Ladies and gentlemen, good day and welcome to the Greenply Industries Q1 FY26 earnings 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 this 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. Karan Bhatelia, Intime India . Thank you, and over to you.
Hi everyone, good morning. On behalf of Asian Markets Securities, we thank you for joining us on the Greenply Industries 1Q FY26 conference call. In the panel today, we have Mr. Manoj Tulsian, Joint Managing Director and CEO, Mr. Sanidhya Mittal, Joint Managing Director, and new CFO, Sanjeev Keshari. We now invite Manojji to begin the proceedings of the call. Thank you, and over to you, sir.
Thank you, Karan. Good morning, everyone. It is a pleasure to have you all on this call. I will be updating you on Greenply's operating and financial performance for Q1 FY26. This quarter, we continued to face some liquidity challenges, which also somehow resulted in a delay of commencement of a few new projects. While our performance in April and May aligned with our expectations, June was relatively subdued compared to even historical trends of the last four or five years. Even some of our regular channel partners faced challenges and could not pay us on time in the month of June. Having said that, we have seen a decent recovery in the month of July, and we are confident that Q2 FY26 will definitely outperform Q1 FY26. I would like to share with you that we have achieved a consolidated quarterly revenue of Rs.
INR 601 crores with a growth of 2.9% on a year-over-year basis. Our consolidated core EBITDA for the quarter was at INR 62 crores, a growth of 6.4% on a year-over-year basis. The core EBITDA margin for the quarter was at 10.3% as compared to 9.9% in Q1 FY25. PBT before the losses on equity-accounted investments, foreign exchange gain/loss, as an adjustment to finance cost, and exceptional item is at INR 50 crores for Q1 FY26, which is a 33% year-over-year growth against PBT of INR 38 crores in Q1 FY25. Remember, last year in Q1, we also had a one-off income on account of income tax refund to the extent of INR 12 crores. Hence, we just thought we will also educate on the numbers at PBT level, removing that exceptional item. Let me now share the highlights of our individual business segments.
As mentioned earlier, June was a relatively subdued month, which resulted in a marginal volume degrowth of 3.1% year-on-year in our plywood segment. However, we remain optimistic towards the later part of the year, supported by favorable industry tailwinds such as the implementation of BIS norms and softening in timber prices going forward. The realization for the plywood segment grew by 4.1% on a year-over-year basis, reaching INR 255 per MSM. On the margin front, our core EBITDA margin for Q1 FY26 was 7.9%, as against 7.8% in Q1 FY25. The margin improved on a year-over-year basis by 10 basis points. I'm pleased to announce the rollout of our first-ever television commercial campaign on Ecotec, "Tham Sahi, Dam Sahi," where our objective is to drive deeper brand preference in the plywood segment by connecting with the budget-conscious yet quality-seeking Indian consumers.
With this campaign, our aim is to build stronger awareness for Ecotec as a reliable value-for-money plywood solution, especially in markets where the prices play a major role. We want to reinforce that good quality doesn't have to come at a high cost, and Ecotec delivers the right balance of performance and affordability that today's customers expect. It's a strategic approach to grow penetration in Tier 2, Tier 3 markets and drive demand at the dealer level. Moving on to MDF business, our revenue in Q1 FY26 was INR 147.3 crores and volume at 46,350 CBM. While our realizations improved to INR 31,763 per CBM, which is an increase of 3.1% on a year-over-year basis, our EBITDA margins also improved to 17.4% as against 15% in the previous quarter, and we are confident of achieving double-digit volume growth and 16% plus margin guidance in FY26.
More details on the MDF business will be shared by Sanidhya. Moving on to our furniture and fittings JV, we have started making sales from this quarter, achieving a nominal revenue of INR 6.5 crores. The JV reported a book loss of INR 10.8 crores for the quarter, with our share of loss amounting to INR 5.4 crores. Our net debt stood at INR 538 crores during the quarter, primarily elevated due to inventory build-up mainly in the plywood segment in response to import restrictions and in MDF ahead of a planned shutdown. Both inventories are expected to be liquidated by the end of H1 FY26, and hence we remain confident that our net debt will decline and return to the guided level of 0.5 by the end of the year.
With respect to our operations at Greenply Middle East Limited, we have successfully reduced our stake from 49% - 19% now, reducing the exposure from $5.8 million - $3.8 million on the guarantee front. As a result, our continual liability has, in rupee terms, reduced from INR 50 crores to INR 32 crores. With this statement, I would like to hand it over to Sanidhya to provide more insights on the MDF business.
Thank you, Manoj, and good morning to everyone on the call. In our MDF business, we have done exceptionally well in this quarter. Our sales in the quarter have shown an 11.7% year-on-year improvement over the last quarter in terms of values. Our EBITDA margins improved to 17.4% from 15% in the previous quarter, which was mainly achieved due to an increase in sales and optimizing operating overhead efficiently. Our Vadodara plant is operating at full capacity, and hence we plan to expand our capacity in the month of August 2025. Construction of the HDF flooring line is completed, and trials are ongoing. We'll be starting production of the same in September 2025. Going forward, our focus will be on sales of more value-added products and improving operating efficiencies further. With this, I would like to open the floor for Q&A session. Thank you.
Thank you very much. We will now begin with 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 Pranav Mehta from Equirus Securities. Please go ahead.
Yeah, good morning, team, and thank you for taking my question. Sir, I wanted to understand on the Plywood Business a bit more. Basically, if you see, you have built up inventory during the...
Mr. Pranav, Mr. Pranav, give me a moment. Actually, the management line has got disconnected. Let me reconnect them again, then you can ask the same question. Ladies and gentlemen, thank you for being on the hold. The line for the management is now reconnected. Also, a reminder to all participants, you may press star and one to ask a question. Sorry for the inconvenience. The next question is from the line of Pranav Sahai from PI Capital. Please go ahead.
Hello. Am I audible?
Yes, Pranav. Yes, yes.
Yeah, Praveen SahaI from PI Capital. So my question is related to the MDF. As you had said, you are taking an expansion in the capacity. So if I look at your utilization, which is last year nearly around 70%, or even for this quarter, it's around 75%-77% of utilization. So in that utilization, and in the last year, we had seen that quite a lot of capacity came in. In that juncture, why is the decision to expand the capacity? Why not improve the utilization to a more, or at what level you can reach to?
So I think when you look at the utilization, you are directly going to the capacity of MDF versus what we are producing. Actually, the capacity keeps changing depending on what product mix you are producing. So with the current product mix that we are producing, we are almost utilizing 90% capacity. That's one. Secondly, when we are expanding or going for capacity expansion, we are not doing CapEx to build another line. So our existing line with a very small CapEx will be able to churn 25% more output. So that was already planned from day one, and all the balancing equipment in the factory, other than the press, is already planned for 1,000 cubic meters. So we'll have a two, two and a half, three-week shutdown, where quickly we'll ramp up the production by 25% by expanding the press.
How much of the CapEx you are doing for this?
Around, if I'm not wrong, it will be in the range of INR 10 crores-INR 12 crores, not more than that.
Okay, okay. Next question, sir, related to the timber pricing. If you can give a color on the plywood timber and the MDF timber prices, how has it been, and what are your expectations for the rest of the year?
So plywood timber prices are almost stable. Whether we see it from last year quarter one or actually last year, most of the time, the plywood timber prices were more or less stable, except I remember in quarter three, it bumped up again, and then in quarter four, it slightly softened. It's in the same range. MDF, the timber prices have slightly reduced in quarter one, I think by around 2%-3% approximately.
So plywood prices nearly around INR 9.5 crore per kg, and the MDF prices reduced to some INR 6 crore per kg around. And any guidance for the rest of the quarter, sir?
See, guidance we are given is an annual guidance, and going forward, it looks like now that with the new supplies coming in, the prices, as we mentioned, either will stabilize or will start coming down. But I think my team is saying that we're going to only expect that around quarter three and quarter four of this year.
Quarter three and quarter four?
Only, again, like in quarter two, because of the rainy season and other issues, it slightly goes up, but then within the quarter only, it also comes back. There's a movement which happens within the quarter, but by the end of the quarter, it is back to the same levels.
If I may, last question related to the MDF Plywood Volume, because on the PYY side, we had seen a degrowth there. Even if I compare the last year, you are a single digit of a growth versus a peer of a double digit of a growth. What are your expectations for the next three quarters? It is expected to improve from here or the guidance, what you had given so that double digit of a growth it's going to meet, and what's your take on that?
See, I think guidance will make more sense after quarter two because quarter one, which I mentioned in my opening speech, June was a big surprise. We have not seen this type of a poor June in almost the last four, five years. So otherwise, we were well on track even for a growth of. But yes, having said that, July is definitely looking better. July has picked up. We had a lot of challenges in the month of June in terms of even collecting our receivables from our channel partners. That also has improved quite a bit.
I think for the full year, double digit looks difficult now in terms of volume growth in plywood, but I still feel that we will be able to give you better guidance because I'm very hopeful that maybe we'll really bounce back very well in H2 for this year, and even quarter two will be much better than quarter one. I'm just holding my guidance for a quarter because at this point, if I say that, yes, we will do 10% volume growth, it will look very irrational. Okay. And on the margin front, for sure, even if we are going to miss on 10%, but sorry, for the full year, if we are able to do a decent volume growth, we'll still be able to do a double digit margin in plywood because of the operating efficiencies. In MDF, for sure, we are on track.
We are on track for a double-digit growth, and on the margin front, for the full year, we are given a guidance of 16% plus. This quarter, we were at 17.5%, so I'm very sure that we'll be able to meet our guidance for MDF.
Thank you, sir, and all the best.
Thank you.
Thank you very much. The next question is from the line of Sneha Talreja from Nuvama Wealth. Please go ahead.
Hi, good morning, team, and congratulations on a good set of numbers. A couple of questions from my end. Firstly, just speaking about health, you mentioned about raw material prices going down. Is it getting passed on in the domestic market? Are you seeing players passing that on, or are the prices being reversed? And everyone is trying to gain on margins. That one thought, please.
I think if you talk about quarter one, I think prices were quite in control. People were not passing on. But if you talk about the current quarter, yes, people are passing on. There is a lot of fight for price in the market. But I think we have the smallest capacity compared to anybody else, compared to our peers to sell. So the desperation at our end should be lower than at anybody else's end. So hence, in spite of a fight and in spite of the price going down and the timber benefit getting passed on, we still feel that we'll maintain our guidance.
Wonderful. But when we are so the question is more broader now. We were assuming that this time when raw material prices fall, there will be some retention, which will be happening, which is probably not being seen in the case of even our channel checks. So the idea was to understand when do we see this coming up, that finally there is less of competition and pricing coming into play because these margins, for sure, in the long run for everyone is not sustainable. So some thoughts here from you would be helpful that when can you actually see that bottom getting hit and margins improving? Probably not for us, but the question has been from the industry level.
I don't know. Maybe the unorganized needs to shut shop. Some of the smaller players need to die, and the larger players need to be satisfied with their capacity getting sold in the market. I think that's when the industry can come to a conclusion and everybody start making better margins. Till then, honestly, everybody is equally affected, and everybody is getting affected as far as margins are concerned.
Have you seen any of these things happening?
Sneha, so just to add to that, I think when you look at the overall capacity today versus utilization for the industry, there's a gap, and see, in this business, it will always happen because when the margins start shooting up, you will see suddenly too many capacity.
Miss Sneha, give me a moment. The line for the management has got disconnected. Let me reconnect them.
Sure. Yeah, hello.
Ladies and gentlemen, thank you for being on hold. The line for the management is now reconnected. Miss Sneha, you can ask your question now.
Yes, Manoj Sir was answering. Manoj Sir, you were answering a little bit of it, yeah.
Yeah, yeah. So what I was saying, Sneha, that in this business, it will always happen that when the margins actually start going up, slightly goes on the irrational side, you will see new capacity commitments coming in, which is exactly what happened around one and a half, two years back. So when you see most of the capacity now in place, there will remain a pressure on the margin. But I think this margin pressure, because of possibly reduction in the raw material prices, will be able to get absorbed. Yes, it doesn't look like that in the immediate future, like we are talking about 16% plus. Today, we are not in a capacity to talk about 19% or 20% plus. Seems by next year, because the growth is there in this business, in MDF, for sure, a 15%-20% growth.
So by the time we enter the next year, you will see a lot of semblance in terms of capacity versus demand. And then, according to me, the prices should start moving up. And then again, you will see a cycle after two, three years that new capacity again starts hitting the market, maybe after three years. So there will be a good period of 24-30 months again after a year when you will see margins will be much better in this business. That is what our take on the whole thing.
Sneha, absolutely agree. Thanks a lot for this answer. Just one last bit on the hardware front, in case I mean, how has progress been in that particular business? Of course, we are seeing losses at this level. But where do we see this breakthrough happening in the hardware part of it? And how has your entrenchment been with respect to OEMs versus retail? Some color would be helpful here.
Too early. We just did around INR 6 crores only in quarter one, less than INR 6 crores. Okay. For this year, we had, in any case, as per the business plan, also there is a level of loss would be there in this business. By next year, there will be a sizable growth which will happen. While we speak, we have already onboarded more than 200-plus dealers with whom we have started interacting. Then again, there is a phase one and phase two. Phase one manufacturing has started, and then there is a phase two and phase three, which will set up the machine and everything. Those things will also happen in the next mostly 12 months. Those things will also happen.
So once that happens, the margins will look much better because right now we are also dependent on a lot of imports, which is happening. That is one. Second, by next year, the business will also get strengthened because possibly the dealer base will cross 500 or 600 numbers. So the numbers will also start looking good. Yes, I can clearly say that the product acceptability in the market is very good. The report on the quality, on the life cycle, and everything has been very, very encouraging from the dealer, even from some of the OEMs at this point of time. So I think we are on track. But yes, we'll have to give this business another four to six quarters for it to really start showing some good, decent numbers.
Understood. Sorry, Sir, one last one. Since you just spoke about this new hardware business, you have once again initiated one more new business, which is the wooden, which is the doors and the profile part of it. Just a couple of things here. What is the logic of getting into this particular business? That's one. How big is the opportunity size according to you? What's our right to win here? So a couple of these aspects would be helpful.
I think I'll answer that question. In WPC and in PVC, firstly, they're not entering this category newly. As far as production is concerned, yes, we're trying to enter. If you look at our existing volume, we're almost selling annually about INR 65 crores of PVC products. The idea is to have our own manufacturing and give our entire dealer distributor network the confidence of the quality manufacturing that we do in-house. That is one. Number two, with in-house manufacturing and quality focus, we'll also be able to increase sales. Also, all the products that we're trying to manufacture in PVC, whether it is foam board, whether it is WPC doors or WPC door frames, I think all these products are products which are eating into our core products. A PVC foam board today is replacing a plywood in the market to a small extent.
Greenply wants to innovate and ensure that any conversion that's happening in plywood or in the flushboard segment comes back to Greenply. So I think this is always our focus. We've been in this category for five years now. We finally understand how the sales works. I think now we're going to learn the manufacturing as well. And if you look at the asset turn and if you look at the total CapEx, I think it's very, very small or minuscule. So we don't look at that as a challenge. We look at that as an opportunity that we can really create a segment of PVC products and further help our plywood business keep growing.
Understood. Thanks, thanks, thanks a lot, Sir. Thank you so much.
Thank you. I request each participant to ask two questions only. The next question is from the line of Guru Darshan from Kitara Capital. Please go ahead.
Thank you, sir. Just wanted to understand, is there any specific reason for realization growth in plywood when the volume is declining?
Sorry, your voice is breaking. We are not able to get your question properly.
Mr. Guru, please please answer.
No, no.
You are audible now?
We are audible, but the voice is not clear, so we are not able to pick up your question.
Is it better?
Yes, slightly better, yes.
Yes, it's better. Yes, I just wanted to understand, is there a specific reason for realization growth in plywood when we have the Plywood Volumes declining in the current quarter?
No, so we had taken price increase even in quarter four, which we had mentioned. Okay. So this is when you are looking at the realization, the realization with respect to Q1 of last year. And last year, we had taken maybe two or three price increases. So now that the entire thing is factored in, that is to some extent visible in the overall numbers.
So in the current quarter, you have recorded around INR 4 crores loss from the GMEL. What would be the further impact for the rest of the quarter from this one?
So the good part is that during the quarter, we were able to reduce our stake further. We were able to sell another 30%. While those 30% was being sold, it was at a price which was slightly lower than the book value, carrying value. So there is a loss which has got booked on account of the same. Also, since the transaction took place during the quarter, we had to pick up till the date of the transaction, the losses, our proportionate losses in that business. But now that we are at 19% equity, we don't need to pick up any further losses from that business. So we are now fully away from that business except the value of 19% of our equity, which is like, I think, close to around INR 2.5 crores-INR 3 crores.
And the other thing which I mentioned in my opening call, that we had a corporate guarantee, which was at the time of our first deal, when we had actually sold 49% sorry, 51%, we were at a counter guarantee liability of $5.8 million. Actually, more than 6.5.
6.1.
Huh?
6.1.
So we had given a corporate guarantee of $6.1 million at that point of time, which is now also reduced to $3.8 million.
Okay. Okay. Got it, sir. Just one last question. Is there any other one-off gain apart from INR 4 crore stake sales in other income?
Sorry?
Is there any one-off gain you have recorded in the other income apart from INR 4 crore stake sale of GMEL?
I think there is something more also on this. One minute. Maybe our team can explain to that because.
I think we're being routed, which was the big problem for.
So I think there is a reconciliation which can be shared separately because of these transactions at standalone level and at consolidated level. There are three or four different treatments which have happened. So I would say that maybe our team can reach out to you and they can share the reconciliation with you for your understanding.
Yes. Just one quick last question. Net debt, sorry, gross debt has already increased like 11% in the current quarter. What is the use? What is it used for? Is it for funding working capital?
Yes. Mostly, it has gone for working capital. Two, three reasons. One, we had built up inventories in plywood also. Okay. That we had a plan that most of it will get liquidated by Q2. So there will be a level of liquidation which will happen. That is one. Second, we also mentioned that we have planned a shutdown in MDF in the month of August, September. So for that, so that we are not out of market, we have already created an inventory, a decent inventory. That will also get liquidated mostly by end of September. Third, as I mentioned, that liquidity in terms of collection side from our channel partner was also slightly tough. So you will see that our number of days on receivables, both in MDF and plywood, has gone up.
I believe that there is enough liquidity where RBI has also taken a lot of measures to put back the liquidity into the market. So that also will improve in quarter two. And I'm sure by quarter three, we will be reducing our number of days on receivables. So mainly the.
So your payables have gone down?
Yeah, payables have gone down. Yes, you are right because some of these imported purchases which were being done in the month of around December, January, February, all of them, the money became due to be paid in the month of April, May, June. So that was against LC. So we had to pay off those LC payments.
Got it.
So these are all planned. This was all planned. I think somewhere in the month of March, it says in that call I had mentioned also that the debt will go up, but by end of September, it will come down significantly.
All right. Got it. Got it, sir. Thank you so much and all the best.
Thanks. Thanks.
Thank you. The next question is from the line of Ritesh. From Investec. Please go ahead.
Yeah. Hi, sir. A couple of questions. Sir, first is I'm a bit confused on corporate guarantee. I think there are three parts to it. One was Gabon, I think, which you explained in brief. I think the second, we have something other in Samet JV. And third is we have something at the Singapore entity. So can you please highlight, I think, specifically with respect to Gabon, you indicated that the residual is 19% equity and it's close to INR 2.5 crores-INR 3 crores. Did I pick it right, sir?
Yeah, yeah. So whatever I said was only on account of our Gabon entity. Okay. The other corporate guarantees, which you are right, which is extended for loans, even for our MDF business as well as for Summit business, those corporate guarantees are separate. But this was a liability. This was a sword which was hanging on us because when even we signed off this deal with the buyer, they were very clear that if in case we withdraw these guarantees, the bank loan which was this was a collateral to that bank loan. And the bank loan was around INR 240crores-INR 250 crores in that business, Gabon business. So if you would have withdrawn that at that point of time, the deal one, the deal would have never happened. Second, in that case, this was a liability.
The whole liability was on us, which was like INR 50 crores at that point of time. So one of the clauses which we mentioned and which we agreed with the buyer was they will take all the endeavor to help us to reduce this corporate guarantee going forward. So in the last one year, we have been able to reduce this from a level of INR 6.1 crores to now INR 3.8 crores. So to that extent, also, it is a gain to us. And now for the 19% equity.
Sorry, you mean million dollars? $6.1 million, $6.3 million - $3.8 million?
Yes, yes. $6.1 million-$3.8 million, and this 19% now has an equity carrying value in our books to the extent of around INR 2.8 crore or something, so at worst scenario, if we are not able to sell this off and this remains, then maybe at some point of time, we might have to take this hit of INR 2.8 crore in our books, but no more operating losses will now get you, you will be able to see from quarter two, so that sword is over. That risk is over now from us.
That's helpful. Sir, the corporate guarantee versus Summit, is it same INR 65 crores or has that number changed?
No. It's not INR 65 crores. It's INR 55 crores. And that remains same.
And so specifically with Singapore entity?
I don't think for Singapore entity.
Guarantee is linked with zero.
We had an outstanding of around $2.5 million-$3 million. So.
No guarantee is given, but it is outstanding.
One minute. I think there is a guarantee. But if you want the details, again, the team can share with you the details on the corporate guarantees. What my team is saying that there is a guarantee still, but there is no outstanding against that guarantee now. So in a way, that guarantee will also get released, which is how much now?
It's 3 million.
$3 million. There is a guarantee of $3 million. But I think it's a banking process and everything because there is no utilization of the same. It will get released.
Sir, what was the end use for this particular guarantee with respect to the Singapore entity?
Working capital.
Okay. So this was one bookkeeping. Sir, my question specifically on MDF is, and also to some extent on ply, how are we looking at the implementation of BIS and QCO? Based on our checks on ground, what we understand, I think the norms under BIS has actually got diluted. Does it put a risk on our product offerings in the marketplace? And will it necessarily force us to downtrade further?
I don't know, I mean, about your information. But see, there are two legs. I mean, I don't know the basis of your statement. So if you can exemplify the basis of your statement, then maybe I will be in a better position. I look at this as a very positive thing. Okay. Wherever I am talking in the industry, in even other categories, there's a lot of effort which is being taken by the government already. There are raids which are being conducted in the market, in the factories. So things are moving in a positive direction, and that's why I still maintain that I am quite bullish on our H2 and even going forward because this is a big change which is taking place in the country.
Even imagine if BIS doesn't get implemented properly, why would the government go ahead and even declare BIS on furniture from February 26? The intent of the government is absolutely clear. They want India as a make-in-India hub for furniture for export purpose. That confidence will only come in the importers worldwide when they will see that India has significantly improved both from the governance perspective, which means there is a pressure from the government also, and then the companies also follow that as a discipline. So I don't see any reason that these things are getting diluted or will get diluted. At least I'm not aware of it. Can you be more specific on why are you getting that as a feeling?
Yeah. Sir, I'll call you separately for that. We have a published note.
Sure, sure.
I'll send it across as well. Sir, I just want to do the next question on QCO. In the prior quarter, you had indicated with respect to MDF, there's a lot of inventory in the system. And the hopes were basically it will get rid of by Q1. Sir, any commentary over here and any hopes on price increases given this inventory will be done away with?
Inventories for sure. My understanding is that it is mostly done away with. Sanjeev can add color to that. And Sanjeev, pricing, if you want to comment anything on pricing also.
So you were talking about the import inventory getting over and then the pricing is moving?
Yes. Yes.
Yes, Sanidhya. Yeah.
Yeah. So I think the import inventory has obviously come to an end. But still, domestic oversupply continues. I honestly don't see any price increase going further. But neither do I see the existing scenario as a challenge for Greenply. We have only one line of capacity to sell. We are such a huge brand name and such a large network of dealer distributors. I think we need to spread our wings further and further penetrate the market and ensure that our number in terms of capacity utilization as well as margins are at least fair, if not great. So that's what our target is in the current scenario.
Perfect. Just two last quick questions. Sir, how should we look at the impact of Lira versus INR, specifically with respect to the Samet JV? Does it change the underlying economics? And I think we had plans wherein we will cater to certain global orders with Summit had from their base facility. That is one. And second question is for Sanidhya. You indicated PVC, it's around INR 55 crores. How should we see this business, say, three years out? Do we have big plans over here? How should we understand the scope of this business? Thank you so much.
I think for PVC, I'll answer first. At least we would look at a top line of anything between INR 200 crore-INR 225 crore in the next three years. That should be our internal target. And honestly, the machines that we are investing in at peak should give us around INR 170 crore. And we'll obviously continue a little bit of outsource that we're doing currently. So at peak, hopefully, three years from today, this business should give us INR 225 crore of top line. That's one. Secondly, you asked, what was the other question?
So on the Turkish thing, Lira depreciation or appreciation is not really going to make much difference to us because, one, this business is in India. We have a manufacturing facility in India. We have some imports from them where also, of course, they are also extending all their support to make sure that we remain competitive in this country versus the price which operates in the market. So we are not worried on the same. And third, in terms of export opportunity, yes, we have already got a trial order from them because they are still finding that the manufacturing cost in India is much cheaper compared to their country. So they have already placed one order. And I'm sure that the export side of the business will grow significantly.
Sure. Thank you so much for the answers. Wish you all the very best. Thank you.
Thank you. Thank you.
Thank you. I request each participant to ask two questions as there are several more participants in the queue. The next question is from the line of Utkarsh Nopany from BOB Capital. Please go ahead.
Yeah. Hi. Good morning, sir. So my first question is for your plywood segment. So I wanted to know our plywood inventory is almost double to INR 400 crore now at the end of June. And we are saying that we are expecting the inventory to go down in September quarter. So how much reduction in our inventory we are envisaging at the end of September? And do we see our plywood inventory again going back to the previous level of INR 200 -INR 2 25 crore, say, by the end of March, 26 quarter?
So I won't be able to comment on INR 200 crore- INR 225 crore. That will depend a lot in terms of how we are able to balance everything.
Okay. We are making a few changes in our business model also. I may not be able to share all the details at this point of time on the same, because of which there will be a natural increase in inventory in our system. Now, whether that will be around INR 40 croresINR -50 crores the way it looks like. Okay. So that is one. Second, the inventory will come down in quarter two. It also depends in terms of the demand supply. If by chance the demand is still slightly tapered, then maybe the reduction may not be that much more.
But if the demand normally Q2s are always very good, okay, in which case because somewhere we'll have to see then the inventory which we are carrying versus our plant production also. So a lot will depend on how these three months fare.
Okay, and sir, despite steep increase in our plywood inventory, our own manufactured Plywood Volume was down by 10% in this June quarter, whereas our outsourced sales volume was up 10%, so can you please explain the rationale why we are witnessing a steep decline in our own manufactured Plywood Volume versus trading volume?
So what is happening is that there are certain products which actually we are still as a model. It's an Outsourced model. So if my sales on those categories will go up, then suddenly overnight, I will not change it from a trading source material to manufactured source material. Okay. So definitely, all our premium products and everything is what we make in our plant. And the premium product sales was not so exciting in quarter one. Though the real estate data is very, very encouraging on that front at least. I mean, otherwise, the real estate has shown a 20% decline in volume across the metros if you compare on a YOY basis. But the premium housing sales is showing a very upward trend. But that is not reflected, at least in our numbers in quarter one.
Because of that, if my demand on products which we are sourcing from the market is high, you will still see that the trading volumes are higher. That is primarily the reason.
Okay. And, sir, lastly, if you can give some idea, what would be our estimated revenue and loss for the furniture hardware business for FY26? And what would be our CapEx guidance for FY26?
For the hardware business, see, I think this run rate, at first quarter, we lost around INR 5.5 crores our share. Looks like it can be anything between INR 15 crore-INR 18 crore for the full year. It's a very early guidance because, look, we are also now pushing our ranges complete. Everything is done now. The team is also in place. We are adding more people to the sales side also because we had started with a very minuscule sales team initially because the entire product range was also not there. So on one side, a certain level of cost will get added. On the other side, we'll continue to invest on the branding side. Last year also, we invested. This year also, there will be a decent investment on the branding side. I can only give you this as a ballpark number.
I might still go wrong on these numbers, but I think INR 18 crore-INR 20 crore is something which still might be there for this year as a loss. Max.
Okay, and on your Capex, sir? Capex guidance?
Capex side. So we will have Orissa this year, right? We have the plywood upgradation. So that is there. Okay. We also have this WPC, right?
Yeah. I think our total CapEx during the year, including Orissa plant, can be in the range of INR 150 crores, around INR 150 odd crores.
Less than that.
Less than that? See, so there will be some spillover of Orissa plant. I don't know the cash flow. But for sure, anything between 100 to 140 would be the number.
Okay. Thanks a lot, sir.
Yeah.
Thank you. The next question is from the line of Mithun Aswath from Kiva Advisors. Please go ahead.
Yeah. I just wanted to understand any other areas that you're looking for where it could be adjacencies where you want to enter, like laminates or any other higher growth categories since plywood and MDF, there's quite a lot of competition. So just wanted to understand, like you've got into the furniture and fittings area, any other categories like laminates that you'd want to embark upon?
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Sure.
Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. So firstly, if we see about MDF industry growth, which you are talking about 15%-20%, but while guiding the growth for this year, you are guiding at double digits. How should we read possibly? How will you grow in line with the industry? And how are the things on the capacity expansion side? Mainly, possibly apart from Action, what Action and possibly the smaller players are doing.
So let me answer this, and then Sanidhya, they can add on this. When we gave the guidance, first thing, we were conservative. We said 10% plus for the full year. Okay. Yes. I mean, 10% plus 15%-18%, there is a lot of gap. But we wanted to be slightly cautious on the same. This quarter also, though we have grown at 7.5%, but June was, again, somewhere not so great even for MDF. Otherwise, for sure, we were well on target to grow at maybe around 13% or plus in MDF. When we are saying 15%-20%, we are saying mostly we are able to see that level of a growth in MDF business. But I can for sure tell you that, yes, we will mostly be because now once we add the capacity, we will mostly be in line with the industry growth for sure.
Sanidhya, do you want to add something on this?
Yeah. I think the industry will grow, and maybe this is another quarter where we'll have a plant shutdown, and again, it might be slightly lower double-digit kind of a number. But going forward, especially next two, we will target a higher double-digit number. For the full year, we'll still maintain our guidance. Key. We're going to do double-digit. But obviously, the internal target is to do the higher double-digit than the lower double-digit. So maybe closer to 15%, closer to 20%, between 15% and 20%, that's the internal target. But we'll still maintain our guidance at double-digit.
Got it. Sir, on this, which capacities are possibly will be added in the industry in FY26 and FY27? What sort of industry capacity will be added, including the unorganized?
Honestly, we are not competing with the unorganized in this segment, so we are not talking them at all. But as far as the four large players are concerned or the five large players, including us, are concerned, obviously, Action is the only one who's announced a capacity in South India. And at some point, when our balance sheet allows us to go for the next expansion new line, we would also like to come up. But at the moment, it doesn't look like in the next six, eight months, it doesn't look like we'll be able to announce another line. Once our existing line, the debt is slightly lower and we are prepared, then we'll definitely put up the next as well.
One last question from my side. So normally, we used to talk sort of a 25% normalized margin for MDF industry. So how do you see the path when the industry or possibly, I would say, Greenply will reach the 20% number? And when you expect whether 25% number is achievable, what is the sense as of now?
I think that's 25%. Every time in history, it was a seller's market for a very long time when there were not too many players. There were only two or three large lines in the country. So it was a very different scenario. I think all of us have got too used to those numbers. But I think anything between 20%-21% EBITDA will give us a very healthy ROC of about 20%. So I think if we can make 20% ROC in the MDF business over a 10-year average, there will be certain years where the margins will be low because of overcapacity, etc. And then when the capacity gets absorbed, certain years we'll make slightly higher margins. But we have to ensure that on a 10-year average, the ROC has to be more than 20%. So if we can ensure that, I think we'll sail through.
See, this type of 25% margin and this is again a possibility because now you will not see anybody announcing any new capacity in MDF. Hardly anybody will announce. So what happens is because there is a level of growth, when this capacity starts getting absorbed, you will see definitely the margins again started going up. Yeah, it can go up maybe for a period of one year, even to 23%, 24%, 25%. But then again, once the new capacities gets operational, you will again see the margin coming back to 15%, 16%. So it will straddle between these two numbers in a cycle of four to five years always. And the average over this period you will see will be between 18%- 20% over a five-year period.
Understood.
Thank you. The next question is from the line of Udit Gajiwala from YES Securities. Please go ahead.
Yeah. Hi, sir. Just one thing on MDF and the new line that you all are setting up. So from next year, say FY27, when we'll have the full capacity, how can we see the share of value-added products moving in terms of volume if you can give some light on that, please?
I think it will be difficult to give you a value-added product mix, but definitely it's going to substantially increase because next year, our flooring business will be fully operational. Obviously, the pre-lam and HMR is quite a high proportion even today, but we are further trying to grow that. I think all our efforts are in the right direction, but it's very difficult to give you a number. But it's fair to say that next year will be substantially higher from this year because the flooring will be in full swing and we'll get a full year turnover of the flooring business.
Currently, sir, when you mentioned that the pricing is being passed on into the market, so are you seeing substantial price discounting that has been done in this quarter? Or average, have you seen 3%-4% kind of a decline?
I would say maybe a 3%-4% type of a decline for players like us. But obviously, players where the desperation is very high and the capacity to sell is very high. I think there's even 5%-7% drop. But again, it keeps changing month to month. You can't consider this for the quarter. So that's how July looks like. I don't know how August and September will be.
All right. All right. This has been answered. Thank you and all the best.
Thank you.
Thank you.
Thank you. The next question is from the line of Vandit Shah from Abakkus Asset Manager. Please go ahead. The participant has got disconnected. Should we end the call here?
Yes.
Yes.
Okay. Ladies and gentlemen, we will take this as our last question. I now hand over the conference to Mr. Karan for closing remarks.
Sir, just one question from my end. How is the split between retail and B2B for us? And how has been the growth if I have to look at from last six to nine months?
I'll answer this question. I think we had a B2B focus, but it was very small as a company. Now, the fact that we're getting into hardware and we've got into MDF in a big way. So the OEM segment is growing for us. So I think in times to come, the B2B growth can be much higher. Our focus on retail was very, very high, and the B2B focus was much smaller than retail. I think in the years to come, the B2B proportion overall on the whole Greenply business will increase substantially. Also, if you see as a market share, I think slowly the business, certain business from retail will also move to B2B because the way the trend is changing and people are moving towards ready-made. So ultimately, the materials will move through OEMs to the end consumer instead of shops to the end consumer.
We are gearing up for that.
Right. And last question from my end. Are you satisfied with the MDF reach in terms of channel partners, what you were expecting before the commissioning of the project, and how you stand now? Or do you think there's much more that you can do in terms of adding deep channel partners, adding new SKUs, mostly on the value-added side?
So, I think at our end, the problem is we are never satisfied. So even though the set of numbers are quite decent, but if I'm satisfied, my entire team will be satisfied. So I'm never satisfied. We're always trying to push more. And market and marketing is such that no matter how much number you do, your goalpost keeps moving. So I think long way to go. Our MDF business is very, very small, and it's only three years now. Two and a half years. Two years with that. So I think long way to go in terms of penetration, appointing dealers, and setting up many lines.
Sure. Sure. Okay. Thanks for this conversation.
Just to add to this, Karan, what happens is that our strategy in terms of moving from one product line, which was plywood to MDF and hardware, gives us a lot of leeway in the entire channel, whether it is OEM or whether it is our B2B business, the project business, or whether it is retail. Because today now, the brand being so strong, the channel partners also start looking at reducing the transaction cost. So where they also believe that if they have to deal with lesser number of companies to cater to all their product segments, they are also happy. So that gives us a lot of leeway in terms of cross-selling. So our plywood dealers have now the opportunity to also start selling MDF stock hardware, and the same for our MDF as well as hardware dealers.
This opens up the opportunity for us when we have this line of product basket. Yes, it takes time, but once it matures, you will definitely see much better traction as Greenply as a company overall.
Understood. Understood. Since there are no further questions, any closing remarks that you want to make?
Yes. Thank you all for taking time to participate in this call. In case of any further clarifications or queries, please feel free to reach us. Thank you.
Thank you. On behalf of Asian Markets Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.