Ladies and gentlemen, good day and welcome to Q3 and nine months FY 2026 earnings conference call of Prince Pipes and Fittings Ltd, hosted by MUFG Intime. As a reminder, all participants' line 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. Sumeet Khaitan from MUFG Intime. Thank you, and over to you, sir.
Good morning, everyone. I welcome you all to the earnings conference call to discuss Q3 and nine months FY 2026 results of Prince Pipes and Fittings Ltd. To discuss the results, we have from the management, Mr. Parag Chheda, Joint Managing Director, Mr. Nihar Chheda, Vice President, Strategy, and Mr. Anand Gupta, Chief Financial Officer. They will take you through the results and the business performance, after which we will proceed for Q&A session. Before we proceed with the call, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. For more details, kindly refer to investor presentation and other filings that can be found on the company's website. With this, I now hand over the call to the management for their opening remarks. Thank you, and over to you, sir.
Thank you, Sumeet. Good morning, and thank you for joining us for our quarter three and nine months FY 2026 financial results. The presentation and the press release have been issued to the stock exchanges and uploaded on our website. I hope everybody has been able to go through the same. The pipe industry witnessed a challenging operating environment during the quarter, marked by subdued demand across key applications of plumbing, agriculture, and infra. Despite these industry challenges, our focus remains firmly anchored on strengthening operational resilience. As a result of this, we have been able to deliver a low single-digit growth in December quarter despite these challenges. We continue to make sustained investments in brand building, product portfolio expansion, and distribution network enhancement. During the quarter, we introduced CPVC pipes under the SmartFit Plus brand across multiple markets, further strengthening our presence in the plumbing solution segment.
Innovation and portfolio diversification into value-added products remain integral to our growth story. We are also actively pursuing demand generation initiatives in the under-penetrated markets to further expand our reach and drive volume growth. These product introductions and increased focus on demand generation is expected to improve our overall product mix and strengthen our engagement with key stakeholders, including plumbers, contractors, and other channel partners, which remain vital to our growth journey. In parallel, we continue to deepen our brand connect through meaningful and purpose-driven initiatives. During the quarter, we unveiled our new brand campaign, "India Ki Pragati Ka Taj," celebrating the people powering India's progress. Over the last four decades, our company has proudly contributed to India's infrastructure development by delivering a diverse and reliable range of solutions spanning agriculture, borewell piping, and advanced plumbing systems.
This campaign is a tribute to the plumbers, contractors, engineers, and distributors who have played a pivotal role in strengthening the country's infrastructure ecosystem. During the quarter, we undertook focused brand activation initiatives in the bathware segment under the Aquel brand. The Aquel cashback reward program, which offers direct cash initiatives to plumbers on select bathware products, has been introduced to strengthen engagement with our key influencers. The bathware segment continues to remain a strategic focus area for us, supported by its superior margin profile and strong long-term growth potential.
Looking ahead, we remain optimistic about a gradual recovery in demand conditions, supported by early signs of stabilization in PVC pricing trends. Our continued emphasis on geographic expansion, product innovation, and operational excellence provides us with confidence to effectively navigate near-term market uncertainties. In conclusion, despite external headwinds, we are confident that our strong fundamentals, diversified product portfolio customer-centric approach position us well for a sustained long-term growth. Thank you for your time. I will now hand it over to our CFO, Mr. Anand Gupta, to take you through the key financial highlights.
Thank you, Parag bhai, and good morning, everyone. I will be taking you through the Q3 and nine months FY 2026 financials now. Starting with quarterly highlights. Revenue from operations stood at INR 573 crores, and our volume for the quarter stood at 42,575 metric ton, a growth of 3% YoY. EBITDA for the quarter stood at INR 828 crores while margin stood at 5%.
During the quarter, we have taken an exception of INR 2.05 crore net of tax towards estimated increase in provision for employee benefits arising from the implementation of the new labor code. Profit after tax after exceptional items for the quarter stood at INR -2 crores. Now for nine-month FY 2026 highlights. Revenue from operations stood at INR 1,748 crores. Our volume for nine-month FY 2026 stood at 129,071 metric ton as compared to 126,748 metric ton same period last year, a growth of 2%.
EBITDA for the nine months stood at INR 122 crores, a growth of 12% YoY while margin stood at 7%. Profit after tax after exceptional items stood at INR 17 crores. Our working capital days for nine-month FY 2026 stood at 66 days compared to 90 days same period last year. Receivables has improved to 49 days as compared to 53 days same period last year, and inventory days stood at 76 days compared to 102 days same period last year. With this, I now end my speech and open the forum for question and answer session.
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 their touchtone 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.
Hello. Hi. Thank you for the opportunity. The first is on the guidance, what you have guided earlier. Is there any revision downwards? Secondly, how has been the January trend? Other players have indicated January has been a good trade. Would you possibly the growth in January should be double-digit?
Yeah. Growth in January has been double digit. As everyone is aware, PVC prices have bottomed out in the December quarter. We have seen a sharp increase in PVC prices of more than INR 11 - INR 12 now, in a span of one month. So we have seen sharp restocking from channel partners. Given our new facilities and additional capacity that we have put up, we have been in a strong position to be able to cater to the upswing in demand. So yes, January growth has been double digit, and we remain positive that this is going to be a sustainable kind of a positive sentiment amongst the channel for next few months and quarters, which should lead to better volume growth going forward.
Got it. On January, is it more to do with restocking or have you seen some green shooting actual demand recovery? Secondly, currently, how is the channel inventory? Is it elevated because resin prices has been increasing or has it got normalized? How should we see?
Yeah. So of course, January has been primarily driven by restocking demand. I would not say channel inventory is very high right now, because to begin with, channel inventory was very low in December. So I think channel inventory is still getting normalized as we speak. Yeah, that is where it is. Anyway, for the end product, this tends to be a strong quarter in terms of plumbing and agri. So that fueled by a strong restocking, I think will lead to some sustainable uptick in demand going forward.
Got it. On Lubrizol, earlier we were doing CPVC with them. Now we have launched our own brand. So how the dynamics will change possibly, can growth be better? How can possibly you will have more margins can improve? Is it completely over with Lubrizol, 100%? Or we have tie-up in still in few states?
Yeah. In CPVC, we have moved on to our own in-house compounding, and we have launched our brand, SmartFit Plus, in the December quarter. Of course, our costs go down as a result of this, and we have passed that on to the channel, and that is reflected in the kind of volume growth that we have had in the December quarter mainly has been led by the plumbing segment. Specifically in that, CPVC has been our highest growing segment in the December quarter. So I think most of the cost benefit we have passed on to the channel, and we are growing and increasing our market share in the CPVC space.
Got it. So what sort of pass on has happened because of this? Any broader range?
I think it would be kind of a 6%-7% cost benefit, which we have passed on.
Okay. That is good to hear. Thank you.
Thank you.
Thank you. Participants who wish to ask a question may press star and one at this time. The next question is from the line of Meet Jain from Motilal Oswal. Please go ahead.
Hello.
Hello.
Hi, sir. Just a personal few questions. Can you tell us how much was the inventory loss in this quarter and the nine months?
For this quarter, we had around INR 18 crores-INR 20 crores of inventory loss. Nine months, I will update you offline because we have already given quarter-wise. This quarter we are INR 18 crores-INR 20 crores.
Got it. My second question is regarding our inventory days. We saw a good decline of our inventory days YoY as well as sequentially. Can you throw some light what strategies have we adopted for them and what led to this decline?
Yes, I think for us, working capital and cash flow has been sort of a KPI for the senior management team. I think major free cash unlock has happened from reduction in inventory, which is primarily driven by, we have tried to increase our sourcing from domestic sources where lead times are lower, and we can work on just-in-time inventory. I think going forward, inventory should remain in this kind of a range of 70 odd days. Receivables, we have seen a reduce to 49 days. Maybe Anand can add on the initiatives we are taking for reduction of receivables.
Yeah. We have taken several steps. One of them is aggressive channel finance, which the channels are undertaking and making sure that they are given more liquidity in order to have better payment to company. At the same time, the policy which we had changed one year back has also fueled the channel to be more participative in the CD policy and other policies. This has made sure that the debtor days are around 49 days, and we are sure that in next six months it should be in mid-40s, what we are targeting.
Mid-40s. Okay. On this channel stocking and channel inventory side also, as we know that the mix like the plan diversification across players and across industry has been very strong. Do you believe that the channel inventories will go back to the previous levels or it will stay down at the lower level itself because of just in time?
I think if you look at the behavior of channel partners, especially medium and large channel partners, because of such a large range of SKUs, which is a nature of the industry, channel partners like to have a good amount of stock and they have built their infrastructure accordingly. That is how large channel partners ensure that even they continue to grow. In this kind of a stable pricing environment, of course, there has been extreme increase in the past month. Going forward, I feel that it will be more stable now that we have reached this level of around INR 70 per kg. I expect more stability, lower volatility going forward. In that kind of a market, channel partners also like to sit on inventory because supply creates demand and availability is key.
For large channel partners, the way they can differentiate compared to smaller channel partners or compared to channel partners of smaller companies, is by having a very strong service that they can give to the retailers across the large range of SKUs. To answer your question, going forward, I expect channel inventory to normalize as PVC prices are also stabilizing.
Understood. Last but not the least question is, given the CPVC growth numbers this quarter, how much growth did we do?
It has been high double-digit growth in CPVC.
Volume, right?
Yeah, volume growth of CPVC has been high double digit. It is, of course, our fastest-growing polymer, and it has been high double digit and we expect going forward. We are seeing major consolidation. If you see the pipe industry right now, large players are growing at a faster pace. We feel now that we have our own brand, SmartFit Plus and CPVC, we will be able to catch up in terms of volume growth, going forward. Because most of this growth that is happening is happening in CPVC because PVC was, of course, facing challenging times in the past year.
Going forward, PVC, of course, growth will normalize. CPVC, now that we have more flexibility and agility in terms of in-house compounding, and that we have passed on the cost to the channel. We expect CPVC will continue to grow well for Prince and for PVC, the environment is better. So we are optimistic on growth in the immediate term and in the medium term.
Understood. Thank you so much.
Thank you.
Thank you. The next question is from the line of Shivani Tanna from Dolat Capital. Please go ahead.
Hello? Hello, am I audible?
Yes.
I actually had a couple of questions regarding the guidance. The volume guidance guided for FY 2026 was of high single digits, while nine months is reported as of 1.8%. Is there any revised guidance for the same?
We believe that Q4, like I have mentioned at the beginning of the Q&A, growth has been encouraging. With CPVC, now that we are growing well with SmartFit Plus, and in PVC, with a better growth environment and lower volatility in input prices, sentiment in channel has improved. I believe that fourth quarter should be the best quarter for Prince.
Okay. Any guidance regarding FY 2027?
Yeah, I think if the sentiment continues, we are optimistic. We have put up the capacity. We feel now both across PVC, CPVC and a few other new product launches that we are doing. Next year should be a double-digit kind of volume growth that we are aspiring for.
Okay, understood. Next question is regarding the CapEx plan. The planned CapEx in FY 2026 was INR 120 crores, which has been completed, while INR 110 crores is still pending. How much was it done in Q4 and expected for 4Q?
If you will see our CapEx for nine months is around INR 160 crores is something what, INR 160 crores is what we have done. In Q4, we do not have major CapEx lined up, but actually something which we intend to complete in Q4, that will come around INR 40 crores, INR 45 crores is that, and regular CapEx will be in the range of INR 15 crores kind of. You can expect Q4 number to be around INR 60 crores, including actual, and INR 160 crores, INR 165 crores we have already done in nine months. We will land up around INR 225 crores, INR 230 crores.
Okay. If I could just squeeze in one more question.
Yeah.
Yeah. Regarding the bathware segment, revenue and EBITDA loss was earlier guided as a break even for INR 25 crores in Q2 FY 2027. What is the now current revised guidance?
See, I will not revise the guidance. I think it is too early. I think, if you see that we have grown this year. It is a budding segment. We have just expanded to South and East in the past quarter. That cost has come, but that sales will take some lag effect. For the nine months, the loss from the bathware segment is INR 18 crores, for the nine months FY 2026. Around INR 6 crores per quarter. I feel that either September or December is when we should target to break even. Currently, team has been put in place, pan- India now. Once South and East will also start delivering in terms of revenue, I think we should see next year will be key for bathware.
Okay. What was the revenue in the current quarter?
INR 13 crores.
Okay, thank you. I will join back in the queue for the pending question. Thank you.
Thank you. Anyone who wishes to ask a question may press star and one. The next question is from the line of Sneha Talreja from Nuvama Wealth. Please go ahead.
Hi, good morning team, and thanks a lot for the opportunity. I am not sure if you have already said this, so apologies for the repeated ask. Just wanted to understand on the PVC price front. Although we understand that China has stopped export rebate, but any other reason for sudden sharp increase in PVC prices that you are seeing? And where do you see these PVC prices moving up? That is the first one.
I think, Sneha, one is, of course, the reason of China and the Chinese government announcing that they will stop subsidizing the exports out of China. Secondly, we are also seeing lower arrival of imports in general. What I am seeing at a macro picture is that industry is consolidating, both manufacturers as well as traders of PVC. Both are consolidating, and I feel smaller players, even some medium-sized players, are also really struggling in this kind of an environment. While operational performance, we are far from where we want to be in terms of the desired state, but still being a debt-free company and still managing even a low single-digit kind of volume growth in these times. We believe that this consolidation will continue to happen going forward, both for processors and for the traders of PVC.
I think that's as far as the lower arrivals of PVC are concerned. Going forward, I think more stability, less volatility. I think everyone knew that in the 60s it was not going to be sustainable. Eventually production cuts would start across the globe for PVC raw material. Now that we have crossed this kind of INR 70 per kg, I think it should now be range bound. That is what we are hoping for going forward.
You feel that largely now PVC price hike is done with and largely PVC prices should stabilize here?
I think there is some upside in the short term, but I'm talking slightly more macro that it will now be. See, it's a commodity, it will never stay flat for a long time. You will see up and down, but it will be range bound. You will not see.
[inaudible]
It's okay.
Sir, second question from my end was just wanted to ask you also have given guidance on double-digit volume growth now both in 2027 as well as, of course, quarter four is given. But this is largely coming on the back of restocking, or are you seeing in general demand pickup? And if there's demand pickup, could you also highlight that it is real estate driven, infra driven, or even agri driven?
Yeah, see, restocking is always going to be a one time phenomena, let me be very clear. But what is good is that now for the nine months of this current financial year, dealers were just hesitant from keeping inventory. So that always led to a disconnect between primary and secondary, was not reflecting each other. Going forward, I believe now distributors are not hesitant to keep inventory. So whatever the actual demand scenario is, our primary numbers will also be a reflection of that. Of course, agri, this is the season, and I think it's on a low base because last year agri season was not great owing to the unseasonal rainfall and all of that. So I think agri will do well because still, despite this upside of PVC prices continue to be affordable. As a result, agri pipe prices also continue to be affordable.
I think agri should do well. And I think real estate, okay, we've had a couple of quarters up and down, but we are still in a good cycle, healthy cycle of real estate. So in general we feel that industry growth will be good. And to add to that, I still believe that in these nine months, whatever data points I have while interacting with my sales team, my channel partners, and my vendors, I feel that there has been extreme consolidation that has taken place in these nine months.
If you see the largest player or even our kind of finished good pricing, the gap with the unorganized players is virtually gone now. So the switch from unorganized to organized has become easier because that price gap is no longer there. I think with economies of scale coming in, growth coming in, operating leverage kicking, I think going forward, large players will continue to grow. Industry will grow, but more importantly, consolidation will again play a large role in FY 2027.
Lastly, Nihar, just on the pricing front, have you taken any pricing cuts in the market to now be more competitive given both the leaders are following similar strategy on ground? Have you also taken any price correction step? That was the last one.
Yes. Especially in CPVC, with SmartFit Plus, we have become more competitive and that has resulted in good growth in quarter three. I think going forward, I am not more interested on the quarter on quarter game, but on a medium term in CPVC and PVC we have become more competitive also with two new plants coming in in Begusarai and Telangana. The freight benefits also have been passed on to the channel partners. The entire benefit of decentralization we have passed on to the channel. Clearly, market share is the priority right now, and that is already reflected in the Q3 numbers and going forward both for PVC and CPVC. Apart from this, in this quarter we are launching a few new products as well, some value-added products which will be able to sort of complement our core product portfolio well.
Thanks a lot, team. All the best.
Thank you.
Thank you. The next question is from the line of Varun Julasaria from B&K Securities. Please go ahead.
Yeah. Hi sir. I just wanted to understand on the interest cost, you have recorded an interest subvention of INR 6.5 crores. Is it fair to say this is just a government and not like a subsidy which you have received?
This is related to Bihar plant where the Bihar government has given interest subvention subsidy. That application we have already filed and that application has been accepted by the government. Based on that, we have recorded the subvention what we are eligible for.
Yeah. That means it will be recorded later, right? I mean after three years.
Yeah. Cash realization will be done at the time of grant.
Okay.
The recognition of income has been done.
Okay. Sir, what is the kind of margin that we are aiming for for the next quarter and for the upcoming year? Given that we have reduced our prices as well, and there is a kind of a price war which is going on. What is the kind of margin that you think is sustainable, maybe excluding the bathware losses for the pipes division?
I think a 10%-12% EBITDA excluding bathware loss for next year is what we are targeting.
Okay, sir. That's it. Thank you.
Thank you. The next question is from the line of Praveen Sahay from Prabhudas Lilladher Capital. Please go ahead.
Yeah, hi. Thank you for the opportunity. My first question related to the CPVC. As you had mentioned that now Lubrizol tie-up, you have moved on. So in that, do you have other tie-up for the CPVC resin domestically or internationally now for procurement?
Yes.
Domestically or internationally you are procuring CPVC?
Both. Now we are completely flexible like we were before the Lubrizol tie-up. Now CPVC, what people need to understand is it is a commodity like PVC, so there is not much differentiation between two players. Anyway, there are a limited number of players. We are now, our CPVC volumes are also fairly large, so we cannot depend on only one or two players. We buy domestic and we import the way we do for PVC. I think going forward, CPVC also. Not going forward, but it is already commoditized with the kind of huge supply of CPVC that is coming in, CPVC raw material coming in locally. We will rely on multiple vendors, both domestic and import.
Right. Second question is related to the volume. As you had highlighted, a high double-digit volume growth in the CPVC quarter. Also you had mentioned that now you have a material contribution of CPVC in total volume. Is it fair to assume the PVC segment has a degrowth for a quarter sequentially? If that is, then what is the major reason for that?
No, for December quarter, PVC segment has degrown and PVC has grown. Major reason is destocking, and we saw a huge decline of PVC prices in November and December. That has been the key reason for degrowth-
Sorry, go on. Sorry.
Please go ahead.
No, so I am just asking that there is no impact of a Bihar facility in the quarter because your capacity has increased.
Yeah, I think if you look at quarter four, utilization at Bihar has ramped up very well, better than what we had envisaged. Q3, the headwinds of demand were such across the industry you have seen degrowth. I think nine-month period for PVC, I believe that their industry has degrown by mid-single digit, for PVC specifically. But we do not put up capacity given one quarter or two quarters view of where raw material prices are. We put up capacity with the long-term view of where the industry will be and where specifically we see in terms of the industry growth.
Going forward, we are going through a very strong sales transformation journey where we are focusing on digitizing our value chain. We already have distributor management systems and sales force automation where we are improving productivity of our retailers at the secondary level and improving productivity of our sales team, our feet on street. Given these kind of initiatives and our new campaign of India Ki Pragati Ka Taj where we are again investing heavily in the brand. With all these initiatives, we feel that industry will grow over next five years and we will be one of the leaders of the growth in the long term.
All right. Thank you for your answer. The last question is related to the working capital. Definitely from the peak of second quarter 2025, now you have reduced significantly. So where do you want to bring this number, 66 days, where to go? Especially inventory number. So inventory from 93 to 76 so far. So where you are seeing this number to go down?
We like to see both the inventory and debtors very differently. As I said, we have lot of scope in improving our debtor days and we are working on it and there are eight to 10 days possibility is there which in a nine to 12 months it should happen, but mid-40s is something what we are targeting in next six months. I think inventory is at 76 and it will remain in the range of 70 - 75.
So I don't see much room over there because we will maintain inventory at that level only. Payables is around 60 which is a function of how do you procure and from where you procure. So it will vary slightly but within the same range. We have scope in better days, and it should translate in the next three to six months more. 66 should be between 60 - 65 in the longer run.
Okay. One clarification. For in Bihar government interest submission, that is entire amount you had booked or there is something left?
We have booked to the extent what we have spent. The policy says that there is a limit of subvention. We have not fully utilized the limit. As we will keep spending on our interest cost, it will keep arriving, but to the extent of INR 10 crores, it will not go beyond as the policy mentions. We have booked to the extent what we have spent. At the same time, this will have two effect, one be in P&L and the other in FA, and based on that, we will bifurcate. Right now we have put in P&L.
Okay. Thank you, sir, and all the best.
Thank you.
Thank you. The next question is from the line of [Priyanshu] from Investec. Please go ahead, [Priyanshu].
Good morning, team. Couple of questions from my side. Just to clarify on that PVC prices are started moving up. So what will be the import price parity as per the management estimations? Can you just please guide on this?
I did not understand the question. Could you please repeat?
Hello. The PVC prices are started moving up. What will be the probable increase in the PVC prices in India near term? What will be the import price parity for the PVC prices?
One more second. Going forward, PVC will be range-bound, and there is not much of a gap between domestic and import right now.
Okay.
Currently, imports are available at the similar price of what Reliance is priced today or at a slight premium.
The second one is a bookkeeping question. What is our agri and non-agri mix, and how we expect this going to be in near term?
Agri is in the range of 30%-35%. This is what as a usual range is, and it will remain as it is in our portfolio.
This is on a 12-month basis.
Yeah.
It is a seasonal business, so quarter four and quarter one is slightly more heavy. Anand said, on a 12-month basis, 30% is the range for agri contribution in value terms.
Sure. Thank you. That is all from my side.
Thank you.
Thank you. The next question is from the line of Karan Gupta from Asit C. Mehta Investments. Please go ahead.
I think there is some disturbance on your end.
Hi. What is the pricing spread between PVC and CPVC now?
Are you talking raw material or finished goods?
Yeah, raw material.
Around 25%.
Okay. Just one on the gross margin side. What is the reason of increase 3% in the gross margin?
I think there is a lot of disturbance on your end. I am not able to hear.
Yes, Karan, there is a lot of disturbance on your side.
Just a second. Now I think it is clear. Just one question on the gross margin side. What is the reason for increase in 3% in the gross margin side?
What is the reason for?
Gross margins increase.
Last -
YoY.
-quarter, we said was a large inventory loss.
Mm. Okay.
And if you are talking about sequentially 72%-75%, that is what I am understanding. Means 3% sequential quarter or YoY?
YoY basis. Sequential.
YoY.
We are down.
Okay. As I had mentioned at the start of the call, we have around INR 18 crores-INR 20 crores of inventory loss.
Basically, last December quarter inventory loss was much higher compared to what it is in this December quarter. Still margins are not normalized because there was an inventory loss. But last December quarter, the inventory levels were significantly higher.
Higher.
Which is why inventory loss was major. This time now inventory is much under control. We are not immune to the decrease in PVC prices, and we have seen inventory losses across the industry. But for us, it has been lower YoY because the inventory now has been under control. Also, second is product mix has improved. Our focus going forward is more on value-added products like CPVC and few other new product launches that we have undergoing currently. So product mix will improve and inventory losses going forward should go away.
Okay. What is the capacity utilization right now overall?
Around 50%-52% of asset utilization is there on production capacity.
Okay. Going forward, I mean, in FY 2027, probably you are expecting it will improve because of the general inventory will improve.
Yeah. So one is the channel inventory is moving up, and second is, of course, overall demand being better. Third is industry consolidation, where larger brands like ourselves will outpace the smaller players, like we have seen in these current nine months as well. Going forward, there is no major additional capacity addition plan. Focus in next financial year will be on juicing out the assets, especially the new plants of Telangana and Bihar.
Okay. Fair. Thank you.
Thank you.
Thank you. Anyone who wishes to ask a question may press star and one now. The next question is from the line of Vignesh Iyer from Sequent Investments. Please go ahead.
Sir, thank you for the opportunity. My question is, I want to understand at what revenue level would our Aquel bathware segment break even?
Around INR 80 crores-INR 100 crores per annum. So around INR 25 crores-INR 30 crores per quarter.
Okay. Got it. What is the early commentary that you gave, what is the total PVC price rise that you have seen in last one month?
Around INR 11.
Okay. Got it, sir. That is all from my side, sir. Thanks.
Thank you. The next question is from the line of [Aasim] from DAM Capital. Please go ahead.
Yeah. Hi. I want to understand your CapEx plans for the next three years. Pipes, I assume nothing is needed because your utilization might be at around 40%-41% this year. On the bathware side, is there any CapEx plans that you are planning to maybe in-house manufacturing? Can you just talk about that and how much you might spend? On the pipes bit also, at what level of utilization will you start planning for future CapEx?
Aquel, we are under process of acquiring the manufacturing unit, which should happen this year, which will be a CapEx of around INR 40 crores. So total and then incremental INR 5 crores to debottleneck the plant, and more maintenance at the plant. So around INR 45 crores on bathware. Then we will be able to manufacture a significant amount of range in-house. As far as pipe is concerned, you are right. Next year there will not be much CapEx. All the CapEx will be towards new product introductions within the piping segment and whatever maintenance CapEx that we do every year. So next year, CapEx will be for piping, mainly towards maintenance and new product, new pipe range that we are bringing in. That is about it.
I think typically around 65% capacity utilization is when we would look at further capacity addition, because last four years we have done heavy capacity additions. What you must realize is now we have significant land bank at Jaipur, Telangana, and Begusarai. So we may not need more greenfield units in the short term. We have enough land bank to increase capacity at Jaipur, Telangana, and Bihar. These are all strategically located because Jaipur can cater to demand in North and West, Telangana as a hub for South, and Bihar as a hub for eastern part of India. Now that you see our manufacturing footprint, we have one or two plants in every zone. So there is no glaring vacuum in terms of manufacturing footprint. Yeah, I hope that answers your question.
Yeah. On the pipes bit, for bathware, you mentioned around INR 45 crores you might spend next year all put together. Do you have a similar number for, do you have a number for the pipes bit, the maintenance and the new products, how much you would plan to spend?
For all the eight plants, the replacement and maintenance CapEx will be in the range of, I am talking about FY 2027 right now.
Yeah.
It will be in the range of INR 70 crores- INR 75 crores. As Nihar mentioned, there will be opportunities where new product developments will be there within piping, and it will be over and above what I mentioned.
Okay. This should, I know you just mentioned for FY 2027, but even for 2028, I think a similar number should be the target, right?
Maintenance CapEx, yes.
Roughly.
Maintenance CapEx, yes, that should be the range. But capacity addition, let's see how FY 2027 plays out. I am bullish in terms of growth. So yeah, I think at around 65% capacity utilization is when we will start looking at further capacity, as and when that happens.
Okay. Thank you. Thank you very much.
Thank you.
Thank you. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Sir, first of all, sorry, I joined late. I was on another call. Even if you have answered, I am trying to maybe ask the same thing again. Broadly, in terms of the volume front for fourth quarter, how much volume are we looking at? For next year, how are we looking at the volume growth?
We are in the middle of the quarter, so I will stay away from putting a number, but January we have seen high double-digit growth. I am bullish that this will continue for February and March. Restocking is just one part, but overall sentiment in the channel has improved. We are more price competitive across CPVC and PVC. With new capacity already there at Begusarai, we are confident of good growth not only for fourth quarter but for next financial year.
Next year also, 8%-10% kind of a growth is doable?
Yeah, we are aspiring for higher than that, but I will guide conservatively that 8% - 10% is something we have to do. We have no choice.
Yeah. On the margin front, we said that 10% is now doable on a sustainable basis.
Yeah. Ex of inventory gain and loss, sustainable margin should be 10%-12%.
This quarter, or maybe nine months, what was the inventory loss?
Say again.
This quarter is INR 18 crore-INR 20 crore is the-
December.
-inventory loss. December quarter, Q3.
Okay. From 1st January, INR 7 PVC price hike and maybe from today also another INR 1.5. Out of this INR 7, how much have we passed on to the customers till now?
We have fully passed on.
Okay. Maybe the entire one can look at in terms of realization, QoQ improvement should also be there. That should support in terms of the margin for fourth quarter coming closer to what we are looking at, kind of a 10% +.
Yeah. See, but the realizations, I think PVC prices in last Q4 also were in a similar range, if not higher. So it was maybe around INR 78 - INR 80 from January to March of last year. This price increase that we are talking about is sequential from December quarter to current quarter.
Yeah. So from 5% margin in third quarter, it should be then coming back to a 10% + kind of a number for fourth quarter. That's the normal expectation one can have.
Correct.
Okay. Got it. In terms of overall, you mentioned that in nine months, how much CapEx till now we have done. For full year, how much we are looking at?
Nine months we have done INR 160 crores and including Aquel, we expect another INR 60 crores, INR 65 crores in Q4.
For totality, INR 120 odd crore CapEx will be there.
INR 225 kind of.
INR 225?
INR 225 crore - INR 250 crore.
Okay. Got it. Currently the net debt would be the similar INR 190 odd crore?
Net debt. Yes. Net debt is around INR 160 crore kind of. It is a gross debt. Net debt is neutral, means we have enough cash to make sure that we are almost neutral on net debt position.
Net debt, we are almost net debt free as we speak.
Okay. Got it. Bathware in terms of breakeven, last time we said by Q2, once we have a INR 25 crore-INR 30 crore kind of a revenue, we should be having a breakeven. Is there any change in that stand?
Yeah, maybe one quarter lag. Maybe September to December is where we should hit that number.
Okay. The ad spend for nine months, how much we would have done? 1.2% of the revenue that is continuing.
Yeah, we are continuing with 1.5% kind of. Around INR 25 crores is what we have spent in nine months.
In this kind of times, I would just like to add that obviously these nine months have been tough for industry and for us, but we have still stayed aggressive in terms of investing in the brand. Because it's some perception building that has to be done on the long term. Given the strength of our balance sheet, even if margins are under pressure or growth is under pressure, we will stay true to investing 1.5%-2% back into the marketplace.
Got it. You also mentioned that now the focus would be first to utilize the Bihar and rest of the plants, and then maybe after two, three years, we can look at in terms of expanding the capacity.
Correct.
Okay. Yeah, more or less I am done. Thank you, thank you.
Thank you.
Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Sir, if I remember earlier, we were targeting a 12% EBITDA margin. Now we have made it a broader range of 10% - 12%. Why is that so?
As you are aware, competition in the industry has increased.
Okay.
With capacities coming in, our focus is on growing volume growth. The way our industry is, the more we grow, the more profitable we will be. It is just out of prudence that we are saying 10% - 12%. Given decentralization benefits, improvement in product mix and operating leverage, margins can positively surprise next year as well. I think we are just being slightly conservative.
Understood. Got it. When you say the competition intensity has increased, is it more from organized side or unorganized side? Secondly, what are the thoughts, this is the new normal competition intensity or possibly it will ease out from here?
I think it will ease out because it was challenging times for everyone, which is why. First, to answer your first question, it was more from the large players. Unorganized players, like I mentioned at the beginning of the call, are exiting the market. They are having a kind of a natural death, because large players like ourselves have become so aggressive in the market. We have seen immense consolidation. While in nine months we have only grown by 2% in volume terms, industry has still de-grown by maybe anywhere around 6%-7%.
Going forward, I think competitive intensity will ease out amongst the larger players because overall industry will grow. There will be no need for this kind of predatory pricing. Given that now in CPVC we have our indigenous compounding with SmartFit Plus and PVC, the kind of better tailwinds going forward, I think we are well equipped to compete in this market.
Got it. That is helpful. Thank you.
Thank you.
Thank you. The next question is from the line of [Priyanshu] from Investec. Please go ahead.
Hey, sir. Thank you for follow-up. I just want to understand about the inventory gain, which we will reverse in the quarter four from the inventory loss, which we already have booked given the input prices are rising now. Can you just guide on this?
I think the inventory gain or loss one should not focus on. We don't focus on much internally as well because that's a very tactical part of the business. On a 12-month basis, inventory gain or loss should even out. While price increase of INR 10 has been sharp and it has led to restocking, we must remember that prices have come back to INR 70. Even the decrease of INR 10 happened in November, December.
Prices have only now normalized. I'll stay away from speculating on inventory gain or loss. What is better is that now that sentiment has improved, channel is restocking. I think that is more important than the inventory gain or loss because like I said, on a 12-month period, this will even out. Going forward, decentralization benefits, product mix improvement and operating leverage, these will be the more sustainable levers for margin expansion.
Okay. Sure. Thank you. That's all.
Thank you.
Thank you. We'll take the last question from the line of Arun Baid from ICICI Securities. Please go ahead.
Nihar, just on the guidance front, you mentioned 10%-12% margins in our PVC pipe business and the volume growth at 8%-10%. I know you're trying to say, "I'm conservative," but that's an oxymoron because neither we are talking of volume growth cutting through because of competition, neither we're talking of margin coming through competition. We're talking of the backward integration to some extent because of compounding with the product mix and regeneration of plants. It's not adding up. Can you please help us geek us in that?
I have not said 8%-10%. The participant said 8%-10%, to which I have agreed that that is the bare minimum we have to do. I am not guiding at 8%-10%. That is what the person asking the question said, and I said that is the bare minimum that we need to do, of course. I also said that we are aspiring for a much higher volume growth than 8%-10%, but that is the bare minimum that we have to do. That is not a guidance from the company.
On the margin front, why 10%-12%? Historically, even till last quarter it was 12%, which you were harping upon, and now we have much more benefits coming through. Why that has been brought down? I know competition was there in last quarter. Anything has changed there particularly?
No, nothing has changed. Competitive intensity, as you know, is there. On margins we are being conservative. I think product mix is improving. Decentralization benefits will come in, and operating leverage will come in with kind of good volume growth. These are going to be the three levers and we are not happy with 10%-12%. We are just being conservative. Of course, the aspiration is much higher.
Yeah, but it has to be said also to some extent, because when we hear it sounds as if nothing is good. That is our take. Anyways, thank you.
Thank you. Ladies and gentlemen, in the interest of time, that was the last question. I would now like to hand the conference over to the management for closing comments.
Thank you. Thank you, everyone.
On behalf of Prince Pipes and Fittings Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.