Ladies and gentlemen, good day, and welcome to the Q3 FY22 earnings conference call of Astral Limited, hosted by Ambit Capital. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference 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. Dhruv Jain from Ambit Capital. Thank you and over to you, sir.
Thanks. Hello, everyone. Welcome to Astral's 3Q FY 2022 earnings call. From the management side today we have with us Mr. Sandeep Engineer, Managing Director, and Mr. Hiranand Savlani, the CFO of the company. Thank you and over to you, sir, for your opening remarks.
We all welcome you to the Q3 results conference call. Firstly, we wish that you and your family members are safe. As we all are passing through this third wave of COVID, which has been equally challenging, but much safer and much smoother, I can say, than the first two waves. We hope that this will be the last wave so that the businesses become more normal and the globe comes to the normal days it used to be. As it was in Mumbai, today Ahmedabad has the same effect of COVID going on. The wave is on its peak in Ahmedabad, and we hope that the same will normalize in coming few days. As you know, there are challenges of COVID across the globe and equal challenge of supply chains and disturbances created therein.
Which is affecting the prices of raw material, polymers, chemicals, which are used for our adhesives and in the plastic business. This volatility and the disturbance, we hope that would normalize in 2022. At the same time, we are challenged on running these various locations and taking care of the people at the various locations and at various offices and head offices. With all these challenges, facing the challenge and facing the time which we are going through, everyone is passing, Astral team has done a reasonably good job taking the company to a new height. As you are aware that we are working with multiple tasks in the current environment and adding new products in both categories and adding new businesses, verticals, expansions, activities across all the plants is at its peak.
Now let me take you one by one through the things which we have accomplished and the things which we are in the plan, which to be accomplished by this fiscal end and in 2022. The Bhubaneswar plant in Orissa in the east is ready, and we are just waiting for the government to give the final connection of the power. Till then, till the commercial activity starts, we have started trials of all our machines and also started to apply for the approvals with the Indian standards for the products which we are going to make there in the first and the second phase. Similarly, at the Hosur plant in the south, we had communicated that we'll start our water storage production facility.
The same has started its production and it's streamlined, and the supply of the water tanks will shortly start for the south region from our Hosur plant. Coming to the Ahmedabad Ghiloth plant. We have been talking about this valve project since long, but I would be happy to let you know that the valve project is complete and many sizes of these valves have been launched in the market and still a few more are in the pipeline to be received and we launch the new SKUs. The range and the launch will be completed before 2022, and this plant will be completely operational with many, many different sizes of valves and different qualities of valve and different applications of valve being made at this plant. Coming to the Santej plant in Ahmedabad. We have started production of blow molding tanks.
We are first making the tanks with the roto-molding technology. There are two technologies to make tanks. One is the roto-molded technology and second is the blow molded technology. We have installed our first blow molding machine and we have started manufacturing of tanks both by blow molding and the roto-molding. The blow molding technology gives advantage of faster production, better strength, equally better strength and saving of the raw material, making tanks which are used in economy range in the rural area. We were working on a special product line for the PP drainage system. The product line, Astral Drain Pro, has been successfully launched with all the sizes, all the fittings and a complete range just a week back. The product line is for the first time made in India. It is a very innovative product range.
It has many advantages. It is launched with a high-end technology, and it also gives equal price advantage to take on the conventional systems, but gives many, many advantages. The highest advantage is that it has a very high resistance, it is maintenance-free, wide insulating properties, and many other properties which we have listed down in our press note which has been put on the site. This has been successfully launched after effort of almost one and a half years. As we wanted to launch the complete range at one go, it took time, but we have a complete range which can suffice the complete requirement of the drainage plumbing by this new product line. Coming to the Rajasthan plant, we have started blow molding of tanks too in Rajasthan, apart from the roto-molding tanks made there.
The need of blow molding tank, especially in Rajasthan and north region, is very high, and we will be able to capture more market in that region with making the tanks under blow molding technology. The last quarter has been a quarter of execution and expansion activity. Now as we start to generate the revenues from the new product, we hope that we will give a better growth and a better market coverage will take place with all these new products in line. Coming to Resinova, the adhesive business. The construction of the new plant at Dahej is in full swing, and it is actually going as per schedule or little before schedule. We intend to start certain chemistry manufacture in Dahej in 2022 end.
Recently, we have launched a new solvent cement product under the name Pipe Fix brand for rural India market. This will increase our market share, expand our market, and will be more effective and would capture the rural market for Astral for the solvent cement business. We will have multiple range of solvent cement starting from the most premium one to the mediocre range to the range which can be even catered to the lower end of the markets. I would be pleased to let you know that we have recently got the accreditation of Great Place to Work by a survey which was done in our organization by the Great Place to Work Institute of India.
Astral is now one of the recognized places where the satisfaction of work and the people who work with us are greatly satisfied to be with us for long-term basis. This has helped us to increase our bandwidth of manpower, to increase our manpower strength, and to get more professionals to work for us in the company. In the sanitary and faucet business, which we have announced and we have discussed in the last con call, the team has completed the design work of the product, identified the vendors for outsourcing. We are going to launch the product, complete product line. Then we are waiting to launch at one go the complete product line in the month of May 2022.
Initially, we will be working on outsourcing model, and in parallel, we will be working on putting up our own facilities in India, which will be equally coming at a very fast pace. As you know, everyone knows that in the recent budget, a lot of emphasis has been given on the allocation of CapEx on water and housing. Inventory of the developers is also falling very sharply. This is all indicating the future is very bright for Astral products in the coming time. I would hand it over to Hiranand Savlani for the financial numbers and go into more details through the question and answer session. Thank you very much, and over to Hiranand Savlani.
Good evening, everyone. Thanks for participating in this con call.
I think before I go to the key highlights of this quarter, many of them are already Sandeep bhai has explained and communicated, but few more I will communicate. Before that, let's go to the number. Q3 number, we all know that the industry was passing through a huge degrowth in the volume. Compared to other leading players in industry, the performance of Astral was quite better, and we were just down by only 4%, while other industry players are almost in the double-digit down. Even if you see the nine-month weighted number, we are still much, much better position of 9% volume growth, and which is one of the highest in the industry in the listed player. We all know the challenges of the market in Q3, so I don't want to again repeat on all these challenges.
I can only say that thanks to CPVC demand. We were in a good shape, and because of that, our margins are still better, and our realizations are better, and per KG EBITDA margins are also equally strong. We all know that now globe is moving towards focus on the ESG requirement, and Astral is equally visioned to deliver quality product to our customer and through sustainable value creation and demonstrate ethical leadership. To continue our goal to on that direction, recently S&P Global has carried out this CSA score for all the corporates, and in which I'm very happy and proudly say that Astral score on the ESG, which was just 11 points in last year, which has increased to 38. It is a substantial jump we have taken in the ESG scoring.
Further, I can say that we were much better than the average of the industry in this segment. That is the building material category. We are equally serious about that side. Being a growing company, we always our focus will be that we should take care of all this requirement. If you see our press release in which we have given the information of ready inventory of housing, which clearly suggests that the sizable drop in the ready inventory in India, and there will be a good growth in the coming time for construction industry. That in turn will not only help our own category but across all the categories, whether it is a pipe, tank, adhesives, sanitary ware, faucet, all the products demand will increase in the coming time, which clearly indicated in the graph presented in the press release.
That graph is thanks to the operations team who have shared this data with us. The biggest positive side we see during this quarter is that we were working for many expansion projects, and I think we were repeatedly talking about the expansion activity. Sandeep has rightly said that we were active on a multiple task. That part is finished now. Majority of the expansion projects are going to end this year. All this new expansion activity, including this faucet and sanitary ware, which we are going to launch the month of May 2022, I think the revenue will start flowing from this expanded activity from the next year onward. Still, I can say we have to keep a little patience because initial journey will always be a challenging part.
The real number which we want to see, that will be FY 2024, because by that time, I think all this new product will settle down in the market, whether it is a tank, whether it is a faucet, whether it is a sanitary ware, whether it is a SWR new products, all will be matured and accepted by the market in next year. The real number will come in FY 2024. Earlier, I have also communicated to all of you that the piping stage, or maybe you can say our other product stage in the building material category in the construction phase comes very last. Once the structure of the building will be ready, then only the requirement of pipe, faucet, and sanitary ware will come.
Today, if any developer does the launching announcement, our turn will come maybe 18 months down the line. Now I think in last one or two quarters, the launches are picking up. I think still we have to wait for couple of more quarters, two to three quarters, which I communicated last time also, that we are expecting that the real demand in the construction side, ancillary products like pipes and all this category will come from second half of next year, which I have communicated earlier in my many communications on media as well as in the con call. We are continuing with that we are expecting that from second half next year onward, the demand should start picking up for all these products.
Sandeep has already clearly communicated that the recent announcement of this budget, which is the huge allocation of CapEx, which is going to support our most of the products, and particularly I can say to the Rex product, that is the infrastructure product, which was not giving us growth in last two year. We were communicating continuously in every our con call that our infrastructure business is not doing well, what we originally planned at the stage of acquisition. Now we are confident that the way government has allocated the fund, the infrastructure boom will be there in our country. All this products of Rex is going to give us a good number, and which we can see in the previous quarter also. Already some uptick has already started, but it is just, I can say, a beginning of the journey.
lot to come in the coming quarter. With this, I think I can only say before I start the Q&A session that our water tank expansion, valve, SWR, sanitary ware, faucet, all is completed now. Keep little patient. We can assure you that the FY 2024 number will be really a blockbuster number for us, and we are eagerly waiting for all product to settle down in the market. Once we will come out from all this initial fixing problems of the product, we all know that initially some problems will always be there at the launch stage. We'll sort out in this coming four quarter, and the real number will flow in FY 2024 onward. With that, thank you very much for patiently listening. Now I am opening the floor for the Q&A. Over to moderator.
Thank you very much. We will now begin the question and answer session.
The first question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.
Yeah. Hi, sir. Good evening, and congratulations for a decent set of numbers given the volatile environment. Sir, two questions. Firstly, starting with, you know, question on lower margin adhesives. Could you help understand, you know, how is the demand and pricing on the finished goods side of adhesives as well as the same on supply side and pricing of raw materials? You know, what are the trends, what you saw in third quarter and what should one expect going into Q4 in terms of revival of margins?
Basically, the prices went abruptly high of all the chemicals which we had to use to make the adhesive. The environmental scenario, competition, and plus that the price increase in adhesives is done at a lag effect because you have to have the MRP on the product line. Everyone was not moving at that pace, so we could not in last quarter pass on the complete price rise of the raw material, which has resulted in this margin issue. At the same time, as we were growing at a faster pace and we had to keep the pace with the market growth and take the decisions as per the prevailing conditions of the market where everyone acts one by one or starts acting first. We had some decisions which we had to take late, at a later stage.
If you come to this quarter, the price increases we have done have been implemented, done in the market. Product is going with an increased price. At the same time, there is support from the raw material pricing, which has softened out very fast. That increase also was very fast. That cycle of fast increase and late communication to the market because of many other issues prevailing in the market and plus the product already been committed and in the market resulted into this lower margin issue. I think I can add to this. We originally in the beginning of the year, we communicated that we are targeting to be an INR 1,000 crore company this year in the adhesive. I think that we communicated in Q4 last year. I think more or less we are on that track.
We are close to about INR 708 crore in this three quarter. If you see the run rate of last quarter also it was INR 256 crore rupee. I think we will be close to at that mark, which we originally forecasted. Margins were a little bit disappointed in this quarter. One of the reasons was our U.K. company's performance was very subdued because they unfortunately couldn't get the key raw material during this quarter. Because of that, there was a degrowth into that company. That was a very disappointing thing for us in this quarter. Because of that, their margins are also under pressure. Otherwise, I don't see any problem into the Indian operation. Because of this U.K. company, they couldn't get the silicone. Because of that and their major product is silicone.
Because of that, they were not able to fulfill the targeted numbers. Now we are confident that now they have got the material. January was excellent for them because of the pent-up demand also. I don't think we will be away from our landmark figure of INR 1,000 crore, which we originally forecasted. Margin may be little bit here and there, but our bigger picture is that we should reach a INR 1,000 crore mark. Margin may come even after one quarter also down the line, but that's okay. This year, this quarter, even the silicones are better off. $2.5 silicone went up to $7-$8 and even $9. Then now it has softened out due to various reasons. I think even U.K. is doing excellently well now.
January was great and the same thing will continue. The Indian operations also will be doing great.
Got it, sir. Thanks for the detailed answer. Secondly, sir, you know, this supply of resins in the country, right, has been creating a lot of problems and volatility. Obviously, COVID was one large reason. I just wanted to get your sense and your intel on any domestic capacities coming up for PVC and CPVC. Do you foresee that next three years this situation of short supply or demand supply mismatches continue, or you think there is, you know, some company which like Reliance or Chemplast or Birlas maybe are trying to put some manufacturing capacity which will help domestic suppliers on PVC resins as well as on CPVC resins? Any thoughts on that, please? Thank you.
See, PVC, I'm aware that everyone is working on it, and there would be new capacities coming into India, but we don't know when these capacities will be coming and when it will be operational because such communications have not been done to us directly by all the giants. Yeah, they are working on it. PVC remain volatile globally. It's not India which is only affected. You please check that this is a global phenomenon of PVC volatility. PVC volatility is something which is old, but this time it was very uncertain and very on the very high peaks. Still these volatilities will continue in PVC. As far as CPVC is concerned, as far as I know, at present only DCW is active, and the capacity is very, very, very less compared to what India needs.
New capacities plannings are there, but I don't know at what stage who is there and what stage people will be bringing in CPVC. Even if the CPVC is brought in by the plants to stabilize the product and to deliver it to the market will take its own time. As far as Astral is concerned, it has a strong hold of supply of PVC. Reliance is greatly supporting us, and we have never had a shortfall in our PVC. Rest we mitigate by imports, where also we have great support from clients. Similarly, CPVC also, Astral has strong ties with its suppliers, and it has always met the demand needed by Astral. At the same time, Astral has met the demand which has come up from its distributors and the market.
We are closely planning and closely monitoring and closely looking to the situation as far as we are concerned. As far as the production plannings in India is concerned, yes, there are, but I don't know the timeline when it will be up and running for all these products, both the volumes.
Got it, sir. Thank you so much. I'll come back in the queue. All the best for the Q4 and period ahead. Thank you.
Thank you. A reminder to the participants, please limit your questions to two per participant. The next question is from the line of Sonali Salgaonkar from Jefferies India. Please go ahead.
Sir, thank you for the opportunity. My first question is regarding the current market scenario. How do you see the trends in demand inventory? And also if you could quantify the price hikes you have taken in CPVC over the past nine months?
I think, Sonali, we are continuously taking the price rise into all, whether it is a PVC or whether CPVC. I don't have an exact number how much we have taken nine months. We can share it offline. Once this call is over, you can call me. This is a phenomenon continuously happening because PVC still there is some. Since last almost I can say one and a half months, the drop has already started. CPVC, there is no drop. It is a continuous one-way journey. If you see the PVC price rise compared to that CPVC price rise is much, much lower. We are expecting that the CPVC price to go further high from here on also. That is what indications we are getting from the suppliers also, that CPVC price will go up from here on also. Two reasons.
One is that genuinely PVC price has gone up, so raw material of the CPVC is PVC only, and chemical prices are also high. Genuinely their cost has also gone up. Secondly, there is a shortage, as Sandeep said, that there is a globally supply disturbance happening. Because of that also everyone want to make money. In both front, we are seeing that the CPVC will go up from here on also, and we are continuously taking price rise from the market. That is why you see in this nine months also we have maintained our margin what was last year. We are continuously passing on to the market. Being a leader in the market, we have to pass on this in the market, and that is what exactly we are doing.
PVC also both sides, whenever price rise is taking place, we are passing on to the market. Whenever there is a drop, we are reducing the price for the market. That that phenomenon is well accepted by the industry since many years. We don't see any challenge in that sense.
Right. Sir, in the first part of the question on the demand and the inventory, and where do you hope to see the volumes and margins growing in Q4?
Demand, I can say, is moderate. It is not yet picked up in the month of January. We are, I think, plus almost double-digit in value terms, a little higher double-digit, I can say. In volume terms, I don't have handy data on a month-to-date number, but I think it should be either flat or maybe 2, 3, 4% kind of volume growth. January beginning was weak. Secondly, everyone was expecting that the price drop to happen in PVC, so many people didn't start that thing. I think now slowly and gradually, second half of January onward, demand is picking up, and that is why we were able to grow double-digit in January also.
Yes, we are expecting that in the coming time, demand should start picking up because now I think COVID cases have started reducing and things are trying to settle down. That doesn't mean that the challenges are not there in the market. There is a huge challenges are there in the market. Nobody expected that the month of November will be washed out. October was fantastic and November all of a sudden what happened, of course, Diwali and everything becomes standstill. This kind of volatility will be there in the market. Very, very difficult to predict. We don't want to misguide anyone that we are going to do this, we are going to do that. We have to work within this kind of uncertain environment, which perhaps we have never seen in so many years of our working.
Keep fingers crossed. Things will be better only. January was good, so I think February part we will try to cover up whatever the lost volumes are there.
Right. Sir, my second question is.
I can also add here that our teams and we are doing the best efforts. I personally feel that we're able to do great in this because the teams are completely geared up with the market and distribution network. We are trying. We are our work and we are ready with the inventory part we have.
Inventory at present.
I think inventory, we are more or less on the line. We don't have an abnormal kind of inventories also, because the reason is that we, PVC, sizably we are sourcing from Reliance, so because of that, we have a reasonable inventory level. CPVC, a little higher inventory, I can say, because of this uncertain environment we kept. Overall, I think our working capital days, which is on the range of 30-31 days. In this quarter also, we are somewhere around 31-32 days only.
Understood, sir. My second question is regarding sanitary ware. If you could just give us a broad-based understanding of what are the kind of revenues, margins that you are expecting in the first couple of years post the launch, and also your overall CapEx number, including the CapEx for sanitary ware. Since you mentioned that initially you will be working on the outsourcing model, but as we advance you'll be investing in own manufacturing as well. That's it from my side.
I think that, like, lot of things are volatile here, lot of things have to be proven, lot of things are in the pipeline of getting things in order. We would be correctly telling you to give the exact picture after this quarter when we have our next call. The reason behind this delay is the COVID effect which has come in Ahmedabad. From last almost 25 days, the working in our office has been completely disturbed. I will not give you all ballpark numbers or ballpark things. I will give you a complete. I know that I have to let you, all of you know about the whole plan, and we'll let you know with the numbers in the next phone call when we have this fiscal and last quarter phone call.
We will also try to come down this time to Mumbai and have a personal thing, if possible and if COVID permits, otherwise we'll have a very extended call for it.
Got it, sir. Lastly.
Sonali, I can add here what Sandeep Engineer say, that the CapEx plan we have not still frozen out for this because we have clearly mentioned that we are going for the light CapEx model. Right now we are not going for any CapEx at this stage. Let us first launch the product, we understand the market, we understand the products properly, and afterward only we will decide what kind of CapEx we should commit. I think CapEx will take some little more time, but till that time it will be only outsourcing model, no further big commitment to that business, except there's the inventory side commitment.
Right. Sir, and what about the CPVC price hikes you took in Q3?
Q3, I think we took around 7%, roughly about 10% kind of level.
Got it, sir. That's it from my side. Thank you.
Thank you. The next question is from the line of Achal from JM Financial. Please go ahead.
Yeah. Thank you. Good evening, sir. Thank you for the opportunity. My first question was, you know, in terms of the RECs, you know, I heard your statement, you know, in terms of the allocation. We see that the allocation has gone up from INR 45,000 crores to INR 60,000 crores for the Jal Jeevan Mission. If you could help us understand, you know, out of this INR 45,000 crores, which is there for FY 2022, how much that really is attributable or allocated to or required for, you know, for these product category at the industry level? Would that be 2%, 5%, 10% or?
We don't have an authenticated data, so I think we will skip this question because we don't have numbers with us. No analyst or no one has published this kind of data, so we can comment on that. We don't have an authenticated number. See, we are not focused only on the Jal Jeevan Mission. The Rex products are not for the Jal Jeevan Mission. There may be one or two there, but maximum product will be the infrastructure side, so road construction side, railway side, port side, airport side. These are the big projects where these Rex products will move for the drainage application and the railway applications and all. I don't think it is restricted to only the Jal Jeevan Mission. There are many such projects where these Rex products are going to go.
We are expecting numbers should be much better in the coming time because across the board, I think announcement is being done by the government. Now only challenge is that how much they are going to execute. That is where the challenge is at. If they will rightly execute, then I think our numbers should be much better, I can say.
Perfect. You know, in terms of the contribution from these categories, how much would that be at present? I know it's hard to give a perfect number, but broadly if you could tell us a range, you know, how Rex contributes in terms of volume or value and, you know, any order book number you would like to share?
The volume we would not be sharing, but I can in short say that the Rex had a little slowdown in some of the months where the pandemic was high because you can understand the projects that are paused and these are drainage and sewage products, plus lot of other applications for the overhead railways and things like that, the micro projects. Last few months we have seen that things are back on track and it has been getting slowly back on track and doing much better off than when it was on the slower side. The rest we cannot share all the numbers.
Understood. The second question I had, in terms of the market share in CPVC category, would it be possible to get some sense in terms of what is our market share, at present, and how was it, let's say, three years ago?
No, we don't have idea. I think clearly, I think before we start the concall, I just received a WhatsApp message from one of the analysts. I will share that to you also that, you see, in the last four years, nine months basis, he has done the analysis, and the CAGR volume growth for Astral was 9%, and which we already published in our number, 9.7, so close to about 10% kind of growth. Compared to the other players, no one was there. A couple of players were in a negative growth, and one player was only 2%. Clear message that Astral is gaining the market share. You all know that Astral is predominantly a sizable player into CPVC market. We definitely must have go and gain the market share in CPVC.
Other way also you can see that our per kg realization is also highest in this quarter. That all indicate that we are gaining the market share in CPVC more than the other products. Our market share is continuously going up, but because of the competitive activity, we don't want to share all these numbers with you. Otherwise we can communicate clearly that we are gaining the market share.
Perfect. Just industry level, if you could, highlight how much is the CPVC tonnage, on an average annually, let's say FY 2021?
I don't have authenticated number, but it should be on a positive side only.
No, Astral numbers, sir. Tonnage in terms of, would it be about 200,000, 300,000, 500,000?
No, I don't have data. We have to stop. We don't have authenticated data. Some people are tracking from somewhere, from customs and all, but I don't have authenticated data, so I will not comment on that.
No problem, sir. Thank you so much, and wish you all the best.
Thank you.
Thank you. A reminder to the participants, please submit your questions to two per participant. The next question is from the line of Sneha Talreja from Edelweiss Securities. Please go ahead.
Good evening, sir, and congratulations on recent numbers. Sir, two questions from my end. So you started with, you know, FY 2024 will be kind of a blockbuster. We do understand you've already achieved like INR 1,000 crore turnover in your adhesives business. Almost there for this year. Could you tell us, for FY 2024 I'm not asking any near-term numbers, what are the growth rates that you're looking at each segment? Is there any new target that you have put in place for adhesives? And especially where do you see your sanitary ware and water tanks segment, you know, going?
Sneha, you know that last year we have given a broader our growth trajectory, and we have clearly mentioned in our presentation that our aim is to double the top line in next 4-5 years. I think that has already been communicated last year. Every year we cannot change in a way.
All right.
I'm telling you the long-term picture. Quarter-on-quarter will be different. Half-yearly numbers may be plus, minus. Yearly may be plus, minus. Broader picture we have already shared that we are targeting to double our top line in next 4-5 years. I'm very happy to say that in first 9 months of this year, we, our top line growth was 44%. Of course, to some extent, polymer price has played a good role, so to that extent also. We can say that we are ahead of the schedule what we have communicated. We are sticking to that number only, that we are doubling, minimum I'm telling you, doubling the revenue in next 4-5 years' time. Adhesives side, I think we have already communicated INR 1,000 crore ballpark number.
We are almost close to that level this year, and then we will give you the roadmap for INR 2,000 crore top line. How many years, that we will communicate to you in a quarterly concall. We are aiming to be a INR 2,000 crore company. How many year it will take, four year, three year, five year, I think once we will be ready with our budget for next three, five years from our team, we will communicate to you.
Sure. That clarity was better, sir. Anything touched on the sanitary ware, and the water pumps, or is it too early to talk about those segments?
I think Sandeep Engineer has already replied this question. It's too early. Let first we launch. You know, initial fitting problem is always there for any new product. Giving good number or big number is very easy to say, but practically to achieve is always a challenging. We don't want to unnecessarily misguide that we will do INR 1,000 crore or we'll do INR 500 crore or INR 100 crore first year. We don't want to give any false commitment. Let us first we launch. We have to understand first the market. Unless and until we will not understand the market, giving any number, it will be too early, and it will be too premature also. Let us wait, keep fingers crossed. Give us couple of quarters time.
We launch, we take the feedback from our channel partners, how they like our product, how they like our pricing, how logistics systems are getting settled down. Once all these things will be settled down, then only we will be in a position to do some, I can say number game. Till that time, I think whatever we will communicate to you, it all will be in air. No, no concrete base will be there on that side.
Sure. Got that, sir. Sir, just one clarity, if I may, on the inventory positioning. You definitely said that, you know, your inventory is at moderate level and, you know, channel inventory is at low level. What, how would it be, you know, spreading across CPVC and PVC? We do understand PVC inventory levels are at this point of time the lowest, but what would be in case of your CPVC-based distributor? I mean, would they have a moderate inventory or again those inventory levels are pretty low at this point because of the shortages?
I think the inventory levels are pretty low, I can say, sizably low, because everyone was expecting that the price is to drop. CPVC inventory was little better than the PVC, I can say. Because CPVC, everyone was expecting that the price drop will not be there. There the fear factor was comparatively less than the PVC player. PVC across the board, inventory was low. That is why, January was comparatively good, and February beginning has been started with robust number. I'm of the view that still inventory levels are low, so some restocking will take place in this quarter. Once the more confidence on the PVC side will be there, or maybe little upward cycle, maybe INR 1-2 price rise can take place from the Reliance side.
I think then the confidence will be more in the industry and they will start restocking very fast. Hopefully those days will come in the coming time, and then the distributor will be again back to their normal inventory. As of today, definitely the inventory levels are low. Secondly, you know, this, everyone is passing through the tough time. Dealers and distributors are also passing through tough time. They also don't want to take a risk because so much of volatility there in the system, so everybody want to be away from the inventory losses. Because of that, they are also sitting on a light inventory.
That will continue for some more time unless there will be a clear message to them that now from here on there will be no price drop, then only they will come forward and they will start picking up the quantity, volume. Till that time, we are of the view that dealer and distributor will shy away and they will keep light inventory only. Once this rising trade will again start or some negative news comes on the polymer side, then only they will start picking up the inventory. Till that time they will be light only. You can check the channel check also. Whenever we talk to our partner everybody is afraid, so they don't want to take a risk.
Okay. Yeah. Got that, sir. Thanks a lot, and all the very best.
Thank you. Thank you, Sneha.
Thank you. The next question is from the line of Kunal Lakhan from CLSA. Please go ahead.
Hi. Good evening. My question was on the volume side. The core business volume for the nine months is about 8.8% growth. Now, just wanted to understand in the context of like, you know, last year's Q4 was quite strong. You know, considering that, you know, how do you expect to end the year at? And secondly, on the follow-up, basically, you know, FY 2023 you said that the expansion will start actually showing results from FY 2024 onwards. But on the existing core business, what kind of volume growth are you expecting in FY 2023?
I think, we have already communicated that we will be maintaining our double-digit mark of volume, for next 4-5 years, that we have already communicated in our last communication, and we are still standing on that, our communication, that we will be able to maintain double-digit volume growth in the coming time. Now it looks that the real estate will start picking up, then in that case it can be higher numbers also. Till that time, I think today you see when the industry is degrowing or industry is hardly any growth, under that environment you are delivering close to double-digit mark. I think that itself is a good number according to us. Because we always internally when we sit we compare with the industry ballpark figure. What industry is growing.
If we are better than industry, then I think our team is doing good job. But if we are lower than the industry average, then there is some problem with our team. I don't think any problem will be there in the coming time. But again, I am repeatedly saying that in a business ups and downs will keep coming, so don't see the quarterly number only. Always look at the yearly number. Astral is always believing in the consistency of number, and we repeatedly telling that we are always believe in the consistency. That is what require on a yearly basis, not on a quarterly basis. Consistency will be a big challenge to us to maintain. We will maintain the consistency of this number of double-digit growth in the coming time also.
If the market sentiment will change, industry will start improving, then in that case we may deliver a better number. Till that time industry is not picking up, we will be maintaining this kind of volume only. Again, it depends on ups and downs on the polymer also. It is not only that. Polymer volatility is also equally important. If you see last year the second wave started after March. This time this second wave, third wave is going on, but fortunately people have put it aside and people are working, but still there are certain disturbances coming and going in many areas. We keep our fingers crossed that things come down after February.
The way things are going with our sales, we would be, as I earlier told that we and our teams will be working hard to do our best as possible in the month of February and March in the Q4 quarter. Things are on track, and I think they should remain on track and we keep fingers crossed that they will remain on track. We would be able to meet sustainably good numbers in this Q4.
Just to follow up on that, like, you know, I mean, how much of our demand, pipe demand comes from like, you know, direct B2B sales to developers?
These certain numbers now we are not going to come out with because of lot of competitor eyeing us on the new market initiatives or new market developments plus market share. I think we won't be letting you know about the developer sales. Regarding your question of developer, we don't directly deal with the developer. We give it to our distributor and distributor in turn send it to the developer. We don't have an authenticated number also that how much it is going to the developer, how much it is going to the small schemes or how much it is going to the retail side. Very, very difficult to bring the exact number, but we don't directly deal with the developer.
Sure, Mr. Savlani. The reason I was asking was that, you know, you mentioned in your opening comments that, you know, the housing sales have been good, but largely it's been driven by, you know, reducing inventory levels and the new launch cycle has just started, which will start reflecting in the pipes demand about 18 weeks later.
We have basically two types of distributors. Certain distributors are project suppliers, and from their growth, we can come to know that the supply in the project and to the direct industry is picking up. We also go and market. We have a team who does retail and projects. We do a benchmarking. To give out an exact number and give out the bifurcation would be something which is not handy one. Secondly, we have certain distributors who are dealer-focused, so from their sales we come to know that the dealer network and its strength is increasing. Going directly to the suppliers, to the builders or the dealers, which we don't do, we do it through a chain of distributors.
We keep a tab on their numbers, where we come to know how the things are reacting in the dealer network chain and in the builders. We and our teams also equally keep a tab on it and try to get, convert, and work on various projects with the builders and with the contractors.
Sure. That's helpful. Just, I want to clarify.
Mr. Savlani, so sorry to interrupt, but for any follow-up may we request you to rejoin the queue, please.
Okay, bye.
A reminder to the participants, please limit your questions to two per participant. For any follow-up, may we request you to rejoin the queue. The next question is from the line of Rishab Bothra from Anand Rathi. Please go ahead.
Yeah. On the question of good set of number and continuing the margin contraction. My question is, since one of the analysts already stated that FY 2024 would be a robust year, I would like to know which segment would you like to highlight that will contribute maximum in this growth oriented year?
Can you repeat your question? I was not able to hear.
Twenty...
24, you say that, but I couldn't get the complete question. Can you repeat question?
Yeah. What I'm trying to ask is, in FY 2024 seems to be a good year, a robust year because of all expansion coming on stream in FY 2023. Which segment according to you will drive the growth maximum?
I think all the segments. All the segment will drive the good growth. Whether it is a pipe, whether it is a infra, whether it's a tank, whether it's a sanitary ware and faucet, where the base will be very low. I think across the board we are expecting to deliver great number.
Okay.
I think the adhesive business also equally would be at a good size and level in next one and a half years. The visibility, the creation of the market would be even better. I think most of you must have seen the new initiative and the campaign we are running in adhesive. The new Bondtite PRO, which has been launched, it is the first of its type of the product launched globally actually, let me tell you. This chemistry has been globally launched for the first time in epoxy adhesives, and we have a campaign running. I think most of you must have seen the campaign. I am sure you must have seen the Bondtite ad, which is already on air right now. It is going on many channels.
Okay. Secondly, sir, what I was trying to come to know is since we are almost across all categories in the space in terms of finished products, is there anything left out which we are eyeing for going forward once these new capacities are stabilized? Or are we trying to backward integrate in order to secure raw material availability? Is there a backward integration process in mind, PVC resin?
In our adhesive chemistry, some of the chemistries when we come online in the Dahej plant, we would be going into some chemistry a little backward integration. I cannot say complete backward integration.
Okay. Not for PVC resin as of now?
No. No way PVC resin.
Sir, what kind of quantum of debts can we pay off in FY 2024?
There is no debt on the balance sheet.
Oh, sorry.
We don't have any. Negligible, maybe INR 30 crore-INR 40 crore debt will be there.
All expansion are internal accrual funded, right?
Yes, yes. All will be from internal accrual.
What kind of CapEx?
Actually, you know, major chunk of the expansion is complete, going to complete this year.
What-
We said that many are already. Next year will be some expansion, maybe Resinova plant at Dahej and maybe some more may little bit come. Otherwise sizable expansion we are going to complete this year and little bit whatever left out is there till next year. We have enough cash available with us. Plus we are generating a sizable cash flow every month, so I don't see we need any money. On the contrary, there will be a problem of where to utilize this cash flow.
That is what I was coming to. Since cash flows, FCF will be significantly large once all these capacities become operational. Utilization of the available free cash, I was coming to that only. If you could throw some light to the investors as to the utilization of the,
Like, you know, even today also we are sitting on INR 300+ crore cash, in spite of so much of inflation in the, you can say the raw material side, whether it is the LAC or whether it is the pipe raw material. Across the board, inflation is there. After providing this inflationary inventory also, we are sitting on INR 300 crore of cash. Definitely we don't need that much of cash. Because of this COVID situation, the board is of the view that let the situation settle down, then we can communicate to the investor at large that what we are going to plan for this additional cash, what is existing available with us and what is going to be generated next year.
Based on that, we will communicate whether we are going to increase the dividend payout ratio, whether we are going to take the buyback route or whatever. We will communicate the disposal plan. Plus, I can say that we are having a expansion plan on hand with us, like faucet is there, sanitary ware is there. How much we are going to provide for that also. Plus we are working on a few more product categories also. With the time only we will be able to communicate. Right now because of COVID, we are not disposing of the cash. Next year definitely we will communicate the plan.
Sure, sir.
We have already taken new product lines, and at some point we will have revenues where to invest, and we will be rightfully investing this money for the expansion of new segments in the construction, in this field of industry.
Okay, sir. Got it. I'll come back in the queue. More questions are there. Lastly, just one minute. I'll come back in queue. Last one. Can you quantify the impact of business loss owing to COVID and the income tax charge? I guess one week was completely lost out on the corporate office side. If you could mention that, and I'll come back in queue.
What, what? Can you repeat question?
Sir, can you quantify the business loss on account of the COVID impact in Q-?
No, no. Very difficult to work out that number because some loss will be there, some pent-up demand will be there. Very difficult to identify how much is because of the COVID or maybe some other reason. At least I will not be in a position to work out exactly.
COVID everyone had faced the same way, so there's no need to quantify this at all. Okay. Sir, lastly on any update on the income tax side?
Sorry to interrupt, Mr. Bothra. Please complete the sentence.
I think income tax, income tax side, we have already given the clarification on the stock exchange website. That is what exactly communication from our side. They carried out the search and it was our responsibility, our duty you can say, to support the department, whatever they have a questions in their mind, we have clarified everything to them. As of today, there is no liability being created or anything on us. If in future any liability will come, we will be the most vocal company to communicate to you because this is the process. Department will take its own time to work out. As of today, we don't see any liability they have identified and communicated to us. We have clarified everything they asked. Let's wait for the time because their process is very lengthy.
Let them to complete the process and we will communicate to that if any. As of today, absolutely nil liability.
One thing I'll tell you is that we did not lose one day of production or one day of sales.
Thank you. A reminder to the participants, please limit your questions to two per participant. The next question is from the line of Madhav Marda from Fidelity. Please go ahead.
Yes. Hi, sir. Good evening. Thanks again for your time. I just had one question that is, on the sanitary ware faucets business, once we started in FY 2023, do we plan to use the same Astral brand or do we plan to have a different branding strategy considering it's a different line of product which is used in a different part in the house? Or do we plan to go with the same branding? Thank you.
Let me launch in May, you will come to know. At this stage, I think it is too early. We are working on that. I think once the launch party will be there, at that time we will communicate to everyone.
Got it. Great. Thank you.
Thank you. The next question is from the line of Rajesh Ravi from HDFC Securities. Please go ahead.
Yeah. Hi, sir. My question pertains to the industry resins supply growth on the CPVC and the PVC. Could you throw some light on upcoming any big domestic capacity expansions which could improve supply for the resins across both the business segment, reducing volatility? Anything which you are aware of?
This question, somebody had asked, I think you were there.
Okay. Maybe I have a mistake.
I think Sandeep has already replied that.
Clarified in detail on this.
Few PVC players have done the announcement, but very difficult to know exact date when they are going to come. Definitely India is adding the capacity of PVC and that too also a sizable capacity. CPVC side also capacity addition being announced, but as of today, we don't know exactly when they are going to come. Yes, both the polymer capacity addition work is going on in the country.
Okay. January month, any price hike which have been taken across both the segments or any price correction in any of the resin price fall in PVC?
No. I think PVC side on the contrary, January there was a reduction.
Correct. Even pipes prices have come down?
Yeah, definitely. It's a market phenomenon.
Right, right. Correct.
Whenever there is an increase, we pass on, and whenever there is a decrease, we also pass on to that also.
Sure, sure.
We will see continuous price rises happening.
Okay. We hear from other players that CPVC demand is quite strong while PVC went down significantly. Is the trend similar for you too?
Yes, definitely. That is the right understanding you have got. That because the polymer price of PVC is very high, so gap between CPVC and PVC was earlier wider, now it has come down to narrow. Because of that, CPVC demand is increasing, and that is what we are seeing on the ground. That is what advantage we are taking being a larger player in the CPVC side. We are taking the highest advantage of that.
Okay. Any, could you broadly guide that how much would be your non-agri portfolio or maybe the building material portfolio in your question of total revenue ballpark number?
We don't share all this internal data. We have stopped sharing since last 3-4 years.
Mm-hmm. Mm-hmm. In the adhesive segment, now that things have improved, you mentioned that, you know, the issue which was there. Can we expect the margins to rebound to, you know, the preceding quarters?
Yeah, it will definitely should rebound, but the problem is that whatever we pass on, and then again the chemical price goes up.
Mm-hmm, mm-hmm.
Because of that, there is continuous pressure on the chemical side.
Okay.
Because of that, once it will start stabilizing or little bit reduction trade will start, then you will see that will be to the upside in the margin. Till that time, I think, margin will be always under stress. As I communicated that because of the U.K., some loss in the sales because of non-availability of raw material, that has also given us the pressure on the margin.
Okay.
Hopefully it will ease out in the coming quarter.
Okay. Great, sir. I'll come back in queue. Thank you.
Thank you. Next question is from the line of Ravi Mehta from Deep Financial. Please go ahead.
Yeah, hi. Just wanted to understand whether you were little opportunistic in the pipe segment like you were in the second quarter. Like, for volumes, you might have kept prices little behind.
On what ground you can say this thing? I don't think so.
No, no, I mean, you shared that you were little opportunistic in Q2 . Looking at your volume, you've done actually very well vis-à-vis the industry.
I never talked about the price. Ravi ji, we talked about the adhesive on this thing to take the growth opportunity. That also the pipe price pass-on was not because of any opportunity. The chemicals skyrocketed, and it takes time in adhesive to pass because it's a MRP-based product, so you cannot just overnight play the MRP and make it come down. Yeah, we have never talked about price points of PVC.
One more question is on the branding. You shared about getting into blow molding, water tanks, which is at the low end of the market. You also shared about getting into lower end of solvent cement to cover the product portfolio. Just wanted to understand how would you be positioning and branding these lower end of the products. Will it be brand dilutive? What are your thoughts on this?
It won't be dilutive. Everyone does this. It's not an exception of dilution anyway. There are certain product line which is a high-end because of the technology of US, and we pay lot of certain premium or royalties are on. We have a certain product line which we made, it's not a low-end, but it's a mediocre price in parity with the price is prevailing by the competitors, and it would be more going to the rural market of the smaller cities and even the bigger cities. It's not going to dilute the brand in any way. It is not going to hurt the brand in any way. Astral doesn't make any proper product which is either sold in any local corner of India which is not as per the standards. That is our first priority.
Some products again are above standard, which we will get more cost, and this is also made with all the technology but on par with the standards.
Okay. Very little overlap with these products at the same outlet you see, because their target audience is different, so.
No, no, target audience will be different. It will not be on same outlet. See, basically in all adhesives if you go, Fevicol also has seven variants or even more.
Sure, sure.
This is very, very prevalent way of getting into this. Even if you go in more adhesives, all the companies have various varieties.
Sure, sure. Okay. Thank you. Good luck.
Thanks. Thank you.
Thank you. The next question is from the line of Karan Bhatelia from Asian Markets Securities. Please go ahead.
Hi, sir. Thank you for the opportunity. Like you mentioned that, you know, we are bullish on our wall project and also our PP SWR drainage pipes. Just wanted to understand the total addressable market and, you know, what market share are we targeting in the medium to long term?
Give us one quarter and we'll let you know. It's just launched a week back.
Right. Last thing from my end. Sir, we keep hearing from the channel partners that, you know, many plastic companies have given commissions and discounts in the month of November and December when the PVC prices were volatile. So all these schemes and all that is still applicable in January, February, or all that is done and dusted?
What I don't understand, one more question. Let me reply. I think you will never ever hear these kind of argument or maybe comment from the channel partner about the Astral brand. There may be many brands in the market who are doing all this activity. Astral never ever do this kind of activity to give absurd discounts in the market. We always believe in consistency, and we will never do all this kind. We are a brand. We don't want to compare with the other players, so we will never, ever do this kind of activity. I request you, please check from the market. Astral has never, ever done in the past.
Correct. Thank you, sir. That was helpful.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi. Thank you for the opportunity. Sandeep, I have one question for you. Over last two years, we have launched several products. Can you highlight which were the key ones which are actually doing pretty well in the marketplace? Second is there will be products which are actually moving slow, as compared to what we would have desired.
Ritesh, your voice was very, very. I request you to speak loudly and repeat because half of the time I could not listen clearly.
Right. I'll repeat it, Sandeep Engineer. My question is, it's becoming increasingly difficult to appreciate what Astral does, given we have been launching several products across different categories. For an outsider, for any analyst, to appreciate what Astral is doing, it's becoming difficult. My question was, which are the products that you have launched in last two years? If you can give some indication on how the ramp up has been, that would be very useful. Any specific products where you think that the ramp up has been less than desired, and any specific reasons for that would be quite useful.
Basically, let me start with we were the first one to bring the low noise systems, not two years, but a few more years back. Today, we are doing excellently well and accepted. Everyone follows what Astral is doing. If you go with the industry and if you understand the innovations and creation of market is what Astral does. There are so many players from years. They say we have history of generations in this business. If you go and ask them what has been created, what technologies have been brought, what things have been done to create this infrastructure market and to modernize the infrastructure market of India has been the prerogative. I cannot say that, we are the guys, we have done it, but we have done it. We have brought products right from CPVC.
Astral has been a benchmark of innovations, and we continue. We bring products with lot of study. We don't just bring products for the sake of a medal we want to carry. Now, our low noise product is growing substantially fast and is doing excellently well. Our CPVC, aluminum CPVC product relaunch has been done a few months back. It has started doing excellently well for us. Now we have brought in valves, the latest valve technology. The valves can be used in India, and export market is huge for valves. Nobody in India actually exports valves globally also. Astral has now the capability and the quality to export.
Similarly, if you go now the PP drainage system which we just launched, I tell you, in no time you will see 10 PP drainage systems and selling better than Astral or competing with Astral, giving a product which is inferior to Astral, only banking on the pricing. We as a technology player go into the product, study the market, study the competition, study the pricing. I know India will not accept any product which is going to be so premium and have too many advantages. If they are using a CPVC SWR, they will not pay me more than PVC SWR. I have to keep first thing in mind is pricing and then the product, then the technology, and then go for the launch. We, whatever products we have brought in have succeeded and are doing well.
We have not ever gone back foot in any of the product lines which are we in, because lot of homework we personally do as a family involvement from both of my sons, as our team involvement, plus involvement of Hiranand Savlani, who is now more of. We have too much homework before we launch a product. If you see the initiatives which Astral has taken has been always followed by leaders who are from India from years and years. These innovations and initiatives will continue. CPVC aluminum is also going to be a great product in the future for plumbing. It is a product which is the best available product globally for plumbing, and we have already started it exports also. These are all new products.
If you want a greater presentation, I think next time if it is in person, we'll do a greater presentation on the new product lines grown in last 2-5 years and how they have grown and how we have ramped up these product lines.
Absolutely no doubt on the commitment that what the company is doing. Just a follow-up question. When you say that these products have been successful, is there a financial metric that you look at like it clocks INR 100 crore in 3 years? Is that how you put it under successful category?
Take it how much it can grow in 2-3 years, you are correct. That has to be the first initiative. How we cover our expenses has to be the second initiative. Third, I look at the global horizons where Astral India is lacking and what India would need as its construction industry modernizes and has more buildings, especially 20- to 40-story, and we need a better product to serve this country. When the infrastructure is growing so fast, when the multi-story are coming up, you need better products to serve this country. You need to have these products in mind. Ritesh, you know, this conceptual marketing for new products always take time. Sometimes you may feel that we may be having INR 100 crore mark in next 3-4 years, but sometimes it doesn't materialize also.
It may take 6 years also. Sometimes it may take 5 years. Conceptually, we have to see that whether the people like the product, what technology we have brought with the car, whether people like this technology, they accept it. Sale may not grow immediately. Sometimes it may take time also. If the product is good, people like the product, I think one day sale has to come. There is no reason that sales will not come. Now, CPVC aluminum, Sandeep rightly said that we have started exporting that product and now we have got the repeat order also for the export. These things will sometime take its own time. If the product is good, we don't bother about the run rate, what we are getting in first 2, 3 years or 4 years.
We are not here for 2, 3 years or 5 years. We are thinking for 10, 20 years. I don't think a INR 100 crore mark or INR 50 crore mark is a success or failure. No. We never evaluate the product from that point of view. We only see that customers should like, users should like this product. That is more important for us rather than only number game. Number game has to come. Ultimately, if the product is good, people like the product, right pricing is there, number will come. Ritesh, in short, I would just summarize that 1998 to 2004, it took me to just reach INR 14 crores in CPVC. I was targeted by all these big companies who are now talking in CPVC that this is never going to succeed in India.
Today, you let me know one big company who are talking about CPVC. This cannot be repeated now being a public company and with all the responsibilities. Yeah, the vision of every product we bring is very, very clear in our minds. The target audience, the market we have to address and not cannibalize any of our product line is also equally for us important.
Sir, that's very encouraging. I wish you good luck and look forward to.
Thank you, Ritesh. Thank you.
Thank you.
Thank you. Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. Over to you, sir.
Thank you everyone and thanks for joining this call and again we look forward to seeing you or joining through the call after our Q4 results and the fiscal ended results. India, take care, be safe, be healthy, and we wish you a healthy life against fighting against this COVID virus which is very strong at present. More strong in Mumbai, but now everyone is safe. Thanks to you all about it. Thank you. Thank you everyone for participating this con call and thanks to Ambit team for hosting this con call. We know that Astral made a lot of work in this past so many quarters.
Once this COVID situation will normalize, we are planning to have a plant visit, maybe in Q1, so that by that time you can see all our sanitary ware, faucet, our new launches of SWR, CPVC, aluminum, a lot of things we have done in this last six, seven quarter. All these things we are going to showcase to all of you, maybe in Q1 if the situation will permit and hopefully it looks that now this should be the fourth, the last wave and we all will be coming back to the rosy days what we were having earlier. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Ambit Capital, that concludes this conference. We thank you all for joining us. You may now disconnect your lines.