Good afternoon, everybody. My name is Jaideep Barve, and I work as the Chief Financial Officer of Control Print Limited.

Welcome you all to the earnings conference call for the third quarter of FY '25-26. At the outset, let me wish you a happy and prosperous 2026.

We appreciate that you've taken out time from your busy schedule to attend this call. Mr.

Shiva Kabra, the Joint Managing Director of Control Print Limited, also joins me on this call. For first-time joiners on the earnings call, more information about our company can be obtained by visiting our website.

Just for information, the detailed presentation has already been put up on the website as well as in the investor presentation notification on the exchange for this call. Let me provide you some highlights of the performance of CPL on a stand-alone basis for the third quarter of FY '25-26.

On a stand-alone basis, the total revenue till Q3 is approximately ₹322 crores, which is a good growth from approximately ₹280 crores till quarter three of FY '24-25. Just for information, the total revenue for FY '24-25, '23-24, and '22-23 was ₹395 crores, ₹347 crores, and ₹295 crores respectively.

Regarding the operating revenue, this is ₹109 crores for the third quarter. Corresponding period of FY '24-25, this was ₹94 crores.

Coding and marking represents 92% of the business. There has been a steady growth in the coding and marking segment.

Pipes, food, healthcare, dairy, steel and metal, cable and wire continue to be our top performing business verticals. We are market leaders in cement, plywood, sugar, and dairy.

The business outlook remains bold for the track and trace division in FY '25-26. We have developed new solutions and acquisition of new customers has been of another plus point.

We are getting good traction in the co-packing activities in the packaging division. A pipeline is also being generated for new machines, laminates, and the co-packing.

The Masklab has now been re-established into a safety division, along with masks, hard hats, ARC flash suits, helmets, gloves, blankets, etc., were also sold this quarter. On a stand-alone basis, the cost of goods sold is around 41%, 42%, 43% of the operating revenues in Q3, Q2, and Q1 respectively.

Just for comparison, for the entire year of FY '24-25, the COGS was approximately 42%. That said, we remain committed to optimize the procurement costs and also look closely into the economy, efficiency, and effectiveness of operations.

This, we feel, can definitely lead to reduction in the operating costs, thereby increasing in the gross margin. Manufacturing costs are approximately 2% of the operating revenue.

In the earlier periods, this was around 3%. Employee costs are 19%, 16%, 18% of the operating revenue in Q3, Q2, and Q1 of this year respectively.

Depreciation is 4%, and this is in line with previous periods. Other expenses are 14% of the operating revenue in the Q3.

On an annual basis, this has remained steady at 13% to 14% in the previous periods. Overheads will also be closely tracked with an aim to increase the overall profitability of the company.

The EBITDA growth is at 21% YoY. PBT excluding the exceptional items was at 35% YoY growth.

The PAT growth was lower at 19% due to higher tax provision in this quarter. The way forward.

We wish to consolidate the existing coding and marking business. We would like to increase the install base, provide more robust solutions.

An increase in prices has already been implemented. We want to develop new solutions and capitalize the available market opportunities in the track and trace segment.

Similarly, the packaging business, both in India and overseas, will be closely monitored, and emphasis will be towards increasing machine sales, co-packing, and the laminates. The overseas subsidiaries will definitely be continued to be monitored with focused growth targets.

We've already provided them business plans and they've been asked for execution. I now leave the floor open for questions.

We'll be happy to address them.

Namaskar Jaideep ji, namaskar Shiva sir, and thank you Captify team for hosting the call. I hope I'm audible.

Shiva sir, firstly, if you could just explain to us all the investors, how have our foreign subsidiaries and the consolidated results performance, what factors have again led to this lower profits on consolidation, and what's the roadmap ahead for you? I'll just come up with follow-up once you start answering.

Saket,

last time I said that we should have a lower loss in this quarter and almost like a break-even in the Q4 in our foreign subs, mainly the Italian one. Codeology and Markprint are combined about break-even, it's not that important.

What's happened is that we've come out with a new model of a new machine, a new packaging machine in Italy. What happened in the past, I'll explain it to you, it's a long story.

The reason why a lot of these machines were sold in the past, and I think that getting from a 90% machine to a 100% machine takes a little bit of more effort. What happened is we didn't want to repeat the same mistake.

We're using more for Control Print style of quality control and working out here to make sure the product is extremely reliable and robust, because if that doesn't happen, the customer is not going to have the confidence to take the production on it. We've not been able to execute orders or besides one machine or something, I think in the last quarter, or Q3 and in Q2.

Because of that, we have a little bit of a backlog. The numbers would have looked better if we're able to execute the orders and book the revenue, and then of course the profit.

Now we're pretty much through the machine. We've got that first one out.

We've got the second one. For the first time in Italy, I think they're making two machines which are exactly the same.

If this happens, and hopefully we should start actually executing a few of the orders we have, rather all the orders we have, which will help make the numbers in Q4 and maybe Q1 of financial yeah, whatever this 2026-'27 better. I'm expecting that it's not like we're not on target, but there was some execution issues where we as a company, obviously for us the technology is first and then comes all the other aspects of it.

As we do that, I think that we're going to get a much better result going forward. I think the results are slightly worse than the reality, but, like I said, it's not like we're not losing money, but we should have been losing less money than what we were.

I don't think we're too far of our guidance. I think I had said something like €1 million-something.

Maybe it's not like €1.5 million, but we should do better.

Sir, to just understand it, it is the lower absorption of fixed cost that has resulted in this lower profits on a consolidated level. Going ahead with the dispatch of the machinery which is there in the order book and already ready to be dispatched, we will be seeing better operating numbers.

This is a correct understanding, sir?

That's correct. That's correct.

I can also tell everyone, see we have about a €800,000 a year R&D cost in Italy. This is the direct R&D.

People are just assigned for R&D only, not something else. There's also other expenses associated.

Whatever R&D they're going to do is going to benefit us globally, because those same products are available for sale in India, and Asia-Pacific, and maybe in the future North America and other places. I will say that it's also because we expense all R&D, we don't capitalize anything, because this is what we do in India.

I think Jaideep may be better. I do think that also, and I don't want to make an excuse that it's an accounting style or anything, because we've followed this for a very long time.

It's also making the Italian performance look a bit worse because they're not apportioning the cost of their development to the other areas where the machines are being sold. That's where the difference is.

The technology is benefiting Control Print worldwide, but all the costs are being apportioned to Italy. It's also making them look a bit worse than what they are.

I'll join the queue for the follow-up. Thank you.

Saket.

Thanks for taking my question. Congratulations on good set of the top-line numbers.

My question is to Mr. Shiva Kabra.

We spoke in July when you said that the gross margins were impacted due to the higher raw material cost in the packaging business. At that time you had said that you are doing some R&D wherein you are trying to crack something which can help you in some cost saving, and that could lead to better gross margin.

Now when we see the numbers, the gross margins have actually become better for the consolidated numbers, but then the EBITDA has actually gone down. I just wanted to know what exactly is the scenario over here?

To answer your question, what the situation is as such, we're still working on the development of the single-polymer recyclable material. It's now under final trials.

That's also one reason the machines have been delayed, because the machine needed some modifications to work with this material. It doesn't work at the full speed, but it at least gives us an option of recyclability.

As a result, there is also like I said why partly the machines are delayed. Now we are purchasing the materials from elsewhere and selling it, reselling it as per the customer's requirement.

Definitely when we manufacture the material, it will be cheaper, but also we are more focused on the recyclable material. The margins have not changed much in this meantime.

If anything, with the euro going up or something, I don't know exactly, something or the other, it might have slightly increased. Our prices would have slightly increased, but with a slight lag.

I don't know till now if there's any benefit of all of these things. I think it's going to take another four months, because we have some pilot line that we're starting in Nala Garh and we will shift later on.

So

So

The line will only be delivered in March, and probably by the time it's commissioned it's going to be like April, May. It's more for a pilot line, but we'll still be taking some production out on it, and it will be relatively cheap to operate.

It's just a lower volume, but we're talking about our volume, it will still work. The second question you had, one was the margins, and then you said something about the EBITDA has not flowed down to the EBITDA.

Yes, there is a question that's there, and Jaideep and me are looking at very closely because both the other expenses and the employee costs have increased sharply. I know some part of the employee cost was something like gratuity and some provisions or something that has been made, which Jaideep will give you a better read on that.

That's some part of the salary cost, but even if I take that out, there's a significant employee benefits cost increase. The second part is that the other expenses have also increased.

We're actually taking a look at both of them quite closely. Jaideep, I don't know if you got that numbers so well in this presentation.

The gross margin, okay, it's sort of dipped to 58.1% from the previous. I wouldn't give it too much importance right now.

What I think is that the more important thing is that both the costs increase, the other expenses and the employee benefit expenses. Now like I said that some part of the employee benefit expenses was some sort of an increase in some sort of provisions, which Jaideep will tell you.

Then the bigger part of the cost is a major part of the cost is an increase in the employee benefit cost. We need to really go deep into that, to be honest, to understand where all these things have happened from and how this came about.

Then the other expenses have also increased. On both of these things, Jaideep is doing a deep dive, maybe Jaideep, you can answer that question better.

All right, that's quite helpful. Essentially, broadly you're trying to say that at a gross margin level, the projects that we were trying to say it's yet to be fruitful.

It is going to take another 4 months to reflected into the gross margin, if I'm understanding it correctly.

It'll take four months to introduce the product, and then obviously once we introduce that and our cost of manufacturing is significantly lower, then obviously what we are importing from Europe is basically much higher than what we get from here. It will definitely make the margins better.

What's important is the volume of the business should increase in the meantime. For which the machines need to be placed and work perfectly.

Both things have gone. The margins will improve in the packaging business as a result of manufacturing locally.

All right, thank you so much. That's very helpful.

Hello, everyone. Good afternoon.

My question is to you, Mr. Shiva.

This is more product-related. I was wondering if laser printers pose any significant risk to the consumable business.

Now, I'm aware that Control Print does manufacture laser printers, but from my assumption, they don't really have the same sort of recurring revenue from consumables, because once you supply there's no ink that goes into laser printers. I'm aware that certain industries are, for example, the pipe industry is now using laser printers for marking solutions.

Is laser printer a threat to the consumables business or to the inkjet printers?

If I can answer that question. The lasers have been around for about two decades now, and I don't deny that, at least what I've seen in the '90s, or even in the late '90s they started, especially in certain high-speed bottling lines and certain things.

They have some fundamental limitations, and I'm going to go through this so this is technical. The first thing is they don't work on all materials.

Okay? The second thing is they don't give a contrast.

For a lot of people who want a branded type of print, they're not going to get a contrast. Like you said, when you print on a pipe, it won't give a contrast on it if it's a LLDP drip or HDPE drip irrigation pipe.

What it'll do is like an engraved print, which doesn't work for most people's branding. The third issue for our own purpose in terms of the laser business, it's a different model, because there are less people, the cost is less, because you also need less of a service thing.

There is also an AMC element to it, and the lasers have a life of about 5 years. What you do is the frequency of replacement of the lasers more frequent.

There is in terms of maintaining the fume extractors and changing the filters of the laser and doing some other things. There's not a direct consumable, it's more for a service type of a contract and services and spares that you're selling.

Then the life of the machine being a bit less, you keep replacing the machine every 4-5, of course in pharma industry, in certain other things with a low usage, it might even be 7-8 years, but fundamentally in most companies you replace every 4 or 5 years. From an earnings perspective, it's not that much different to us.

There is an element in both things. The most important thing is that the lasers don't work on everything.

There's a big safety issue with lasers, specifically when you mention pipes, all chlorinated compounds or halogenated compounds, iodine, bromide type compounds, chlorine. What will happen is the moment you use a laser on it, it will create a chemical reaction on the surface.

It will, for example, release chlorine gas at that point of time. The chlorine gas will attack someone's throat and eyes, and also convert into hydrochloric acid by reacting with the moisture in the air.

Both things are very dangerous. Now in India, if you look at the laser, fundamentally it's a Class 1A safety that's around it.

It comes under some IEC rules. I've got all the technical details, but I'll have to explain it later.

The laser needs to be completely enclosed. It releases a whole bunch of small micron-sized fume particles when you print.

We capture them with a fume extractor, but still some are released. Now what happens is, abroad, what we've seen is that the laser is growing, but it's not increasing because on a lot of lines people find it a struggle to enclose the entire line.

If I have a form-fill-seal machine, or even a pipe machine, where the laser's there, it needs to be enclosed completely. It needs to be that if the safety is open, the entire line is interlocked, the laser will switch off at the power level itself, and the line will stop, and so on.

In India, see, none of these things are being followed, even though we are also part of the same rules. I don't know what's going to happen.

In general, when we talk to the larger customers, yeah, and I agree that even they look at other people. I'm not sure what's going to happen.

In general, I will say that even the so-called big companies out here don't follow the same sort of safety norms that they will in their own home markets of Europe and North America or something. I think they're more cognizant of these issues.

I think even as awareness grows, these things will happen. In the pharmaceutical industry again, when they have a lot of particles out there, it's in a cleanroom environment.

They have issues sort of using lasers. There are pluses and minuses in this whole situation.

It's very technical question of what you're asking. Fundamentally, whatever we're seeing abroad, in Europe, in Japan, in America, and of course also in India, that the Chinese guys are very aggressive in using laser for everything without any safety measures or any thought.

Elsewhere in the world people are much more circumspect, they're more cognizant of the safety issues and the technical issues. The other thing with the laser, specifically on some materials, because of the thermal energy, it sort of engraves into the material.

When you have certain thin materials or where the barrier property is very critical, it will also cause pinholes in that material. Like I said, there are multiple issues.

We're also in the packaging industry, and people are being forced to use more recycled material, even though nobody's doing it right now. That's going to happen.

What happens is the recycled materials behave differently than the virgin materials. When you print on the recycled material, you might not get the same print quality, it might be much more uneven.

There are various pluses and minuses in this whole aspect. I think laser will keep increasing at a gradual rate.

I think for us in our business model it's not really an issue. I don't see from your fundamental question, like I said, it's been around for a long time, unless there's some method of overcoming specially the safety issues, and then the issues in terms of contrast on the material, I don't see it ramping up very fast.

Understood. To sum it up, you're saying that this is not for now, you don't really see a big threat to the fundamentals of the business.

Also there's some sort of industry risk or substrate risk and you cannot really apply laser to every particular product, is what I've understood.

The laser's restricted definitely to certain products where it's there. Like I said, certain people specifically because you mentioned pipe, I've answered that.

I'm saying in certain places people can use the laser, but it has safety issues. Some people are still using the laser.

You can use it on LLDP drip irrigation pipe, for example, but you can't really use it on any of the PVC, CPVC, UPVC, or any of the chlorinated pipes. I'm just trying to say that there is a element to the whole thing.

On a LLDP drip irrigation or HDPE pipe when you do it, you need a lot of energy to get a small engraved print. Now, for a lot of customers who want to brand their product, they want much more contrast and visibility.

You get my point? Because if it's just for internal traceability, that type of print is fine.

If you want that the customer should know that it's a Supreme pipe, for example, and see it, and you want a jhakas logo, or whatever, then you need to have a high-contrast print on it, which you can't get with a laser. What I'm saying is there are multiple issues in the laser adoption, and therefore the laser has picked up slowly.

In China, it's picked up faster because most cases, they're ignoring a lot of safety-related issues around the laser, the safety regulations that are already in place. Obviously, but it's still, even in China, the coding market has not decreased per se.

It's just maybe a higher percentage of lasers has happened. The rest of the market, even including the CIJ market is still growing, or at least stable.

Okay. All right.

I think you've answered my question. Thank you so much.

Hello. Good evening, gentlemen.

Building on one of the previous participant's question, trying to understand as to where was the delta in the gross margins and the employee cost, if you could just throw some color on that. Also on the other expenses,

I'm sorry, can you hear me now?

Just a moment. Is it clear now?

Hello?

Okay. Hi.

My question was regarding the decline in gross margins and the increase in employee costs and other expenses. If you could throw some color on that as to where have we seen the delta over there apart from the gratuity and the other provisions that we've made, because there seems to be a considerable movement in the employee costs per se.

That would be my first question.

Jaideep, please

Hi. I think I'll take this question, Ansh.

What's happened is that, as you rightly said, the employee costs have risen in the Q3 as compared to the Q2. That is basically mainly a result of adjustment of provisions.

You are aware of the new labor code which has been mandatorily applied. Since 21st of November now we are under the new regime of the new labor code.

As per the mandate given, we have to absorb all the past service costs also. We had a major impact because of the gratuity provision, and also we made some kind of staff incentive provision.

That's the result why the employee costs have risen. Other expenses are on the higher side, but definitely we are looking at more cost control measures like basically business promotion expenses or traveling expenses have grown as compared to the past quarter.

We would like to concentrate more on the control aspect, and definitely we'll try our best to get a reduction on this and optimize the costs. In the Q4 we'll make sure the results are better in terms of the overheads as well.

Sir, in your note five, you have said that there is no material impact on the new labor code. There seems to be some kind of a mismatch over here, sir.

I'm not getting the last line, Ansh.

I'm sorry, I'm saying, sir, in your note number five to Notes to the Accounts, you have mentioned that there is no material impact because of the labor code. Just trying to understand as to then

No, the

couple of

crores, it may be increasing in terms of the delta, but it's not a material impact on our overall results. Do you understand what I'm saying?

Because

I don't know what the exact numbers are, again. I think that the employee cost increased by some thing.

About a couple of crores was the provisions is my very approximate idea. It

increased by ₹5 crores.

It explains part of the delta, like he said, but it doesn't explain the entire delta. That's what I said before.

If you take out that amount, then the delta looks less. It's not material in our overall results.

You have to be honest about that.

Okay. Sir, my next question would be on the impact on the India-EU FTA.

Where do we see ourselves placed because of this, and do we see the foreign players being able to enter the market per se, and being able to take our share in the market? Can you just give some color on that as well?

I can't hear you clearly. Can you please repeat this again?

I'm sorry. Is it better now?

It's

a bit better now,

yeah. I was just asking regarding the India-EU FTA, do we see any foreign players entering the market post this FTA?

Do we see any kind of movement coming from Europe in this space? Do we see anyone taking our market share, taking our business from us?

Can you just throw some color on this?

It's absolutely of no consequence either way. It may make our exports a bit cheaper.

I don't know actually what the duties were previously on stuff from India to there. The three main competitors, Videojet, Domino, and Markem-Imaje, all manufacture in China primarily.

Then Domino and MI have a assembly line right at the end for here, they get the entire kit and they get like a sort of CKD or SKD or something, and they just assemble it here. Since none of the three manufacture in the Europe anyways to begin with, none of their imports are going to come via Europe, I don't think that fundamentally anything changes.

More importantly in our business, like I said, it's a sticky business because most people have a printer. Everyone is competitive.

The service network needs to be there. Everything else needs to be there, and those are I'd say the most important critical factors for people to be successful in this business.

I don't think we're going to benefit much. I don't think we're going to in any way be impacted definitely negatively.

We're not going to be impacted negatively. I don't think it makes a difference to our three key competitors.

I'd say not really have any impact on our business per se.

One year down the line if it had happened before, it could have helped us a little bit in that the packaging machines and the packaging materials that we import from Europe would become a bit cheaper. By the time I think this FTA is ratified, we'll already have our own production of the packaging material, I don't see it being useful in that aspect

Hi, sir. Good afternoon.

Thank you for the opportunity, sir. I actually wanted to know a couple of numbers.

Sir, what would be our segmental performance in sales volume? What would be our sales volume of printer and installed base for 9 months?

Shiva, can I answer this question? The printer sales for the 9 months are a little over 2,100 printers.

Our installed base is about 22,000-plus printers.

Sir, what's our revenue break-up by region and by segments?

Within the coding and marking, we have four different streams of revenue. One is the printers, other is the consumables, then the spares, and the services.

The break-up for the Q3 is 18%, 58%, 7%, and 15%.

Oh, thank you, sir. Sir, what would you say about the Europe operations?

When can we see a reversion of EBITDA margins?

Shiva, you want to take this question?

Please repeat that question. It got a little cut off.

I wanted some clarity, sir, since we were doing at 24 Am I audible, sir?

Yes, yes.

We were doing 23, 25, and 24 in FY '22 to '24. Since of Europe, we have fallen down to around 19%.

When could we assume we could get back to the original margins or we would stop bleeding money in Europe operations?

I think, okay, I mean I cannot say anything to everyone, but like if I look at on a stand-alone basis, which is what is more important for us. Now even the stand-alone basis carries like I said, the the track and trace business is is break-even.

It might even be making money, depending on how we apportion the overheads. It's making money or I'd say on a marginal basis it's profitable now.

The packaging business even in India and Asia is loss-making as of right now. Obviously in Italy and stuff like that, we have a much bigger, losses that we are taking on that account.

Now there are three different businesses fundamentally, or four different businesses. One is the coding and marking, and I'll put the digital printing in that.

It's like one business. That is still growing, the profits are there, and the margins are consistent, and the profits have increased.

Although we're still doing a break-up exactly of where the other expenses and the employee benefiting expenses have increased. We believe that the business has grown further in profit in line with the revenue, if not more.

Okay? I don't want to give the exact break-up because we're not providing it in the presentation.

Fundamentally that business's gross margins and revenue are there's revenue growth of I don't know, like 14-15%, something of that sort in the stand-alone business. Some part of it has come from the packaging and the track and trace, which have grown faster, but from a much lower base.

That business is is is a profitable business, and the margins are increasing because our costs are not increasing that fast. We're doing the exact check-up, because the other expenses is something that we are confused about because we've not looked at in that depth.

From the employee cost, I can say most of the employee costs which have increased have increased in the packaging business, maybe the track and trace business, and the other things, and especially the international business. Now as the packaging business, ramps up in volume, like I said, we get past some of these technical niggling issues which we believe we've resolved, and we are able to execute the orders in this quarter and the next quarter.

It's a slightly lengthy process, because even if the machine is now fixed, the customer still has to come to the factory, do a factory acceptance test and all these other types of things, which is a bit of a different, longer, drawn-out process as compared to, what we do in our coding and marking business, where we just it's like a ready-made product, we just ship it. My view is that, as the packaging business moves up in terms of revenue, and I I do believe that in Q3 or Q4 of this financial year, this coming financial year, even in Italy, it's going to be break-even.

In India it'll be profitable hopefully by Q1 or Q2 of next year, Q1 of next year. I think as that happens, and the losses of the packaging business come down, the even if we're not making money, the stand-alone and the consolidated will sort of merge.

My my feel my gut feeling is that if we can make as much money in India in the packaging business as what they may lose in Italy in Q1 and Q2, at least we'll be sort of on a break-even basis on the overall thing. Then you'll see a a sort of homogenization of the stand-alone and the consolidated.

Then the margins across the board will be quite similar. Then obviously the longer-term plan is that the packaging business will grow and will be profitable in and of its own.

Will the track and trace business, I definitely expect them to contribute significantly to the bottom line in the coming financial year. The if you if you if I looked at the business and I sort of x-rayed and I looked at different segments, then, I think that the core coding and marking business is still as profitable on a gross margin basis, surely.

I can I can say that. I think even if although we've not done that deep dive and apportioned the expenses perfectly between the businesses, but even if from whatever I can see from the employee point of view and other direct costs which are measurable for us, it has grown in profitability.

It has grown in like in in percentage margin, in EBIT basis, it it has dropped.

Thank you, sir. One last question would be, sir, what is our

We'll rejoin.

Hello, am I audible?

Sir, my question would be, if we are operating in an oligopoly market itself and we have so much of unutilized capacity, why has our market share remained or capped at around 40 20-odd percent? Is it the barrier to taking share from Videojet or Domino a matter of technology, or is the lock-in of consumables at the competitor side stronger than what we could have anticipated in the past?

Shubham, can you hear me clearly?

Yes, sir.

I think this question's been answered in many con-calls. Fundamentally, it's a very sticky business, and we have actually grown our market share slowly over the last few years.

Because it's a sticky business, it's difficult for the competitors to take our customers and for us to take our competitors' customers. It happens, but it's a bit of a slower business.

Technology-wise, I think we've got the best product stack right now, definitely.

What could trigger a market share increase, let's say hypothetically?

Definitely one of the gains we've had is more in our non-CIJ products and especially in the thermal inkjet and the piezo where we've gained market share. As technologies change, some earlier person was talking about laser, sometimes people are more open to using someone else's CIJ, and then a second supplier's laser going forward, or a second person's thermal transfer or thermal inkjet.

I think that's one area where we feel maybe that's some opportunity to gain market share. The second is to just continuously perform a bit better and just keeping these small market share gains, because they're very profitable.

Even if the market is growing at 10% and we are growing at 14%, this is quite profitable for us. It's because that extra 4-5% is, yeah, it's a lot of money.

Right. Sir, and the second question would be, we are running some pilot projects with pharma cos, and what is the typical gestation period from let's say pilot to getting a full-scale roll-out?

What could be our potential let's say value addition in top line and bottom line if you could just give some

color? I cannot answer the top-line and bottom-line part, because it's all hypothetical.

Right now the pilots are sort of over, but there's a lot of negotiation going on right now. Some contractual elements to the negotiation, it's not just a commercial negotiation, there's also legal aspects to it.

We are in the process of trying to finalize those deals. It's one of those things that we have to go carefully because this is not a regular type of a sale of product.

This is a patented technology we're giving and there's certain restrictions in what the customer expects us to do and what we can provide, and so on. I think I'd given that we have two two of the top five to 10 customers in India in previous things, I think we have closed it now in a commercial negotiation stage, but we try to close that hopefully in this quarter.

Okay. Sir, lastly, what is the Hopefully

it'll be soon. It'll be soon, but like I said, there's a little bit of back and forth, because both people have given it, ours and our customers have also given to their legal teams just to make sure.

When lawyers get involved, everything slows down and it costs a lot more money.

Okay. Okay.

Thank you, sir. I'll join the queue.

Good afternoon, sir. My question is for Mr.

Jaideep Barve. I hope I am audible.

You are. Okay.

Thank you for that. Sir, first of all, congratulations for an impressive growth in the top line.

Okay. You published the numbers.

I'm sure you can throw some color on the significant increase that we are seeing in the employee cost, okay. I think you did mention that some part of it relates to the change in the labor codes and another is on account of the increase in the provision on the side of incentive, right?

Just wanted to understand what is the policy that you are following in terms of making a provision for incentive? Are you making an upfront provision for incentive before the sales happen?

Because of that there is a mismatch, because the increase is quite significant. When I look at the numbers, it is a 28% increase in employee cost over last year and 22% over the previous quarter, and it is definitely impacting the overall profitability that we are seeing for Control Print for the third quarter, okay?

Thank you.

Yeah. Nitin, I would like to address your question this way.

See, incentives are always a result of a planned structured process. We identify the employees who need to be incentivized.

We also have sales incentives policies. We've got incentive policies for the service managers plus we've got incentive schemes for the back-office team.

As and when for the people where the results can be quantified, like sales and services, everything is calculated. For the others where it is more of a non-quantified basis, what we do is that based on our experience and based on the performance, we prepare a list and we get it approved, and then the provision is made according to that.

Thank you for that. See, your overall employee cost is 23% of sales.

I'm looking at the consolidated numbers. Do we expect a similar percentage to continue as we move forward?

See, we are definitely looking at optimization of not just the employee costs, but we are also looking at optimization of even the cost of goods sold and the other overheads. Definitely we will see some kind of a good improvement in the periods to come.

Fine. Thank you.

Thank you, Mr. Jaideep.

Appreciate it. Thank you.

Hi. Sir, my question is could you share some guidance on the printing core business?

What kind of industry growth do you expect over let's say 3 to 5 years, and how do you see your company growing in that period? Also, if you could give us some color on the track and trace business, how you see that evolving?

Prateek, to answer your questions, now specifically looking at the coding and marking business is going to grow at 10-11%, 12%, depending a little bit on the Indian economy. Like we're assuming that India is going to grow something like 6-7%, and then coding and marking will be 1.5 times that, and so on.

We've been doing a bit faster than that. We feel that our product portfolio is better than the competitors, we'll look to continue growing at that.

Right now, considering our lineup and everyone else's lineup and our edges compared to everyone else's, for the next year or two, I'm thinking because I can't predict 5 years down the line, but I'm sure we'll grow at the market, but maybe in the next year or two, if we still maintain our product edges in the thermal inkjet and the piezo and certain other things, we may be able to grow at faster than the market, about 15% growth rate according to me, give or take a couple of percent here or there. Obviously if we maintain that edge, which we feel we've got a strong organization and strong everything, maybe we'll be able to maintain that 15-ish percent growth rate for a longer period.

Like I said, there is a technical element to it, although I know I said that it's very sticky, but there's a technical aspect to it also. The product does matter.

The second part of the thing was the question regarding the track and trace business and how it's evolving. Like I said, it's already a few hundred crores, like TrackTrace, ACG, those types of people are there.

We're coming with a slightly different strategy. We're doing some more plain vanilla stuff right now.

Now we've sort of finalized certain elements where we should be able to go for more high value-added business. For us it's more for fusion of the track and trace into something which is going to give much more business intelligence to the customer rather than just meeting a compliance requirement.

Because anyway we have to meet the compliance, but how can we sort of connect that to resolve some of the customer issues? Let us try to conclude them and roll them out.

They are pilots, the big pilots. Like now the pilot has to become commercialized now.

If that happens, we'll be busy with that anyways for quite a lot of time. Then we'll have to see what the market reaction is and whether what we believe we're providing the customer as a benefit, what the customer believes he's getting, if he's getting it, the market is big.

If he's not actually, the theoretical benefit versus the practical benefit is not there, then, yeah, we'll still sell stuff, but then it might not grow at that same rate. It's very difficult to say.

We're making a technology platform play in both the packaging business and the track and trace business and digital printing, they're very different from the coding and marking business, where it's a very established platform and everyone knows what they're getting.

Thank you, Shiva. Just a small follow-up

It's difficult to predict is my point, because these are they can be hockey-stick type of growth or they can just not take off. It's very difficult to predict.

Right, right.

Just a small follow-up question on track and trace. As of now, the demand that you are seeing, is it purely from the compliance perspective or you are also seeing companies doing it by themselves?

The reason I'm asking is that I have seen a couple of organic players, they are putting QR codes on their products so that you can see that the exact factory it is coming from and etc.

Those are all like children's things. No, the reason is the compliance.

There's a thing called L1, L2, L3, L4, L5, which means when L4 and L5 the information that you print is connected to that of the regulators and people down the line in the supply chain, and so on and so forth. What if people are printing a little QR code on a thing and it's leading to a website link, that's just basically like a little bit of marketing type stuff that they want people to go on to the website and claim 10% and get his information or something.

No, the pharmaceutical companies are regulated. All the top 300 brands or something of the sort, it's regulated, and for these customers, it's a regulatory and a compliance matter.

They have to comply with the norms. Even in the export segments, in some countries there is a requirement of this.

Fundamentally, it's a compliance-based business. Then we are trying, which is our strategy, that if you're doing the compliance and we're getting so much data, we're printing so much data, why can't we do more things on top of that and really resolve some of your burning issues?

That's what our fundamental take is. It's a compliance-based business in pharmaceutical.

Other people are doing it, those are they're not mission-critical applications, I'll put it that way.

Hi. Thanks for the opportunity.

Sir, earlier you mentioned that we've taken price hike on our printers. Are we the only ones who've taken a price hike or our competition has also taken a price hike, and whether these price hikes are to match the commodity inflation or should this price hike result in any sort of gross margin expansion?

I think, Jaideep, you can take that one. It is more not on the printer so much as the material or the consumables and the services.

It was just lagging from our side. There has been some cost increases is my belief, but I think Jaideep can answer this better.

Jaideep? I think maybe he's gone off the call.

Sure, I'll ask my next question. I recently met a company who had a packaging solution similar to V-Shapes, but it was not V-Shapes, it was some Chinese supplier.

I wanted to know if you are aware of any such Chinese competition there in the market, and how does our patent protect us against such competition?

The patent protection is quite fundamental. There are two companies that are there in this business.

One is Easysnap, which was founded by the person who founded V-Shapes. That uses an older patent.

Now that patent itself is being violated by the Chinese companies. They do have a patent in China, but someone needs to go to China and sue those people, and so on.

It's not easy to do that with a small Chinese company, because the guy will shut it and his brother or sister will open a new company or something. We'll have to go after the customers or something of that sort.

We don't have any, to be honest, real presence in China, we don't know how to get all this stuff done. We do have patents in other countries, and we are not afraid to take legal options.

If a large customer out here employs one of those machines, we're not afraid to go to court. Now the Easysnap patent will expire

In terms of the feeding of those printers as well as the per-unit price, how would that compare with us?

Let me just finish this thing on the packaging machine. Now if the Easysnap patent will expire at the end of the year.

The Chinese people will be able to copy that type of machine. It has fundamentally some limitations, which is the reason we purchased V-Shapes, because we figured out that this technology is going to have a benefit.

We have a patent till 2036 in all major jurisdictions. We've also filed a whole bunch of patent extensions and different types of patents to cover packing powders in our format, or using a homopolymer recyclable material, for example, or switching to a paper-based material which is more than 70%.

We've also been working on a bunch of other projects. We expect that with an ecosystem of IP, things around this, it will make it difficult for people to get into the business, because they cannot service all the needs of the customers, and so on.

Right now the Chinese guys who are selling are fundamentally as of right now out of patent of the Easysnap. People are not copying the V-Shapes machine as of yet.

It's more complex, much more complex to make. They will copy it.

Whenever they do, we will sue them. That's as simple as it is.

Okay. Currently, the Easysnap technology which is there, how is it competitive in terms of pricing-wise say per unit sachet and the packaging machine itself versus our solution?

They're very similarly priced. The main difference is that Easysnap is running on an older technology, the speeds are much lower.

Also because the way they cut the material without a shape, it's much more difficult to do that consistently. The material tolerances have to be much lower.

If the material tolerances aren't perfect, and the setting of the machine is not perfect, then the chance of you making too deep a cut and the material leaking, or you making too shallow a cut and the product not snapping, increases quite disproportionately. Easysnap is not the main issue out here.

The main issue right now is for us to just grow the market. It's not a competitive situation.

It's more of, I think all customers would know that our product is much superior.

Okay. Understood.

Thanks, I'll get back in the queue.

Thank you for the opportunity. Just a question on our cash flows.

Assuming our packaging business breaks even and we're doing about ₹50 crores of cash flow a year, how much of that will go into CapEx to maintain the 15% growth in the coding and marking business? How are we thinking of the balance and plans to utilize the same?

I think approximately what we depreciate we spend about that much as maintenance and other types of CapEx. We don't even spend that much.

Part of the depreciation is also certain things that we invest in certain tooling, certain other things that we do. I don't think that fundamentally the CapEx is required.

There is some CapEx that we're doing in terms of the development of the homopolymer for the packaging material and its manufacturing and certain other things. We don't expect for our coding and marketing, digital printing, track and trace business there's no CapEx needed.

The capital investment out here is the R&D, frankly speaking, and whatever projects we do on those fronts. The cash flow is probably higher than ₹50 crores, but I'm not sure what it is.

Jaideep will give you a better number. I think we continue to maintain that, I think.

Yeah.

Shiva, the R&D is expensed or is it capitalized? That's the first one.

The ₹50 crores was from the presentation that you have posted for this quarterly results. I got that number from there.

It might be in a consolidated basis. I think our stand-alone profits are high and what's happening is some of that money is going into funding the losses in the other things of our subsidiary, but, Jaideep, are you here?

I'm there.

If you can just answer this question about the cash

flow. Samarth, what happens is that R&D costs are expensed out in the books of accounts.

Okay.

Yeah.

We expense It

will come in other expenses. In the BSE filing, it will come under other expenses.

Is this correct, Jaideep?

Yeah. Regarding your question on whether the capital expenditure is required for the core coding and marking, there's nothing major as planned for the core coding and marking, which Shiva has also mentioned, because we are at the moment running at about 65% to 70% of our capacity.

We don't foresee anything like a major CapEx in the coding and marketing.

Just to understand, out of the 50 or say ₹60 crores of our cash flow, are we paying about a dividend of ₹15 crores a year? What is the plan for the balance?

Are we looking at more acquisitions or See,

it's very early to say whether we are looking for acquisitions, but if we come across, we might consider.

Thanks. The second question was just on our expansion into the Middle East.

Who are the competitors there right now?

If I may answer that question, fundamentally, it's a small type of a setup that we're doing. It's not a major setup.

It's just meant to help service the customers that we already have in certain segments where we're very strong. For example, it could be in stuff like steel or something.

We only have about four or five people working for that entire market. It's meant more to be in certain niche industries and applications where we have some definitive technological advantages compared to our competitors, and to sort of replicate the same across the Middle East and Africa.

We're not going to have even 20 people there, we have four five five people I think assigned for that area.

Gotcha. Thank you so much.

Hi. Am I audible?

Yeah.

Thank you for the opportunity. I just wanted to understand how are we standing today on the packaging business?

I think we have established a machine in India, and we are trying to seed the market. What sort of response are we getting from our customers and what is the market telling us right now?

Could you just repeat that again? I'm sorry.

For the packaging business, the V-Shapes business, right? We have established it in India as well to seed the market, right?

We have put up a machine and we are doing co-packaging for our customers. Is that right?

That's correct.

Yeah. What are we hearing right now from the market?

What are our customers telling us? How is the traction there?

Are we seeing any demand and any growth there?

I think what happened was there is demand. We have four machines installed in India also, but all of them are not working completely because of some niggling issues.

As we've got more into the business, we've found out more issues, because what's happening is people want to take 100,000 packs to test the market, and see how the format is, and to test just everything. Now what happens in that given situation is that they have a bunch of technical issues, because we struggle to print that much in such small quantities and certain other things.

As a result of this whole thing, it's been a bit strange, but the market is good. It's actually quite positive, and I have no problems with the way the market is shaping up, and it's definitely picked up in the last couple of quarters.

Now we're really working on trying to execute the orders that we have, specially for the co-packaging, and get the guys who bought the machine streamlined because even they have the same thing that those guys are exporting, but then the customers they have are not taking one product and continuously running it, they have a range of different serums, and face creams, and I don't know whatever stuff they use, and it's a bit painful, because we need to fundamentally provide for all of those different situations. To print it, to test each material, test the compatibility, do this stuff, whether you make a billion or you make 10 pieces, you have still the same amount of work for us.

To get the artwork, to qualify that, we've been working a lot on streamlining the process. We specially had a lot of problems in printing smaller batches and our turnaround times, because it takes 3 months for us to get something reverse printed and laminated and sent back, and most customers want everything in 30 seconds.

So

Right.

We've been working a lot on streamlining our own supply chain, because getting the machine, installing the stuff, getting the licenses, all those things was one part, but we're not so equipped maybe to get those quick turnarounds for a lot of customers.

Right. You mentioned

The demand is definitely increasing both here and in Italy. I think now the things are much more streamlined.

Even our own team is a lot more confident that we can execute the co-packaging orders. As a result, they are much more confident in taking a lot more orders.

That's what the thing is.

Right. You mentioned four machines we have established, right?

Can you say that again, please?

In India we have sold four machines, right? Is that what you said?

Yes.

Okay. Just in case of our acquisitions, how are each one of them doing?

If you could share some numbers, like Codeology and Markprint. What are their 9-month numbers?

Jaideep, if you can help out with this, please.

The 9-month numbers for Codeology is they're picking up the business, in fact. They still something to catch up.

For Codeology, the entire consolidated Codeology group, we are having a loss of about €147,000 as of now, sorry, pounds as of now. For Markprint, it's a good position, though not a great position.

Markprint generates profits, we are not overly worried about that. However, the scale of business can definitely be improved for Markprint.

Right. Majority of the losses is coming from the V-Shapes, right, the Italy business?

The major losses are coming from Italy, you're right.

Okay. Okay.

Correct.

That's it from my side. Thank you.

I think we can take the rest of the questions if it's there. It's no problem.

Hello, sir. I just wanted to ask about your international

I just wanted to say, because obviously if someone is waiting for an hour to ask a question, it would not be fair to not let them ask questions. Sorry about that.

Please continue, Moksh. Sorry.

Just wanted to ask about our international subsidiaries. When is the turnaround expected for all our subsidiaries, and could you provide some more color as to the current operations and any other timeline for the turnaround there?

Moksh, like I said, Codeology is profitable in their current business. Not massively so, not minutely so.

They're just a bit profitable, because the UK market has been a bit dull. The losses they're making are marginal, but it's mainly because we have asked them to invest in the V-Shapes business, and we are establishing a co-packaging and a full marketing setup in the UK also.

That's why they're taking some expenses for licenses, for other things, and whatever to start up. The Markprint business is already profitable, and we expect to not only to remain profitable, but to grow in profitability.

We're working on that. We've got some great applications, there's some good stuff that we're working with them.

Now the Italy business is fundamentally what we're all talking about, because that's the major loss-making entity. Codeology, Markprint is not really that relevant in terms of the overall factor.

The Italian business is the main one. I'm expecting in Q3 and Q4 of financial year 2026-2027 they will be break-even, and I'm expecting that Indian business in packaging will be break-even at least in Q1 and Q2, and profitable by Q3 and Q4.

I'm hoping that next year the packaging business as a whole will be break-even, if I combine it across India and Italy and even the UK, and so on. Does that answer your question?

Yeah. That's it from my side.

Thank you for answering my question.

Sir, thank you for the opportunity. Sir, I wanted to understand regarding the solution that we are offering in track and trace, and how is it different from ACG and the other players?

Because I understand, sir, none of these players manufacture printers as we do. If you could just help us understand how is our strategy different, and can we do a partnership with the likes of ACG who do packaging and all by supplying our solutions to them?

That's a very good question. Our solution is quite different to what they're doing.

Like I said, everyone is doing the compliance. The big players in that are ACG, TrackTrace, and PharmaSecure, and Optel, which is more of an international player.

We're also one of those guys who has the entire solution from L1 to L5 and we get the entire compliance done. The difference between us and the other players is that we're focused more on meeting the compliance needs like them, but also using our printing capabilities, our software capabilities, and other stuff to offer a more comprehensive solution to the pharmaceutical customers, they can tackle other business issues of theirs.

Now I can't tell you exactly what it is. Like I said, if we finish this negotiation and we roll out the pilot, and I get a permission from the customers, I will make a presentation on this, like we make a white paper and a presentation, which we will provide to everyone next maybe whatever it is.

Let me just finish this thing, hopefully I will conclude everything and move ahead. Yeah.

Got it. Sir, second question was recently there was a publication that your seed companies need to have a barcode and they need to have traceability on their packaging.

Can that be a additional market for our track and trace solution along with the printing for the printers and the consumables that we provide?

Definitely agrochemicals, including pesticides, and seeds, and also I believe to some extent fertilizers in the future are also going to come under this regulation. From what my knowledge is I don't know if it's been notified, but not it's been delayed or something has happened.

If you're saying it's official now, people have started doing it, especially in the agrochemical industry for the pesticides. I don't know if everyone is already executing.

Obviously, if that happens, then the addressable market increases. Normally in our past experience, till the government doesn't mandate it and say you have to do it, it's a different business still.

From what my knowledge is that the government is not mandated as yet. It's something that is supposed to happen, but delayed once or twice, and until they don't say we're going to pull your product from the shelf, past experience shows that people don't really But yeah, it'll increase the addressable market for sure.

Got it. Sir, just a final question from mine.

Sir, how do we plan to scale up these labor applicators and the barcode scanners that Codeology produces in India? Because I suppose that there will be a lot of customer synergy, product synergy versus the printing solutions that we are providing.

In fact I'm in the Nala Garh factory right now, and the Codeology team is here, and they've come specifically to give the training on the entire print and apply manufacturing and setup. It was a bit delayed, but now we expect to really go ahead and move on it.

Because you do it, you have some issues, and now we're ready for the second round of real training and manufacturing out here. Hopefully after this, we'll be in a much better position to actually execute and start selling the solution to customers, rather than being a hypothetical tool in the market.

Got it, sir. That was from my end, sir.

Thank you so much and all the best.

Hello. Thanks for the opportunity.

Just a few questions from my side. I would like to understand on the stand-alone basis, right?

This time our EBITDA is lower compared to last time. Is it due to the product mix or something else, because yeah, our revenue is also higher from last quarter.

That is my first question.

Rahul, this has sort of been addressed earlier in this conference call. Jaideep, if you want to repeat the thing?

See, I'll tell you what, Rahul. As we've been saying, there has been an increase in the costs related to employee benefit expenses as well as the other expenses.

We've explained the reasons why they are, and management is definitely committed to take a closer look and monitor them. We hope for a better Q4 in terms of the margins achieved through optimization of the costs.

Sorry. I joined a bit late.

Sorry if I have repeated the question. The second question is on the V-Shapes, right?

I think so last con-call also I attended we were expecting somewhere around Q4 to break even on V-Shapes, if I'm not wrong, now it is delayed. Sorry if you have already addressed it, but if I can recollect, yeah, that was what was said in the last call.

We said earlier that what happened was we had some slight technical issues in terms of being able to send out the machines, because we wanted to like I said, some minor improvements we made on the machine, and therefore we couldn't really ship that many machines in Q2 and Q3. We've shipped one machine, I believe, finally.

In this quarter and next quarter now, we should just ship the remaining machines that we had, a few machines, not a huge backlog, but we have a few machines that we need to ship out. That will reduce the losses in Q4 and Q1 or help us do it.

That will definitely help improve the overall performance. At the same time, we're also getting a strong push in the co-packaging business.

I wouldn't say it's particularly profitable, it's more to help popularize the product and scale people up so that they start becoming machine customers and or do the co-packaging elsewhere with our package, and so on. I think from that perspective it's looking positive.

I said I'd given a specific guidance that in Q1 and Q2 in India we'll be break-even in the packaging business, and profitable by Q3 and Q4. In Q3 and Q4 of this coming year, I expect that Italy to be break-even.

There'll be losses, but they'll be on a declining platform from now on.

Okay. One last question.

Do we maintain the current mid-teens growth what you projected in the earlier calls? We maintain that guidance?

Can you repeat that again, please?

I was saying we projected mid-teens growth, right, in a previous con-call. Do we we stand on that projection, right?

Or do we have some

Right now I think we've got the 9-month figures and so on. Jaideep, I don't know what did we We did some 16% growth or something.

It's near

16% growth, correct.

Hopefully we'll continue on a stand-alone basis in that zone or something. For three quarters, and obviously like I said, if the coding and marking market is going at a certain pace, and then hopefully we'll be able to grow faster than that.

Far we've maintained that for this year, for 9 months. Of course, for next year we'll definitely see for next year.

Okay. Thank you.

Just wanted to thank everyone for participating and really appreciate your time. Obviously, I think a lot of questions regarding the gap between the stand-alone and the consolidated, and then because of some tax reasons the PAT looks a bit poor.

We're quite convinced that the stand-alone and the consolidated will start merging in this coming financial year.

Thank you so much, everybody. It was nice to have you on the call, and keep supporting us.