Ladies and gentlemen, good day and welcome to the Greenpanel Industries Limited Q4 FY25 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. Rishab Barar from CDR India. Thank you, and over to you, sir.
Good day, everyone, and thank you for joining us on Greenpanel Industries Ltd. Q4 and FY25 earnings call. We have with us today Mr. Shobhan Mittal, the Managing Director. Mr. V. Venkatramani, the 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, Rishab. Good evening, everyone, and thank you for joining us to discuss Greenpanel's operating and financial performance for Q4 FY25. MDF domestic sales volumes fell by 25% year-on-year. This was on account of discontinuing sales of commercial-grade MDF in anticipation of implementation of BIS QCOs. Commercial-grade in Q4 FY25 was nil as opposed to 40,924 cubic meters in Q4 FY24. Export volumes were higher by 34% at 14,458 on a low base of 10,804 cubic meters. MDF domestic realizations were higher by 7.4% year-on-year at INR 31,214 cubic meters. Domestic realizations increased due to an increase in mix of value-added products to 50% as compared to 44% in Q4 FY24, and also due to the discontinuation of lower-priced commercial-grade MDF. Export realizations were higher by 9.6% year-on-year at INR 22,389 per cubic meter. MDF EBITDA margins at 16.3% were higher quarter-on-quarter due to EPCG scheme incentives.
Plywood volumes were lower by 12% year-on-year. EBITDA margins at 12.1% were higher due to write-back of provisions for turnover discounts. Plywood realizations at INR270 per sq m were higher by 8% year-on-year due to reasons mentioned earlier. Post-tax profits for the quarter were lower by 1% at INR29.39 as compared to INR29.81 in the corresponding quarter. Net working capital at 36 days has shown an increase of 8 days year-on-year due to lower turnover and high inventory levels. Net debt stands at INR165 as of 31st March 2025, inclusive of INR336 for the expansion project. I'd now like to provide a summary for the financial performance for FY2025. MDF domestic volumes fell by 6%, of which commercial-grade MDF contributed 3%. Domestic MDF revenue fell by 9.7% due to low volumes and a 3.7% fall in realizations.
MDF EBITDA margins at 11.7% fell due to a 3.7% fall in domestic realizations and a 23% price increase in wood prices year-on-year, which impacted EBITDA margins by 6.7%. Gross margins of the company fell by 900 basis points to 46.9%. EBITDA margins at 10.9% were lower by 615 basis points, and post-tax profits at INR 72.11 were lower by 49%. Commercial production has started in the expansion project, and we expect capacity utilization to ramp up over the next three to four quarters. We expect an improved performance in FY26 with the addition of thin MDF in our product portfolio. Domestic furniture manufacturing industry prospects will receive a boost with the expected implementation of BIS QCO from February 2026. This should also lead to increased demand for furniture manufacturing and raw materials like MDF and plywood. Mr.
Venkatramani will now run you through financials in greater detail, post which we will have a Q&A session. Thank you.
Good evening, and thank you for joining us to discuss the Q4 FY25 financial performance of Greenpanel. Net sales , during the quarter, were INR 338.94 compared to INR 396.08 during the corresponding period. MDF sales in value term fell by 15.3% at INR 305.17 and contributed 90% of the top line. MDF domestic volumes fell by 25%, while export volumes were up by 34%. MDF domestic revenues were INR 272.80, while exports contributed INR 32.37. Domestic realizations were higher by 7.4% year-on-year at INR 31,214 per cubic meter, while export realizations were higher by 9.6% at INR 22,389 per cubic meter. Blended MDF realizations were higher by 5.8% at INR 29,961 per cubic meter. Uttarakhand MDF unit operated at 80% and Andhra Pradesh plant operated at 50%, with blended capacity utilization at 60% on proportionately increased capacity of 661,899 cubic meters. Plywood sales saw degrowth of 5.3% at INR 33.77.
Plywood sales volumes were lower by 12% at 1.25 million sq m, and the unit operated at 42% during the quarter. Plywood sales realizations were higher by 8% at INR 270 per sq m due to reasons mentioned earlier. In Q4 FY25, gross margins were lower by 911 basis points year-on-year at 44.6%. EBITDA margins were up by 189 basis points at 15.9%. EBITDA value stood at INR 53.85 and post-tax profits at INR 29.39. That concludes my presentation. Please start the Q&A session. Thank you.
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 will 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 you have highlighted in the call, your Andhra Pradesh plant is running at 50% capacity utilization. Now, possibly you have increased the capacity also by brownfield expansion. So how are the plans on ramp up? I understand you will possibly add a new product portfolio in MDF, but possibly this utilization will go down further. And by adding up this unit, what sort of your cost will increase beyond employee depreciation and interest, whether it's considered?
So on account of the volumes, we are expecting about from the existing lines, line one and line two, we're expecting about an 11%-12% growth in terms of volumes in the coming year. And because the first quarter is quite muted for the new line, so we're expecting about 72,000 cubic meter capacity utilization over the year from the new line. So combined, as a company, this would give us about a 30% volume growth, including the production considered for the new line. So this is where we would stand, is what we expect to stand for the current year.
So you said something 72% utilization. What was that? I misheard.
No, I said the volume expected from the new line would be 72,000 cubic meters.
Understood.
So that is what we are expecting. Yeah.
Got it. Got it.
The numbers that I mentioned, the numbers that I've mentioned to you are the domestic numbers, and we are expecting about 80,000 cubic meters additional volume coming from the export business, so resulting in a total volume of about 550,000 cubic meters.
Got it. Sir, there are sort of one-off income in both ply and MDF unit this time. Can you please quantify it?
Yeah. In MDF, it has come from EPCG incentives. So that's contributed INR 35 crores during the quarter. And on the plywood side, we have written off turnover discount provisions to the extent of INR 1.25.
1.25. Understood. Can you please give me more idea about EPCG incentive? Like how is it? Will it be coming in upcoming quarters or upcoming year?
So the total incentive expected from EPCG scheme is about INR 86 crores. We have accounted for INR 35 crores in FY25. So the balance of about INR 51 crores is expected over FY26 and FY27.
Okay. So you will be recognizing each quarter proportionately kind of what?
Yeah. Proportionate to the sales executed against those licenses.
And you domestically. Got it. And what is the status of the import in India?
Imports have come down significantly. So I think April was about 1,100 cubic meters.
How do you see the trend going forward?
We don't expect to see any significant increase in imports.
Understood. Thank you. I'll come back in too.
Thank you. The next question is from the line of Parth Bhavsar from Investec. Please go ahead.
Hi, sir. Thank you for the opportunity. I have a few questions on exports business. We are targeting around 80,000 crores. I wanted to get an idea on what sort of margins did we make, like indicative margins did we make in Q4?
It was not 80,000 crores. Shobhan ji actually said 80,000 cubic meters.
Yes. Right. Volumes would be 80,000 cubic meters for FY26?
Yeah. Approximately about 84,000 cubic meters, and the margins in Q4 were approximately about 1.75%.
Okay. Okay. Got it. Got it. So sir, if we adjust for this EPCG business, so a quarter-on-quarter our profitability in MDF was almost flattish. Is that the right way to look at it?
That's correct.
For MDF?
That's correct.
Okay. Thank you, sir. Those were my questions for now.
Thank you. The next question is from the line of Pankaj Bobade from Molecule Ventures. Please go ahead.
Hello. Am I audible? Hello?
Yes.
Yeah. Please go ahead.
Yeah. Thank you for the opportunity. So my first question is regarding the realization trend. So imports are now out of the way, and I think the 29% should be the lowest we have ever seen. So can we assume some improvement going further as well in the realizations?
See, as far as FY26 is concerned, we don't expect to see any significant improvement in the realizations. There could be some small improvement in realizations, but our primary focus would be on expanding volumes both in the existing plants as well as the new plant.
Okay. And next question is regarding the RM cost, particularly in South India. So how is the RM cost behaving there, and have we seen any increase and expected to reduction in RM cost?
Yeah. We have started seeing some reductions from April. So I think we would probably expect to see around 5%-7% fall in timber prices during FY26.
Okay. Okay.
So this is a very preliminary estimate. I'll probably be able to give you a better estimate post-quarter one.
Okay. That's fine. And sir, any commentary on the underlying demand side for the MDF segment?
Yeah. Shobhanji, can you please take that question?
Yes. So what we are noticing is, of course, that the import concentrated segments are, of course, shifting towards the domestic side. Market demand for the general growth of the MDF industry continues to remain strong as opposed to other industries at 15%-20%. And what we foresee is that there are no major additional capacities also coming in. So with the fact that imports are going to be quite muted and the market is on a growing trend, and the fact that no new large additional capacities are coming online in the next financial year, the benefit of this should shift towards the existing producers.
Okay.
Yeah. That's it from my side. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Yash Sarda from Edelweiss Public Alternatives. Please go ahead.
Hi, team. Thank you for taking my question. So I have three questions. Hello, I'm audible?
Yeah. You are.
Yes. Please go ahead.
Yes. You are.
Yeah. So my first question is, like you said, new capacities coming for thin MDF, which will be replacing some of the imports, or which will cater to the demand which is currently getting imports. So can you give me some what's your perspective? Like what will drive this switch of market share from imports to ours? Will it be cost? Will it be efficiency for the domestic manufacturers to take from us or quality? What will drive it?
So I would say it's not primarily imports. It is also some of the competing companies are already prevailing in the thin MDF segment. Of course, being in South India and being highly focused on imports being a price-sensitive segment and the fact that imports are getting restricted, so that would definitely result in opening up a certain percentage of the market share for our industry. And we already have a fairly large and strong network of distribution who are currently focused on the thick panels. And at the moment, they are obviously satisfying their requirement of thin panels from other sources.
But the fact that now the Greenpanel as a company is in a position to offer the entire product portfolio, the fact that we're located in the South of India having competitive advantage in terms of freight, also with respect to serviceability and resulting in working capital reduction, inventory reduction for our dealers and channel partners, there would be a preference shift towards us, which would result in us gaining market share in the segment for sure.
Understood. Very clear. And second question to Venkatji, if you can help me with supply demand specific to South, like what is the supply scenario and demand? And broadly, how much demand is in South and supply? Very broad numbers are okay if possible.
Okay. There are only about three or four MDF manufacturers present in South India, so we have Greenpanel, Century, Rushil Decor, and one unorganized company, so the total supply would be about.
Or 1.1.
One second.
Sure.
About 1.3 million cubic meters. Approximately 35%-40% of the demand is generated from South India.
Of the total domestic demand, right?
Of the total domestic. Correct.
Like you already alluded, there is no capacity coming for next year. Any news from your side, anyone who just announced the capacity, which maybe will come two, three years after? Any announcement which may, you know, from unorganized?
I think, well, not only unorganized, but we know that the Action is in talks with regards to installing a line in the south of India.
Okay. A new greenfield CapEx or just a line in the existing plant?
No. The Action doesn't exist in the south of India from a production aspect. So it would be a greenfield CapEx.
Understood. Understood. And one last question from my side. Like for last one year, our realization in MDF has not increased with regards to the increase in raw material prices. So what would be the current differentiation between the prices of MDF compared to low-end plywood or imports, and what it used to be in 2023 or 2022, a normalized year?
Venkatji, you'll get that?
Yeah. Got the question, but I don't really have the numbers for plywood, and we can tell you from an import aspect where it would stand. Domestic manufacturing generally, I mean, ends up being about 8%, depending on the thickness and the product category, anywhere between 8% to 12% more expensive than the imports coming into the country, but that is at the port level. The moment you start transporting imported material further inland with local freight incurring, then it starts reducing the difference. Local freight and transportation costs.
Yeah. Got it. Got it.
Sorry. Local freight and warehousing costs.
Understood. So currently, it is minuscule, but earlier, before this timber price increase and our price being flat, earlier, the difference used to be same or it used to be higher?
No. The difference used to be around 18%-20%.
Right. Understood. Understood. Thank you. That's all from my side. Best of luck for the upcoming year.
Thank you.
Thank you.
Thank you. The next question is from the line of Tanmaiy Mohta from Locus Investment Group. Please go ahead.
Thanks for the opportunity. So I just had a few bookkeeping questions. One was.
Sorry. We are not very clear.
Thank you, sir.
We can't hear you. Sorry. You are not audible.
Okay. You hear me now?
Not really.
It's coming very low. Hello?
Yeah. Hi. Can you hear me now?
Sir, it is coming very low.
I'm not audible. It's like I'm at max volume. If you can hear me?
Sir, can you connect on the hands-on mode? I believe you are connected on the hands-free mode.
Yeah. Hi. Can you hear me now?
Yeah. It's better. Please go ahead.
Yeah. Sorry. Sorry for the confusion. Thanks for the opportunity. Actually, I've had a few bookkeeping questions. One was your value-added mix for the quarter and the year and your OEM mix for the quarter and the year. And second was on lines of the realizations to expect. I mean, do you expect realization from the export front to sort of increase going forward? And if you could just specifically tell me any reason why you think that exports would be better going forward.
Okay. As far as the value mix is concerned, for the quarter, it was 50% in volume terms and 62% in value terms, and the figure was similar for the full year also.
Got it. Got it. And what about the.
Regarding.
ji, do you expect any improvement in the export realization?
No. So as a company, now that we have the thin panel in our product portfolio, and this generally tends to be about, I would say, anywhere about 25%-30% higher priced than the export side. So on a sort of average basis, our export realizations will improve. And this is not factoring in any price increases in the existing product segment that we're catering to. Of course, any dollar movement against the rupee would result in better realizations in rupee terms as well. And with an improved mix of thin and thick panels, overall realizations for cubic meter and export are expected to improve for us.
Thank you. And just one last question on when you expect the capacity to sort of start shaping in and when it can start contributing to the overall volumes?
We are targeting a capacity utilization of 35% for FY26. Hello?
Okay. Okay.
I think we should start getting a substantial contribution of the capacity from quarter two of this year because at the moment, the line is still under the control of the planned supplier, and it is still under the optimization phase because it's, let's say, a very technologically advanced line, and it's a very high-speed line. Hence, it's a longer period of optimization. So we foresee that by quarter two, we should have the line handed over to us, and we should start seeing a fair amount of output coming out of it.
Thank you. Thank you. All the best. I'll come back to the queue.
Thank you.
Thank you. The next question is from the line of Rishabh Bohra from Anand Rathi Share and Stock Brokers. Please go ahead.
Hello, sir.
Yeah. Good evening. Please go ahead.
Yeah. Just wanted to understand a few things on the payment front. Has there been a reduction in employee cost and other operating expenses for the quarter as compared to last year?
Yeah. Like we have mentioned in earlier quarters, we have been reducing the admin expenses, especially as far as branch operations are concerned. So if you look at it, I think admin expenses and employee expenses put together have come down by approximately 15% this year. And employee costs, in spite of an 8% increment last year, have remained almost fixed year on year.
Got it. And with respect to EBIT margin, I think improvement in plywood is far better than MDF. So is there a raw material proportion, or is something else to it?
Yeah. Like I mentioned, it's primarily come from reduction in OpEx expenses.
Lastly, sir, if you could explain the tax impact implication? There is no tax outgo or tax expense for the quarter. What is this pertaining to?
Yeah. So we had received the income tax refund, which was shared by Greenpanel. I think it probably came in October. So that's why tax expense is almost negative for the full year and very low for the quarter. And the second factor is the new plant started commercial production in the last quarter. So in income tax, if a plant has been operational for less than six months, we get income tax depreciation for six months. So while we are charging only three days or four days depreciation in the books of account, we are getting a 6% depreciation reduction in, sorry, 6 months depreciation reduction in income tax. So both those factors have contributed to keeping the tax impact very low in FY25. But for FY26, I would probably expect a tax rate of around 20%.
Got it. And lastly, sir, what will be the normalized depreciation and interest for next year onward? I mean, next quarter onward?
I would say approximately about 100%-102% growth.
Got it. Thank you.
For the full year.
Got it.
Sure.
Thank you. Come back in the queue.
Thank you. The next question is from the line of Udit Gajiwala from YES SECURITIES. Please go ahead.
Yeah. Hi, sir. Thank you for taking my question. Sir, in the opening remarks, when you stated that you all are looking at around 550,000 kind of wholesale volume number for this year and domestic should grow by 30%. So basically, what gives us the confidence that we'll be able to expand our market share with this quantum given that there are a lot of players who are a bit aggressive now with the new capacity?
Okay. So you'll have to break up that figure. So what we are saying is on the existing two lines, one at Uttarakhand and one at Andhra, we are targeting 10%-12% volume growth this year. And we are targeting a 35% capacity utilization in the new plant. So here, if you look at it, we'll primarily be producing the thin MDF. And until very recently, almost 60% of the thin MDF was being imported into India. Now, imports have come down substantially. So during March and April, it has been approximately about 1,100 cubic meters per month. So we think a large part of that market share can be captured by us.
Got it. Sir, secondly, I mean, on margin front, right? If we eliminate the benefit of EPCG that we are getting, on a steady state, what kind of operating margins can we see for MDF in FY26 and also for plywood?
I think I would be looking at approximately a 12% margin in MDF and a 7 to 8% margin in plywood.
Okay, so for MDF, basically.
Of course, excluding the EPCG incentive.
Right. Okay, sir. Understood. Sir, I'm sorry to again come back to this one. This EPCG benefit, so you'll be taking that impact quarterly as per the sales? So the balance is INR 50 crore?
That's correct.
Okay. So for seven, eight quarters, for two years, like you mentioned. So for eight quarters, we mentioned quarterly.
Yeah. It could be anywhere between six to eight quarters.
So eight quarters. All right. That's helpful. I'll fall back in the queue.
Thank you.
Thank you. The next question is from the line of Bhargav from Ambit Asset Management. Please go ahead.
Yeah. Good evening, team, and thank you for the opportunity. Sir, just to understand this EPCG thing in more detail, is it fair to say that it is actually a waiver on import of, it's a customs duty waiver which we would have paid on plant and machinery for MDF CapEx?
That's correct.
Okay. So as such, if we continue to incur more and more CapEx, this actually can be a sort of a recurring income, right, for us?
No. We won't be incurring any recurring CapEx. So our CapEx has been completed as far as the new line is concerned. So that's why I could put a fixed figure to it that the total is INR 86 crores. We have accounted for INR 35 crores in FY25, and the balance INR 51 crores is expected to accrue over the next six quarters.
The INR 35 crores has been also received cash in FY25, right?
It has been accounted for in quarter four, although it was for the full year because we could account for that incentive only after the plant was commissioned.
Okay. And in terms of cash flow, how much have we?
Although the export obligations were completed earlier, we could only account for it in quarter four after the installation was completed and commercial production commenced.
In terms of EPCG obligation, sorry. Just to clarify, EPCG obligation can be discharged at a company level. It is not specific to the plant that you have saved duty on. So because we had an ongoing export business from our previous lines, we were able to discharge the obligation even before this line had gotten commissioned, the new line had gotten commissioned. Understood. Understood. Secondly, sir, if you look at the last one year, Greenpanel has been making a lot of inroads into MDF led by sort of disruptive pricing. But now that they have reached optimum utilization level, is it fair to say that there will be a lot more price discipline now going forward?
Yes. You can say that. Yes. We're already noticing that.
From here on, I mean, it means that irrational pricing may not hold now that there is BIS also and optimum utilization has been achieved, right?
Correct.
Okay. So.
So due to the BIS implementation, so we also see the threat from the unorganized segment minimizing going forward because when the new standards are declared and brought into notification, for compliance, there will definitely be a cost increase on account of the unorganized players. And that would result in lesser price-cutting power on their part or even to the extent of passing on some of that cost in the market, minimizing the difference between the organized segment.
Sure. And just last clarification, this balance INR 50 crores that is pending on the export grant, which will be accruing over the next two years, we can assume that the cash flow will also be commensurate, right? Hello?
Venkat ji.
Yeah.
No. There's no cash flow impact as such. Basically, by importing the machinery under EPCG scheme, we have avoided a cash outflow.
No, no. I'm saying you were.
So now we are discharging the export obligations against that customs duty saved.
I'm sorry. You haven't saved the customs duty, and hence there's no cash flow impact.
Correct. Yes.
Okay.
In a way, we already saved this cash flow at the time of capital expenditure.
Okay. So to that extent, there was an increase in KPEX, which is now getting reversed. That's the right way to look at it. Hello?
Hello? Bhargav ji? I couldn't get that. What did you say?
No, sir. What I'm trying to say is that when we import, we would not have paid customs duty, but still we would have accounted as a payable, which we are reversing.
Correct. Correct. That's correct.
That's right. Understood. Okay, sir. Thank you very much. Thank you very much.
Thank you. The next question is from the line of Utkarsh Nopany from BOB Capital Markets. Please go ahead.
Yeah. Hi. Good evening, sir. Sir, my first question is on your MDF volume growth side. So if we see for March quarter, our domestic MDF volume has degrown by 25%. So can you please explain the rationale why we have registered such kind of a sharp degrowth in our volume?
As mentioned in the comments, in quarter four last year, because of the BIS compliance, we had zero sales of commercial-grade MDF, which we had discontinued consciously, as opposed to almost 40,000 cubic meters of commercial-grade sales in the corresponding quarter last year.
Okay. So if we have discontinued the commercial-grade sales, is it not likely that our domestic volume is also likely to get impacted in the coming quarter's time? And we are expecting our domestic volume to grow or the existing line volume to grow by 11%-12%. So I wanted to understand how we are confident of growing our existing line volume by 11%-12%.
Yes. Because the consumption, whichever segments or customers were consuming the commercial-grade MDF, now will have to satisfy their requirements with BIS-compliant MDF. So demand has not gone anywhere. It is just a matter. The case is that it will now get replaced by BIS-compliant MDF, which was earlier being satisfied by commercial-grade MDF because no one now can offer non-BIS-compliant MDF anymore. So the demand continues to remain there. And even if they choose to fulfill this by way of imports, it would also again have to be BIS-compliant MDF. That's the whole point of the QCO being in place.
Okay. And sir, in the current June quarter, do we expect our volume to grow at around 11%-12% rate on a YOY basis?
We are seeing that even at the moment, the unorganized segment is not fully compliant because there is, let's say, a grace period for the BIS compliance. So of course, the first quarter, although it's too premature to say, but the first quarter is still a bit muted. But we expect this to grow over the full financial year, the numbers that we are talking about.
Yeah. Fine. Got it, sir. And second thing, sir, on margin, if we exclude the benefit of EPCG, then our margin has come under pressure on a quarter-on-quarter basis, and it has gone below 5% level. And we are guiding that our margins to go up to around 12% level in FY26. So I wanted to understand why we are so hopeful that our margin should recover to such a good level in FY26 when we are seeing a margin pressure even on a Q1Q basis.
Okay. There are two reasons why we are expecting an improvement in the margin. One is we are focusing 10%-12% growth in domestic volumes from the existing plants. So improving capacity utilization at the older plants will have a positive impact on the margin. We are expecting wood prices to come down this year compared to what they were last year. And the third point is there will be a very small increase in fixed costs with the new plant. So I'm expecting an annual increase in fixed costs of only about 5-6 crores for the new plant. So it will basically have a much higher operating margin as compared to the existing plants.
Okay. And sir, if you can just provide the data of timber price for the March quarter, what it was for north, south, and blended basis, and what it is right now in the current June quarter.
I won't be able to give you for the June quarter right now, so we will discuss that for the Q1 numbers, so at the moment, I'll just give you for the March quarter, so for the North plant, timber prices were INR 7.15 per kg, and for the South plant, it was INR 6.23 a kg.
Okay. Thank you.
Sorry. That was for quarter three. For quarter four, North was 6.44, and South was 6.22.
Okay.
These are the purchase rates, and the consumption rates were 6.67 for North and 6.38 for South.
Okay. Got it, sir. Thanks a lot, sir.
Thank you. The next question is from the line of Yash Bhutra from Anand Rathi Share and Stock Brokers. Please go ahead.
Sir, basic question. With respect to consumption pattern, how has been the sales mix with respect to retail level and B2B level? I mean, who are our main buyers? Is it contractors, or is it the OEM manufacturers?
Okay. If you look at it in terms of sales network, it's primarily B2C because almost 85% of our sales happens through the channel, and only about 15% is to the OEM manufacturers. If you look at it in terms of consumption, the majority of the MDF uses raw material in producing ready-made furniture.
Okay. And since.
In consumption terms, it's more B2B.
Got it. And sir, with respect to procurement of raw materials, is it the auctioning happening at the timber procurement sites, or how do we make sure that we are adequately placed with raw materials so that capacity doesn't remain idle?
See, depending upon requirements, we decide how much volumes to be purchased from which area. So if the requirement is small, we purchase from a local area, which may be within a radius of 30-50 km from the factory, and if we require larger volumes, we go over a larger area, which could be, say, 150-200 km, or in extreme case, even up to 400-450 km from the plant.
Okay. But do we have contract arrangements with farmers because these are now not sold from forest, and these are all plantation-grade timber? So how does things work?
See, yeah. We have a network of contractors who procure most of the material for us. Apart from that, we have a few farmers who come directly to the plant and supply the material. But that would be a small proportion of the total.
Okay. Thank you, sir. Thank you for answering my question.
Thank you.
Thank you. The next question is from the line of Karan Bhatelia from Asian Market Securities. Please go ahead.
Hi, sir. Am I audible?
Yes.
Yes.
Sir, I just wanted your clarification and thought process on the margins for the MDF. Now, if you see in the fourth quarter, we are zero commercial-grade, like we are selling zero of the low-margin product. Now, assuming that the value-added portfolio percentage remains the same, what will give us a confidence of a double-digit margin? So where are you coming from?
As I mentioned earlier, there are three factors. One is the improved capacity utilization in the existing line. The second is fall in wood prices, and the third is I mentioned that fixed costs will be very low at the new plant. We will be adding only approximately INR 5-6 crores of fixed overheads for the new plant, so these are the three reasons why we are expecting a better operating margin compared to quarter four.
The Q4 export margins were at 1.75%. At 80,000, what could be this margin profile, assuming that majority is thin MDF exports?
No, majority may not be thin MDF imports. So I won't comment on that. We will see at least two quarters of export performance from the new line. So basically, depending upon how wood prices behave, margins are expected to be slightly better compared to quarter four. But since I don't know how raw material prices will behave exactly, at the moment, what I'm estimating is about a 6%-8% reduction in wood prices next year.
Right.
So as each quarter goes, we will get a better idea. So I'll probably have a better estimate in quarter one.
Okay. And what are the sales and marketing expenses for the year gone by?
I think we would be spending approximately about INR 20 crores.
Okay. Thank you. That's not bad.
Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Udit Gajiwala from YES SECURITIES. Please go ahead.
Yeah. Thank you for follow-up, sir. So if you can just elaborate, what will be the CapEx cost for the coming fiscal?
So we are not expecting any major CapEx. So I would say approximately 25 crores of the balance CapEx for the new line. And maybe if we decide to do some small CapEx for the existing business, I would put that at a maximum of about 10-15 crores.
So not more than 40-45, what crores for the full year?
No, I would say not more than 30-35 crores. Yeah.
Got it. Thank you for the example. Thank you.
Thank you. The next question is from the line of Arun Baid from ICICI Securities. Please go ahead.
Yeah. Shobhanji, if you could just tell us, what's the ballpark expected realization for the new thin MDF line in India?
Sorry. New thin MDF line in India?
Yeah. The ballpark expectation of realization is there.
Arun, you see, today, our realizations are close to about 30,000 cubic meters, which is a combination of pre-laminated, value-added products, etc. But if I talk about the thin MDF line on a per cubic meter basis, this would be about 15%-20% higher. But you shouldn't put that 15%-20% on that 30,000 figure because initially, a majority of the sales will be of the industrial product. So for the thick-grade MDF, industrial MDF sales is approximately about 25,000-26,000 per cubic meter.
So would it be fair to say that the blended basis is going to have similar thin-grade MDF with your value mix there also?
See, it may take some time for the value mix because even for the existing lines, it's possibly taken us about 15 years to build up a 50% mix of value-added products. So I wouldn't say it would take such a long time, but for the new plant to have the same mix of value-added products, it's possibly a three-year exercise.
Just one clarification. I'm not clear. So we were saying that we expect about 11%-12% growth in our India business on the volume front, right? This year, whatever you have done.
Pertaining to the older plants.
Yes. Yes. And plus 84,000 from the new line in India. Am I correct?
No. 72,000 from the new line in India.
Okay. And from export? And 11% growth on the India business on the new existing lines, right? And the exports, you mentioned 80,000 CVM. So we did roughly around 70,000 CVM this year. So basically, we are not expecting any major things from exports from the new line?
Arun, at the moment, we've taken a very muted number from the new line for the exports. I mean, this is, of course, a conservative number for the time being, and it should be we are focusing on opening up the markets and exploring the markets on this as well, but at this point of time, because the line is not yet fully settled and timber prices are also not very clear to us, hence, at the moment, from the new line, we've not allocated a very large capacity for the export market.
Okay. Okay. Thank you. Thank you, Shobhanji. Thank you very much.
Thank you.
Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Sir, what was the commercial-grade non-BIS compliant sale in FY 25? And secondly, this sale possibly will be now BIS compliant. So it is quite possible whatever the sale you might be doing, that might be now split between all the players.
See, like I mentioned, for the commercial-grade MDF, sales was nil in quarter four.
Okay?
But if you compare FY 25 with FY 24, it was almost similar. The two years were almost similar, approximately 70,000 cubic meters each year. Now, post-implementation of BIS, neither domestic players nor importers can sell non-compliant BIS material in India. So nobody can manufacture or sell commercial-grade MDF in future.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank everyone for joining this call, and we look forward to speaking to everyone after the next quarter. If anyone has any further questions, please feel free to reach out to us. Thank you, and good evening.
Thank you, everyone, and good evening to you.
Thank you very much. On behalf of Greenpanel Industries Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your line.