Mr. Abhishek Somany and [inaudible] . We will have the opening remarks from Mr. Somany, followed by the Q&A session. Thank you, and over to you, Mr. Somany.
Good afternoon. Sorry. Good evening, ladies and gentlemen. I hope I am audible because I could hear a little bit of disturbance at the organizer's end. Just to take you through the quarter and the year, and I am sure there will be many questions later for the current scenario, specifically due to the ongoing geopolitical reasons. As far as the quarter is concerned, the domestic demand saw a gradual improvement during January and February on account of decreased domestic demand, reducing the pressure from exports. So there was a little bit of a recovery in January and February. Obviously, March was a very aberration month because of the various circumstances which played out geopolitically.
Overall, if you see, exports did increase from last year. It would have touched about INR 18,000 crores for the industry, but it got stopped at INR 17,000 and something crores because of the March outage where nothing really went or sailed in March. Gas price, as you all know, has increased very significantly, which we can talk about that. I am sure there will be a lot of question and answers around that. As far as we are concerned, sales growth has been about 6% in Q4 and 5% for the entire year, slightly better than last year. EBITDA improved quite significantly, 3.2% in Q4 and about a percent in the entire year. Capacity utilization was largely flat, from approximately 80% - 79%, so it is largely flat. Of course, in the quarter it improved to 82%, but otherwise it has been largely flat.
Somany Max Plant, there is good news there that we almost did a breakeven at Somany Max Plant. Correspondent quarter last year, same quarter for Q4, the loss was about INR 9 crores. So from that, we have been able to break even. So that is as far as capacity utilization is concerned for the year to about 79%. Sales came in with a 4.8% growth and a 6% growth like I mentioned, 5% and a 6% growth like I mentioned.
EBITDA for the year is 9.3% and for the quarter was 11.4%. If you see the tiles volume, we have increased our GVT sales by 3% and there has been a reduction in the ceramic in PVT by 3% corresponding. Sanitaryware has done fairly well. We have grown by an 8% for the entire year, and we have closed the figure at INR 350 crores up from INR 296 crores.
This year we've taken a very aggressive target, a very aggressive double-digit target. Gas pricing overall, before the war broke out, was pretty much constant. There was no major changes in the gas prices, INR 1 or INR 2, basically based on the USD-rupee conversion. After that, obviously, it has gone up very significantly. As far as our business is concerned, our brand spend has been about 2% for the year. We got rid of the superstar and therefore it's slightly lower because of that reason. Working capital we've done fairly well. It's marginally lower by four days to nine days. We've had a very good debtor collection. That particular figure is at 40 days, down from 51 days and 38 days on a standalone basis. The net dealer addition has been very strong this year.
We've added net new additions of 200 dealers across India, taking the total dealer showroom to about 3,100. That has increased in a very significant way. Now for the guidance. The caveat is there are no further shocks geopolitically, but otherwise our guidance is to improve EBITDA margins from here by at least 1.5% or more. Brand spends will also go up a little bit, although in percentage terms, we will maintain it as we are taking aggressive growth on our top-line growth and the value volume growth. Input cost increase currently has been passed on to an extent, and we can talk about that in the Q&A. This is as far as our highlights are concerned. I would leave a lot more time, which we normally wouldn't do.
We would give you a complete synopsis of where we are and what we are, but I'm sure there will be a lot of Q&A for you for the current situation. Overall, we're happy. This whole situation, the old saying that somebody's loss is somebody's gain, I think as far as the industry is concerned, the branded players, the organized players are to gain from this disruption, provided there's no further disruption in this regard. So we are to gain from this disruption because a lot of the capacity in Morbi shut down and everybody is now buying from the same source of gas unlike earlier times where they were buying LPG and propane and that over in JVs and various other sources. This is again a positive for the industry.
The other positive for the industry is that our pricing has been narrowed between the small scale unorganized players and the branded players. Overall, I hope this discipline continues. If it does, then there will be definitely better days for the tile industry. So that's the highlights from last year, and I would now leave the floor for Q&A.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question, press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use earplugs while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you must press star and one to ask the question. The first question is from the line of Sneha Talreja from Nuvama Institutional Equities . Please go ahead.
Hi, good evening, sir, and congratulations on super strong balance sheet improvement. First question is related to receivable days itself coming down and working cash to come in under negative. How sustainable is this improvement, and where can we see the numbers in FY 2027?
Receivable days, once you get it down, then you start monitoring a lower number. We hope that receivable days remain around the same area. It may increase a day or two, but we would want to manage it in the same area. As far as working capital is concerned, a lot of our stock which you may not see going down here, but a lot of the stock from our outsource vendors have gone down substantially, which makes a lot of difference in the number of days. That puts less pressure. Even from our own plant point of view, a lot of the old stock, the over 180-day stock, etc, some other stock which was not so saleable got sold during March. That's again a big relief. Again, once the stock levels are at particular level, we start monitoring and learn from mistakes.
We should be able to control this. I do not know from a sustainability point that's a question mark because currently we're seeing that there's been a delayed response to price increases in April. April was a better month for us, but nothing great from the point of view of such large price increases. People take time to absorb. Labor was also not there. Let's see. The net-net is that the tile is a product which will not be manageable with some other flooring or wall material. There will be a better demand even if it's a delayed demand. We're running plant at 100% capacity. In the interim, it may go up, but finally, let's not forget that one month or three days of stocks have gone out of the Indian market. That will come back.
Like I said, this is not going to be replaced by a marble or a stone or a wood or anything else. Good days to come in future.
Understood. Secondly, when you, of course, mentioned the April month and how is it going at this point of time with price increases, what I wanted to understand was, can we break up January and February with March? Just want to see how is the demand panning out in January and February ex-price rises. You did mention some amount of improvement happening. Just wanted to understand how would have been the volume growth in January and February.
Yes. If you remember, even in the last call I had mentioned, which was in January, that December being a very, very heavy month and we pushed a lot of material in December. January normally would have taken a dip, but we grew at decent single digits in January and also in February. So from that point of view, we did see some uptick. For us in March also, we did not push too much material. We wanted to move the material off the vendors first from our non-joint venture vendors because there was a chance of they increasing their prices in April, and that would be on us. Therefore, our focus was to remove that stock. In March also, we did not really overtly dump material. So January, February recovered from March. We saw decent growth considering December was a very heavy month.
Understood. Lastly, back pricing. Could you compare north, south, and west pricing for Q4, and how is it at this point of time?
Sneha, Q4 would not be of any significance because from 9th of March it shot up. I mean, if it was not for the war, then the Q4 prices were pretty much standard to Q3, other than the rupee dollar small movement. There was no significant increase had it not been for March. If you can clarify, what do you want me to tell you? In the current price?
The back prices. I mean, both would be actually appreciated even if considering the March impact or just for understanding pricing that you are getting at this. I mean, for pricing prices that you have in north, south, and west.
For Q4?
Yes, Q4 as well as the current one.
Currently, current is so extremely volatile. That I will come to. That may be a larger debate or larger discussion. Otherwise, if you see, if I give you know what? Let me give you an average. Q4 is largely flat had it not been for the March last week.
Okay.
Let me give you the FY 2026 and FY 2025 prices because that would give you a better idea. Right?
Sure.
Q4, I will go to Q4. Kassar was in the mid-40s range, and in Q4 it was 48. Morbi was again in the mid-40 range. It was 46. In south it was INR 55 in FY 2025. It went down to INR 50 in FY 2026. If you see mid-40s and one was 50, so largely common. If I see the whole year pricing, it was 43 from FY 2025 for the north and went up to 45. For the west it was 48 in 48. For the south, it was 51 in 51. So that is still very flat.
Understood. Got that, sir.
This is, let me clarify, only gas pricing. This has nothing to do with our other fuels which we use, such as.
Biofuel.
Yes. Yes, biofuel. Correct.
What portion of your fuel usage would be biofuel in case we can get a percentage of the benefit also?
It is the same as last year. Nothing has changed over two years. It is identical to what we were using. We have not moved any other plant to biofuel. I do not have the numbers off my cuff as to exactly how much is percentage of the biofuel versus kerosene fuel.
Understood. Lastly, in case I can, I know it's out of time. In terms of Morbi, what are you currently using and what would be the gas pricing currently only for Morbi versus let's say your north plant? Just want to understand that distinction.
The Morbi pricing is currently, for May, the pricing is INR 74 + 6%.
Okay.
I think it's 74.1 or 74.2, something like that, + 6%, is the pricing for Morbi, and we are using GSPC gas, and we have been using GSPC for the last so many years. We didn't move to propane or LPG any which ways.
Okay. North would be how much, average?
North would be about INR 3, INR 4 cheaper.
Got that, sir. Thank you. Thanks a lot, sir, and all the very best.
Thank you.
Next question is from the line of Dhvaneet Savla from Savla Family Office. Please go ahead.
Hello. My first question is with regard to the current scenario. Is there a particular point wherein we think that it is probably not feasible for us to resist the tide because our extra margin is much higher than what it could usually do? Secondly, considering the current scenario as of May, if we call in there, in our structure upside, we were looking at the 27 number.
Like I said, we did not dump upside on the 27 number. 27 number we should be able to get a decent single-digit growth in terms of volume. Value obviously, prices have gone up, so very difficult to say how much the prices will stay and when gas prices go down. Whenever it goes down, prices will go down. So difficult to give you a prediction on the value number, but otherwise volume will be in very decent single digits for the tile business. For the sanitaryware and adhesive business, we will be in very healthy double digits.
Okay. About the first thing that, is there a point which have you done any study or analysis on? Is there a point wherein it does not work for us to function the factory because the cost structure has gone up so high and we are not able to pass on the cost?
Yeah. I think what you are trying to understand is where is the tipping point to increase in price beyond the point where if you are not able to increase the price in the market, then we cannot run the plant. Is that what your question is?
Yes. Yes. That's my question.
The last two years is that the gas price, tile prices have gone down fairly significantly over the last two years by about 15%-20%. About INR 3 - INR 4, maybe actually INR 5 - INR 6, the prices went down in the last two years. Today, even after the price increase, we are pretty much at the historic price which was there two years ago. From that point of view, there has not been a very inflationary change as far as the builder is concerned or as far as the customer is concerned. He was taking advantage of this over the last two years. I think tile still being the most cheapest material for the flooring and wall, like I mentioned, there is no alternative to a tile.
I doubt there would be that situation where it won't be viable to run the factory. Obviously, the caveat is that the Doomsday War doesn't come up, like oil jumps up to $200 or something like that I can't envisage. But at the current scenario, I don't see the factory shutting, even if it had to go up by 15%.
Okay. Thank you. Just a small technical question. You spoke about the bathware and the sanitaryware question. Is it fair to say that since we have certain volumes coming from that segment, we are getting a little bit more traction than probably a pure tile player would? Or we are able to mitigate this crisis because we have some additional value-added thing which is probably giving a little bit more margin than a plain vanilla tile player would?
Yeah. Sanitaryware and adhesive gives us better margin, and we are able to accelerate that growth because we are growing with the same dealership. I do not have to make new relations. Only 25% of our current dealers are dealing in our sanitaryware. That is the scope, that is the headroom which we have to accelerate our sanitaryware business.
Hence the double-digit growth expectation.
Correct.
Got it. Thank you.
Thank you. Request to all the participants, unlimited further questions from participants, and we join the queue for a follow-up question. Next question is from the line of Shweta Mulchandani from IIFL Securities. Please go ahead.
Hi, Abhishek. How are you doing?
Yes, please go ahead.
Hi, sir. Thank you so much for the opportunity and congratulations on the first quarter. Sir, I just wanted to check that we have been hearing that Morbi has started getting gas supply from 1st of May, and it has been 15 days now. Just wanted to check the status of how the plants are running. Is it at any capacities operating out of Morbi? Actually, average capacity utilization of Morbi that has been, or do you expect it to increase in Q1?
Yes. You are absolutely right. From 1st of May, they have all got gas. There is enough gas being supplied to Morbi at INR 24 plus tax, which I mentioned to Sneha. The situation currently in Morbi is that whoever has started up is facing a little bit of challenge with labor. There is a major, major labor shortage in Morbi. As a result of that, as we speak today, approximately 50%-65% of Morbi is up and running, and I believe by the end of this month, the number would reach about 85%. 85% of Morbi would start running to capacity. The balance 10%-15%, I do not think will run ever. My guess is they would shut down. If they cannot run now where everybody has passed on prices, I doubt they will be able to run their plants because they are extremely inefficient.
Every time Somany Ceramics increases prices, an inefficient plant has to increase that much more, which is anyway not being absorbed by the market. If you see what is happening in Morbi has increased prices by about 30%-35%, which means that the organized players have increased prices by about 16% or 17%, because we were that much more expensive than Morbi. In percentage terms, our increase is lesser but is there. With that kind of a sharp increase, we are having trouble facing demand. Demand is weak currently, like I mentioned earlier in the call, that people are waiting. General sentiments are down, plus the labor is not there for building the tiles. Therefore, we believe that the demand will come in with a pent-up demand like we had after COVID.
It could come by this month end or in June, but it would come in because tile does not have any alternate, plus there has been a 40-day gap, which is pretty much an entire year's growth has gone off the grid, which cannot be made up. I believe Morbi, it will be a very testing time for them post-July as to whether they will be able to hold their plants running with expensive gas and piling of stock. If demand doesn't come back in June in a very, very significant way, Morbi will be in trouble. In fact, as far as we are concerned also, maybe a couple of our plants we may have to shut down due to stock. But overall, we are currently running at 100% capacity as we speak.
Okay, sir. This was very helpful. Just for the records that you are operating 100% utilization. Is this across plants in the country or is this specific to Morbi?
No, it's across the country. There are certain plants which we had taken decisions to shut down in terms of our product mix. There are a couple of SKUs which are down, which we do not consider in our. It's there as far as our capacity, but when we say 100, we're not considering that. Other than those non-value-added SKUs, everything else is running across the country at 100%.
Understood, sir. And sir, given that 75% of your capacity of 75 million sq m comes from outsourcing, and like you just mentioned that Morbi, which is troubled and it can face some challenges with demand or the price of production phase very well. Will we expect some deterioration in your volume growth in the outsourcing part as well in FY 2027, and that can be covered by your own and JV plants?
Yeah. Currently, the couple of plants which had gone down and we were not getting material, we are building up stocks there. But I don't think we would have that much of an issue because our plants are generally OEM plants, and they're OEM-ing to other large manufacturers. So chances are that they would keep running unless demand has an issue with some other geopolitical issues. But otherwise, these plants which we were facing volume issues in April because there were four or five plants which we were buying our material from, and they had no material to give us. That will come back in May in terms of material availability. But yes, we're keeping a watch. I doubt there would be that situation for the plants which are these OEM plants for large organized players.
Thank you. I'll just come back with a follow-up question. So that was our final limit of questions. This question is from the line of Rishabh Gaar from Kotak Institutional Equities. Please go ahead.
First, I wanted to congratulate you for great numbers and rock-solid balance sheets, and great job on working capital too. Now, going by your commentary, it seems that going forward, we are set for revenue growth in somewhere in the mid-20s, because if we take roughly 15% price hike and add roughly high single-digit volume growth, then that's where we reach around mid-20s kind of revenue growth. Is that understanding correct?
Yes. If the prices remain at current levels, then anywhere between 20%-25% would be the revenue growth. Obviously, if the gas prices towards the end of the year had to crash back to original levels, I can't predict that. In that case, the prices will obviously drop. If you factor that into penetration, then I don't know what it will be. As it is said, you're absolutely right.
Sir, margins should, like you already mentioned from 11.5, we can probably go to low teens kind of margin or even mid-teen kind of margin?
No. I'm talking about margin improvement from the 9.8%, 9.3% base to improve it by 150 basis points and more.
Okay. Understood. Sir, lastly, sir, the market leader has announced a share buyback of INR 300 crore. Sir, our stock is also at 2015 levels and our balance sheet is far more stronger. We are almost debt-free. Sir, don't you think it's opportune time to do a share buyback?
Unfortunately, we are consolidating some of our wholly owned subs, and therefore there is an embargo from SEBI. We cannot do a share buyback for the next six, eight months. But we will see after that as to how the war progresses. But currently, we cannot do it for that reason. Therefore, the promoters stepped in before the trading window shut to buy some stock.
Great. Thank you very much and best of luck.
Thank you. Next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi, thanks for the opportunity. Sir, would it be fair to assume in Q1 and going forward this year should be a good year for organized trade as you highlighted. Morbi is also shutting down the operation, possibly Morbi was shut, and therefore possibly the organized players should gain market share. I think going by the thesis, ideally April should have been a good month because Morbi was shut. But the commentary has been April has been a bit on the slow side. By slow you mean April the volume had declined?
April has been slow for two, three reasons. We did not get quite a large portion of our material which we normally would have bought from Morbi because those plants were shut. Our volume did not get up. That was one reason which we had no handle over. Other than that, we had a price increase of approximately 15%-17% and Morbi of 30%. Consumers take a while to absorb this kind of price increase. Thirdly, we have dumped a lot of material as an industry, not Somany, but literally as an industry a lot of material got moved to the dealers and the dealers were also cautious. They didn't want to get stuck with higher value material in case the war had to stop and the prices had to go down.
It was their fear, obviously, an unfounded fear, but there's only so much you can explain to them. They also doubled down on removing their stock. For all of these three reasons, for us it was a little bit of a growth, but it wasn't a flat month. Let's put it this way, it was like a normal April with a little bit of growth. I don't know about my competition, but we had a little bit of growth, so very happy about that.
Understood. Got it. Last question from my side. It will be fair to assume whatever price hike or some other price hike we might be seeing because of this inflationary situation, higher the hike is, higher the cost reduction is passed on. Nothing will hit our margin. That is a fair assumption? Actually, when you take a 15% price hike, possibly if you take the 15% price hike is taken care from the entire cost inflation, in a way the margin gets diluted and the percentage number may be not on a percentage basis. How can we read?
We have taken almost an entire price increase. There is obviously something which you absorb as far as projects are concerned, but if you discount the projects which is approximately a 17%-18% business for us where we have been able to pass on about 85% of the cost. But in the retail we've been able to pass on 100% of the cost.
Got it.
Thank you.
Thank you.
Next question is from the line of Nilesh Ghuge from Ananta Consys Private Limited. Please go ahead.
Thank you so much, sir, and congratulations for the good results. My question is that we have assumed with the Somany Max-
I am sorry to interrupt, but your audio is breaking in between. Could you please come another reception area and speak from there?
Yeah. Okay.
Sorry to interrupt. Continue your question.
Yeah. My question is that at Somany Max plant, have you achieved the breakeven? Is it sustainable or is it one-off whirlwind or Morbi decision that supported us?
No, in fact, in Somany Max we have achieved breakeven and if you see our inventory going up, a reasonable amount is also due to Somany Max because we produced more and we've put more material in Somany Max when we put the new press. Somany Max is clearly sustainable. Last year the entire loss of Somany Max was down by INR 6 crores from it was INR 27 crores last to last year and it went down to INR 21 crores. We believe what we had said in the beginning of the year that this loss will be under INR 10 crores or maybe a breakeven. We are yet to see that.
Sure.
Substantial improvement in Somany Max and if not next year, next year it will be in positive.
Okay. Digitalization level which is required for Somany will deliver extra margin?
To make the utilization level better in Somany Max by putting the press. Absolutely right, sir.
Sorry, sir. I did not get you.
To the utilization level, to improve, we had put in that press to make sure that we utilize Somany Max to the fullest. That is going as per plan.
Okay. Thank you so much, sir. Thank you.
Thank you. Participants, last week we requested another 10-12 questions per participant. Can we join the queue for follow-up? Next question is from the line of Anubhav Goel from Cosma Ventures. Please go ahead.
Yeah, hi, sir. Congratulations on the margins and the Somany Max plant breakeven to quarter 1. Can you say that 85% of Morbi should come back by the end of this month? So this means 85% of those 550 units which used to run on can actually be back on gas by the end of this month?
Yes.
Okay, sir. And sir, most of these units who must have made a switch from propane to gas, our pricing in Morbi will be the same versus them at INR 70+? Or it would be slightly lower?
Yes. The source is exactly the same. Everybody is getting from a single source, which is GSPC. And price movement upwards or downwards would be common to everybody.
Okay. Our price is the same. Okay, sir. Sir, for North plant, can you give some color on what is the pricing range, like you mentioned this for Morbi?
The North plant is a couple of rupees cheaper. It is about INR 4, INR 5 cheaper because we have different formulas in the North plant versus GSPC. It is largely the same. I mean, that 77, 78 will be. What is it? 74 +4% or 6%. 78 is the price for Morbi and about 73, 74 price is for the North plant.
Thank you, Anubhav. I will request you to come back. Next question is from the line of Varun Julasaria from 360 ONE Capital. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Sir, I just wanted to understand for this quarter we did a 2% volume growth, whereas our competitors, they have done a double-digit volume growth. Even some smaller competitors have also done a higher volume growth. Even our realization has not grown to their extent. I just wanted to understand what happened in our case, why we could not achieve that kind of growth.
We focused a lot of volume growth towards our non-JV partners. There was a lot of inventory lying there. I did not want them to price me at a higher price, so we focused there. Our inventory we kept for sale in April because prices were further going to go up in April, and this was material which was made at older pricing. As far as realization is concerned, I think you actually got that wrong. We have improved our realization by INR 6 over last year.
No, sir. Sir, if you just want to compare to competitors, we have grown around 0.2%, whereas they have grown around 1.8%, right? That is where I am coming from.
You mean the EBITDA margin?
Sorry?
You mean the EBITDA margin?
No, realization. Our realization.
Realization overall, it matters as to what kind of stocks you have sold, what kind of product mix you have sold. Obviously, the fact that I have sold more of my non-JVs and my outsourced material, that is obviously cheaper material. But overall, if you see in the year, I have increased my realization by INR 6 and my stock is down by about 2.5 million sq m, which is down by about 15 days over the year. It was a strategic move to sell the non-JV material first because they would have immediately priced it in April and asked me for a higher price for a material which they produced at a cheaper rate.
Okay. And sir, on the margin guidance, you mentioned around 10.8% for the next year, right? That is what you are targeting.
Yeah, four better.
Thank you. Varun, I will request you to come back. Next question is on the line of Anu Parakh from Anand Rathi. Please go ahead.
Yeah, hi. Thank you for the opportunity. I just wanted clarification as to how much price hike has been taken in tiles, sanitaryware and accessories in Q4 of 2022 and Q1 of 2023.
In tiles, since March, when this whole crisis started to now, the average price increase is around 16%-17% as far as tile is concerned. As far as sanitaryware is concerned and the bathware is concerned, put together it is approximately 8%. We had taken a price increase in bathware in February when the grass prices had moved up very significantly. That particular price increase in February was about 18%, but currently in the month of April, a blended price increase between bathware and sanitaryware is 8%.
Okay. And also, last year the [inaudible] . Can you please help us understand for [inaudible] in terms of the output volume?
I am sorry, I could not hear you very well. Can you ask that once again?
Yeah. The output sales volume last year was 27.6 million sq m. What would be the for FY 2028?
No, I am not understanding. Our total sales volume was 72 million sq m last year.
Output. Output sales volume.
What's that?
Output.
Apologies for the interrupt. Anu, can you please repeat for Abhishek, if you don't mind?
I cannot understand which sales you are.
Am I audible?
Yeah.
Am I audible? Yeah. So the outsourced sales volume.
Outsource sales.
Yeah.
From my end as to what, but as a percentage.
Okay.
Our outsource sales, sorry, 30%. Yeah, the outsource sales is 30%, but mind you, Acer and Amora are both now outsourced, which actually used to be a JV, so it's counted in outsource. But anyway, that outsource sales is about 35%-36%. But one must discount Amora and Acer, which were no longer JVs, but entire producers were bought by us.
Okay. Will it not get impacted because of the gas supply disruption in FY 2028?
No. All of those plants have started running. Except in May, all the plants have started running.
Okay. Okay, sir. Thank you so much.
It did get affected. My volume got affected in April because I did not get material in Morbi.
Okay. Okay, sir. Thank you so much.
Just to clarify, effective May 1st, all plants have started, specifically our plants where we were taking joint ventures by 15th, 16th of May, as we speak. Most of them have come online. The problem is on the gas right now. The problem for the next 10, 12 days is more about the labor. April, they were shut because they did not have the gas. May, they are slowly coming up to full capacity because of labor. So by June, it would be 100% up and running. So May also, partly we did not get material, but June onward, we will have 100% material.
Thank you very much. Next question is from the line of Pradeep, Promession Markets Securities. Please go ahead.
Hi, Karan from Promession Markets. Am I audible?
Yes.
Sir, could you give Capex and Capex payment plans for 2027?
Yeah. So our Capex is largely going to be on de-Capex and also some balancing equipment. I think there is a lot of disturbance.
Sir, sorry to interrupt. Karan, can you please mute your line from your side?
Yeah.
It would be balancing equipment. We are doing some balancing equipment in the vintage plant also to make it more value-added, so we reduce the losses there. Instead, we come into profit over there. Basically, it is going to be small investments, nothing of significance. Everything will be contained in the INR 70 crore-INR 80 crore of routine Capex and balancing equipment to make our assets more value-added for more capacity utilization. Everything for us, as of now, it seems to go in absolutely the right direction, where the JVs which were pulling me down should only keep giving me more profits and boost the bottom line and the top line.
Right. And sir, apart from the gas inflation, what type of inflation can we see for packaging, logistics for this year?
The new Labour Codes, you have seen we have taken a one-time INR 5 crore adjustment. Plus, we have also had a new labor increase in Haryana, which again, we have been able to pass on as of now. Other than that, any further increase, all the products, all the input costs which were related to natural gas has gone up. That is approximately INR 1.5, INR 1.25- INR 1.5 per square feet of input cost. Any other input cost which is related to transportation is yet to be seen because petrol, diesel just went up today. I am only pretty certain that if things do not improve, this will go up even further. But that impact is still not come, so I will not be able to quantify that impact.
Currently, the gas impact is approximately INR 5.5 to INR 6, and the other input cost is between INR 1, INR 1.5. The total increase of approximately INR 7 a sq ft is what we see. Depending on the plant, depending on the value addition, anywhere between INR 6.5 - INR 7 is the price increase in current scenario. All the prices increase
The 15%, 15% hike which we have taken covers some of that INR 7 input cost you mentioned, right?
Yes, entirely. But in projects, it is slightly lower to about 15% of our business' projects, and there we have been able to pass on about 90% of the cost.
Thank you.
Thank you.
Thank you.
Welcome.
I will have to mute mine, sorry.
You may press star and one to ask a question. Follow-up question is from the line of Anubhav Goel from Cosma Ventures. Please go ahead.
Hi, sir. Just wanted the current pricing for our south unit.
What pricing? Gas pricing?
Yes, sir.
Gas pricing current is INR 78 per standard cubic meter , but we have from next month contracted a long-term contract, so that will go down very significantly. Gas pricing could be at least a 17, 18 rupee difference. So significantly go down.
Got it. And for margins for this year, we can expect from 9.3% or 9.26% to about 10.5%, is that it?
Yeah, for 150 bps plus.
Okay, sir. Thank you, sir.
Thank you very much. If there are no further questions, I will now hand the conference over to Mr. Somany for closing remarks.
Thank you so much everyone for your time for coming for our investor presentation. I think it is quite a boon this whole scenario which has played out for the tile industry, especially for the organized sector. We are very confident these are an aberration, the war has been an aberration, but other than that, we are taking some advantage from that, but more so strategically, I think we played our part right of putting some investment in our Somany Max plant and also now in the vintage plant, plus putting some investment in our bathware and sanitaryware plant to augment that towards more value addition and better capacity utilization. I have always maintained and maintaining even now that capacity utilization is the biggest winner, and hopefully, we will be much better off as far as capacity utilization is concerned this year.
With some discipline in the market in terms of pricing, I think there is some amount of consolidation which is going to happen in the industry, which at least 10%-15% of will be not starting forever. This is very good. Any new plants coming in will be very difficult because with the current USD-rupee dollar and the current uncertainty, new plants coming in, unless otherwise it is already on route, new plants will not come for the next 18-24 months. I hope all this has a benefit towards the organized sector. Until next quarter, I would like to leave and wish you a very happy summer holidays. Thank you.
Thank you very much. On behalf of HCF Technologies Limited, we thank you for this conference. Thank you for joining us, and you may disconnect your lines. Thank you.