“Ganesh Polytex Limited" Conference Call Transcripts: Unicon

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 “Ganesh Polytex Limited Conference Call”

MODERATORS: MR. GANESH HADVALE

MR. SHYAM SHARMA

MR. SHARAD SHARMA.

MR. GOPAL AGARWAL

Moderator: Ladies and gentlemen, good day and welcome to the Ganesh Polytex Limited

Q3 FY'11 earnings conference call hosted by Unicon Financial Intermediaries

Private Limited. As a reminder for the duration of this conference, all

participant lines will be in the listen-only mode. There will be an opportunity

for you to ask questions at the end of the today's presentation. Should you need

assistance during the conference call please signal an operator by pressing “*”

and then “0” on your touchtone telephone. Please note that this conference is

being recorded. At this time, I would now like to hand the conference over to

Mr. Ganesh Hadvale from Unicon Financial Intermediaries Private Limited.

Thank you and over to you Sir.

Ganesh Hadvale: Thank you. Good evening to all of you and thank you for joining us today on

behalf of Unicon Financial Intermediaries Private Limited, we welcome all of

you for Q3 FY'11 earning call of Ganesh Polytex Limited. Before we begin I

would like to say that some of the statements made in this call maybe forwardlooking

in nature. We have with us Mr. Shyam Sharma, Chairman and

Managing Director of Ganesh Polytex Limited, Mr. Sharad Sharma, he is Joint

Managing Director of the Ganesh Polytex Limited and Mr. Gopal Agarwal, he

is the Chief Financial Officer of the company. Without taking much time, I

hand it over to Mr. Sharma for opening his remarks. Over to you Sir.

Shyam Sharma: Good evening ladies and gentlemen. On behalf of Ganesh Polytex Limited I

wish you all a very happy New Year and extend a warm welcome to Ganesh

Polytex Limited Q3 conference call. As this concerned 01:50 it is a matter of

great pride and honor to inform that our company, Ganesh Polytex Limited has

been awarded with (indiscernible) 2.03 silver shield by the Executive of

Chartered Accountants of India for assurance in financial reporting for the year

2009-2010.

Under the category, the manufacturing sector turnover less than Rs.500 Crores.

Now I would like to acquaint to you the result updates. During our previous

quarter we had announced a successful commissioning of the Q3 production

line of 18000 TPA at our Rudrapur unit, which was fully operational during the

December quarter. Then the company continued to register operational and

financial projects by housing 02:52 loan consolidation and optimization of

returns from the investment made during last year. We are pleased to inform

that IFCI Venture Capital Funds Limited has provided letter of intent for

subscribing 50 millions optionally convertible debentures of Rs.98 on the

company on the preferential basis convertible into equal number of equity share

for Rs.10 each for the company at a premium of Rs.80 per share.

IFCI Venture Capital will be making the shared investment through its Green

India Venture Fund which has a cost of 30 Crores for investing in companies

engaged in green development and reducing the negative ecological impact,

Ganesh Polytex Limited bring a waste recycling 03:52 company has been

recognized and eligible for funding under Green India Venture Fund. The

proposed the investment is impacted towards the company's growth plans. I

will request to Mr. Gopal Agarwal, to give you regarding the Q3 financial

performance of the company.

Gopal Agarwal: Thank you and welcome to all of you. Now let me take you through our broad

financial numbers for the quarter ending December 31, 2010. During the

quarter the company recorded sales of Rs 81.6 Crores and thus registered a

growth of more than 55% on year-on-year basis.

The EBITDA for the quarter stood at to Rs. 10 Crore as against Rs. 6.2 Crores

in the corresponding quarter of last year. The net profit of the company has

reflected a healthy growth at 76% on year-on-year basis and translation into a

basis EPS of Rs. 3.65 for the quarter ended December 31, 2010.

Now I would also like to highlight that during this quarter Kanpur rate 05:07

of the company was subjected to excise duty. Ganesh Polytex Limited and the

other waste cycling companies were earlier not liable to pay excise duty on the

recycled polyester fiber due to court order. On June 39, 2010 Central Board Of

Exercise 05:25 And Custom issued an instruction contrary to the judicial

decision to levy the excise duty on the recycled polyester fiber. These

instructions we are legally challenged, thus the jurisdiction commensurate in

most part of the country did not enforce the instructions and therefore most of

the waste recycling units are not paying excise duty; however our jurisdiction

commensurate in over enthusiasm, ignored the law of uniformity and forced us

to pay that excise duty. We are seeking legal remedy and are hopeful that the

remedy will be available to us in short time. As a repurchase 06:01 of the

highlighted debt our profits marginally impacted during the quarter, which we

are confident to make up in coming quarter.

With that I would like to through this call open for question and answer

session.

Moderator: Thank you. Ladies and gentlemen we will now begin with the question and

answer session. We have our first question from the line of Rabindra Basu from

CRISIL Equities. Please go ahead.

Rabindra Basu: The PSF prices have increased during the last quarter or so how is this affecting

the companies per unit realization or we able to benefit from it?

Gopal Agarwal: The PSF prices are in the rising trend got over, and that increases particularly

for the spinning fiber, our price is also increasing but not to that pace, the only

reason when we are having two three months order book and so during this

quarter most of our supply were at old rates. Further apart from making and

spinning in that fiber we are catering to other segments like stuffing nonwoolen

textile, market dynamics of these segments are different from the spun

yarn segment and so it is not possible to make price increase tandem with

textile segment.

Rabindra Basu: Okay but on certain things are you able to renegotiate prices as you said you

already have your order book so is there a clause where in spun yarn or in the

textile segment you could even renegotiate the price or that something which is

not that flexibility is not there?

Gopal Agarwal: No the negotiation is not advised for any company any committee or 08:08

contract, we have to fulfill it.

Rabindra Basu: Okay and another thing I would like to get an understanding on the excise so

how do you propose to mitigate this effect in the coming quarters as you said it

is benefiting this quarters EBITDA. So how do you plan to tackle this issue in

the coming quarters?

Gopal Agarwal: Basically the excise duty is going to be impacted on everybody this will not

impact us more, but it will be beneficial for us because of our Durgapur unit,

which is exempt from the excise duty for 10 years.

Rabindra Basu: Okay, thanks a lot Sir.

Moderator: Thank you. The next question is from the line of Minal Dedhia from Networth

Securities. Please go ahead.

Minal Dedhia What is the revenue break for POY and PSF in this quarter?

Gopal Agarwal: Out of 15% revenue come from the yarn segment and it is 5% from PSF

segment.

Minal Dedhia: Okay and after the expansion what are you looking after revenue mix as?

Gopal Agarwal: We are looking at the PSF will going forward.

Minal Dedhia: The same ratio, okay and I also want to breakup on the production, how much

of POY was produced this quarter in PSF?

Gopal Agarwal: Actually we are not making the POY we are making the dyed yarn.

Minal Dedhia: The dyed yarn. Sorry.

Gopal Agarwal: During this quarter we produced about 680 tonnes dyed yarn and at about

10,700-tonnes of polyester fiber.

Minal Dedhia: What is the status of the expansion that you are planning for the POY segment?

Gopal Agarwal: We are planning to expand the capacity of recycling.

Minal Dedhia: Also you were planning to get in a POY plant in place soon right?

Gopal Agarwal: That plant is on hold just now.

Minal Dedhia: Okay from hold right now. Okay fine. Thank you.

Moderator: Thank you. The next question is from the line of Pramod Bhat from Bonanza

Portfolio. Please go ahead.

Pramod Bhat: You said that earlier the difference between PSF, and recycle is it still at about

15% or is it higher now?

Gopal Agarwal: That different is in higher now, it is because we are catering to so many

segments not only to textile segment so the textile segment prices of spinning

the fiber has increased so the difference has increased.

Pramod Bhat: What is it approximately currently?

Gopal Agarwal: The difference is currently about 20%-25%.

Pramod Bhat: Going ahead do you expect to book at a higher rate or would you be able to or

you would have to still prioritize a bigger discount or the current discount?

Gopal Agarwal: It is going to be from market requirement, which is going to change, and we

cannot give any real picture but it is estimated result market rates would be

11:40 increasing to some extent only.

Pramod Bhat: What is the current order book like?

Gopal Agarwal: We having around one month old, advance booking our system is like that.

Pramod Bhat: One month booking? Sir the funds which you are raising from IFCI, when do

you expect to get them in?

Gopal Agarwal: We are spending for the hardware integration as well as the renovation of our

existing plant.

Pramod Bhat: When do you expect to get the money?

Gopal Agarwal: The whole thing is in March. We expect them within 12:15 March only.

Pramod Bhat: In March you will be getting the money and one question is that you had a last

time you had indicated a debt of approximately 72 Crores to be precise, is the

current state of debt almost the same as on September you have indicated that

to be around of 70-73 Crores?

Gopal Agarwal: You are talking about the borrowing book?

Pramod Bhat: Loan book?

Gopal Agarwal: We are having about 67 Crores loan book.

Pramod Bhat: As of December and cash and bank balance?

Gopal Agarwal: Cash and bank balance is about 4 Crores.

Pramod Bhat: During this quarter the EBITDA margin comprises of almost 100 as compared

to the previous quarter almost 80 basis point and as compared to June more

than 150 basis point. This is only because of the excise or is it because of the

raw materials?

Gopal Agarwal: I think both cases are there. Both the measures are hardly measured, size and

shelter (indiscernible) 13.28, because in the winter it is becoming a problem.

Pramod Bhat: Okay so on the logistic front you expect to resolve some of these things or

some these problems might continue for sometime?

Gopal Agarwal: So basically balancing a better in a long term.

Pramod Bhat: Okay and when crude prices are likely to remain firm does it affect your pricing

and your ability to push price increases?

Gopal Agarwal: Crude price, higher crude prices are going to give some benefit to us but no

buildup.

Pramod Bhat: Okay. I will come back with some further followup questions at a later time.

Thank you.

Moderator: Thank you. The next question is from the line of Umesh Patil from Wallfort

Financial Services. Please go ahead.

Umesh Patil: Couple of question from my side; Power fuel which been has increased

substantially during the quarter what is the precise reason for sharp increase

and what would be company’s strategy to address the increase in such cost to

maintain the margins?

Gopal Agarwal: Increase in wage is related to the growth in turnover. Over last one-year base

cost has been increasing steeply in every industry due to social welfare scheme

of our government and also a very high level of inflation, to address the

increasing wage cost, we are going for more automation and mechanization of

our processes 14:45. As regard to power and fuel cost major increase in fuel

increase for the present capacity and some increases there because of rise in

power rates and increase in fuel prices. Increase in these expenses is being

addressed by consolidation of operations as well as increasing the operational

efficiencies 15:03 and adding value added products. We are also modernizing

our old plants to save on the operational cost.

Umesh Patil: Second question is related to interest liability as the company has managed its

interest liability very well and the interest expenses has reduced drastically in

the first nine months compared to the corresponding years of 2010, even during

Q3 interest expense has increased marginally despite the addition of substantial

new capacity, so how did you achieve this?

Gopal Agarwal: Company is trying for a judicious mix of foreign currency loan and rupee loans

in its overall borrowings to lower the interest cost, as well as to optimize the

risk. We will set the unit a good result and overall borrowing cost has come

down within 10%, because of 13% earlier. Further clearance of schedule

repayment quarterly repayment of term loans which also contributed to the

lower interest cost.

Umesh Patil: So what is the average cost of debt as of date?

Gopal Agarwal: It is about 10%.

Umesh Patil: How much cash balance do you have at the current level?

Gopal Agarwal: Company is having about 4 Crores cash and bank balance.

Moderator: Thank you. The next question is from the line of Nisha Manjari from Taurus

Portfolio Management. Please go ahead.

Nisha Manjari: My question is on your 124 Crores Greenfield CapEx plan; could you give me

a breakup of funding in terms of equity and all?

Gopal Agarwal: We are looking for mix of equity and debt apart from internal accrual will also

be there to fund that CapEx plan.

Nisha Manjari: Can I get an exact ratio?

Gopal Agarwal: It is about 50% to 55% debt and balance from equity and internal accruals.

Nisha Manjari: How much has already been arranged?

Gopal Agarwal: Some funds have been arranged from IFCI Venture Capital, and we are also in

the process of arranging the balance funds.

Nisha Manjari: I had read in a report a couple of days back that the company is consistently

trying to change the perception of the market towards it being a textile

company to a waste management company and I think the investment of IFSI

venture fund is one step towards it apart from that what is the progress on that

front?

Gopal Agarwal: Basically IFSI funding is a major milestone in the change of perception about

the company and we are also looking for going ahead with other recycling

opportunities like recycling of other plastic waste, so this will also give a boost

in the direct plan 18:19.

Nisha Manjari: Is there any other formality also in terms of changing the industry

classification?

Gopal Agarwal: In fact Mumbai Stock Exchange is not giving any classification for this waste

recycling company, so they are putting us into a textile company. Now they are

prepared to other classification, but that study is also not exactly the flexing of

area of operation.

Nisha Manjari: Any development expected in the near future?

Gopal Agarwal: In what regards?

Nisha Manjari: In terms of change in perception order or a change in industry classification?

Gopal Agarwal: We are constantly trying to let the people know that what we are doing, what

we are into, so I think this project will take time, but eventually we will get the

feel in our perception building exercise.

Nisha Manjari: Our Company is also eligible for carbon credit?

Gopal Agarwal: We think so, because we are recycling the plastic waste and this plastic waste is

a threat to PET waters 19:20 (ph) and other polyester items are made from the

cotton fuel which endures an immense carbon emission, so by recycling the

waste we are trying to reduce the new quantity, the fresh quantities, and so we

are reducing the carbon emission, so we think we are eligible for carbon credit.

Nisha Manjari: Can we expect some increment in PAT point II carbon credit this year?

Gopal Agarwal: It is a long-term process, but we are trying and we are hopeful to get the carbon

credit.

Nisha Manjari: Last question, could you give me the average realization of PSF and dyed yarn

for nine months?

Gopal Agarwal: For nine months the average realization for yarn is about Rs.146 and for fiber

Nisha Manjari: What is the expectation for the full year, will this be maintained or some

increment?

Gopal Agarwal: This will be maintained and some improvement will be there.

Nisha Manjari: To the extent of?

Gopal Agarwal: Now it is marginally affecting at 2% to 3%.

Nisha Manjari: That is all from my side. Thank you.

Moderator: Thank you. The next question is from the line of Shaileja Sharma from AXIS

Mutual Fund. Please go ahead.

Shaileja Sharma: I just wanted to know you just told us that IFCI venture would be giving the

funds from its main venture funds. I think this fund is specifically for

environmental friendly company, so could you let us know how are you ecofriendly.

Could you just throw some light on that?

Gopal Agarwal: We are recycling the PET bottle waste, which are otherwise (indiscernible)

21.43 and harmful for the environment that are used for land sales and

inclination (ph), by recycling the PET waste we are making the environment

more friendly to possible to live in and the green venture funds the objective of

green venture fund is to promote the activities which are into the environmental

impact, to the user in negative environmental impact, so we are eligible for that

Green India Venture Funds investment.

Shaileja Sharma: Another question is what are the end usages of your product and the scalability

of this?

Gopal Agarwal: There are different uses of our products. PSF is used for spinning of yarn in the

textile industry, it is also used for stepping in soft wires, pillows, mattress, and

other stuffing furniture, it is also used for non-movement textiles, like medical

textiles, zero (ph) textiles, it is post textiles, diapers, dyes, so all of the items

which get into for this PSF.

Shaileja Sharma: Thanks a lot. That is all from me.

Moderator: Thank you. The next question is from the line of Shailesh Kumar from KR

Choksey. Please go ahead.

Shailesh Kumar: I just wanted to know the breakup of your debt? How much is rupee

denominated debt and how much is your POY’s related debt? What is the

repayment schedule?

Gopal Agarwal: Out of the total loan book of 67 Crores about 25 Crores is in foreign currency.

Rest is in rupees.

Shailesh Kumar: And what is the cost of this dollar debt?

Gopal Agarwal: Dollar debt cost is equally around 5%-6%.

Shailesh Kumar: 5%-6% so in terms of LIBOR plus how much it does cost?

Gopal Agarwal: LIBOR plus 2%-3%.

Shailesh Kumar: Rest is the hedging cost.

Gopal Agarwal: Yes.

Shailesh Kumar: Fine. Sir repayment schedule?

Gopal Agarwal: Repayment, the term loans are about to be repaid over the next three years.

Shaileja Kumar: Sir, you are also going for CapEx do you think you would be able to manage

our cash flows- 125 Crores CapEx?

Gopal Agarwal: We are having sufficient cash accruals and the accruals are increasing with

increasing capacity and substantially after the completion of our expansion

program. So, we will be able to manage that.

Shailesh Kumar: Sir which are the banks or financial institutions which have promised you

support or given you approval for loans?

Gopal Agarwal: The process is going on, it is not completed yet and most probably we will take

the rental systems from our existing bankers only.

Shailesh Kumar: Okay fine thank you.

Moderator: Thank you the next question is from the line of Pramod Bhat from Bonanza

Portfolio. Please go ahead.

Pramod Bhat: Sir if I understand correctly you will be repaying 42 Crores over the next three

years right?

Gopal Agarwal: No we are having 32 Crores from loan as of now. So we will be paying roughly

10 Crores annually.

Pramod Bhat: You said 67 Crores?

Gopal Agarwal: 67 Crores is the total borrowing booking which includes working capital

borrowings as well as term loan borrowings.

Pramod Bhat: Would it be correct to assume that these would be rolled over because you also

have another 60 Crores of debt for the CapEx plan which will be coming up?

Gopal Agarwal: No the loan payment will be met out and the new term loans will be tied-up for

these expansion plans.

Pramod Bhat: Out of these 32 Crores how much approximately repayable in FY'11 up to

March?

Gopal Agarwal: Only one quarter he is left and that is about 2.5 Crores.

Pramod Bhat: Sir also wanted to check if I estimate that approximately 55% will be debt in

the 125 Crores project. Roughly 60-65 Crores you will be raising by fresh debt

is I am correct in assuming that.

Gopal Agarwal: Yes.

Pramod Bhat: This will also have mix of foreign and local or you will be going only for…?

Gopal Agarwal: Yes it is a mix of foreign and local.

Pramod Bhat: Current mix whatever you are having.

Gopal Agarwal: It is about say 50%-50%.

Pramod Bhat: That also gives about 35-36 Crores, which you will be putting in either by

equity or by some further funds other than ICFI venture is that correct?

Gopal Agarwal: We are looking for about equity of 30-35 Crores for which includes funding

from IFCI Venture Capital.

Pramod Bhat: Okay but that would still leave gap that you will make up from internal

accruals?

Gopal Agarwal: Yes

Pramod Bhat: Okay and how much of this money has so far has been spent you not spent

much if I am correct assuming?

Gopal Agarwal: We have taken over the land for the expansion project and we have also put

some order from McKenzie 27:32 (ph).

Pramod Bhat: In terms of actual expenditure so how much approximately?

Gopal Agarwal: It is not much is about 6-7 Crores

Pramod Bhat: 6-7 Crores and this total expenditure will happen by FY’12?

Gopal Agarwal: Yes by FY’12.

Pramod Bhat: In the entire FY’12 this expenditure will happen?

Gopal Agarwal: Yes.

Pramod Bhat: What is the three-month average for yarn and fiber selling price in the current

quarter?

Gopal Agarwal: Current quarter yarn is about Rs. 152. Fiber is about Rs. 70.

Pramod Bhat: Okay and in terms of your production output how much was it in the year

before and in the September quarter in terms of output?

Gopal Agarwal: In terms of output for nine-month period if you take we are operating at about

72% capacity.

Pramod Bhat: 72%, no what I wanted was you mentioned that PSF capacity for the quarter

was 10,700 tonnes and for yarn it was 680 tonnes for the quarter for

corresponding quarter last year?

Gopal Agarwal: Corresponding quarter last year it was 370 for yarn and 7300 for fiber.

Pramod Bhat: And for the September quarter if you have it?

Gopal Agarwal: September quarter it is 700 per yarn and 7084 29:0 fibers.

Pramod Bhat: That completes the question I have. Thank you very much and congratulations.

Moderator: Thank you. The next question is from the line of Pankhuri Shah from KBS

capital. Please go ahead.

Pankhuri Shah: There is no entry barrier in terms of capital intention for technology of PET

waste so how do you intend maintain your leadership position?

Gopal Agarwal: With our long experience in the industry, we feel that we have very certain

entry barrier. We have very large player in the industry and we are working

further to maintain the leadership position, in the future also. A strong network

for correction of waste further planning to spend that network is another entry

barrier. We have developed a vast range product over the period of time meant

for wide range of application across the different industries. Product

development is ongoing process in our company and we are confident that with

our focus on constant research in product development. We would be the front

runner in the industry, we have also developed over a period of time despite

customer network across the globe based on excellent quantity, trust, reliability,

consistency and great customer services and mutual relationship in our view

these are benchmark which can be perceived as entry barrier.

Pankhuri Shah: Okay. Thank you.

Moderator: Thank you. The next question is from the line of Rakesh Chandra from Master

Trust. Please go ahead.

Rakesh Chandra: “Sir, jaisa ki aap promoter ki second generation se hain tho mein jaanna

chahtha hun ki company in theen saalon mein aapka kya vision hai?” (“Sir,

since you come from the second generation of the promoters, I would like to

know that for the next three years, what is your vision?)

Sharad Sharma: “Basically the company is into recycling process main toh lagi huin hain, aur

recycle continuously badati jah rahi hain, aur agar plastic waste ke baare main

soch rahein hain, saath saal sei value additions chain ke baare main soch

rahein hain to uske hisab sein company ke agey ke teen saal ke liye to position

achi lag rahin hain, growth opportunity bahut badiaya hain.” (“Basically the

company is into recycling process is increasing and whatever we are thinking

about the other plastic wires, and TATA is also thinking of value addition now,

taking that into consideration, the company is going to be in good position for

the next three years. Growth opportunity is excellent.”)

Rakesh Chandra: “Yeh plastic waste joh apne bateyaen toh plastic products kaun se products ke

liye aap sochein hain” (The other plastic wires that you mentioned, what

products do you have in mind?)

Sharad Sharma: “Other plastic products main jaise PVC hain, PP hain, aur other plastics joh

bi, LD, LDPP hain, un sab cheezon ke bare main soch rahein hain.” (“In other

plastic products there is PVS, PP, and other plastic like LD, LDPP we are

thinking about these only.)

Rakesh Chandra: “Jaise aapka (indiscernible) 32.40, aap kaam kar rahain hain, ya, yeh bhi fiber

ka hi hain.” (“Like how you (indiscernible) is there other on which you are

working or is it only the fiber?”)

Sharad Sharma: “Bilkul uske bare main bhi soch rahein hain.” (“Yes, we are also thinking of

those.)

Rakesh Chandra: “Dhanyawad.” (“Thank you.”)

Moderator: Thank you. The next question is from the line of Umesh Gupta from Reliance

Wealth Management. Please go ahead.

Umesh Gupta: Hi just one question on this excise duty. What is the rate at which it will be

applicable if at all and what is the total amount for which the claim is and have

you provided anything on that account?

Gopal Agarwal: It is 10.3% and we have provided because Kanpur facility is applicable

Rudrapur unit is not applicable, so that we have provided for.

Umesh Gupta: No you provided for what amount for this financial year revenue or it would

have been from some retrospectively effect hiding for last few years?

Gopal Agarwal: We have provided it from July 2010 quarter. July 29 has been a circular way

and it is provided on that debt only

Umesh Gupta: So you have provided in this quarter result or where have you provided for that

amount?

Gopal Agarwal: We have provided in this quarter result only, in the last quarter also in

September we started paying it.

Umesh Gupta: How much is the amount so far for the current financial year, which you have

provided in this quarter.

Gopal Agarwal: About 100 Crores for the current financial year and about 125 Crores for the

previous quarter.

Umesh Gupta: 100 Crores is the sales amount on which you have to pay.

Gopal Agarwal: Sorry, 1 Crore for this quarter and 1.25 Crores for the last quarter, September

quarter.

Umesh Gupta: So, this 2-odd point Crores you have provided in the current quarter.

Gopal Agarwal: Yes.

Umesh Gupta: So, till the time, there is no favorable judgment you will continue to provide

that on a quarterly basis right?

Gopal Agarwal: So far we are providing.

Umesh Gupta: Thank you.

Moderator: Thank you. The next question is from the line of Jignesh Vaidya from Sun

Capital. Please go ahead.

Jignesh Vaidya: Sir, couple of questions on your raw material expenses front. This year it has

increased to around 76 million, so around 67% of sales, is it because of the

increase in your raw material expenses?

Gopal Agarwal: Certainly. Expense always are order to 35:10 increasing and transports are

here everything is increasing. Basically this is a particularly winter season and

the market pitching is also sold, supply is sold, consumption is sold that is

where it will take the things,

Jignesh Vaidya: The other was on the other expenses; it has declined from around 827 million to

792 million, so it is around 8% of total sales?

Gopal Agarwal: That is because our sales base has increased and the capacity has increased, but

expenditure has not increased in tandem with the sales, so that is our

operational efficiency.

Jignesh Vaidya: Was there any one off item last year?

Gopal Agarwal: No, except the job charges, there was no other charges.

Jignesh Vaidya: Sir, as discussed in your last concall, what is the update on Bilaspur, when

would you start production there if your financial closure happens may be next

quarter?

Gopal Agarwal: It will take around one quarter year.

Jignesh Vaidya: One year.

Gopal Agarwal: It will take around 15 months time.

Jignesh Vaidya: One question on your new capacity. Out of the 18,000 tonnes that you have put

up last quarter, so what is the capacity utilization there?

Gopal Agarwal: The present capacity utilization is about 75%.

Jignesh Vaidya: Okay, in the new capacity that you have put up.

Gopal Agarwal: Taken together all the capacity put up.

Jignesh Vaidya: Thank you Sir.

Moderator: The next question is from the line of RN Gupta from an Individual Investor.

Please go ahead.

RN Gupta: How much stake are you giving to IFCI now? You are issuing letter of intent

15 lakhs warrants, so, how much percentage will it be of your total capital?

Gopal Agarwal: It is about 8% on fully diluted equity capital.

RN Gupta: When you are like to receive these 37:43 funds.

Gopal Agarwal: These funds, we have called up the extraordinary general meeting of the

members next month and after holding the EGM, we will allot debenture to

IFCI and we hope that we will get the funds in March only.

RN Gupta: How will we utilize these funds?

Gopal Agarwal: These funds will be utilized for ongoing expansion program of the company.

RN Gupta: There will be an expansion of the capacity?

Gopal Agarwal: Expansion of the capacity.

RN Gupta: When we can expect the conversion of these warrants in to equity?

Gopal Agarwal: It will be convertible into 18% of the option of the IFCI within 18 months.

RN Gupta: Within 18 months, this means by September 2012.

Gopal Agarwal: September 2012 the option will be there with IFCI.

RN Gupta: Thank you.

Moderator: Thank you. The next question is from the line of Abhinav Mansinghka an

Individual Investor. Please go ahead.

Abhinav M: I just wanted to understand on your raw material side. If you could broadly

explain how prices have moved on a per kg basis, for the course of three to four

years and if you could just give me a sense of whether there is any correlation

to any product prices or they are largely sticky and may be you can throw how

you procure…?

Gopal Agarwal: It is part of the market, it is about any 39:33 supply sector and there is a

major collection cost involved, transport cost involved, so suddenly raw

material cost are increasing and we are making different varieties of fiber, so

every cost is impacting the sector also.

Abhinav M: Sir, on a per kg basis, if you would give me sense as to how the prices have

moved over the course of the last three to four years broadly?

Gopal Agarwal: Broadly three to four years the raw material prices have moved by about 25%-

30%.

Abhinav M: Annually is it?

Gopal Agarwal: Annually.

Abhinav M: How have end product prices moved in the same period?

Gopal Agarwal: The end quarter prices are more or less going on the same ratio.

Abhinav M: More or less going on the same ratio, so is it that basically the prices are low…

Gopal Agarwal: Higher or lower it goes on, but it is a market demand and supply factor.

Abhinav M: On your capacity utilization you mentioned that you are currently operating at

75% what is an optimum capacity utilization. Can you move to 100?

Gopal Agarwal: We are making basically different varieties, different colours, different

variations so our captive digestion 41:0 is regards over the yet to achieve

little high, which is in our cabling atmosphere, standardize of the products

which we only get put some three four plants we have the changes we can

achieved 90% even, we are planning more the longer in immediately.

Abhinav M: If you could be give me just bit a sense of 125 CapEx how is it broken up it

terms up various product lines and various facility?

Gopal Agarwal: It will be around 50% for renovation and 50% for expansion for the existing

capacity as well as the forward integrations.

Abhinav M: So how will the capacities increase, if you could put it tonnage terms.

Gopal Agarwal: Around 12000 terms per year capacity will be increase of recycling and for

yarn spinning capacity it is in quintals, it is not in metric tonnes, it depends on

the count basically capacity it could be varying.

Abhinav M: What would be the revenue potential of this expansion, so if let say 225 Crores

of expansion at a peak utilization what would be the revenue potential of this

expansion?

Gopal Agarwal: We are looking for a revenue of about 125-200 42:40 Crores out of this

expansion.

Abhinav M: So it is roughly one time effect is that a fair understanding? One-time effect of

yarn is a fair benchmark to you, 125 Crores is what you are spending and 125-

150 Crores is?

Gopal Agarwal: Yes, one time.

Abhinav M: Thank you.

Moderator: The next question is from the line of Amit Kumar Tiwari from Escorts Mutual

Fund. Please go ahead.

Amit Kumar Tiwari: Firstly you have already talked about high inflation and all that because today

the Prime Minister also basically discussed the thing because the high inflation

is actually putting a problem to the development and all that, so what my

question is that in the present scenario the interest rate are hardening and

borrowings are becoming costlier as you know going forward how is the

company going to manage interest cost which maybe increased substantially in

Q4 quarter and basically I think 9 Crores is the total borrowing of the company

I think, is it?

Gopal Agarwal: The total borrowing position is 67 Crores as of now, the interest rates are

increasing due to RBI measures to the control the inflation, at best expense will

also be increasing due to interest rate hike, we are all facing major impact in

this cost reduce our borrowing book, further borrowing for our expansion plant

we are tying up for new loans at most appropriate rates. It will impact much. It

will increase positively in this quarter so they will also cover the cost.

Amit Kumar Tiwari: Actually you have already told that around 10% is the cost of debt which the

company has taken?

Gopal Agarwal: It is about 10%.

Amit Kumar Tiwari: It is a floating rate of interest or fixed rate interest or what kind of the basically

rate of interest have we already taken?

Gopal Agarwal: Mostly it is of floating rate.

Amit Kumar Tiwari: What is the top line target for 2012 March going forward for the next one-year?

Sharad Sharma: Looking for about 30% increase.

Amit Kumar Tiwari: 30% increase from the current actually we are 45:30 having and down the

line three years, that is in the year 2014 actually what would be topline of the

company?

Gopal Agarwal: We are growing at about 30% since the last four five years. We foresee that

kind of growth in future also, so we cannot tell you the exact number of what

we are looking for but roughly the same kind of growth in future also for the

next three to four years.

Amit Kumar Tiwari: But roughly actually we are actually moving ahead with 30% of CAGR which

we could assume that for the next three years down the line?

Gopal Agarwal: We are trying for continue 46:15 to that 30% CAGR.

Amit Kumar Tiwari: Okay thanks a lot. That is all from my side.

Moderator: Thank you. The next question is from the line of Vishal Mehta from Claris

Capital. Please go ahead.

Vishal Mehta: I just wanted to get your current capacity breakup by product?

Gopal Agarwal: You want to know that installed capacity?

Vishal Mehta: Your current capacity by product in between fiber and between yarn?

Gopal Agarwal: Our current capacity is 57,600 tonnes for fiber and 2400 tonnes for yarn.

Vishal Mehta: Now I believe that the CapEx plan is for about 125 Crores right?

Gopal Agarwal: Right.

Vishal Mehta: After this CapEx is done where would our capacity stand for these two

products and are we adding any other products to this?

Gopal Agarwal: We are looking for about 12000 increase in spread recycling capacity.

Vishal Mehta: In the fiber recycle 12000.

Gopal Agarwal: We are looking for about 12,000 increase in fiber recycling capacity details for

the waste recycling and we are also going for putting this yarn spinning

capacity

Vishal Mehta: That would take our yarn spinning to what level for power integration?

Gopal Agarwal: Turnover by but it will increase our (indiscernible) 48.21.

Vishal Mehta: So on the fiber part of the recycling fiber, out of this 125 Crores how much

would be spending on this 12000 Crores capacity expansion?

Gopal Agarwal: About 50% is for fiber recycling capacity and about 50% for this yarn spinning

capacity.

Vishal Mehta: This yarn capacity is different from the yarn capacity that we have right now?

Gopal Agarwal: That is different that would be spun yarn; our fiber manufactured will be used

for that purpose for fabric making.

Vishal Mehta: After your capacity expansion you run over about 70, 000 tonnes of fiber

capacity?

Gopal Agarwal: Around.

Vishal Mehta: How much are you expecting to use internally out of this?

Gopal Agarwal: Around 10%.

Vishal Mehta: So the new yarn capacity will end up using only about 10% of this?

Gopal Agarwal: That is a different capacity that is only processing of the yarn in (indiscernible)

49.31 and this is a different capacity with the yarn making for fiber to yarn.

Vishal Mehta: What kind of revenue can this 125 Crores of CapEx generate for us?

Gopal Agarwal: It is around 125 Crores.

Vishal Mehta: You would expect EBITDA margin a bit higher than what you have right now

after that CapEx?

Gopal Agarwal: We are looking for the increase in EBITDA margin, around 17%-18%.

Vishal Mehta: Thank you.

Moderator: Thank you. The next question us from the line of Yatin Mehta from Economic

Times. Please go ahead.

Yatin Mehta: You are going for a big expansion plan going forward, is there any problem in

procuring raw material or are you fully integrated with your raw material

requirement?

Gopal Agarwal: Raw material requirement will be more CapEx’s are related to creating a

problem, but we are having a different system as well as the marketing of our

product also, so we will be having cushion of that.

Yatin Mehta: You have a board revision pass for raising 25 Crores, you already raised I think

13-14 Crores from IFCI, so what will be the next route of getting the fund will

there be some other equity route or will you again go for private equity round?

Gopal Agarwal: Yes, we have not decided still. One has already, about 9 Crores we have

converted from our warrants and 13.5 Crores we are going to get from IFCI and

within that we have different plans for that, and it will be decided by April.

Yatin Mehta: Are you going to new regions because I think some metro because the kind of

input that your require would be available more in the metro cities, so are you

planning to get some plan 51:55 located near some metro because?

Gopal Agarwal: We are no planning for metros because we are planning to divert our project in

the other cities, states of the southern region of the country because we have

our network of the marketing as well as the procurement to increase there.

Yatin Mehta: Last question from my side, what is you raw material cost as a percentage of

the finished product, what is your total input cost versus your selling price?

Gopal Agarwal: The total input cost is about 52% 52:26-63%

Yatin Mehta: Including energy cost and processing cost?

Gopal Agarwal: I am telling only the raw material cost 60%.

Yatin Mehta: So your energy cost and processing cost will be different from that you will

realize Rs.70 and Rs.140 as you said?

Gopal Agarwal: No that is the finished product prices.

Yatin Mehta: That is kind of finished product. That is what I am telling. Thank you so much.

Moderator: Thank you. The next question is from the line of Sachin Sharma an Individual

Consultant. Please go ahead.

Sachin Sharma: My question is regarding the carbon credit one is that has the company

appointed some consultant for the same?

Gopal Agarwal: We are in the process of appointing consultant for carbon credit, ___we are

looking so far we has got permission on the 53:23 one company in Canada,

they have both carbon credit for waste recycling. So we are trying to getting the

information and then we will be able to finalize the payments. We have good

possibility, but we are not 100% clear about the process.

Sachin Sharma: Any ballpark number on what kind of income you can generate through this

carbon credit route?

Gopal Agarwal: Actually we do not know about the numbers, but roughly we are one time

recycling of PET what are the sales 1.5 tonnes carbon dioxide emission, so

looking to that number at our present capacity and technique of present rate of

CSR it translates into the roughly 9-10 Crores only, through our present

capacity.

Sachin Sharma: This is based on your present capacity. Okay, fine thank you Sir.

Moderator: Thank you. The next question is from the line of Ashish Chugh from Hidden

Gems. Please go ahead.

Ashish Chugh: My question is with regards to the capital expenditure plan, which the company

is currently undertaking. Can you tell me how much capacity is being added at

what location and I believe 12,000 tonnes per annum is the total capacity

addition, which is going to happen, so is it all happening at your current

location or is it a new location, which you have selected for capacity

expansion?

Gopal Agarwal: At least about 50% capacity will be lead to our existing location and 50% in

new location.

Ashish Chugh: So, have you finalized the new location?

Gopal Agarwal: Yes. We are finalizing the location.

Ashish Chugh: Where exactly is this new capacity going to be set up?

Gopal Agarwal: It is at Bilaspur, about 7 km away from Rudrapur plant in UP, Bilaspur is in

UP.

Ashish Chugh: So, this is again size free and tax free zone?

Gopal Agarwal: No. It is not a size free and tax free zone. In fact all the size free and tax free

zones have now been taken off except this northeast area of the country.

Ashish Chugh: When is the capacity expansion expected to be completed?

Gopal Agarwal: It will take about 15 month's time.

Ashish Chugh: 15 months time. So middle of say FY’11-12?

Gopal Agarwal: No end of FY’11-12.

Ashish Chugh: End of FY’11-12. Till now you have been growing organically, have you also

pounded over the idea of may be making an acquisition or growing through the

inorganic route?

Gopal Agarwal: We are looking for every opportunity, which apart from having synchronization

with our existing business provide us for expansion of business and capacity.

So apart from expanding our business organically, we are also looking for

suitable inorganic opportunities even in the cycling business.

Ashish Chugh: Okay and these inorganic capacities would be best ways to PSF or higher value

added product?

Gopal Agarwal: We expect to PSF to may be for higher value items.

Ashish Chugh: Thank you. That is all from my side.

Moderator: Thank you. The next question is from the line of N Mohan from Master

Capital. Please go ahead.

N Mohan: As with 58:01 what is your raw material, in coming years if there is such a

shortage of raw material how would you overcome such shortages in the near

future?

Gopal Agarwal: For procurement of pet bottle waste we have developed network of collection

center. Most of the material is sourced through this network to meet the

collection more efficient; we are working on to tie up with some big

consumers. So this will provide us a significant edge.

Speaker: 58:38 Yes also I think the other collection centers in the other parts of the country, we

have had a discussion over there so we will take it increase our economy.

N Mohan: Can you tell me that from where the maximum source of your raw materials

comes from north, east or west?

Gopal Agarwal: From all over India it is there mostly, but mainly in the north and eastern belt of

the country.

N Mohan: Okay. Sir in your chairman speech you have mentioned about using all kinds of

plastics along with pet bottles, but still not using, can you say any serious

reason or have you postponed that idea?

Gopal Agarwal: Yes, we have put a CapEx plans for this and whole planning is going and we

are looking for that and it is just reason we are looking for going into that other

waste recycling and we are working on that front and we are hopeful that

opportunities 59:34 will come out with some more plans.

N Mohan: Thank you Sir.

Moderator: Thank you. The next question is from the line of Anil Sharma from ABN India.

Please go ahead.

Anil Sharma: In the last concall you said that you have a franchise system to collect the pet

bottle waste. Kindly elaborate on what is this and is your future plan? You told

you are making more centers and how will you go to collect on grass route

level?

Gopal Agarwal: We are having collection center for collecting pet bottle waste from

(indiscernible) 1.00.58 these collection centers are running on franchised

models. We are also going to add further collection center to strengthen our

collection system.

Anil Sharma: How will you collect this from grass route; you said that you are collecting

from consumers only?

Gopal Agarwal: Actually our collection centers work like they are number of rag picker, these

rag pickers collects the waste and provide it our collection center, there waste is

segregated, sorted and it is made comfortable for transporting to our plant.

Anil Sharma: Okay thanks.

Moderator: As we have no further questions, I would like to hand the floor back to Mr.

Ganesh Hadvale for closing comments. Please go ahead sir.

Ganesh Hadvale: I would like to thank all participants and especially the management of Ganesh

Polytex Limited for taking time out to attend this conference call. Thank you

and have a nice day ahead.

Gopal Agarwal: Thanks to all of you for participating in this conference call. We really

appreciate your valuable time and the queries raised by you.

Moderator: Thank you gentlemen of the management. Thank you Mr. Hadvale. Ladies and

gentlemen, on behalf of Unicon Financial Intermediaries Pvt Ltd that concludes

this conference call. Thank you for joining us. You may disconnect your lines.