1 boiler is coming as we explained earlier, which will be burning rice straw as fuel to economize on the fuel savings. And second CapEx that we are doing, which we have almost initiated already, because with increase in wood pulping, we will be having higher level of black liquor with us. So for that, soda recovery boiler with higher capacity. Presently, we are running 2 soda recovery boilers. So we intend to, in the long run, keep these 2 as standby and a new recovery boiler of 1,000 tonnes solid per day is being installed, which should be operational maybe within 1 or 1.5 year. So that is a laid out plan already. Yes. So depreciation, I think, Rachit will be able to explain better.
Yes, sir. Quarterly appreciation is around INR 30 crores to INR 32 crores. This year, like we are expecting INR 125 crore to INR 130 crores depreciation this year. So in next financial year, maybe like it is somewhere around INR 120 crores, INR 125 crores.
Okay. So sir, if I can squeeze in just 2 more questions. Just regarding EBITDA, so when we are going, we are like strengthening our backward integration. So how will our EBITDA margin stand for the coming 2 years, so FY '24 and FY '25. So can we expect an EBITDA margin of 20% to be sustained?
Yes. 20% definitely will be sustained by all means, but if our cost of material consumed, which is now at almost 48% to 49% because of higher prices of the wheat straw, so even wheat straw prices are now coming down slightly. So if we are able to control our cost of raw material consumed to the level of 42% to 43%, so we should be doing EBITDA even at the last quarter's level also in the longer run on a sustained basis, which could be anywhere around 20% to 23%. Yes.
So currently, writing and printing paper prices are close to INR 88,000 to INR 90,000 a tonne. So if the raw material prices go down, is there any chance where we can find the paper prices also correcting, where you said after June -- like till June, you said that the prices will remain stable, will remain firm, but probably after June...
Yes. Because the total family of the paper industry, if you talk of the brown paper or you talk of the flex, you talk of folding box board, you talk of newsprint, you talk of tissues, so since the total family members in the paper industry, they have come down. And pulp prices internationally, they have also come down substantially, almost from $1,070 per ton to today softwood pulp is at $830 per ton, which is almost 25% down. So that way, definitely prices can correct.
Okay. Okay. And even after correction of prices, we'll be able to sustain the 20% EBITDA margins?
Yes. Minimum 20%. I think we can -- we are almost quite definite about that, 20% we shall be able to maintain, which we have been maintaining almost for the last 3, 4 years also.
Okay. And sir, in our presentation, you have given some information relating to the packaging industry. So are we planning to also get into packaging -- like packaging products as well?
No, not yet, not yet.
Okay. So we'll be into writing and printing and the cutlery segment? These will be the 2 segments.
Yes. Yes. That will be the main focus. So if cutlery goes good, maybe we may expand in that segment.
[Operator Instructions] Next question is from the line of Prashant Rishi from Cascade Capital.
Sir, just following on the last question that was mentioned, you said the pulp prices have corrected and paper prices have corrected. So pulp prices have corrected more than paper prices would have corrected recently, right?
Yes.
Okay. Sir, so going forward, just a theoretical question, are we better off, say, buying pulp from open market and manufacturing paper versus what we are planning to do that putting up a good pulping capacity and then producing paper? In a scenario where pulp prices are crashing and paper prices are, say, going down slowly, are we better off buying pulp from the market?
Because it is a backward integrated unit, so when we make pulp, so if my pulp was, let's say, we presume a figure of, for wood pulp, let's say it is between INR 55 to INR 60 a kg, which comes to almost $725 or $720. So still, when I make pulp and get black liquor, which I treat in soda recovery, I get steam also. So from that steam, I make power. So that benefit is to be reduced from this costing. So even at a price below $700, it is more viable to make paper in-house, number one. Number two, when we make wheat straw pulp, that price is much lower than this. It is almost 25% to 30% lower than the wood pulp price. So that price, we can never get from the bought out pulp. Yes.
Okay. All right. Sir, I have another accounting question. Maybe Mr. Rachit can help me. When I look at the liability section on the balance sheet, there is something called security deposits. So around INR 100 crores of security deposits are outstanding year after year. I just wanted to get a sense where have you collected these deposits from and are we paying interest on these security deposits?
No, these are interest-free deposits. A major of the amount are interest-free deposits. We are taking it from our dealers, from our like vendors, from our contractors. These are the deposits we are taking from them only.
Okay. So no interest on this?
No.
Next question is from the line of [ Rohit Sukhija from WAPS ].
As you mentioned in the last quarter that you were increasing wood pulping capacity to 350 tonnes. So when do we see that capacity addition? And also, how much percentage of our profit would increase by this capacity addition?
Rachit, I think you can go ahead. Yes.
Could you please repeat that question?
Sir, you mentioned in the last quarter that you were increasing wood pulping capacity to 350 tonnes. So my question was, when do we see that capacity addition? And also how much percentage of our profit will increase by this capacity addition?
Yes, it will definitely increase, as I explained earlier, because we will be replacing it with waste paper and imported wood pulp, which is costing almost INR 5,000 to INR 10,000 higher. So it will definitely add to our margins by minimum 3% to 4%, yes.
Next question is from the line of Kunal Jain from District Asset.
So my question is like, as the CBSE and ICSE syllabus change and how that will affect our top line business revenue-wise?
Revenue-wise, change in syllabus, that will I think help keep the market in the buoyant mode. Instead of increasing our top line, we can only make what we can make as per our capacity. But it will sustain the demand in the market, it will keep the pull in the market. It will keep up the prices also on the cable side. So to that extent, definitely, it is going to affect the top line, yes.
Okay. And anything on the new education policy? So how much we see this coming in?
Yes. Because -- as we explained earlier also, the printers who publish guides, help books and all the supplementary materials, so they have been, for the last 2.5 or 3 years, they have been holding back their printing to the minimum level. So once NCERT or government does come out with their total curriculum as per the new schedule, so I think that work will start afresh. So that will add to the writing printing paper demand in the coming 1 or 2 years on the sustained level at higher levels. So that is what we are expecting. Yes.
[Operator Instructions] Next question is from the line of Gurvinder Juneja from Fortuna Advisors.
I have a question on the liability side of your balance sheet. When we analyze, we realize that a fair bit of your liabilities are due for payment in the next 1 year? So I wanted your guidance on how are you planning to repay or roll over that debt. And at what terms are you likely to get that fresh debt?
That is the part of the long-term loan, which is payable due within a year. So that is due within 1 year as per the schedule. So it's somewhere around INR 110 crores.
Right. Sir, what I wanted to understand was, obviously, you'll probably need to roll over some of these facilities because the free cash flow in the next 12 months is going to fall short of the repayment, which is okay, but just wanted to understand what's your preparation and what kind of response the banks are willing to give you? What kind of lines are they willing to give you?
So yes, in the normal course, like per our repayment schedule, INR 110 crores is almost due for repayment in the next year, but management is also planning to pay additional debt of maybe somewhere around INR 20 crores to INR 30 crores in the next financial year. So we will start repaying like INR 130 crores, INR 140 crores in the next year. So that is our plan.
Whatever dues will be definitely paid and we intend to pay even more than whatever is due. So that is the plan of the management. Maybe we'll pay some amount extra in this financial year also over whatever has been due in this financial year. Yes.
Got it, sir. And sir, what's your total CapEx plan for the next 12 to 18 months? I mean, of course, you've outlined the areas in which you will make the CapEx, but an amount estimated, nearest INR 25 crore estimate of your CapEx plans?
Yes. I think with the soda recovery boiler and other small projects, it could be anywhere around INR 100 crores to INR 125 crores each year in the next 2 financial years.
[Operator Instructions] Next question is from the line of from [ Bharat from PSG Capital ].
Congratulations on a wonderful set of numbers. I just wanted to ask, we had put out an announcement in January saying we've got an order worth 17,000 tonnes from Maharashtra and other States Boards and it's going to contribute around INR 200 crores of revenue. So that comes up to around INR 1 lakh 15,000 per tonne. So is there a sustainable margin? What's the kind of margin are we going to make on that? And is that a sustainable price that we could look at for the next 12 months maybe?
Yes. That value is inclusive of GST and delivered.
Okay.
Yes. So the realization that we get is, again, as I explained, in the range of -- which is higher than the market by 5% to 10%, depending on order to order. But because market was going up at the time of these standards. So maybe you have noticed that in our first quarter, our margins were on the low side, because we were executing orders which we had taken on the lower rate. So once we are in [indiscernible]. So maybe when other people are having lower realization, we may be executing orders which we had, had at very high price in the peak market and people who are enjoying peak rates.
So that phenomenon almost continues with Satia. As I have been telling you in earlier -- and even in Corona period, we were able to maintain our margins because of that only, and our numbers also. We made almost 110% plus capacity utilization even in COVID period. So the margins are likely to be maintained in the next 2 quarters because of these 2 big orders that we have got recently. And thereafter, we'll be with the market, as it happens with everybody, yes.
Right, sir. And just a follow-up. So this quarter results, we've put out a huge jump in -- our results have come from the power generation and the drop in the paper segment. So any clarification on that as to why that happened?
Yes, it was due to some transfer pricing advice from one of our advisers. So earlier, we had been booking energy transfer to paper segment from power segment at a lower cost. So they advised us, we need to book it at a higher price, looking to the enthalpy of the steam that we pass on to the paper segment. So that is why power sector profitability is on the higher side and paper segment is on the lower side. So we get benefit of 80-IA deduction in the power segment. So ultimately, overall figure remains the same.
Right. And we're going to continue to do this going forward?
Yes, yes. Because they explained a very scientific basis -- they gave a very scientific basis of steam enthalpy, that how much energy is there in the steam when power is extracted from high prices steam, and low-pressure steam is given to the paper or pulp section. Yes.
Next question is from the line of Balamurali, individual investor.
My question is on the cutlery business...
Balamurali, sorry to interrupt you, your voice is not coming very clear, may I request you to speak through the handset?
Yes. My question is on the cutlery business. So how much quantity from this CapEx we can expect and what kind of revenue we can expect from the next year from this business?
Yes. As we told, we'll be having 6 new machines of 1 tonne capacity per day and 2 machines we have already with us in 2 tonne capacity yield. So total tonnage capacity is almost 10 tonnes per day. So if we have 70% utilization, if we are able to take from these machines, as we find is the prevailing practice in the industry, so 7 tonnes per day. So we should be ending up at full capacity like minimum 2,000 tonnes of cutlery in a year. So if the price is anywhere in the range of INR 200 a Kg to INR 250 a Kg depending upon the item to item. So the top line for this segment should range between INR 40 crores to INR 50 crores.
Yes. And one more thing, in Q4, how much we can expect from the paper segment production figures, sir? We are already almost 100% capacity.
From the cutlery business?
Not cutlery, paper segment.
From the paper. Yes. Paper, we should be doing almost 55,000 tonnes minimum.
Next question is from the line of Hemant, individual investor.
Congratulations on a very good set of numbers. Basically, 2 questions from my side. First of all, we had earlier guided for INR 2,000 crores of revenue in FY '23. So we have already done close to INR 1,360 crores. So are we on track to deliver INR 2,000 crores? If that is the case, I think Q4 numbers should be better than Q1, Q2 and Q3. This is my first question. The second question is, when do you expect the new education policy to kick in?
Yes. As you rightly said, I think my estimate is definitely PM4 numbers will be on higher side, almost 10% more than the last quarter. So we should be crossing INR 500 crores easily if everything goes fine. So we may be anywhere near INR 2,000 crores. So maybe INR 1,900 crores if everything goes well. So that is a right observation as you made.
And new education policy, because you know how does the government move. So once the curriculum and all those things are rolled out. So I think the true effect will come in the next season because for this season -- for the next session that is going to happen in the next year, all the textbook boards, they have either already done their buying and printing is going on in full swing. So from next year onwards, that effect should come. Yes.
So one more thing is, given the kind of growth which the company has given, but actually the market cap is not reflecting the same. So what steps the, I mean, management is taking to create more investor awareness sort of thing?
Management has already given interim dividend of 20%, and let's see what's the final dividend. So number one is, management is ready to share whatever fruits they have with the investors. So that should make the investor interested in the script. And the confidence -- with our consistent performance -- so we have been going to the market time and again after every quarter and answering whatever queries to our best ability that we could answer and make our position very, very transparent. So I think it is up to the investor then to see and trust on the guideline, on the transparency that management has. And definitely, people will come.
Next question is from the line of Govindlal Gilada, individual investor.
So earlier you answered the questions regarding paper, outlook on that. Just one confusion. You told that recently pulp prices have corrected. Because of that paper prices have corrected or there is some misunderstanding from my side?
Yes. I said that international pulp prices, maybe softwood pulp, which was $1,070 almost 3 months back, is now at $830. But definitely, since the delivery lead time in getting that product delivered is 2 to 3 months. So whatever we have booked 2 to 3 months back, so we get delivery after 2 to 2.5 months, number one. And number two, that component of imported pulp in our final product is 5% to 10% only.
I know, sir, softwood pulp is used for packaging board all that in minor percentages. So is my understanding correct that you told recently prices have been corrected, or because of this with lag effect what you are getting raw material cheaper, going forward prices will correct? What you've told, I didn't understand, sir, just a clarification.
No, no, international pulp prices, they reduced because of resolving of logistic issues, number one, mainly. And energy prices coming down internationally. As you know, gas prices, which in Europe were almost anywhere near EUR 20, they have come down to almost EUR 3, EUR 3.5; and coal prices, they have also come down. So energy prices have come down, number one, and logistic issues have been resolved, number two. So these were 2 major reasons which were making the mobility of the pulp difficult and prices were going up.
So that depends on the new capacities that come up internationally. As in hardwood case, there is capacity, 2 capacities are coming for almost 4 million tonnes every year. So once they come, so hardwood, which was at $960 at peak is now available at almost $760 or near about that range. And similarly, wheat straw prices, which had peaked at one time. Even our national economic survey wrote one line in that survey that fodder prices have become very, very high in India. So it went up to almost INR 10,000 a tonne. Now they have come down to almost INR 9,000 or INR 8,500, almost 10% decrease is also there. So I think things are normalizing. And yes, let's see what happens in the future.
So I understood, sir, this hardwood pulp prices have come down. So your view, sir, going forward little longer term, how pulp prices you are seeing? They already came down from $960 to $760, you told. So little longer term, what's your view on pulp prices, sir?
Actually, the log depends on China. Like in India, softwood is a $830; China is $890, $900; Europe, may be even still higher. Similarly, hardwood, international players -- this trend is likely to sustain for some time. That is definite, for another 5 to 6 months. Yes.
So in spite of this pulp prices coming down, your view is that paper prices will sustain at this level through June?
Yes, I said, after June, even paper prices may correct.
So because of the raw material prices pulp going down, or generally, after June, 2, 3 months off season will be there?
Yes. Because demand is at the peak from January to June. So once that demand subsides, then prices may correct to some extent. That's what I said.
So how much they can come down, sir, June to let's say, 3, 4 months, because of off season? Then again, season starts in November, they can go up again, sir?
Yes. Actually, not more than 5%, 6%, because internationally, today, the price is anywhere around $1,100. So if import price we see, so even that comes anywhere near INR 86,000 to INR 88,000 tonne only.
So you mean to tell right now Indian prices are at import parity?
Yes, yes, yes. Rather slightly on the higher side, because of nonavailability of imported paper, number one. And second, because of the early lead time that we have in delivering the goods. Yes.
To sum up what I understand and what you told, so in spite of that pulp prices coming down, they have come down also, prices will hold till June, you are telling that. Then because of off season, 5%, 6%, they may come down. Then again, -- but little longer term, if we take 1.5, 2 years, what can be the downside, sir, to paper prices?
One to two years, really, one, we cannot take chance now, as I said earlier, that new education policy, how does it unfold, how aggressive the government is in implementing the schedule that they have given to different boards, so it depends on government effort. Yes.
Net-net, even the prices come down a little bit for 3, 4 months. So this FY '23, this year what we are going to conclude is for '24, same performance we can repeat I think on EBITDA and PAT.
Yes. Because as I said earlier, the raw material prices have come down and are coming down, chemical prices are coming down. So fuel prices, they have substantially come down. So the margins are likely to be maintained in the industry.
Versus quarter 3, quarter 4, this current quarter, chemical and coal all that, some benefits will be there?
Yes. There will be definitely some benefit and quarter 4 numbers should be better than quarter 3.
Coal prices, how much they were average quarter 3? And right now, how much they are?
Actually, we are not buying any coal. But definitely, they have come down substantially. I can't quote the exact number because there is a lot of variety in the coal segment, looking to the calorific value of the product.
Great, sir. Thanks for answering so patiently. All the best.
Next question is from the line of Utsav Anand, individual investor.
Congratulations on the great set of numbers, sir. I'd like to ask, as the profitability increasing, do we see the dividend percentage increasing over time, over the next few quarters?
I think, Rachit ji being CFO, [Foreign Language].
Sorry, you were asking for dividend?
Yes. Do we see that increasing because we see that the net profit margin of the company is increasing, right? That has gone up from over the past 2 quarters. If that sustains, can we see the percentage of dividend increasing down the line?
Yes, definitely. Management is planning for the dividend policy that will -- definitely, you will see the increasing trend. We have already announced 20% interim dividend and maybe we can plan any final dividend too. So you will see the increasing trend in the dividend.
Okay. And just wanted to get an update regarding the raw material prices like the wheat straw that is being used as pulp for the paper, right? Are they coming down? So do we see the profitability increasing in Q4 as well, like the NPA margin going up?
Yes, in Q4, definitely, as we explained earlier, that number should be better than this. And definitely, once the cost of raw material consumed, which used to be earlier in the range of 40% to 41% in agro industry, which has now gone up to 45%, 46%, and in some cases, like ours where we are using waste paper and imported pulp, also to almost 48%, 49%. So Once we come to that level, we could expect a higher EBITDA margin. Definitely. Yes.
Okay. And what's the current wood pulping capacity of the company?
It is almost 160 to 180 tonne day.
Like it was mentioned in previous con calls that you are planning to increase it to 300 tonnes? Any update on that, by when can that be done?
Part will be started in the last quarter, because we have 8 digesters where we make the wood pulp. So 2, 3 digesters, with the new technology that we have been telling earlier, which will be consuming low steam and giving higher pulp. So they'll start in March only. And next 6, they will start in the first -- by the end of the first quarter of next financial year.
So by March 5, what capacity we'll reach from 160 to? What capacity we will be at?
So we'll be adding almost -- from present 160, we should be exceeding 200 tonnes per day.
By March, right?
Yes, by the end of March.
And the balance 100 will be by when?
Rest will be by the end of the next quarter, in the next financial year.
Any reason why this has been delayed, because we were expecting this to be in this coming -- the 3rd quarter?
Yes. This is the project of its own kind, which needs a lot of instrumentation and reworking, lot of fabrication. This is a project of its own kind which is second in India, I think, if I am not wrong. The first was done by JK in Sirpur.
Yes, that was in JK. And the second company is Satia that is doing it.
Yes. The second company is Satia. So there's a lot of work in that, a lot of engineering involved, and since it has to be -- it's not a new plant, so we have to run the existing facility also and do changes in the plant on running basis only. This takes a lot of time. Yes.
Okay. So by March, we will be getting up to 200 and by Q1 we'll be approximately near 200, right?
Yes, yes.
There's one more thing like when we reach that 300, right, for the pulping capacity, keeping a normal scenario, right, what profitability do you see it will bring about further?
Because profitability is linked to so many factors, but definitely, the cost that we have been paying over and above the normal cost by using waste paper and imported wood pulp, so that will be corrected.
So like do we see 4%, 5% margins being added due to this?
Minimum 3% to 4%, yes. That's minimum.
And I hope there's no delay further, right? Because it's already -- it will be 1 year that it has been delayed, right?
We are trying to maintain quite strict schedule, but since we have to have 160, 180 tonne pulp every day, so we cannot shut down the total facility and then do whatever work has to be done. Yes, that is the main issue, yes.
Yes, I understand that. That's like maybe one of the reasons that's getting delayed. There's one more thing, right? I see the profitability has gone up also. Do we see the debt being paid a bit earlier, that gets our interest cost down?
Pardon?
As the profitability has increased, right, we are getting much more better NPM and all these things. So do you see that we can pay the debt much earlier? So that will help us bring down the interest?
As I already said, even management is paying to -- intends to pay some debt -- they intend to prepay even during this financial year. So next year, again, we'll be paying more than what is due to the institution. Yes.
Like any range on idea, how much additional you will be paying this year?
Minimum 5% to 10% this year and maybe more next year.
5% to 10% of the additional that is required, right?
Yes. At least 5% to 10% of the total debt payable. It is almost INR 100 crores plus in a year.
Okay. And how is the outlook for Q4 and Q1? That's the final question from my side. And how is the outlook looking at? Because you have already orders for...
And I said earlier also, it should be better than Q3. And since price realization is going to be on the higher side, and production numbers, they are likely to slightly exceed or remain the same, we should be even overtaking the top line that we achieved in the quarter 3, and should be doing more than INR 500 crores. So looks to be good for me, much better than quarter 3, yes.
Congratulations on a great set of number, sir.
[Operator Instructions] Next question is from the line of Manjul Shah from AMA Services.
Sir, just 2 bookkeeping questions to Mr. Rachit. What would be the cost of funds, cost of interest, actually -- so basically interest rate on the debt we have right now?
Yes. As we are aware that it is increasing like every month. So current cost is somewhere around 8% to 8.25%.
Okay. 8% to 8.25%, okay. And the tax rate, basically, what I'm seeing that last year we had a tax rate of around 18%. So what would be the tax rate for the full year this year?
We are MAT company, so we are paying around 17% MAT, but we have active taxes somewhere around 12%, 13% due to the higher 80-IA. So we are like enjoying tax holiday, plus we have some agriculture tax-free income, some nontaxable REC income. So effectively, the tax rate is 12% to 13%.
Okay. So is it expected to continue in the coming 2 years also?
Yes. In fact, for the next 5, 7 years, it should remain the same.
Okay. Next 5, 7 year.
I now hand the conference over to the management for closing comments.
Thank you, investors, for your interest in the company. We wish you all a very, very happy and prosperous New Year. Thank you. Thank you for your interest once again. Bye.
Thank you very much. On behalf of Satia Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.