Good evening, ladies and gentlemen. Welcome to Somany Ceramics Limited's Q3 FY 2025 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the management's opening remarks. Should you need assistance during the call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agrawal, Head Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.
Good evening, ladies and gentlemen. It's my pleasure to welcome you on behalf of Somany Ceramics Limited and SKP Securities to this financial results conference call. We have with us Mr. Abhishek Somany, MD and CEO; Mr. Shrivatsa Somany; Mr. Sailesh Raj Kedawat, CFO; and Mr. Kumar Sunit, Head Strategy and IR. We will have the opening remarks from Mr. Somany, followed by the Q&A session. Thank you, and over to you, Mr. Somany.
Thank you. Welcome, ladies and gentlemen, to the earnings call of Q3 FY 2024-2025. As you must have seen the results by now, again, this quarter was weaker domestic demand, and it continued with the lower exports overall for the industry, not for our company, but a weaker domestic demand. However, within this domestic demand, which for the industry was negative and the export was also negative, I will come to those figures, our sales grew by 4.5% in Q3, which is better than what we did in Q1 and Q2. Operating margins were maintained at 8.4%, which is similar to the last quarter. Gross margins improved by 1.4% in Q3. Capacity utilization went up from 77% to a little above 80%.
Gas price moved up by about 4% in Q3, purely on the account of a little bit on the movement in the USD, plus a little bit on the natural gas prices on the spot. As you can see, the margins, as I mentioned, have been maintained at 8.5%. Of course, it's down from the last quarter sequential year-on-year and from 9.7%, but from the previous quarter we have been able to maintain it. As a result, PBT and PAT are also down. I will take you through the segment reporting, which is our ceramic tiles. We have done in quarter three, 34% constituted of ceramic tiles of sales. 28% was PVT. That's polished vitrified tiles. And glazed vitrified tiles, which is the sunrise segment, is 38%, exactly as per our commentary.
Last year it was 34% in Q3, and we said we will take it up to 40%. We are at about 38%, and this is continuing to grow, and it will cross 40% very soon. Bathware sales grew. We were very happy with the bathware sales, considering all other manufacturers are either flat or negative, is what we hear. Bathware sales are at about 8.5% in Q3. Capacity utilization in the bathware segment was better than the tiles. It was at 87% for Sanitware and optimum capacity for Faucets. Brand spends were maintained at 2.5% of sales. Working capital was largely maintained. We had a little bit buildup in the inventory. Whatever you see a little bit extra is on the inventory side.
The balance sheet has been under check, and we have not bought any sales; therefore, our receivables have only gone up by a day or two, which is much better than the industry but in line with our expectations. Our distribution network increased. We added 134 net dealers and 46 showrooms in the nine months, which is up to Q3. The guidance, again, is the mid- to high single digits. We do believe that quarter four should be slightly better. Like quarter three, we have seen some green shoots. EBITDA margin we will be improving or maintaining for sure, but improving a little bit depending on how much we are able to sell. Brand spend will be maintained at 2.5%. The total debt inclusive of JV has been brought down. It is now stand at INR 299 crores inclusive of working capital and term loans.
Out of this, 78% of the INR 299 crores is in two entities, which are our newest JVs, Sudha Somany, which is the south JV, which is INR 115 crores, and INR 107 crores is in the brand-new plant which started only almost just about a year ago, which is the Somany Max. Out of this, the term loan is INR 58 crores, and the current majorities are INR 41 crores, and the working capital is INR 101. We are very comfortable as far as our debt is concerned. Asset turnover to consort level is 2.3x. The Somany Max plant, I must say, is getting stabilized. We are now at 51% capacity utilization, and we are doing another launch soon in the month of March or maybe April, which should take up the capacity even further. We are very happy.
Again, here we are playing the patience game and not discounting the product. We are holding onto prices. That is how you can see that our average realization has not come off. We have seen in the industry pressures on that. We have been able to maintain this by A, not discounting much, and also by selling the more value added at a fair value. We do have an exceptional gain of INR 9.42 crores with the disinvestment of the two JVs and a capital release of INR 20 crores, which can be utilized for new strategic investments. I would like to bring to your notice that we have got out of the two JVs. This is in line with our statement earlier that we would be using our capital employed in a much better way.
One of these JVs was not a very profitable one, and that was the reason is because ceramic wall tiles are losing sheen, and it is selling less than what the capacity of this plant was. Plus also, ceramic wall tiles, because it's become so competitive, we have found better vendors in regional areas. We found a vendor in the north, and we found a vendor in the south. It was only prudent to get out of this JV so that we can source better, smarter, cheaper from regional sources, and get some profit in the bottom line. The P&L will look better by disinvesting from this JV. Although this JV will continue to be our supplier, but by releasing him from a joint venture agreement with us, he now can sell to other people, we being the largest buyer any which ways.
But then in that case, the minute he starts using a larger amount of his capacity, we will be able to also buy from him at slightly better and cheaper prices. The Acer JV was again another exit. This exit was prompted by, again, the same reasons of this particular product losing sheen, which is the normal glazed vitrified tiles. Also, this JV had come of age. We needed some investments here to renovate this plant in terms of the polishing line, et cetera. The third reason also was that one of the partners sold some stake to Millennium, to Inframat. The Millennium group partners of Acer sold to Inframat, and that also was a discomfort to us, so therefore we exited the JV. Again, this would be value accreting as far as the P&L of Somany Ceramics is concerned. Largely, I think it's been a fairly decent quarter.
Like you can see, we have not bought any sales. Our balance sheet is under check. Our free cash flows are only getting better after the buyback which we did. It's getting better slowly, and the first two quarters were very muted. Since then, it's only becoming better and better. We are looking at some other strategic investments, one of which has been announced in the board meeting this quarter, whereas we're buying a construction chemical business. So I have been talking about it, and this was a very, very small acquisition, and we're looking at this to build up our construction chemical business in various other categories other than the adhesives and the grouting business which we already have. So this would be something we're very excited of. It's early times. Let's see how we can shape up this company.
Very fortunately with this company, which we're acquiring, is in Bahadurgarh, which is literally a 10-minute drive from our existing tile facility. So that makes it easier for us to manage this entity. It comes with a sizable piece of land and building and a lot of intellectual property in terms of various different formulations. So now it's a question of strategizing with the partner and seeing how we can ramp these products up in the B2B and the B2C segment. Of course, very clearly we have a right. We will be moving up to 100% ownership of this plant in the next three to five years. So that's already agreed upon as a creeping acquisition over the next three to five years. We have 51% currently, and then we will keep moving up from 51% to 100% in the next three to five years.
Very excited about this new acquisition, which is in line with our products. It goes to the same B2B suppliers, so it is all to do with building, whether it is commercial or whether it is residential. Also, some of the products which this company makes is in line with our existing dealerships. Some of it will flow into the same dealerships, and some of it we will be contracting some other dealership, which again is very exciting times to form new alignments with trade partners. Very excited about this business. Having said that, tile remains to be our focus, sanitary ware the next focus, and construction chemicals will be the new foray. But we are doing this because it is a growing business, and also the network is kind of common, so that gives us a lot of comfort, just like when we started adhesives.
This is it, and I would now open the floor to the Q&A. Thank you so much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from Sneha Talreja from Nuvama. Please go ahead.
Thanks a lot. I appreciate it.
Sneha, we cannot hear you well. You are cutting off, please.
Is it better now?
Yes.
Yeah. Just wanted to understand demand perspective from your end. Is it higher quality and—
Sorry, Sneha, you are cutting off. Not being able to hear you.
Sir, is it better off?
Yeah.
Yeah. Just wanted to understand the demand perspective from your end. We have seen, I think, I don't know which H2, but we always hope that demand would revive in H2. But somehow we've not been seeing that. With the amount of completions that we would be seeing on ground, I just wanted to miss out. I mean, just understand where are we missing this demand in terms of.
I don't think we're missing the demands, Sneha, first of all. I think we've grown better than the industry. The Morbi industry is only in negative growth. Some of them are shut permanently. Some of them are shut for this whole month of January. I don't think we're missing demand or we are losing market share. In most areas, we are only gaining or maintaining our market share. I think that question, which is where the demand has gone, considering so many buildings have come up, we are also looking at when these buildings will start getting into completion and eagerly waiting for it. To give you some kind of a sneak peek into it, the kind of orders we have secured with the residential builders and some commercial builders in the month of December and also in January—they're very positive.
Some of them have started supplies from the month of February, March, but most of the supplies will happen in the first and second quarter onwards. There are green shoots there. But it is kind of perplexing as to why the IHB, which is the individual home buying, is being delayed and deferred because homes are being made, will have to get made. Tiles are the preferred material. Sanitary ware: there is no choice but to put a bath setting and a sanitary ware. So it is a little perplexing. I think this is a deferred purchase and there is an overall slowdown in the economy. Having said that, I think looking at other people's results in the building material space, I don't think we are worse off than them. We are only better off.
We have been able to maintain margins. Most importantly, we have been able to maintain our receivables, which means clearly that we have not got sales, or we have not sold very cheap quality materials or a cheap quality new brand or anything like that.
No, very well understood on the balance sheet part. I appreciate that effort. On the margins front, given that you also mentioned that you have secured certain orders on the project front, will it incrementally lead to any further margin dilution for us, given that we have heard leaders speaking on incremental project orders coming in, which has led to certain margin dilutions?
Not really. I do not think it is at a certain margin dilution because we have been able to maintain. I think we have slightly lower base. We have a little bit of a cushion. We have a slightly lower base on the upper-end spectrum of the tiles, which is the large format tiles, et cetera, where some other manufacturers are selling more than us, especially industry leaders. I think we have a little bit of cushion there. We are pressing the pedal there to increase that sales, and I think it should be able to compensate, and that is what is happening right now also. Yes, it is a question of what we are selling to these builders. We are not really selling the wall tiles and the standard floor tiles. We are selling GVT tiles. Here it is a question of selling at slightly cheaper prices.
If that drives my capacity utilization up, then it kind of compensates for a slightly lower margin on that particular project. My capacity utilization gives me a lot more leverage in terms of economies of scales and also more importantly, the quality of the tiles. That also improves when I increase and run the plants at full capacity. It gives me cost leverages.
Understood, sir. That was helpful. Last question, if I may ask, what would be your current mix of retail versus projects? Also, if at all you could give some sense on tier one, tier two, tier three sales for us.
Sneha, that particular mix has remained largely the same, which is 10%; 11%, up to 12% is government. I think the private sales is still at that 7%, 8%. But the kind of order which we picked up, that will increase by 2%, 3%. 2% to 3% is export. So we were always in the 77% to 80% range as far as retail is concerned. I see that coming down to 74%, 75%, wherein the 2%, 3% will get converted to the residential and the commercial private builder sale. That's what I see
Understood
In the next couple of quarters. Clearly, we are taking more orders from builders. Please be rest assured that these orders are not coming at the cost of any receivables. It may come at the cost of slightly lower pricing, but then that I just mentioned, it gets compensated by my capacity utilization.
Understood, sir. That was helpful. Thanks. Thanks a lot, and all the best.
Thank you, Sneha.
Thank you. Before we take the next question, a request to participants to please limit your questions to two per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from Utkarsh Nopany from BOB Capital Markets. Please go ahead.
Yeah. Hi, good evening, sir. My first question is regarding our tile sales volume in December quarter. If we see our own and JV tile production grew by roughly 5% on a year-over-year basis. But our own and JV tile sales volume degrew by 7% in December quarter, and at the same time, our outsourced tile sales volume grew sharply by 35%. Can you please explain the reason for the same?
Sailesh, you want to take that question, please?
Yeah, sure. There is no significant change as far as this mix is concerned. It is by and large in line with the sequential quarter-on-quarter basis. It is more like a broader change in the sourcing mix, which we have been doing of late. But otherwise, if you see Q2 and Q3, it is largely in line, wherein our own plant is giving us around 28%-29% of revenue, and close to 40% is coming from JV, which definitely will change in next quarter for sure, because two JVs we are moving out. So that number will shift from one block to another block, from JV to other OEM. For that matter, you will find next quarter OEM will be moving up, but this quarter OEM will remain around that number, 33%, 34%.
There is a movement of not more than 1% or 2% here and there.
Sorry, my question is regarding we are seeing a decrease in our own tiles manufacturing volume, our sales volume, but we are seeing a sharp growth in our outsourced tiles volume. Just wanted to know what is the rationale for that?
That is-
There's no rationale for it. I think this is correct. It's all momentary. It depends on what particular product we were making in what particular line. But the minute the demand picks up, obviously our own manufacturing will be moving close to 86%, 87% capacity utilization, and the JVs is also at the same rate. This is nothing to highlight. It's an aberration on a quarter of maybe a line being shut for some reason in the own capacity, which then seems as a lower capacity utilization or maybe a particular line which had piled up stock of a particular category of product and for that reason that got stopped. But this is an aberration. There's nothing but design. By design, very clearly our manufacturing gives us the best margins, and after that it's the JVs and then the outsourcing.
The focus will remain to line balance and make sure that our manufacturing is at optimum capacity.
Okay. And sir, my next question is on the fuel cost. If you can just help us, what would be the average fuel cost by region for December quarter and what it would be at present? Do you see any impact of sharp rupee depreciation on fuel costs going forward?
First of all, the second question first. The decrease in the devaluation of the rupee, the component which is of the foreign exchange in the gas pricing to that extent, it will move up by 1% or 2% because on a weighted average, everything is not on the dollar component. Only a part of the gas pricing is on the dollar component. That will obviously increase with the rupee going from an average of INR 85 to now closer to INR 88. But having said that, in quarter three, our pricing overall was INR 45.
Last year, same quarter was INR 44 and last full year was INR 44. So no major change. Our northern plants, the pricing was INR 43. All our western plants, including the Morbi joint ventures, were at INR 49, and the southern plant was at INR 51. So no real change as far as the pricing is concerned. This, I am quoting figures only for the natural gas pricing, not for our biomass and our coal.
Sir, lastly, I just need two data points. If you can just give us a sense, what would be the capacity utilization of our Somany Max plant in December quarter and what is the reason for-
51%, Utkarsh. I had mentioned it earlier. 51%.
Okay. What is the reason for increase in depreciation cost on a quarter-on-quarter basis?
Okay. Sailesh, you want to take that question?
Yeah. There is some accelerated depreciation we have taken on some of our equipments which we have discontinued. We are doing a line balancing in our Kassar unit. There are some old equipments which we have removed and we are putting up new equipments. There is a one-off charge which has come in this number.
Okay. The normal run rate would be INR 19 crore only going forward?
No, the normal run rate will not be INR 19 crore. It will come down because this is an incremental charge which has come in this quarter. There is some more incremental charge which may come in quarter four because we are still doing some line balancing. There are some equipments which will come out and there are some new equipments which are getting put. But the normal run would be around INR 19 crore or INR 20 crore. This quarter it has gone up by INR 3 crore, INR 4 crore rupees. I would say normalized amount of depreciation would be around INR 19, INR 20.
Twenty.
Yeah, 20 you can take.
Okay. Thank you.
Thank you.
Thank you. Next question is from Keshav Lahoti from HDFC Securities. Please go ahead.
Thank you for the opportunity. Just wanted to get a sense, as you highlighted, domestic demand has de-grown in market. Why is that only tiles sector that is de-growing, while the same trend we can see the pipes, the ply segment, the cement sector? What is missing in the tile sector or something like laminate or something gaining market shares from tiles? How should we read it?
No, nothing is gaining market share from tiles. How you read this is that if you see the branded segment, none of the branded segment has de-grown. Most of the branded segments have either grown or remained flat. It is the entire Morbi sector which has de-grown because a large part of the Morbi sector was exporting, and with exports going from last year's INR 20,000 crores, this year would be anywhere between INR 13,000 and INR 14,000 crores. That has led to added pressure with the Morbi manufacturers, and with the stocks piling up, they have had to shut a lot of their sales. Therefore, there has been a reduction in their revenue and in their production. Also, if the building, the real estate sector was the earlier question with Sneha, there is so much action with the building and why is it not translating to tiles?
I think that is also a question where a lot of these Morbi guys who do not have a very strong retail outlet, they are mostly selling to the builders, and the builders are not really buying at the same capacity that they should be buying, considering that there has been so many launches. Please be rest assured that tile is the most preferred material as far as wall and floor covering are concerned. Obviously, we do not compete with paint, which has a very high replacement market. Neither do we compete with laminate and ply because the areas of application are completely different when you talk of tiles. Tiles, the biggest competition, or another variant which one can put on the flooring would be some kind of natural stone and a very niche segment of wood. Otherwise, tiles remain to be the most preferred item.
Got it. One last question from my side. Why you have the right to win over builder? Because normally, you also get in outsourcing business, so if someone is builder might be very price sensitive that way. That way, when Morbi have a right to win over you in a builder-like-
That's why builders, if you see Morbi's domestic sale, a good 70% is builder. If you see our domestic sales, 70-plus percent is retail. That's the answer. A lot of the smaller builders are extremely price sensitive, and they clearly look at Morbi as their preferred vendor and not larger companies.
But now, as you are being the leader are indicating you are growing at a faster pace on the builder side. So what has changed? Why are builders now preferring you over Morbi? Why you are gaining market share on that side?
No. I think the larger builders or better builders across the country were never with Morbi. They were always with the branded players. But those are the builders who are on the long lead where they finish the buildings and the finishing stage has not happened. So the DLFs, the Lodhas, the Prestige Group of the world are mostly doing with the top 10 brand players.
Understood. Got it. That is helpful. Thank you.
Thank you. Next question is from Ashutosh Khetan from Asian Markets Securities. Please go ahead.
Yeah. Hi, sir. I just wanted to ask what is the total CapEx outflow for FY 2025 and FY 2026?
Could you repeat that question, please? I missed you.
Yeah. I wanted to ask that what will be the total CapEx outflow for FY 2025 and FY 2026?
Other than balancing equipment for FY 2025, which is a new INR 10 crore acquisition which we are doing, other than the normal balancing equipment, and FY 2026, as far as currently is concerned, we have no such plan for any major CapEx. But I do believe that the way our sanitary ware and bath fitting is going, we may need a small CapEx there to enhance capacity, because I think we will run out of capacity in the next 12 to 15 months. If, Shrivatsa, you want to add something there as far as sanitary ware capacity is concerned as to when you think we will run out and maybe need a small expansion?
I think, yeah. I think the sanitary ware, in both, we will need a little bit of expansion in fittings and sanitary ware because fittings we are already hitting around 5.5 crores of production every month consistently for the last two months. So we are running almost 110% capacity. So small expansions that we will be doing in machine shops and furnaces, et cetera, and on the fitting side.
By when you would require it in the next 12 months?
I would require it in the next 12 months.
We would require it in the post-12-month phase, little bit of in sanitary ware and bath fittings. Until then, there is no major expansion.
Sanitary ware the major one over the next 12 to 18 months, and definitely, this fittings we are already in the process of doing the smaller expansion.
When we have a figure of what the amount is for the expansion, it's not going to be nominal; we will let you know. But that we would be announcing or looking at that post third quarter next year.
Got it. Got it, sir. Thank you so much.
Thank you.
Thank you. Next question is from Jyoti Gupta from Nirmal Bang. Please go ahead.
Good evening, sir. Just want to know any specific reason our employee cost has gone up by 12%-13% employee cost in this quarter?
No, it is all to do with sales. We have got some new people in for new strategic initiatives, such as this particular acquisition, which we are doing. But other than that, all this will go down the minute the sales picks up. Sales has remained flat and some new people have come in, increments have happened. It is absolutely in line if we had the desired capacity utilization.
What is the kind of sales outlook, volume outlook are you actually projecting for FY 2025 and FY 2026?
FY 2025 and FY 2026, we are looking at high single digits and low double digits. But we said that even last year that we will be doing low single digits to mid. Sorry. Low double digits to mid double digits, and we have now revised it because of the neutral quarter one, quarter two. But we are hopeful with what I mentioned in the first question, where the builders which have announced their buildings and that is going to come into finishing, plus some green shoots as far as economy reviving, the new initiatives from the government towards low-income housing, and also the initiatives by the government to increase spending on infrastructure. They already had that desire but did not do it for some reason this year. All of that should spur up the economy a little bit.
With that, I am very hopeful that this would be a very high single digit or a low double digit going forward into FY 2025, FY 2026.
One more question in terms of freight, ocean freight. Have they started declining? Is the movement on the sea improving gradually?
Yes, some countries there has been a decline, but we do not export so much. For me, I am sorry to have that figure at the tip of my tongue, so it would be wrong for me to comment. I would have to get back to you, but please feel free to write to Sunit or Sailesh, and they can give you the figures exactly as to how much it has gone down by. I am sorry, I do not have it on my fingertips.
No worries. Thank you so much. Have a good day.
Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. Next question is from Amit Purohit from Elara. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, just on your split between project and retail, what could that be? Second, in the event where somehow the retail growth rates may not pick up so well, would you look to have this kind of margins or 8%-9% margin or a 10% margin? How do you think about, from a medium-term perspective, your outlook on margins?
Yes, I think this was already answered if the previous question in the call was similar, but I will repeat it. Not to worry. What I am saying is that yes, there is a little bit of a muted demand in the IHB, which is the individual home building, which is where the retail sells. My retail's secondary sale is to individual homes, you and me building a home. But the project sale is definitely increasing, and that is not at the same pricing as the retail sale. Having said that, we have so much capacity which is underutilized, and there is no cost leverage over there. We get a lot of cost benefits when we use extra capacity and optimum capacity, not only in terms of efficiencies of the working but also in terms of quality.
Whatever little the discounting will happen in the project segment, that will be compensated by my extra capacity utilization. Yes, with the capacity utilization going up and my value-added mix only improving, you can very clearly see it improving. That is why our margins have remained the same. I am very hopeful of the figures we just spoke.
Okay. No, I just wanted to know what would be the mix of project in our sales.
I'm sorry, project currently is about 10%, 11% is government, and about 8%-9% is the private projects, and 3% is our export, and the balance is retail. This will move in favor of the private builders by 2%-3%, which means the export remains the same, government will remain more or less the same. As per the builders going up, which will bring the retail down from 79% to closer to 75%.
For this quarter also, the retail sales would have been flattish, or you would say that it would have still grown in terms of volumes?
Retail sale has grown in terms of volumes.
Okay.
Because builders haven't grown, and export is not grown. So whatever has grown has come from retail only.
Okay. I thought the project business has done well, right? Or you were saying that this quarter it will be
No. It is going to start. It will start moving from next year onwards. In fact, quarter one, quarter two. We have picked up good orders, but those are all sample flags, which have gone, small little supplies, which have happened. But the bulk of the supplies, or month-on-month supplies haven't really happened.
Sure. Thank you, sir.
Thank you. Next question is from Madhur Rathi from Countercyclical Investments. Please go ahead.
Sir, thank you for the opportunity. Sir, I wanted to understand as your—
Madhur, could I request you to be a little louder, please?
Sir, am I audible right now?
Yes.
Yeah. Sir, I wanted to understand what level of capacity utilization would it take for our plants to get to that 10%-12% kind of EBITDA margin?
It's not only the plant utilization. Of course, I'll answer your question. The optimum plant utilization for any tile company is near 90%. Anywhere from 88% to 92% is the optimum capacity utilization. That does aid, but one thing is currently we've not been able to use the capacity for any kind of tile, the cheaper format or the better ones. One is to first ramp up capacity in whatever we can sell, and then it would be how we can ramp up that capacity and make it more value-added. Both those really play on margin accreditation. To make it simple, if I move at steady state, today's pricing and today's retail versus project projected sales, which is project moving up by 2% and retail going down, we'd still be able to add about the percent and a half in margins.
After that, it would be a question of how much extra margin we can get from value-added sales, combined with our efforts onto reduction of other costs.
Okay, sir. Right now we are above 80%. If in the next year, if volumes grow as expected, like high single digit to low double digit, we could achieve a 1%-1.5% in margin improvement.
Of course.
Okay. Sir, on the Somany Max plant—
I would also reiterate here. I'm sorry. I would also reiterate here that while this is happening, mind you, there will be certain advantages which are going to flow in because of the two JVs which were loss-making, which have gone off the balance sheet. That also will add a little bit to the margin.
Sir, can you quantify what will be that improvement on the margin?
I can give that to you offline. Hello?
Yes, sir.
I don't have it at the fingertips. I would give it to you offline.
Okay. That will work. Sir, just a final question on the Somany Max plant. Sir, I think, is it at a breakeven level right now, or do we still think that in a quarter we will go to the breakeven level?
I will require at least two more quarters to get to breakeven. Anyway, first quarter next year would be good. From second quarter next year, it should be at a profitable level. Not breakeven, it should be at the profitable.
Okay. And sir, at maximum capacity utilization for that Somany Max plant, sir, what could be the incremental revenue addition as well as margin can we expect from that plant?
Sunit, please correct me if I am wrong. I think that particular plant can give me INR 250 odd crore of revenue.
Yeah. Towards the north of 250, depending on the optimum capacity utilization and the product mix for which it would be manufactured.
Yeah. Currently we are half of that.
Okay, got it. Sir, margin potentially?
That would be a blended margin. I mean, there's no separate calculation for that margin. It's a blended margin, which will reflect in our consolidated results.
It would be a margin accretive to our overall.
Yes, of course, obviously. It's a value-added tile.
Okay, got it. Sir, thank you so much, and all the best.
Thank you so much.
Thank you very much. That was the last question in queue. I would now like to hand the conference back to Mr. Somany for closing comments.
Thank you so much. Looking forward to a better Q4 and looking forward to more initiatives from the government to spur up demand. The economy clearly is lagging, and we need some government spending to spur up the normal demand. It has been a good budget from looking at increasing the disposable income at the lowest level of tax bracket. Hopefully things should be looking up. Anyway, from our point of view, the buildings which are unfinished and they are getting into finishing stages would give us a better outlook. With the way the war is looking, both the wars are looking to come to some kind of a conclusion. That also will benefit the freight rates and increase the sales of exports from Morbi, which means that there will be lesser pressure in the domestic industry. Looking forward to all the positives.
We are very excited for the new acquisition. Also, we are very excited for our bathware manufacturing in Somany Max. Other than that, be rest assured that we have our eye on the ball on the balance sheet and will not let that slip, come what may. Thank you so much, and we shall be together again for the earnings call of the FY 2024-2025. Thank you so much.
Thank you very much. On behalf of SKP Securities Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.