Ladies and gentlemen, good day, and welcome to the Greenpanel Industries Q1 FY 2026 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 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. Rishabh Brar, CDR India. Thank you, and over to you, sir.
Good day, everyone, and thank you for joining us on Greenpanel Industries Limited's Q1 FY 2026 earnings conference call. We have with us today Mr. Shobhan Mittal, the Managing Director, Mr. V. Venkatramani, President Finance, and Mr. Himanshu Jindal, CFO. Before we begin, I would like to state that some statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the result presentation that was sent to you earlier. I would now like to invite Mr. Shobhan Mittal to begin the proceedings of the call. Over to you, sir.
Thank you, Rishabh. Good afternoon, ladies and gentlemen, and welcome to our Q1 FY 2026 earnings call. While sequentially our domestic MDF volumes grew by 2% versus Q4 FY 2025, there was a degrowth of 8.5% versus Q1 of last year, largely due to the discontinuation of 37,000 cubic meters of commercial-grade MDF sales post-implementation of BIS QCOs. Excluding this, domestic sales grew by 47% on a like-for-like basis. On the domestic front, though demand continues to be robust, growing at a lower to mid-double-digit CAGR, the recent bunching up of capacity additions led to price and credit aggression by players to quickly gain relative market share, impacting volume growth. The excessive buildup of inventories at the channel, both domestic and imported, before implementation of BIS are yet to be fully liquidated, is also another reason for a less-than-expected volume growth in Q1.
On the exports front, our volumes were almost flat sequentially but degrew by 40% year-on-year. Obviously, exports have been more of an opportunistic play for us, and we have been taking conscious calls based on possible volumes versus margin play. The recent geopolitical situation, especially in the Middle East, also disrupted movements, impacting volume growth. Plywood sales are yet to stabilize, although we've already taken steps to improve synergies with our existing MDF business, both in markets as well as on cost. This will take a bit more time, but we're confident of a revival over the next few quarters. Our domestic realizations, both for MDF and also plywood, remain flat year-on-year, while the MDF export realizations improved by 7%. As a consequence, our MDF revenues degrew by 12% versus last year, and our plywood revenues were lower by 3% as well.
Consolidated revenues from both segments being INR 323 crores in Q1. On the operations front, we were able to stabilize the new thin panel plant at Andhra Pradesh. This, though, came with the initial hiccups and cost inefficiencies impacting margins and should get normalized from Q2 onwards. Timber prices are on course correction already and were lower by 7% sequentially, leading to an improvement of 2.5% on gross margins. Consolidated gross margins being 47% for Q1. Consolidated operating EBITDA, excluding the impact of currency movement on the EUR borrowing for the new plant, was INR 13 crores, or 4% of revenues. MDF at 4.4% and plywood at 0.6%. On the industry front, the tailwinds for the sector are becoming more and more visible now with each passing month. Some very clear green shoots which should play out over the short to medium term being for the expected reduction in timber prices.
No further meaningful capacity reduction in the sector. Slowing down of MDF imports, run rate for Q1 already being 1,000 to 1,500 cubic meters versus recent historical highs of 15,000 cubic meters per month. Lastly, the play of BIS norms and stricter implementation of these covering the smaller domestic players from September onwards, apart from the QCO expected on furniture next year. Moving ahead to facilitate sales, apart from some of the more visible actions we took recently, example, the change of sales lead and convergence of ply and MDF sales team to complement product offerings to the channel, we simultaneously continue on our quest to strengthen our branding presence and channel connect.
In Q1, we rewarded 150 top-performing channel partners at Bali, Indonesia, reinforced ambitions to scale up via our annual sales conference, re-strengthened our in-shop branding across 2,000 dealers and sub-dealers, ran HDWR campaigns both physically and also digitally, launched thin MDF and HDWR doors, and also revamped a loyalty program app for a more seamless experience for our partners and the associated carpenter fraternity. This should help improve our connect and savings of our products going forward. To summarize, while Q1 was fraught with a few expected exceptions, some clearly beyond our control, example, FX movements, and while there are still challenges, especially on the pricing for now, our renewed focus will be to recoup lost volumes and regain market share going forward over the next nine months.
Our aim is to counter pricing pressure through expected reduction in both raw material and other variable costs, as well as fixed cost optimizations and operating leverage by increasing volumes. With this, I request our CFO, Himanshu Jindal, for the financial and other updates. Over to you, Himanshu.
Thank you, Shobhan. Good afternoon, all. Since we've already covered revenues along with the underlying details and volumes and realizations, let me briefly give you more details on the exceptions impacting Q1, and along with the balance sheet aspects for the quarter. On the exceptions which impacted Q1 results, the first one was the impact of adverse currency movement, the EUR-INR. The forex loss on euro borrowings, which is the ECB, being INR 27.6 crores, and on CapEx, there's another INR 2 crores. Almost INR 26.5 crores of this is unrealized, which is nominal mark-to-market, non-cash. The second piece was initial stabilization of the new thin panel plant, which Shobhan already talked about, which is what led to a higher consumption, largely on power and fuel. This impacted margins by another 3% versus the last fiscal.
Apart from these, there was also the first-time capitalization of the new plant, which was absent last year, obviously, which is what resulted in a higher interest and depreciation expense of INR 10 crores. Counting these in, the reported EBITDA was negative INR 12.4 crores, the PBT was negative INR 47.4 crores, and the PAT was negative INR 34.6 crores. On the balance sheet front, our working capital requirements did increase mildly, as expected, given the new MDF plant coming into operation March and last fiscal. The core cash conversion cycle expanded by 11 days to 47 in Q1. Our gross debt at June end was INR 386 crores, bulk of which is for the new plant at AP, which is almost at par with the March figures despite repayment of the scheduled tranches in Q1 due to the unrealized FX loss on the euro-denominated borrowings.
Considering the cash and bank balances at year-end on hand, the net debt was INR 233 crores, and there was zero utilization of our funded working capital facilities, implying a comfortable leverage and liquidity position and thus financial strength for the company. On that positive note, I think we can open the Q&A please.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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 a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. Sir, as we know, possibly Q1 should have not been how possibly we might have expected earlier. So what sort of will there be any curtailment in guidance on the volume and on the margin side? What you have guided earlier?
Yeah. So no, we are not changing anything on the guidance side in terms of volume or margins at this point of time. As mentioned earlier as well, there is pricing pressure in the market, but we're going to counter that with cost savings both on the variable and fixed side as well as operating leverage. And as of now, we want to maintain our guidance for the volume as well as our margins.
Understood. But still, so this implies that you need to sort of achieve a big growth on the later nine months. So will that mean you will be more possibly aggressive on the pricing side? And what sort of price cut you have taken in the last few months?
So there have been schemes already in place from July. And as a company, we are very comfortable with our balance sheet at this point of time. So now the focus of the company is strongly going to be on recouping the market share that we have lost and on the growth side. So yes, pricing pressure will be there. We will work strongly to negate that with optimization of cost and leveraging our volumes. And that's our expectation at this point of time.
Got it. What sort of schemes have you given in July? And secondly, possibly as the new plants came up for you, normally players take and give higher discount in the market. So will Greenpanel follow a similar practice?
So sorry, can you repeat the last part of your question? I didn't catch it.
So as I was saying, right now your new plants came up, so the capacity utilization is low. Normally what happens, players practice giving higher discount than other players in the market to gain market share. So your commentary is more aggressive on the growth side. So will Greenpanel follow a similar strategy?
So we are monitoring market and geographies very closely. The new plant is catering to a certain segment of the market as well. Sorry, there is some disturbance. The new plant is also catering to a certain segment of the market where pricing is slightly different than the retail market because thin panel is going into a different segment of consumption. So we're responding accordingly how each segment and each geography is playing out and accordingly tailoring our schemes to that.
Okay. Got it. Understood. I'll come back. Thank you. Thank you.
So there'll be a dynamic approach. There won't be a sort of blanket kind of scheme. There will be a dynamic approach to how we address schemes in different product segments and different markets looking at the competition.
Look, we give any quote, any number, what is the average scheme you have given a discount in July month? What would be average?
In July, I think, I mean, on an average basis, I would say it could be somewhere around about 3 odd %.
Got it. Okay. I'll possibly ask you one more question. So what is happening? Earlier you used to sell commercial-grade MDF, which you have stopped now. So a big shrink is coming on that side. So how are you handling that part? Possibly, that dealer you're not able to regain and possibly convert that to more quality MDF, better get it from Greenpanel?
No. So what we have noticed is that we've been able to convert a lot of that volume into our standard industrial grade because commercial grade was basically competing with industrial grade or the cheaper industrial grade from unorganized segment. So we've been able to convert those volumes into our industrial grade sales. I'd say not entirely, but the majority of it has already been done so.
Got it. Got it. So was that done in Q1 because you're speaking?
Sorry to interrupt.
Operator: Sorry to interrupt. Mr. Keshav? Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. I'll just pick up from the prior question. Sir, if one had to understand the market sizing, what historically we have indicated is around 2.4-2.6 million CBM at the country level. What part of this would be commercial grade? The reason to ask this question is it's a sizable knock-on volume that we are taking, but you indicate around 37,000 foregone. So just trying to understand the market landscape, and I'll just take a pause over there.
Actually, there is no, I would say, that the commercial grade was an offering on our part. It falls in the industrial category only. It was an offering on Greenpanel's part to be able to compete with the imported segment and the unorganized segment. So there is no commercial grade segment per se. It was, let's say, a more competitively priced product with some cost savings in terms of volume, sorry, in terms of density and glue consumption to be able to compete with that. But this category falls in the industrial segment. And in today's market, I would say the industrial category would still account for about 60%-70% of the total market size.
To just add to what Shobhan said, there was a lot of inventory lying with our channel partners from imports, which happened before the implementation of BIS, and also from unorganized companies, the smaller MSMEs to which BIS implementation will be effective from August. I would say that we were not able to convert our entire commercial grade to the industrial category. Possibly the balance conversion will happen during quarter two.
Great. Thank you. Thank you, Venkat Sir. Thank you, Shobhanji. But just a follow-up question over here. I understand the price point of MDF. Basically, we want to be competitive, but it honestly perplexes me when we say that it is because of BIS, the volumes have fallen. How should one read into it? Is it about price point, or is it about quality? Because the production should go, price point was always correct. Or is it like the market is undercutting us significantly, specifically for the unorganized space? That is where our volumes are actually taking a knock.
I'm not saying that because of BIS, volumes have fallen. We had a certain segment of voluminous sales coming to us from the commercial grade in anticipation of BIS and for complying with BIS because I had to be fully compliant with BIS from February onwards. We removed that segment offering from our portfolio, which was helping us compete with the imported as well as the unorganized segment, both in terms of quality and in terms of price competitiveness. As Mr. Venkatramani is saying, now that we see that imports getting more and more diminished and the volumes disappearing from the market, even the inventories disappearing from the market, it provides us with an opportunity to now go with our industrial segment and convert that even further so because that category of material is becoming lesser available in the market. Imports have gone out of the picture.
So even our OEM customer.
Yeah. Sir, sorry. So what we are saying is we had certain non-BIS portfolio, which was there. Would you draw a parallel for the other industrial player, other peers at the listed companies in the space? Will they have a similar problem to what we had, or is it something which is specific to Greenpanel?
No. The commercial-grade offering was specific to us.
Okay. I will explain that further.
Since the commercial grade was primarily going into the OEM segment and a large number of OEMs are based out of South India, it was not really applicable to players operating in North India specifically. So North players would not have been impacted by that because most of the OEMs are operating out of South India.
Correct. And sir, Shobhan, you just touched upon this. Sorry to dig in a little more. You indicated that we will move from commercial to industrial. So is the market ready for that? Is there appetite for that? And if you could highlight, what is the differential? Is it like INR 10,000?
Non-commercial is industrial. And of course, the largest segment of the market is industrial.
Correct. So what is the differential to standard non-commercial?
Well, yes, absolutely. Because.
Go ahead.
Ritesh, Ritesh, I'll just add to what Shobhanji and Venkatji just mentioned. I think please try and understand this as a product offering that we had to compete against unorganized players or imports. Yeah? That category was not applicable for the others in the industry. Why? Because obviously a lot of entrants came in very recently, last two, three years in the organized space. Yeah? So we were there in the market with this product to be able to compete against a particular section of suppliers. Yeah? Now that the BIS has already kicked in, this product offering has already been shut down, yeah, voluntarily upfront by Greenpanel. And now we are converting everyone into industrial. This is exactly what is happening. So there is enough market for industrial where people are buying. Obviously, this is a low-value, low-margin product, but the bulk of the market is this. Yeah?
Okay. So my question is to add to that.
Okay. Just to add to that, what Himanshu is trying to explain is that the commercial category will disappear from the market over a period of time because it's a non-BIS compliant product. Imports, like Shobhanji mentioned, have already come down significantly, I would say approximately by about 90%, what we witnessed during quarter one and the current month. And since BIS is applicable for MSME players also from August, assuming that implementation happens from that date, they will also not be able to produce the commercial grade. So over a period of time, the entire market for commercial grade will be converted into industrial grade.
Sure. Sir, just last follow-up. What I was trying to ask is what will be the price point?
Sorry to interrupt. Mr. Ritesh.
And non-commercial.
May we request that you return to the question queue for a follow-up question? Thank you. The next question is from the line of Praveen Sahay from PL Capital. Please go ahead.
Yeah. Just continuation of a last participant question. What is the realization difference between the BIS compliant versus non-compliant, the MDF?
The general difference of the industrial and commercial grade product was anywhere between 6%-8%.
Okay. And next question related to the pricing, as you had said that the timber price correction is there and there are some price challenges. Last quarter, you had given for a month 5% of a scheme. Now, again, in July, 3% of a scheme. So the way forward or the rest of the quarters in a year, what kind of a price correction you are building in because you had given a volume and the margin guidance already. So what's your take on that?
So you see, I think a lot of the schemes are also dependent how the raw material price corrections are going on for all the producers, and people are reacting to the market pressure accordingly. So I would say to give a very far-sighted sort of information on what the schemes will be, it's very hard to say. That is why, even as a company, we are also releasing very short-term schemes to counter the month-on-month pressures. And if this month is going to be, for example, I mean, hypothetically, 5%, it's hard for me to say that will it continue to be 5% next month, or will it go down to 3%, or will it go up to 6%?
So it's not possible for me to factor that in right now and tell you that this is what's going to happen because a lot of players are in the picture right now, competitors' activity, raw material prices, market conditions. So it's not easy for us to predict that.
Anything on the industry capacity, sir? How much is the addition this year or next year expected?
Sorry, I didn't understand that. Venkatramani, can you answer that?
Yeah. So we are not expecting any major capacity addition in the MDF segment during FY 2026 and 2027. There might be a couple of additions in the unorganized segment, but we are not expecting any major capacity additions in the organized segment.
Thank you, sir. I'll fall in the queue.
Thank you. The next question is from the line of Udit Gajiwala from Yes Securities. Please go ahead.
Yeah. Hi. Good afternoon, team. So just to reiterate one part that you mentioned that you are sticking to the firm guidance, which was 550,000 CBM. So that just translates to your growth rate in the north of 35%-40% for nine months. So can you just explain how that is possible for you to achieve, and what will be the base effect of this commercial grade which you have discontinued for the balance nine months?
Sorry, what was the second part of the question? What will be the?
For the last nine months of FY 2025, what was the contribution of this commercial grade? So the Q1 you had mentioned is 36,900. What was it for the balance nine months?
Yeah. It was 43,000 for Q2 and Q3. And as you know, there was zero commercial grade in quarter four. So we had approximately 70,000 cubic meters of commercial grade sales last year. 37,000 happened in quarter one, and the balance 43,000 over quarter two and quarter three.
Yes, sir. So precisely. So sir, if that will continue to be in the base for these coming two quarters, how are we confident of achieving that 550,000 CBM mark for this year?
So what we mentioned earlier, we are now focusing very strongly on the market share expansion. And as I mentioned earlier, I think cost is working in our favor. And as a company, our focus is now on the market share. We are not chasing margins. We're not trying, I'm not confident that there will be any price increases in the market, but we are confident of cost savings both on the variable and the fixed side that will enable us to be able to compete with even the unorganized segment to a large extent because we have a lot of operating leverage available to us by way of increasing volume. So we're going to play on that. So as of now, our target is to stick to our guidance and achieve that number.
Can I add something, Shobhan?
There will, of course, be a bit of aggressive play both on the pricing side, cost-cutting side, and taking market share from what we've lost.
Yeah. Maybe if I can add to what Shobhan said, I think what we need to appreciate as Greenpanel, we have the biggest capacity. Yeah? Today, with Line 3 coming up, operating at less than 50% capacity utilizations don't make sense. Yeah? We have been disciplined all this while playing by whatever the market norms were. Today, the ask is very simple. We need to deliver volumes. Yeah? I think that's the number one priority. To be able to do so, whatever it takes in terms of whatever it takes as schemes or discounts going out to the market to supplement that, yeah, will be met out from the savings that we are expecting both from the variable and the fixed cost optimization that we are undergoing right now, and also from the operating leverage that is going to play out with the volumes coming in.
I think that's what we are chasing. We've got a very strong balance sheet today with untouched working capital lines and a lot of cash reserves available already. I think that's the whole thing which should drive guidances and achievement of results. See, quarter one is a very, very short period. I think just on the basis of one quarter where there were multiple things happening apart from the Line 3 stabilization, etc., there is still good nine months. The only request that I have is at this point in time, let's discount quarter one and let's work on what is remaining for the balance here. Yeah? Nine months are going to be critical, and we'll see every quarter, every month how things go.
Precisely, sir. I mean, I completely buy that point. The only challenge is the nine-month ask grade.
So are you all factoring your internal targets, excluding the commercial-grade, and that is what you're working and stating that it can be a 40% growth? So there's some disconnect on achieving those numbers, or maybe we may see how nine months pan out for sure, but there's still that disconnect that the ask rate is too high for nine months given that you all still have 43,000 each quarter base.
I completely agree with you, but please do appreciate there is something already, like Venkatramani shared. 36, 37 out of the 80 is already in the base on quarter one. So half of it is in quarter one. The balance is spreading out into quarter two and quarter three, largely in quarter two. Yeah? So thereafter, quarter three, quarter four are largely quarters where there is no base impact coming into play. So let's hold on to it right now. Let's see how quarter two goes by. A lot cannot be said on the call in terms of how we're going to work. Yeah? But there are things very clearly on our minds. Along with Shobhan, he's already chairing a lot of meetings with our sales and operations also. I'm sure things are going to happen. Just wait for it.
Quarter one was also, like my peers explained, was also fraught with this BIS, people moving away, yeah, post the BIS implementation. They still had stocks, yeah, which are getting liquidated in the market as we speak. It's come down, but it's not completely disappeared. Let August happen. Let the MSMEs also get covered by the BIS regulations. We'll see how things progress.
Sure. Sure. All of it. Yeah. Sure. Yeah. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. The next question is from the line of Akash Shah from UTI Mutual Fund. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Sir, am I audible?
Yes, you are.
Yes. Thank you. So just wanted to ask, sir, I mean, what are the, if you can quantify the cost saving, that would be great. If quantification is not possible, then at least directionally, can you please share what is being done and, I mean, how the fixed and variable cost will be coming down in future, I mean, in the coming quarters?
For sure. So we start with timber, first of all. Timber, the prices are already cooling off, as you already know. Yeah? So there is some impact which has already come into picture in quarter one consumption. We know our purchase rates, they are coming down as well. So there is still some 2-3% at least on gross margins which can improve via the timber cost saving. Yeah? The other piece is, like I shared with you, quarter one, we had this new line coming up which was going through stabilizations. I had to run this line more as a compulsion to ensure that everything that I need to produce on this line at the best economics gets done. Right?
So there were multiple, let me say, restarts, shutdowns of these other two lines, plus a continuation of line three, yeah, at economics which are not going to be the economics going forward. So there is automatically 2%-3% of additional contribution which is going to be available the moment I run my lines consistently. So all in all, my margins should automatically improve. There is a lot of work which is being done as I speak, yeah, which is privy to us. We'll demonstrate, and then things automatically you can see. Yeah? Now, coming to the fixed cost, see, I've invested for 100%. My capacity utilizations are 50% today. Correct?
Yes.
From 50%-100%, I have two options possible. Either I cut down all my cost and bring it down to 50%, yeah, number one strategy. The other is I focus on volumes. Right? Do everything that I need to do to be able to recoup volume share losses. Right? Regain market share given the capacity that I have. And simultaneously work on these other things that I told you, which is work on working capital, the variable costs, etc., etc., and optimize my fixed cost. Yeah? Things which I can defer, I'll defer, which are luxuries at the moment. Yeah? Things which are discretionaries are things that I'm going to cut down very clearly. This is something which is already happening. On the other fixed cost, things which I don't think are necessary, I'll take a call maybe in quarter two, quarter three, anytime. Right?
We are gradually progressing. I don't have a very definitive answer right now, but yes, on margins, I think with additional volumes coming in, the operating leverage is going to play out, and that should also solve some part of my problem did I answer your question?
Yeah? Sure. Sure. This certainly helps. Thanks a lot. And I mean, just one more follow-up question is if a company focuses sort of on improving the volume growth, and certainly if there is a sort of aggressive focus on volumes, and there is certainly competition in the market, so there is certainly a possibility that we have to try and give a bit higher discounts or schemes to the channel to try and push volumes. So don't you think because of this realization will come down a bit, and as a result, there will be some impact on margins as well?
See, I said we have buffers to play with on the cost front. Correct? I'm saying again, and something that Shobhan reiterated, we'll see how, see, it could depend on the markets. It could depend on the product, etc., etc., how the schemes are going to be structured out. More importantly, please do appreciate there is premiumization also happening. Right? This will eventually play out, which should help me arrest the decline in my realizations. Right? The costs are not going to increase so much. They're going to come down. Right? And realizations, maybe they build up a little. But I'll try and manage the entire equation in a way that we are able to come back with stronger margins over a period of time.
Sure. Just this last one. So what are the changes in the sales team that we are doing? I know that we have converged the ply and MDF business sales team, and also we have recently changed the sales head. But apart from that, any key other changes that you would like to call out on sales front?
Shobhan, would you, yeah.
No. So basically, you're asking if we can predict how much will be the sales price reduction. Is that what you're saying?
No, no, no. No, sir. No, sir. I'm not asking that. I'm just asking any key change that we have made on sales team front, or let's say sales strategy front.
No. So no. I think on the sales team front, there's not. I won't say, of course, it's a constant endeavor to improve the sales team, the workings, etc. We do have a new sales head in place who's joined us about four months ago. A few of the zonal heads have also been put in place, and they've been added as well. We've divided some of the zones for better focus. So I mean, on a top level, those are the changes that we've done. But apart from that, there's no major restructuring, I would say.
Sure. Sure, sir. Certainly. Thank you so much for answering. Thank you.
Thank you. The next question is from the line of Utkarsh Nopany from BOB Capital. Please go ahead.
Yeah. Hi, I'm Utkarsh. Thanks, sir. So I just need a few data points. So if you can help me. So over the call, you mentioned that we are offering an average scheme of 3% to our dealers for July month. What would it be on an average for the June quarter?
Sorry. For the June quarter, we only had for a month a scheme going on the industrial grade. And what I said about July was that on an average payout across the schemes that we ran would have been about 3%.
And we are offering this scheme for both the unit for the north and the south unit for July month?
No, so it varies from products and geographies. So for example, in certain markets, it would be on value-added products. In certain markets which are more concentrated on the industrial product, we would only offer schemes on that. In certain markets, it's on both.
Okay. And sir, the second question is on the subsidy side. So we have stopped recognizing the subsidy benefit from this June quarter onward. So if you can help me, how much subsidy amount we have accounted for in Q1 of FY 2025 and in FY 2025?
So yes. So we, sorry. You want to answer that, Himanshu?
I can. Yeah. So there is nothing which has been accounted for in these two years, Utkarsh. See, more importantly, I think that this note has been going out for quite a while. There is something like 116 crores of subsidies that we are supposed to receive for the old line that we installed in AP, yeah, out of which we have accounted for 35. The balance is on hold, yeah, till the time we get more clarity. We are hopeful that this money will come in soon, but let's see.
Okay, so we have not accounted for it.
But Himanshu, we stopped recognizing it a while back. It's not from this June. I don't know if I misunderstood you that?
Absolutely. Absolutely. So we stopped recognizing it a while back.
Long back. Long back.
Okay. And, sir, another question is on the thin MDF plant. So if you can just help me out at what rate we operated our thin MDF plant for July month and how much you expect that the plant utilization to get ramped up by the coming March quarter, and what would be our sales volume and revenue for thin MDF plant in the June quarter?
Himanshu, do you have that data? Ready?
I can share something for sure. And maybe Venkatramani, please add whatever you wish to. See, I think the idea is to run this plant at least 30%-35% this year. In quarter one, we were running already at 33% this capacity. Not everything got sold, though. In July, let's wait for the full quarter to come into play. Maybe October, November, whenever we are having our next call, I'll give you more data, more insights.
Okay. And sir, volume and revenue number for thin MDF for June.
Sorry to interrupt, Mr. Utkarsh. May we request you return to the question queue for a follow-up question?
Sure.
Thank you. The next question is from the line of Shivk umar Prajapati from Ambit Investment Advisors. Please go ahead.
Yeah. Hi, sir. Thanks for having my question. The first question is on the margin front. How sensitive is margin to say, "INR 1 per kg change in timber prices"? Or if suppose there's 5 or 10% of decline in the timber prices, then how much of the margin expansion we can expect on an estimated basis? Hello?
Yeah. Can you repeat the question, please?
Yes, sir. So actually, sir, I just want to understand the margin sensitivity in respect to the decline in timber prices. So for example, if we say there's a decline of, say, 5%-10% of price in the timber, then how much of margin expansion we can expect, either it is 2%, 3%, or on an estimated basis?
See, with the rupee, I think it should be roughly around 2%-3% on the margin.
Around 5% of decline?
Sorry?
With the rupee change.
Not the rupee change.
No, no, no. He's talking about specific timber prices.
Yeah. Like if there's a 10% decline in timber prices, what will be the gain in the operating margins?
A 10% decline in timber prices should contribute about, I would say, about 4%?
No. It will contribute 3%.
It will contribute 3%.
Okay. Keeping the current realizations and raw material prices, it will contribute 3% at the margin level.
Understood, sir. And sir, my next question is on the MDF imports. So post this BIS implementation, you had already mentioned that 90% of the imports—I mean, the imports are down by 90%. So sir, what about the BIS licenses? I mean, how many players did got the license, and how much time did it take to get a license? And the players who have already got the license, they belong to which country?
So as far as my information at the moment is that two players have so far obtained licenses to continue to supply and be BIS compliant. But please do keep in mind that it is not as simple as just getting licenses. It's also them modifying their production quality to comply with BIS. Now, India is still, for these exporters out of Southeast Asia, India is still a small dumping ground. Every supplier is maybe sending 3,000, 4,000 cubic meters individually. So in order for them to produce specific BIS-compliant materials and increase cost, it's not that straightforward that they will just get a license and start supplying. It will also result in cost increases. Given the domestic market pricing, cost competitiveness will also come into question.
So with BIS compliance and with the current market conditions and pricing that is prevailing in the Indian market, at the moment, I don't see imports to be a threat going forward.
That helps me, sir. Sir, another question is on this EPCG amount. Did we record any EPCG amount for the quarter?
Yes.
It was INR 5.1 crore for the quarter.
Okay, sir. So that means our margins for MDF is below 3%, the EBITDA margins, if we exclude this EPCG amount.
That's correct.
Okay. Great, sir. Maybe the last question.
Sorry to interrupt. Mr. Shiv Kumar, may I request you return to the question queue for a follow-up question? Thank you. The next question is from the line of Rishikesh from Kotak Mutual Funds. Please go ahead.
Hi. Good afternoon. Can you help me with the CapEx number for FY 2026 likely with new considering that new capacity is done? Any new CapEx likely for us over the next one year or two years?
So this year, there are no getting all the payments. Yeah. Please, please.
No new CapEx is planned.
There is no new CapEx required.
Okay. And second is, if I look at it, obviously, last cycle, clearly, we probably peaked out at INR 300 crore plus cash flow, operating cash flow. Now, incrementally, let's say, considering compared to last cycle, the capacity has definitely gone up. So what will be our thought in terms of capital allocation? Because obviously, this cycle potentially, even if, say, margins don't revert to the same level, but still, there's a reasonable amount of cash generation that will occur for us, even, let's say, at INR 250, 200 crore cash flow. So any thoughts in terms of probably long-term capital allocation on this?
I think we will, of course, the focus is for us to service where we're driving strongly also to recover additional working capital investments that have happened. So of course, the primary focus is to service the debt that we have that we have, and as there are no capital expense requirements in the future, we'll also have to service a little bit of the working capital requirement as sales grow as well, so apart from that, at the end of the year, based on any surplus cash flows, we will be taking a call.
Sure. Sure. Thank you.
To add to that, what Shobhan also mentioned in the previous conference call, that we are interested in expanding our plywood capacity, but we'll take that decision once we cross 80% capacity utilization on the existing capacity.
Okay. Thank you.
Thank you. The next question is from the line of Yash Sonthaliya from Edelweiss Alternative Asset Advisors. Please go ahead.
Hi. Thank you for the opportunity. I hope I'm audible.
Please go ahead.
Yes.
You are, please.
Yeah. So firstly, I want to understand on the sequential basis, excluding the cost and product mix of new plant, can you help me with the product mix margin, how sequentially margin, product mix, and realization and utilization improve for the older plant, both north and south?
Hello.
Hi, Venkatramani. Do you have that calculation by any chance? Venkatramani, you might have it.
Not readily. Not readily. But just to tell you, I think if.
He wants it individual plant-wise.
Yeah, yeah.
No, I'm okay with both plants combined. Just wanted to understand, excluding the impact of new plant and lower grade from that plant, how the business has improved sequentially with timber prices decreasing and premium mix increasing.
Okay. I'll take that question. So if we look at the value addition part, split it into two parts, the older plants and the new plant, the entire production and sales at the new plant comprised of the industrial grade. There were no value-added products in the new plant. So if we remove that and look at the value-added contribution from the older plants, it was 50% of the total domestic volumes, which is the same as we have achieved in the quarter four as well as the last financial year. And to look at the margin profile, yes, the new plant definitely disturbed the margins because it was operating at a low capacity utilization. But since MDF is a continuous plant, certain overheads like power and fuel cost are almost similar whether you're operating at, say, 80% or 30%. So that makes a big difference.
As we see the improvement happening in the capacity utilization over the next couple of quarters, I think we'll see a significant improvement in the economics of the new plant.
Clearly understood. Sir, what I wanted to understand is sequentially how older plant gross margin and operating margin improved because the product mix and timber prices both were in the favor?
See, I would say.
Before the quarter four.
Yeah. I would say we have seen already some improvement in the gross margin as compared to quarter four because of the fall in timber prices. But we did not get, I would say, the full impact of that in the margins, primarily because of operating inefficiency in the new plant because it was going through the stabilization phase in the first quarter. So as we progress, I think we'll see that happening from quarter two, quarter three onwards, plant efficiency improving, producing products which are in demand in the market because during the stabilization phase, you're testing the quality of the entire range, right, from 1.5 millimeter to, say, 25 millimeter, just to ensure that the plant is operating correctly. But now that phase is behind us, so we will be producing products for which there's a demand in the market.
So as the production scales up, and that also brings in some operating efficiencies in raw material consumption, we'll definitely see margins improving both for plant three as well as the existing plants.
Okay. Maybe I will take that offline, and second question, like mentioned in the presentation, the newer plant produced initially lower grade MDF, and we also provided some discounts to liquidate the inventory, so when can we expect this to normalize, and when can we expect the overall production to start for value-added? Because imports are already on the lower side, so maybe we can grab the opportunity as soon if I'm not wrong.
See, regarding the products, like I mentioned, we'll start seeing the improvements in quarter two. There might be a slight overhang of the trial production during quarter two, but it will definitely improve significantly from quarter three. And regarding the production of value-added products, Shobhan, can you please take that question? When are we likely to start producing the value-added grade?
In line three?
In line three. Correct.
So I think we still need this quarter to stabilize the line. I think the Dieffenbacher are still, they are meant to come back to settle the line. There needs to be some replacement of parts as well, which we are awaiting. So I think towards the end of the quarter two is when we will see stabilization of the line completely.
Great.
So probably we'll start producing the value-added category from quarter three.
Understood. And last question, for last eight, 10 quarters, the industry is.
Sorry to interrupt.
From.
Mr. Yash?
Yes. Sure. Yeah, yeah, yeah.
Yeah. Thank you. The next question is from the line of Pathanjali Srinivasan, Sundaram Mutual Fund. Please go ahead.
Sir, thank you for the opportunity. I hope I'm audible. Hello?
Yes. Please go ahead.
Yes. Yeah. So I have a couple of questions. One is, what is our expectation in terms of break-even for the thin MDF line, sir? At what level of utilization will we be able to break-even at?
So roughly.
Break-even today?
Yeah. 40% capacity utilization, you should be able to see money coming in.
Okay. Normally, for MDF, the break-even happens between 55% to 60%. But as we have mentioned in earlier calls, since the fixed expenses for line three are much lower than the older plants, we have just added some employees at the plant level, no addition in the sales or the corporate teams, so the fixed cost will be much lower for the new plant, and hence that's why Himanshu mentioned a lower break-even point for the new plant.
Yes. Yes.
Sir, but just following up on that, I think we mentioned that the full year we are targeting around 35% utilization. So would it be correct to understand that this year we won't break-even at this plant?
Yes. It's a possibility.
Okay, sir. Sir, and just one more question. This foreign currency loss that we reported this quarter, are we not hedging it? Any reason why we're not doing that? And also, will it be a continuing thing, or is it going to go away from the subsequent quarters?
You see, the forex loss which happened in this quarter was exceptional. So you are aware of the tariff wars and the consequence of this on the Euro- Dollar, largely on Euro- Dollar, which is why you are seeing fluctuations. Now, I think what we need to understand and appreciate, we have a 10-year loan, yeah, on the new line, which is largely what we have as gross debt today. Now, the repayments of this is to be made every six months, right, for the next 10 years. To get a hedge in place for a full 10-year, A, the markets are not there. B, even if someone wants to sell it to us, it's going to be ultra expensive, right, even if there is something possible.
So I think the company here has been following a very, very, I think the right approach, which is not to hedge the entire exposure, but to hedge tranches which are going to be due in the short term. Because of this extreme volatility, you are seeing a consequence on our P&L. I think what we need to also appreciate, I think, see, when we talk about foreign currency versus INR, the INR loans are basically, there is a very single straightforward interest rate that you need to look at. Correct? But when you look at a foreign currency loan, you are looking at two aspects. One, the interest rate itself, which in case of euros has generally been between 0%-3%, right, currently at around 2%-2.5% for us.
On the contrary, on the currency side, when you study the fluctuations over the year, you'll find that obviously this is correlated to the inflation differentials and the interest rate differentials. Correct? So even for the borrowings that Greenpanel took in the past, for us, it was roughly 3% on an average, yeah, for the full tenor of the loan. So 2-3% on interest, 2-3% on currency fluctuations, that translates to not more than 6% of overall expense getting booked under various heads. So I think for this reason, I think commercially it makes sense for us to keep things where they are. As of now, as you're already aware, euro is already cooling off post-E.U. deal, the E.U.-U.S. deal, which happened very recently. It's come down already to 1.14.
So we will keep monitoring, and if there is a need and there is an opportunity, we'll try and see what we can deploy in terms of hedges. But for now, at least the volatility which was there till 30th June was unhedged.
Sure, sir. Gotcha. Thank you.
Yeah. Yeah. Yeah. Yeah. Thank you.
Thank you. The next question is from the line of Pritesh from Lucky Investments. Please go ahead.
Sir, can you tell me what is the contribution margins at the current pricing in the MDF? So at what contribution margins are you operating?
Pritesh, this is. See, you see our gross margins already, which was 47%. Beyond that, there is power, there is fuel, there is stores, there is consumables, etc., coming into play. I don't think we report so much granular details on contribution for these reasons.
Sorry.
There is a wide variety of products that we service, various markets, various strategies that we deploy. So for those reasons, I don't think contribution is something that we mention in the public domain. But gross margins is very clearly a proxy of what we are doing.
I had the gross margin number. It's okay. My second question is on the industry number of the capacity, or let's say the market which was mentioned at 2.4-2.6 million CBM. Can you tell me what will be the industry capacity utilization? And in that, if you have to tell us what will be the so-called unorganized segment that you keep mentioning in the call, so what will be the unorganized share of the capacity? So I want to know what will be the industry capacity utilization, what will be the unorganized share of the total capacity?
Okay. Venkatramani, you want to take this?
Yeah. Sure. So of the total industry capacity, which we estimate at 4.25 million cubic meters, the organized share is 65%-66%, and unorganized share is between 34%-35%.
Okay. And.
But as far as the demand is concerned for the domestic markets, we estimate that last year the industry did approximately 2.8 million cubic meters, which I think would translate into capacity utilization of somewhere between 60%-65%.
And 50,000 CBM import, which means 50,000 into 12, so about 6 lakh. 6 lakh on 4.2 million. So let's say that's another 15% which can be serviced via India capacity. And do you believe somewhere in your assumption that some of these unorganized capacity via BIS, etc., will find it difficult to operate? And hence, you have a certain volume growth number assumption made for your company. Is that the assessment that you guys have in your mind?
Okay. Imports were not as high as 50,000 per month. If you look at financial year FY 2025, they were probably in the range of 20,000-22,000 cubic meters per month. So approximately, I would say about 10% of the domestic demand. So that's what the imports part was supplying. And as far as the unorganized segment, which is still not under BIS, it's not—we are not really aware of how much volumes they are contributing in total or through the commercial grade. So I think that impact will be visible over the next two quarters, always assuming that BIS is implemented for the MSMEs from August onwards. I think probably the date is 11th or 12th August when it's supposed to be implemented for the MSME and the smaller category.
So assuming that's implemented on that date, so I think probably over the next two quarters, we will understand how much they were contributing in total or through the commercial grade.
So without quantifying, do you believe that you will grow faster by? I'm just concluding my question.
Mr. Pritesh, may we request you return to the question queue for a follow-up question?
My friend, I am just concluding what I'm having a conversation. It's not a question. So are you assuming somewhere that you will grow faster by virtue of the unorganized losing share in the whole process?
Yes, sir.
Okay. So when you mentioned that we are not depending on what exactly others will do to grow our volumes, we are looking at the measures that will be implemented by us to ensure that we achieve the guidance given. So yes, to some extent, it's correct. The reduction in imports, fall in imported inventory, implementation of BIS for the MSME and the smaller category will definitely help us in achieving the guidance. But we are not solely relying on those. We are also taking our own steps to ensure that we achieve the volume and margin guidance.
Okay. Thank you very much and all the best, Yash. Thank you.
Thank you.
Thank you. The next question is from the line of Tanmaiy from Locus Investment Group. Please go ahead.
Hi. Am I audible?
Yes, please.
Hello? Yeah. So I actually had two questions. The first part of the question was on the timber prices which are falling. So just wanted to understand if this is more of a demand or a supply-side sort of reduction in prices, and how do you think this is going to sustain going forward? And is there still that differential between the north and south prices? And if yes, then what is the sort of differential? And my second question was on the tariff front. So I just wanted to understand that with the tariff being imposed on India, is there any, will there be, do you think there will be some sort of inventory dumping into India? And the war in Thailand which has just sort of come about, and a lot of our suppliers were holding stock from Thailand.
So do you see any change in our sort of business mix because of that?
Sure. So on the raw material side, basically, the availability of timber is increasing. Plantations are coming to a point of harvesting, and timber availability is increasing. So that is resulting in increased availability and, let's say, lesser pressure on the pricing. Between the north and the south, there still continues to be anywhere between 20%-25% price difference on timber price, north being the higher one. And with regards to, I think the tariffs may not affect us directly because, and also, I mean, we still have to see during the summer months in the Middle East, there is less activity in which ways. So we still have to see how the situation in Thailand affects supplies to the Middle East. Maybe that will result in some gain to us, but that's yet to be seen. It's not evident just yet.
Got it. Got it. Thank you. Thank you. And all the best.
Mr. Parth, your line has been unmuted. Please go ahead with your question.
Sorry. Yeah. I couldn't hear you. Yeah. So sir, I had a few bookkeeping questions. I wanted to understand what was the timber cost in north and south in Q1?
Venkat, you should have the average consumption rate for quarter one.
I can give it to them. So the consumption rate on an average was around six in quarter one. North and south differential was around INR 0.50 each. Yeah. So north was a little expensive. South was not. With the new season and the new quarter beginning, I think the prices are already coming off. Yeah. There's still a huge differential versus where we were in the quarter.
Got it. And sir, you mentioned. There's just one last question. You mentioned that there is 7%-8% pricing differential between industrial and commercial-grade MDF. So I wanted to understand how would the margins look like between the two? What would be the margin differential between the two?
Venkatramani, you want to take that up? The commercial versus the industrial?
Sure. So the price difference, like I mentioned, was between 6% to 8%. But like we have spoken on earlier calls, the density of the product is also lower as compared to the industrial-grade since we were primarily competing with imports in that product category. So taking both those factors into consideration, I would say it was probably the margin difference was somewhere between 2.5% to 3%.
Perfect, sir. That helps. Thank you for answering my question, sir.
Thank you.
Thank you. The next question is from the line of Bhargav from Ambit Asset Management. Please go ahead.
Yeah. Good afternoon, sir. And thank you very much for the opportunity. Sir, my first question is that is it fair to say that we will have the highest unutilized capacity in South? And the related question is that given that the timber prices in South are lower versus pan-India, and assuming that our fixed cost as the utilization ramp-up also is sort of lower, and herein I also include the freight cost, given that we have a capacity in South, is it fair to say that we'll be the most competitive in terms of supplier in South, which obviously is the largest market for India?
Well, it's safe to say that because with a singular location with such a large capacity, of course, fixed costs are very economical.
Having this surplus capacity, once we start increasing volumes, this is going to substantially improve product costing overall on the contribution side. We've been mapping now, given the different timber pricing in the north and the south. We regularly map the freight aspect, the raw material aspect, and decide which geographies are better served and more profitable for the company. Let's say we play this, we keep this very fluid and dynamic. In a month, maybe a certain geography is still being served from the north, but the next month, if it becomes more competitive from the south because of lower timber price and freight being competitive, then we have the option to shift it to the other plant. Yes. As volumes go up, this competitiveness for us will increase.
And, sir, how much supplies in south would be from our other plants which are not in south as of now? Sorry. Can you repeat that? No, I'm saying that the supplies which Greenpanel does in south India. I'm sure they don't do just from their south plant, given that the new capacity is just on board. So how much supply would be coming from the other pan-India plants in the region?
No. So there is pretty much, apart from the flooring products and plywood, the south is 100% being serviced from the south plant only.
Okay. Okay. Understood. And lastly.
See, prior to the new plant, which has a capacity of 231,000 cubic meters, we already had a capacity of 444,000 cubic meters in South.
Yes. Yes.
So the major supplies for, or I would say, like Shobhan clarified, apart from flooring, the entire MDF business for South India is met with the south plant.
Okay. And sir, lastly, is it fair to say that in Q1, can we expect that the gross and the EBITDA margins would have bottomed out, and from here on, it should only improve given that the spread in the second quarter is lower versus the earlier quarter? And as the capacity utilization ramps up, the operating leverage should also kick in.
Sorry. Venkatramani, are you answering that?
Yeah. I'll try and take it. So Bhargav, you're right. I think your presumption is right. I think this is the way to look forward.
Great. Thank you very much. And all the best.
Thank you.
Thank you. The next question is from the line of Shivk umar Prajapati from Ambit Investment Advisors. Please go ahead.
Yes. Hi. Thanks for having me again. My first question is on the penetration level of ready-made furniture. Given MDF demand is 60%-70% comes from these ready-made furniture, I just want to understand, do you have any data handy so that we can understand what's the penetration level in different states? Assuming tier one would be having a higher penetration level. And second one is the co-working space companies, Awfis or TEC, these players are trying to enter into the furniture manufacturing businesses. So did you receive any queries from their side?
No. So unfortunately, this penetration data, it's not so easily available. But definitely, larger cities have a higher penetration of ready-made furniture making and acceptability compared to the tier two and tier three cities where carpenter making is still very, very prevalent. But any concrete data is not really very easily available, especially differentiation between cities or zones in India. So that is the situation. And sorry, what was your second question?
The second question was on.
Oh, sorry. The co-working spaces. No.
Right.
No. So I mean, as of now, we're dealing with certain large format OEMs. But any new entrant who's planning to enter, I mean, no, we've not received any specific queries as such.
Okay. So, Bhargav, thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Mr. Ritesh, your line has been unmuted. Please go ahead with your question. As there is no response from the current participant, moving on to the next question. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the follow-up. So this quarter, ad spend has been a bit on the lower side. How should we see going forward? So what sort of ad budgets do you have for this year?
So the major reason for the lower ad spend was on account of IPL as well, which we have discontinued, which was a substantial number for the previous year. And apart from that, the numbers will continue to be consistent compared to last year. There's not going to be too much of a difference going forward for the remaining of the year.
Consistent as a percentage or in absolute terms you're talking?
In absolute terms.
In absolute term. In absolute terms.
Got it. That is helpful. That's it from my side.
Thank you. The next question is from the line of Yash Sonthaliya from Edelweiss Alternative Asset Advisors. Please go ahead.
Hi. Thank you for the follow-up. So on the BIS norms, we are hearing from different places that the norms are being diluted by many players, and they are able to supply the products very easily. And the grades what we are expecting is not coming. So what's your take on it, and how can it impact your new plant?
So I think this is completely contradictory to the information that we have because, firstly, there has been no change in the BIS norms in terms of grade that has been ongoing so far. And based on the new norms that will come in, which are still under publication stage and hopefully will go into effect in the next hopefully couple of months, those will actually be more segregated and more stringent than they are today. So I don't understand where this point of dilution comes from or how some manufacturers are commenting that it's been diluted.
Interesting.
Okay. It could also be due to the fact that BIS was not applicable to MSME and smaller players from the date it was applicable to, I would say, the organized category. So with expected implementation of BIS for the MSME and the smaller players from August 11th or 12th, I would say we should expect full implementation and also expectation that there would not be any violation of BIS QCOs from the date it's implemented.
Very clear, sir, and my last question, we always allude the schemes we provide to the distributors, sometimes 3%, sometimes 5%. So just want the clarity. Last quarter, if we are seeing 3% in this quarter, 5%, these are always incremental or the change of the scheme we provide, 3%-5%, 5%-3% on the average basis?
So these change every month, every quarter. So I don't think that's a top-up to what happened in June.
5% that was mentioned for the first quarter. It was not applicable to the entire quarter. So I think it was probably there for a period of about 45-60 days.
Very clear, sir. Thank you for answering all of my questions, and best of luck for the coming quarters.
Thank you.
Thank you.
Thank you. As there are no further questions from the participants, I now hand the contents over to the management for closing comments.
Thank you all.
Thank everyone for joining this call. And if anyone has further questions, feel free to reach out to us. We will look forward to speaking to everyone next quarter. Thank you.
Thank you and have a good day.
Thank you. On behalf of Greenpanel Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.