Ladies and gentlemen, good day and welcome to the Prince Pipes and Fittings Limited Q4 FY 2024 earnings conference call hosted by DAM Capital Advisors Limited. 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 the conference call, please signal an operator by pressing star then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde . Thank you, and over to you, sir.
Thank you. Good morning, and apologies for the delay. On behalf of DAM Capital Advisors Limited, I welcome all to Prince Pipes and Fittings Q4 earnings call. From the team, we have Mr. Parag Chheda, Joint Managing Director, Mr. Nihar Chheda, VP Strategy, Mr. Anand Gupta, CFO, and Mr. Karl Kolah, Head Investor Relations. I will hand it over now to Mr. Parag Chheda for his opening comments. Thanks.
Yeah. Thank you, Aasim. I thank you all for joining us for the quarter four and FY 2024 earnings call. The presentation and the press release have been issued to the stock exchanges and uploaded on our website. I trust you have had the time to go through the same. I will initiate the call with a brief overview for quarter four. We have delivered an improved overall performance after successfully navigating the adverse impact on sales and volume caused by ERP implementation earlier this year. I am glad to share that our efforts of rationalization in realizations, cementing our distribution network, and strengthening our brand equity has started to translate into a meaningful volume growth. We reported 16% Y-o-Y volume expansion and registered highest ever quarterly volume sales of 51,444 metric tons. The company achieved revenue of INR 740 crores during quarter four.
Despite the price adjustments, EBITDA margins were at 12.5% Y-o-Y, as per our guidance translating to EBITDA of INR 92 crores. I am glad to share that the board of directors have recommended a final dividend of INR 1 for equity share. We have already shared several details with you of our acquisition of Aquel brand, which is enabling us to strengthen our bathware platform. Responding with agility, we unveiled the brand Aquel by Prince at the Plumbex India Exhibition. The build-out of this segment has also taken good momentum as we achieve the first full quarter of sales and undertake key staff appointments across disciplines in all regions. Let me now share some industry insights which showcase very conducive growth environment.
According to ANAROCK, housing sales created a new peak in the first quarter of 2024 and grew by 14% year-on-year across the top seven cities. The Indian residential market is experiencing an upsurge in the new residential launches across the top seven cities. This surge is a direct response to the growing demand for homeownership. As homeownership remains a core aspiration for many Indians, developers are strategically ramping up construction efforts and launching new projects to meet this expanding need. Even the long-term trends seem to be very positive. According to the Confederation of Real Estate Developers' Associations of India or CREDAI, the Indian real estate sector is poised to make a substantial impact on the Indian economy. The sector is projected to reach $1.3 trillion, accounting for 13.8% of the projected GDP by FY 2034.
Furthermore, by 2047, it is estimated to reach $5.17 trillion, constituting 17.5% of the projected GDP. Current market size of the Indian real estate stands at $300 billion. In line with our expansion goals, the construction of our Begusarai plant is progressing on course as this marks Prince Pipes' dynamic expansion in East India, which is a major frontier of growth for us. As informed earlier, the proposed CapEx in Bihar facility has been raised to around INR 220 crores, and the capacity has been increased to about 48,000 metric tons. The fittings capacity that was originally planned for phase two has been preponed. With the establishment of our plant at Bihar, Prince will have a manufacturing presence across the country.
The plants of Jaipur, Telangana, and Bihar have significant land bank, which will help us swiftly conduct any expansion when required. The water tank segment is progressing well, and we continue to expand our in-house manufacturing footprint. We plan to launch in Chennai in this quarter. Additionally, the proposed capacity for water tanks is estimated at 60 lakh liters per month at Bihar plant, which will go onstream in quarter four of FY 2025. We have been building a multi-location manufacturing network of our water tank segment to enable us to leverage the network for greater scaling. Prince is building several levers of growth that will give greater play to our strategies to become a stronger, greater, and more resilient enterprise. With a presence across pipes, water tanks, and bathware, the overall addressable market for Prince would be over INR 60,000 crores, giving us a significant room for growth.
Sustainability continues to be a core focus area. I am happy to share that the Haridwar plant emission certificate done as per ISO 14064-3:2019, including scope one, two, and three from DQS India, reiterating the company's commitment to ESG goals. As I conclude, I would like to reiterate that at Prince Pipes, we are committed to, and pride ourselves on our ability to address the needs of changing times. Our focus remains on meeting the evolving customer demands, building a robust and efficient supply chain, safeguarding the environment, and undertaking strategic initiatives that will give greater play to our basic business model. As we progress, we will continue to focus on a quick response, agility, and implementation to unlock greater value in the business. Thank you for your time and mind share. I will now hand it over to Anand to take you through the key financial highlights.
Thank you, Parag, and good morning, friends. I will be taking you through Q4 FY 2024 financials now. For quarter four, revenue stands at INR 740 crores. Sales volume reported at 51,444 metric ton. EBITDA margin for Q4 stands at 12.5%. For Q4, EBITDA is at INR 92 crores compared to INR 148 crores in Q4 FY 2023. PAT stood at INR 55 crores compared to INR 94 crores in last Q4. For the full year, revenue stands at INR 2,569 crores compared to INR 2,711 crores in FY 2023. Sales volume has increased by 10% to 172,783 metric ton for full year as compared to 157,717 metric ton in FY 2023.
Profit after tax, including exceptional item increased by 51% at INR 183 crores as compared to INR 121 crores in the previous fiscal. We continue to judiciously expand our channel finance program, and we have made steady progress since the recourse has shifted to distributors and have increased sanction amount from INR 123 in Q3 of 2024 to INR 150 in Q4 of 2024, with 146 distributors currently in our program. In addition to channel finance program, we are further tightening our trade policy for improved cash flow. With this, we would like to open the floor for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on 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 Achal Lohade from JM Financial. Please go ahead.
Yeah. Good morning, team. Thank you for the opportunity. Congratulations for strong volume performance. If you could elaborate, in terms of what has driven this, in terms of application as well as the polymers.
Yeah, thank you, Achal. This growth has actually come. Of course, we continue to do well in plumbing and SWRs. This kind of a volume performance was possible because of strong volumes across agriculture as well. As you know, Q1 is a season for agri as well, Q4 and Q1 both. We have seen good growth across our core sector, which is plumbing. Even in agri and infra, which is the Double Wall Corrugated pipes and HDPE pipes, we have seen a contribution across plumbing, agriculture, and infrastructure, which is why we are confident that this growth is more sustainable going forward.
Okay. In terms of the polymer, like any particular, any substantial change in terms of the growth or it is similar for PVC, CPVC, PPR, et cetera?
Yeah, similar across PVC and CPVC, as well as the PPR. Of course, HDPE is more because the base is smaller, but in the core segments of PVC and CPVC, the growth has been across both.
And, just to clarify, you are talking about the quarter here, right? Not the full year, right?
Q4.
Q4 only. Okay. The second question with respect to if you look at the receivables as of March 2024, that jumped meaningfully, right? If I look at September it was INR 400 crores and March it is INR 585 crores. If you could help us understand what has driven this significant increase, is that a particular region, pocket, channel, anything, any more color you can give? The second question related to that is that, is there any change in the credit policy in 4Q or as we speak?
Sure. Achal, in the three months of the last quarter, we saw that the traction happened mostly in March. Out of the three months, March had seen a good pull from the market and that has resulted in overdues lying at the year-end, which you rightly said is around INR 580. While we speak, this number has come to around INR 460, INR 470, which in the last 45 days we have done good collection from the market, and we see that in coming two quarters it will be fully streamlined. In terms of credit policy, we are working towards it and, in terms of tightening the credit days, in terms of tightening the different aspects of policy, we are working and, we are very confident that this will help us in getting back to where we were in next three to four months.
Understood. Just to clarify, what is the channel financing number as of March 2024 and 2023 you said?
Channel finance sanction limit, I had mentioned that it is around INR 150 crores and last quarter it was INR 123 crores. We are making steady progress in that. In terms of utilization, the sanction limit which the distributors are using right now is close to INR 100 crores now.
INR 100 crores as of March 2024. How much was that in March 2023?
It was around INR 75 crores.
INR 75 crores in March 2023. You said it is 100% non-recourse right now?
Yes.
Understood. Just one more question. You said this 16% growth, in a remark, it is sustainable. How do we look at the volume growth and margins, if you were to give some indication for coming year or medium-term?
Yeah, I think not only for the coming year, but for the next two, three years, we see that real estate will continue to do well, so will infrastructure. We also see commodity prices, at least for the next couple of quarters, being extremely range-bound and no volatility, which should do well for agriculture as well. I think we are expecting a healthy monsoon season as well, which will do well for the agri and the per capita incomes on the rural side. So, I do believe over the next two, three years, 15% volume growth coupled with our regular sort of EBITDA margin guidance of 12%-14%, I think, is something which is what is attainable.
Got it. And just one last question, if I may. What is the industry growth, according to you, for PVC or for the entire pipes sector for FY 2024? Any ballpark estimate there?
I think we don't have an estimate offhand. We will be happy to connect once we have clarity on that. I think Karl will share with you.
Sure. Thank you and wish you all the best.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we will request you to rejoin the queue. Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. Firstly, on the bathware segment. What was the bathware segment sales in Q4 and FY 2024, employee and ad spend, and finally the PAT for this segment.
Quarter sales for Q4 was around INR 3 crores- INR 4 crores. What was the follow-up question?
Ad spends and the PAT for this segment. Ad and employee spend, what number you used to give earlier?
For the annum, INR 4 crores of employee and INR 4 crores of A&P for bathware.
Okay. Would you like to guide what is the segment PAT?
I don't have an offhand number.
Right now, we are not looking at segment PAT. Top line is around INR 10 crores for this financial year. As Nihar mentioned, the employee cost is close to INR 4.5 crores, and ad spend is around INR 4 crores. Other ancillary expense out of this segment is around INR 1 crores. This is how the breakup looks like. We are not releasing any segmental profits right now. Going forward, we will see that as and when we grow in this segment, we will start publishing that as well.
Understood. Got it. In opening commentary, you speak about Bihar phase two. By phase two, you mean the additional capacity which you will add after this 48 KMT is preponed?
The phase 1 is the pipe capacity.
Okay.
The fitting capacity, that is what we are addressing. This is together 48 KMT.
Got it. This 48 KMT will commission by Q4 FY 2025.
Commissioning will start happening from Q4 FY 2025. Obviously, the full capacity will not go immediately. It will be done in a phased manner in three to six months from the go live of production.
Understood.
Looking at the demand scenario right now and the kind of buoyancy that we are seeing in demand across segments, our full efforts are towards how we can expedite Bihar. That is going on, and hopefully, we can have some expedition of that. Currently, we are guiding for Q4, but we are gunning for something quicker than that.
Understood. Got it. Just on the price correction front, the price correction which you were taking on your Prince Pipes and Fittings side. That is now done, and what sort of correction you have taken at a broader portfolio level?
The correction is done. In Q4, we have taken the price correction, and that is reflected in our realizations also correcting. It has all been accounted for, and as we speak, we are competitive across segments, across geographies.
Got it. Last question, what is the A&P spend for the entire year and for this quarter?
[inaudible]
Okay, I will come back. Thank you.
Thank you. The next question is from the line of Shubham Aggarwal from Axis Capital. Please go ahead.
Hi. Thank you for the opportunity. Firstly, on the working capital, we have already discussed it in a bit. I recall that we were using channel financing to reduce the debtors, and this was expected to stabilize around 45 odd levels. You mentioned in an earlier comment that it is expected to normalize in two quarters, that is by September. Should we expect it to come back to 50 odd levels by September? That is one. Similarly, on the working capital on the creditor side also, we are seeing that there is a decrease in creditors. Is this because of the continued increase in domestic sourcing? Where should we expect it to settle? That is question number one.
For debtors, as we have said that in the three months of the last quarter, March being on a heavier side, this number has gone up. We are taking proactive steps in terms of strengthening our credit policy and in the next three to four months, we are confident that we will be back to our numbers, 50- 55, where we used to hover around.
Just to add to that, something like tightening of debtor days is something that takes time. Because we are a growing industry, we are constantly expanding our channel as well. We have always maintained that reduction is not going to be done overnight. Of course, the normalization, yes, in one or two quarters, we will be able to achieve that. But channel finance is a tool to ensure that we are able to grow without really increasing the size of the balance sheet. That is not something that will happen overnight. It will happen over time. We have been able to reduce it in the past with time, which is why we are confident of doing that in the future.
To address the second part of your question, I think in terms of creditor days, yes, it is a function of our procurement, whether it is the ratio of import to domestic. We do not import looking at credit days. Importing firstly is a or buying firstly is a function of pricing as well as covering our volumes. So it really depends quarter- to- quarter what our strategy is. So creditor days is not something which is really in our control. I think the best and most sustainable way of controlling working capital is through debtor days, and which we are confident will strengthen with time.
Yeah. Perfect. The second question was on Aquel. So you acquired Aquel now. Just wanted to get a sense that what is the kind of investment you expect to do in this business over the next two years? When I say investment, one, the amount of money you intend to put in and the amount of loss that the segment is expected to report over the next two years.
The total asset purchase was of INR 55 crores, which is in two tranches for the brand as well as the state-of-the-art manufacturing facility in Bhuj. I think we will need another INR 7 crores- INR 10 crores of maintenance and debottlenecking CapEx at Bhuj, and with that we would be able to unlock production capacity of INR 100 crores- INR 120 crores at Bhuj. So that will be the very small incremental CapEx that we do over the coming quarters. In terms of the other investment, it is more from an OpEx point of view, which is manpower cost and branding cost. Of course, post Aquel now we will become more aggressive with A&P in two ways. One, of course, now we will become pan-India. Till now, whatever numbers we are doing are only from two zones, North and West.
By the end of the first half of current financial year, we will be pan-India across North, West, Southeast. So one is geographical expansion and second is now that we have a very lucrative platform like Aquel, we will become more aggressive in ATL, BTL as well as digital. So the branding spends will go up and we will share that with all of you at the right time.
That number you are finalizing it, right? The number, the OpEx expenditure that you intend to do in Aquel.
Correct.
Got it. My last one is just on the CapEx. If you can break up the CapEx that you did in FY 2024, where did you put that and what is the expected CapEx for 2025 to 2026? That is all from me.
The majority of the CapEx which you will see in the schedule of fixed assets, which is around INR 200 crores, is land at Bihar has been capitalized because we have registered that. It is around INR 28 crores. Ruby which we have regularized is at INR 37 crores. Aquel is INR 12 crores, which has been built into the FA. And apart from that, the ERP which we had done is around INR 8 crores. These are broader INR 100 crores item and rest INR 100 crores is into existing plant for debottlenecking and replacement CapEx.
What is your general maintenance CapEx?
It's around INR 60 crores-INR 70 crores. That's the range. That's the maintenance and then comes the replacement.
Got it. Thank you, Nihar. Just one more question. What is the inventory loss gain for the year and Q4, if any?
Q4, there is no inventory loss. For the year, I think you can see the. I don't have the number offhand, but every quarter we have shared the gain or loss. But for Q4, there is no inventory gain or loss.
Got it. Thank you. That's all from me.
Now, just to add to that, maybe I can give some more color. I think the way PVC prices are, I think they are. Of course, you will have slight upward or downward movement, but mostly will be range bound which will make a very growth conducive environment. I don't think we will see very large inventory gain or loss going forward, which was the normal situation for this industry. I think that is good for a distribution-driven business when there is low volatility in input prices. We will not see extreme restocking or destocking, and neither will we see extreme inventory gain or loss, which is why we are trying to even prepone our capacity addition for the Begusarai facility.
Got it. That's all from me. I will get back in the queue.
Thank you. The next question is from the line of Dhananjai Bagrodia from ASK Investment Managers. Please go ahead.
Hi. Congratulations on the good volume growth. Maybe I missed this, but could you share some color on the working capital and why it's bloated and how we could maybe going forward work on this?
I think we've shared earlier, working capital has increased because of the debtor days, because the demand traction improved in the second half of the quarter, which is why that has increased. As we speak, the receivables have come back to a level of INR 460 crores- INR 470 crores.
Okay.
As we use channel finance effectively over the next two quarters, by the end of the second quarter, we expect receivables to come between 50- 60 days.
Are we done now with all our ERP implementations and everything? From now on, it'll be normal course of business, right?
Yes, that is already done since before this Q4 as well.
Okay. I know it's very tough right now, but any guidance now on how we should look at the company? Because now we've done all the hard work, we've put in the effort in terms of getting everything in streamlined. How should one look at it for, let's say, FY 2025 in terms of volume growth, and how are we looking to maybe reduce the pricing differential versus the little larger players?
I think pricing differential today, we are competitive. We have done the price corrections in certain markets where we are over-premiumized which hurt volume growth in the beginning of the year.
Yes.
That has all corrected, which is why you are seeing the kind of strong volume performance in the March quarter. We believe this will continue to sustain especially because the positive demand trend that we are seeing across plumbing, agri, and infra. That's the demand scenario, and we are confident of 15% volume growth for the next few years.
Next few years. Okay. Bathware is too small right now, right?
Bathware, in the previous questions we have tried to address that. Now we will be going pan-India. After the Aquel acquisition, we will be accelerating our growth.
Perfect. Thank you. Thank you so much.
Thank you. The next question is from the line of Sneha Talreja from Nuvama Wealth Management. Please go ahead.
Good morning, team, and thanks a lot for the opportunity. A couple of questions from my end. Nihar, while you said that we have taken price correction measures, where do we stand now versus peers? Any difference in the pricing that you would like to share?
Yeah, like I said, the price correction has been accounted for and already we have taken that action in the market. Currently, as we speak across PVC and CPVC, we are competitive. This is after interacting with our channel and taking feedback from the sales team and doing our independent research as well. We feel that today now we are competitive across the product portfolio, which is why you are seeing this kind of a strong volume performance.
So number one, you mean to say we would be plus or minus 2%-3%? Any range that you would like to give here?
Yeah, I think we are competitive. There would not be a very large-
Gap.
Is what I am trying to say.
Understood. Secondly, just wanted to understand when you alluded that agri was also good and currently also Q1 is also packed with agri demand. Is there any election impact that you are seeing, or how has been the Q1 so far for you? How do you see the year panning out to be like? What is your guidance on FY 2025, both volumes as well as margins?
Elections would typically have more of an impact on infrastructure and those kind of segments, which for us is still not very large. It is less than 4%-5% of revenues. I think in terms of demand from private real estate or agri, I do not think election has much of an impact on that. The second part of your question, I think for long-term volume growth, I think 15% is what we are aiming for as a company. EBITDA margins, we stick to 12%-14% as our guidance for the operating margins. I think we are confident of delivering that. Like I said earlier, we are trying to prepone the capacities in the East, looking at this kind of a demand across segments.
We got that. Thanks a lot, team, and all the best.
Thank you.
Thank you. The next question is from the line of Varun Jain from Dolat Capital. Please go ahead.
Yeah. Hi, sir. My question was on market share. What was your market share at the beginning of FY 2024, and what was it at the end of FY 2024? Secondly, if we look at some other companies' growth guidance, especially the market leader, and we look at your volume guidance, will we be losing some market share in FY 2025? Do we expect that?
No, we don't expect to lose market share in FY 2025.
What was our market share in FY 2024, beginning and end?
So quickly we don't get exact numbers in terms of what every There's 35% of the market is still unorganized. What I know is we have grown at 10%, and industry growth would be sub that. So still we have increased our market share. Of course, we would have grown at a better pace had we not had the ERP issues in the first half. But the kind of efforts that we are doing in terms of network expansion, in terms of addition of new products within the piping portfolio, and the kind of aggressive spends that we are doing in A&P, and the kind of addition that we are doing in the sales team across retail projects, infrastructure, as well as digitization of the value chain through BMS and SSA. We are confident that we will continue to grow.
We will continue to grow aggressively, continue to gain market share, and which is why we are aggressively putting up capacity. If you see out of our total capacity of more than 3 lakh tons, more than 80,000 tons has been put up in the last three, four years. And over the next year, we will be putting up around 48,000 tons in Bihar as well. So that tells you our mindset for growth. And we are putting our money where our mouth is in terms of adding that capacity because we are confident that we will continue to grow aggressively and we will continue to gain market share the way we have done consistently over the past many quarters and years.
Okay, sir. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Udit from YES Securities. Please go ahead.
Yeah. Hi, sir, and congratulations for your volume growth that you have reported. Sir, firstly, would you like to mention what was the EBITDA loss for the sanitaryware faucet business for the quarter and full year?
This we have informed that the top line is around INR 10 crores and the direct cost attributable to this segment is close to INR 8 crores-INR 9 crores under branding, employee, and related cost. Segmental, we are not disclosing right now. Going forward, once the segment picks up, we will start disclosing the segmental numbers also.
Okay, sure. And sir, what will be the CapEx over and above the maintenance in FY 2025?
For bathware or for pipes?
For total company level.
It will be in the range of INR 80 crores-INR 100 crores. It includes both. It doesn't include the new facility at Begusarai. I am talking about the existing capacity and bathware including. It will be in the range of INR 80 crores-INR 100 crores, obviously excluding the second trans of Aquel what we will be doing in later part of this year. It includes maintenance as well as replacement CapEx both.
Got it. Lastly, sir, are we registered for the Jal Jeevan Mission that is going on? If so then what will it be as a percentage of total volumes?
Yeah, there is no one central registration for Jal Jeevan Mission. There are state level approvals that you need and as and when the demand comes from that state, given our size, capacity and vintage in the industry, those approvals we get fairly quickly across states. That's a decentralized at a state level, yes, and with many states we are already approved. And we continue-
What will-
The programs pick up, we get the approval at the right time.
Got it. And what will be the contribution of it to our total volume then this year?
It will not be very significant.
Okay. Got it. Thank you so much.
Thank you. The next question is from the line of Akash from UTI Mutual Fund. Please go ahead.
Hello, am I audible?
Yes, Akash, please go ahead.
Yeah. Just wanted to check, actually, debt has gone up. Any thoughts on how we are planning to reduce our debt?
The working capital and term loan. Term loan has been added, and that has been added for the purpose of the new facility at Begusarai. Working capital has not significantly increased. It has increased a bit. It is a working capital requirement. With the cash we have and the unlocking of debt is what we will have. It is not a matter of concern for us right now, both in terms of working capital loan and a term loan.
Sure. Sure. Yeah. Thank you.
Thank you.
Thank you. The next question is from the line of Sohil Kaura from ICICI Securities. Please go ahead.
Good morning, sir, and thank you for the opportunity. My first question was on the bathware segment. If you could guide for FY 2025, what sort of revenues you are expecting, and, if possible, also on the EBITDA level.
EBITDA currently we will at least, I think it will take 12-18 months more for really breaking even from here on. But, in terms of top line, like I said, now with the Aquel acquisition our go-to-market accelerates. Today we are selling whatever INR 10 crores of sales we have done in the past year has only come from two zones. Even in those two zones, our distribution network is still being set up. I think before revenue, I think still the first focus is on setting up distribution across northwest and in southeast we are setting up our sales team across the hierarchy. That would take the next two quarters.
By September end, we would become pan-India, and after that we would be able to give a strong guidance for pan-India sales contribution. But currently a lot of work is going on at the ground level in terms of selecting the right distributors, whether they are the pipes distributors or new bathware distributors, and as well as setting up display units across retailers. So all that ground level work is going on aggressively as we speak.
Right. Secondly, I wanted to ask on the profitability front. So Q-o-Q, there is a significant improvement in volumes, about 20 odd percent. But in terms of EBITDA kg, I mean, in quarter three FY 2024, there was also significant losses and Q4, like you mentioned, there were none. So Q-o-Q I am basically not seeing much improvement in EBITDA per kg. So there is barely just 1% improvement. So, could you please explain that?
No, so focus is on volume growth. We have taken some price correction like we had guided for in the December quarter. We had to be more competitive in certain markets. We had become over premiumized relative to competitors. So we did that price correction, and as a result of that, you are able to see this kind of a volume growth. So we have always consistently said that our focus continues to be on having strong volume growth, with guidance of 12%-14% operating margins, which is what we have been able to successfully deliver.
Right. Thank you so much, sir.
Thank you. The next question is from the line of Pravin Sahay from PL Capital . Please go ahead.
Thank you for taking my question. I have a couple of questions. The first is the clarification on the CapEx, that is INR 80 crores- INR 100 crores+ of, if there is any further on the Aquel. Is that what you have said about the 2025?
So INR 8 crores- INR 10 crores we will be investing in the Bhuj facility to unlock a production capacity of INR 100 crores- INR 120 crores of faucets from Bhuj. Apart from that, we will be spending INR 80 crores- INR 100 crores of debottlenecking and maintenance capacities for the pipes and fittings and water tanks.
Is there anything from the Bihar facility?
We have not included Bihar in this. Bihar has been taken as a separate project where we have already given a CapEx projection of INR 100 crores- INR 120 crores, which we will be completing by Q4 of FY 2025. The numbers what we have spoken is purely on the existing facility, what we are having.
Okay, got it. Second clarification on the bathware segment, that the projected or targeted from the Bhuj facility, you are talking about INR 100- INR 120 odd crore. Is there any timeline also can you attach to that?
No timeline. If we invest this INR 8 crores- INR 10 crores, we will be able to immediately unlock this kind of a production capacity. We will do this capacity over two quarters.
Okay. On the advertisement expenses, can you give the numbers for 2024?
It's INR 54 crores for the full year.
Okay. Last questions are on the growth side. Definitely for a quarter it's being a very good number of a 16% of growth. Also you had given that it's a mix of agriculture, infra, and plumbing. Way forward, can you give some qualitative color for FY 2025 from where you are expecting a high number of growth to come in, whether it's more still focused on the plumbing segment only or infra, some other verticals you are looking at for bringing the growth?
I think our core segment continues to be plumbing and SWR, which we are continuing to grow in that consistently and those are our value-added products. Apart from that, the agriculture, which is a seasonal business for the January quarter and the June quarter, we are expecting good demand because of not only a healthy monsoon and increasing rural per capita incomes, but also because of stable input cost. As you know, we are a pass-through industry. Because of the low PVC prices, the finished good also is aggressively priced. Agri is very price sensitive, the agri pipe demand. We are seeing a good demand from that segment as well. Infrastructure, whether it is the Double Wall Corrugated pipes or the HDPE pipes, we are seeing aggressive growth potential in that as well.
Whatever CapEx also that we are doing is we are doing across segments. This also, the water tank segment, which today is a small contributor, but we have now slowly started manufacturing at all locations. First we started from the Silvassa plant, then we started at Jaipur, then Hyderabad. Last quarter, we started at Haridwar, and now soon we will start at Chennai. In Bihar as well, we will have water tank manufacturing. We will be really leveraging our multi-location manufacturing footprint for a product like tanks, which is very freight sensitive. To come back to your original question, we are seeing why we are confident of this kind of volume growth sustaining is because we are seeing this kind of strong demand momentum across plumbing, agri, infrastructure, as well as water storage.
Is it possible to give any contribution color on this? Like how much agri has contributed for a quarter and a year?
On a broad level, plumbing and SWR is around 65%, agri tends to be around 30%, infrastructure around 4%, and water storage around 1%. That's a very broad thumb rule.
Okay. And last, as you mentioned that we did some price correction as well. With the strong growth in the sector, do you expect to come back with some price hike?
Can you repeat the question?
Earlier, answering to the question, you had mentioned that you had did some price correction as well in a quarter. But with the strong growth across the segments, do you expect the price correction to roll back?
The price correction is not done for discounting. We had just over-premiumized, which is why our volume growth in the first half of the year was not as good. With this, we have only become more competitive in the marketplace. That all has been done. It is already accounted for, and we have taken that action in the market. Our focus continues to be on strong volume growth with delivering 12%-14% operating margin. I think if we are able to do that, we will be able to unlock a lot of value.
Thank you and all the best, sir.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next follow-up question is from the line of Shubham Aggarwal from Axis Capital. Please go ahead.
Hi. Thank you for the follow-up. Just wanted to check on this. Just a thought that given that you are increasing your distribution network both in pipes and Aquel, as well as investing behind Aquel. The pipes volume growth is mentioned to be around 15% for the next two, three years. The revenue growth for Aquel should also be strong. However, I believe that should lead to the margins to be in the lower end of your 12%-14% margin guidance range. Is that understanding broadly correct, or would you like to comment something on that?
I think there are multiple factors that impact margins. In our kind of business, I think the top three or four factors are, one is the pricing power, depending on the demand supply situation. Second is product mix within piping also, plumbing and specifically CPVC and PPR are more value added. Agri and infrastructure tend to be more volume driven.
There is also operating leverage. With our kind of cost structure, the more we sell, the more profitable we are. I think I will not speculate whether margins will be on the higher band or lower band of 12%-14%, because there are multiple factors. But I think we are confident that it will be on an annual level. 12%-14% is something which is achievable, and we are keeping in mind the investment that we are making in bathware, as well as the other 2 or 3 factors that are crucial for our margins being consistent.
Okay. On the industry side also, are you seeing any higher or lower growth in CPVC compared to PVC right now? Also, if you can tell us what was the price movement in CPVC for Q4 and for the full year. Not full year, Q4 is enough.
In Q4, we have taken certain price corrections in CPVC, which are in line with the industry. I think it will be around 3%-5%. The growth we are seeing across PVC and CPVC both, because the growth is coming from a very sustainable growth in real estate, which is why we are seeing this kind of growth across polymers, across applications.
Got it. That was all. Thank you.
Thank you.
Thank you. The next question is from the line of Nikhil Agarwal from VT Capital. Please go ahead.
Yeah, good morning, sir. This is Nikhil Agarwal from VT Capital. I just wanted to know about the CPVC. We have taken some price corrections. Are we expecting any further price corrections or CPVC prices to remain under pressure because of the new capacities that are coming in?
Today we are competitive as far as our finished goods is concerned. I do see that CPVC prices will continue to be subdued as local capacities come in. CPVC raw material prices will be subdued going forward. Whatever decrease in cost, we will pass on to the market. I think this is very good with more local capacity coming in across multiple players. I think we will always see. Today we are extremely import dependent as a country for CPVC raw material. Whenever local supply increases, pricing becomes more competitive and that's when actually the category can grow. We have seen that play out in PVC and I think over the next coming years, we will see that play out in CPVC as well. Better adoption will happen as affordability improves.
Okay. Will your margins continue to be, will CPVC continue to have a higher margin trend compared to PVC? Because I believe the game in CPVC is about the procurement. Since more capacities will come, you will also lose out on the premium that you currently charge.
We do not really charge a premium in CPVC today. Yes, I believe CPVC will continue to be, the market structure is very different from PVC. It is an extremely consolidated market where the top four of us enjoy, I think more than 70% market share. I believe this is a brand play. It is not as commoditized as PVC. The end user is more and more brand conscious because it is for hot and cold water application, mostly in concealed bathrooms. I continue to believe this is more of a branded play and to answer your question, yes, CPVC will continue to be a value-added product relative to PVC. However, we will focus to grow across polymers, across segments.
Okay. What would be the, if you could just generally give an idea about the margin difference between PVC and CPVC?
We do not share segmental margins, but from a direction point of view, CPVC is more profitable than PVC.
Okay. That is it from me. Thank you so much.
Thank you. The next question is from the line of Rahul Agarwal, an individual investor. Please go ahead.
Yeah. Hi, am I audible?
Yes.
Yes, sir.
Thank you for the opportunity. Good morning. Nihar, essentially question is more on the raw material side. Just wanted to understand, obviously the expectation is that PVC pricing is going to be stable, CPVC resin price is going to be down largely. Last five months, I think we've seen INR 1 increase every month on an average, which is about almost 8%, 9% now on Reliance pricing in India. Then there are these discussions around anti-dumping duty on emulsion grade, and then potentially maybe suspension grade.
What would you foresee in terms of impact on demand here? Because broadly, we're all expecting plumbing, SWR, agri, all to do well because of various factors we discussed in the call today. But in case, let's say, for example, if there is an ADD on suspension grade, prices go up another INR 5 a kg or maybe INR 3- INR 4 a kg just to close that gap. How would you see the volume impact here?
PVC today is at an extremely affordable range. A lot of PVC raw material manufacturers are actually really not making money at the current level, which is what my I'm not a subject matter expert, but this is my limited understanding, is the current PVC pricing is actually not really sustainable. We will see a slight uptick, but we will not see something like what we saw in the supply chain crisis where PVC prices crossed INR 140 per kg. Are we going to see that? No. That's when affordability becomes a challenge. At INR 140 per kg of PVC, industry growth will be challenging. But if PVC prices go from, let's say, INR 80 to INR 85 or slightly more than that, I don't think that really impacts it in a significant way where affordability becomes a question or price sensitivity becomes a question.
I will not speculate in terms of how much increase will come due to the ADD investigation. But looking at the best estimates, I don't think it's going to be in such a range that it will impact the affordability of the category itself. I am not concerned that because of this, PVC price will go up to that extent that volume growth will become a challenge. I think it will go to a level where manufacturing PVC becomes more sustainable, and I think that will be very well absorbed. I don't think that will really impact demand across industry.
Right. In the last time when PVC prices actually went up, post-COVID, I think the situation was that we saw a lot of MSMEs going out of market, and hence it supported organized market share. At INR 85, INR 90 bucks, obviously, you are saying that the affordability won't get impacted. But there will be a case of gaining more market share because then 15% looks like obviously achievable, but you could do more right in such a situation.
Absolutely. We want to do more. We aim to do more. We are putting up capacity to be able to beat that guidance. Are we happy with 15% volume growth? Absolutely not. But we are conservative with guidances, but we are putting up with our capacities because is more than 15% possible? Absolutely. I think that kind of buoyancy in demand we are seeing across segments, and we are putting our money where our mouth is by aggressively putting up capacity. But I would prefer to be conservative with guiding at 15% volume growth for not only next year but for next couple of years.
Perfect. Just to conclude, any meaningful changes do you see in PVC domestic supply? CPVC obviously is going up, but any meaningful changes you are seeing in PVC resin supplies in India?
I think there are projects going on, but if I talk only about the current financial year, I do not think we will be seeing any increase in local capacities. I think that would take at least a minimum two years is what I understand. I am not very sure. But I think for the next four or five quarters, I do not think that is something that is going to happen. But again, we need local capacity. Today still there is more than 50% dependence on imports for PVC raw material, which is not good for a growing industry. So any more local capacity is always welcome so that industry grows, and then as being one of the leaders, we are able to grow aggressively as well.
Got it. Just one clarification with Anand. The CapEx number mentioned, could you let me know what is the Bihar CapEx already done till date, including land?
In terms of progress, infra is under progress. Civil is being done. Including land, it will be in the range of INR 70-80. Land is INR 27 and rest is civil structure.
That's already done, right?
Yes, on the ground.
Okay, perfect. Thank you so much and all the best for the next year.
Thank you.
Thank you.
Thank you. Due to time constraint, that will be the last question for the day. I will now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you all for joining us today. Thank you.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.