Ladies and gentlemen, good day and welcome to Surya Roshni Limited Q1 FY 2022 earnings conference call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as of this call. These statements are not guarantees of future performance and involves risks and uncertainties and are difficult to predict. As a reminder, all participant lines will be in 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. Raju Bista, Managing Director, Surya Roshni Limited. Thank you. Over to you, sir.
Yeah. Good afternoon, everybody. Myself, Raju Bista, Managing Director of Surya Roshni. Good evening once again everybody and a very warm welcome to everybody present on the call. Today again, I am joined by our ED and Group CFO, Mr. Roop Narain Maloo, Mr. Tarun Baldua, Executive Director and CEO of Steel Pipe Business, and Mr. Nirupam Sahay, Executive Director and CEO of Lighting and Consumer Durables and SGA, our investor relations advisors. I hope everyone got an opportunity to go through our financial results and investor presentation which has been uploaded on the stock exchanges as well as on company website. We hope all of you and your loved ones are healthy and safe in the wake of ongoing pandemic. The downward trend of COVID-19 cases is certainly a good sign and we sincerely hope that the pandemic gets over soon with the aggressive vaccination drive going on across country.
We have been following all the necessary guidelines to safeguard our employees' interest and also ensuring that our operations are running smoothly and healthy. I will now share a few highlights for the quarter and after that I will request Mr. Maloo to share his thought on the financial performance of the company in detail. A sudden spike of COVID-19 cases during the second wave increased fatality and infection rates which ultimately resulted in dampened consumer sentiment and disruption in supply chain and production.
This was coupled with increased commodity prices and lack of ability of the workforces. However, during these difficult times, our first preference remained towards employee safety, offering support to the affected employees and their families, vaccination and standing with the entire community. We leverage technology to enable our teams to work efficiently from their respective homes.
On the vaccination front, 100% employees at our corporate office and about 85% of our employees at manufacturing location and branch offices has been vaccinated. Even in such a difficult and challenging environment, we were able to improve our operation and achieve growth on the revenue as well as profitability front. Our revenue for quarter one FY 2022 grew by 64%, EBITDA grew by 112%, and cash profit registered a growth of about 221%. This we believe is a testimony to our strong fundamentals, operation excellence, top-notch domain knowledge of our management and the sheer dedication of our entire workforce. During Q1 FY 2022, the steel pipe industry business performance has demonstrated strong growth in spite of facing challenges in the form of increasing raw material prices and COVID-19-led restrictions resulting in lower demand.
The raw material prices in the international market has been on an uptrend since April 2020 with a peak around mid of May 2021. The domestic prices continue their upward trajectory till June 2021. We tried to mitigate this by our continuous pursuit to increase the shares of high value, high margin lucrative products like API coated pipes, GI pipes, export and high margin value added products. We reported revenue growth of 77%, EBITDA growth of 143% with the highest ever EBITDA margin of INR 5,033 compared to INR 2,463 in Q1 of FY 2021. The cash profit also witnessed a strong growth of 289% for Q1 FY 2022 when compared on a year-on-year basis.
This performance was led by strong growth of 109% in value terms for export along with API coated pipe register a growth of 112% due to the timely start and completion of expanded capacity of 3LPE coated facility, which supported in a robust execution of orders. Being the largest exporter with a long-standing relationship with marquee customers and being reputed for maintaining the highest quality standard, our export revenue and realization are expected to accelerate further.
With global business relooking at the supply chain and working towards China plus one sourcing strategy, we have witnessed a broad-based demand surge for our product from various countries. China has withdrawn export incentives and is planning to impose export duty. Export demand is expected to improve further, this coupled with better pricing give us confidence to achieve around 30%+ volume growth in export business for FY 2022.
We remain positive about steel consumption and demand for steel tubes and pipes driven by increasing economic activities and the wider reach of our vaccination program. India is well on track to become a preferred destination driven by various initiatives by the government such as Make in India, Local for Local, PLI scheme, and China plus one strategy. We are participating in the tenders under the various government initiatives like Jal Jeevan Mission and city gas distribution across country and have received a good quantum of orders. Also, from a long-term perspective, the decreased share of unorganized small players and the increased presence of larger organized pan-India players is expected to result in better opportunity and margins for the larger players, especially in the ERW segment, which has been the most fragmented segment historically.
Our lighting and consumer durable business has also registered a good growth, which is driven by strong growth in value-added products like LED lighting. LED lighting grew by 29% in terms of volume, whereas conventional product, we saw a degrowth by 14%, which was natural. With overall consumer lighting registered a 51% growth on consumer lighting segment. We have registered healthy growth across all regions, even in the face of COVID-19 second wave. The plants remain underutilized in May and June in 2021 due to decreased demand due on account of market closure due to the spread of second wave of COVID. This, along with higher price of natural gas, impacted profitability for the quarter. During the quarter, we have also observed increase in raw material prices in lighting, and we are passing on the same with continuous price hike in the market.
We have witnessed a strong momentum of project inflow of our professional lighting business, where we have completed several marquee projects like Bhandari Bridge facade at Amritsar, Cricket Stadium at Hyderabad, Baroda, Mumbai Expressway projects by NHAI, and we have also received order for Nandgaon facade lighting, Delhi-Baroda NHAI package 22, Saram Bridge NHAI Kolkata, NEEPCO NHAI street lighting, NH 56 street lighting during the quarter.
Several marquee projects under implementation like facade lighting of Katchery, Guwahati and Lucknow Airport projects and additional projects from NHAI like Aurangabad and Delhi-Baroda package of five and six will enable us to strengthen our credentials for further project win. We remain confident of maintaining the growth trajectory that we have witnessed during FY 2021. A favorable product mix towards value-added product is expected to drive the margin expansion.
We are focusing on the high-value product mix like LED batten and downlighter and also on smart lighting LED, which has a very good growth potential. To augment the growth momentum further, we will continue to launch innovative smart lighting solution and new products. We are also continuously working on in-house automation initiative at our manufacturing facility and R&D to improve our productivity. Consumer lighting, professional lighting, and consumer durables are expected to drive our growth as we keep on introducing new products in the transition to being a FMEG company. The PLI scheme for manufacturing of component of LED lights will enable accelerate growth in the medium and short term. As we are participating under the large investment category, we are planning a minimum cumulative investment of INR 25 crore between 3 to 5 years during this period.
This will also enable us to augment our manufacturing facility further through backward integration, leading to reducing reliance on imported components. To further enhance our brand building initiatives, we have appointed Ogilvy as our creative agency from last month, June 2021. Ogilvy will work with us on brand building and on developing advertisement campaign across TV, print, digital, et cetera. We firmly believe in creating values for all our stakeholders, including our employees. In continuation of our policy of rewarding employee dedication and hard work, the company has granted INR 9.17 lakhs ESOP in the second tranche to 234 key executives and employees under the trust group.
Cumulatively, it will be around 2.8% of the equity. We remain confident about the opportunity across all our businesses. Focus on value-added product offering, along with improving operating efficiencies, will enable us to achieve strong growth and profitability, and create value for all stakeholders.
I would like to thank all the employees, customers, suppliers, bankers, and shareholders for their constant support and faith on us during this challenging time. Now I will request Maloo to update you on the financial performance in detail. Over to you, Maloo.
Thank you, Raju Bista. Good evening, everyone. Thank you for joining us on this call today. I will now take you through the quarterly financial update on a consolidated basis for quarter one FY 2022. The revenue growth grew by 64% on year-on-year to INR 1,453 crores from INR 887 crores. The EBITDA registered a growth of 112% year-on-year to INR 900 crores from INR 44 crores, along with 144 points improvement in EBITDA margin front to 6.41% from 4.96% in this quarter. This was primarily due to significant growth across the regions, better product mix, reduction in finance costs. The diluted EPS stood at INR 6.86 for quarter one FY 2022 as compared to INR 0.41 in quarter one FY 2021. Continuous reduction in debt driven by repayment of term loans. Repayment of term loans of INR 102 crores during quarter one FY 2022 led to further improving debt-equity ratio to 0.51.
Even during the current challenging quarter, we have been able to rein in working capital days. Overall, as a company, we have been able to improve working capital days by 50 days to 73 days as of June 30th 2021 from 123 days as of June 30th 2020. I will now take you through the performance of the steel pipes and strips division. For steel pipes and strips, revenue grew by 77% in quarter one FY 2022 to INR 1,239 crores from INR 702 crores in quarter one FY 2021. The EBITDA grew by 143% in steel pipe division in quarter one FY 2022 to INR 77 crores from INR 32 crores in quarter one FY 2021. We achieved highest ever EBITDA margin of INR 5,033 in this quarter with against INR 2,463 in quarter one FY 2021.
Sales profits grew by 289% in quarter one FY 2022 to INR 62 crores from INR 16 crores in quarter one FY 2021. As mentioned by Mr. Raju Bista earlier, this robust performance was driven by our continuous function to increase the share of high value margin lucrative products like API coated pipes, GI pipes, and exports, coupled with strong growth of 109% in value terms and 36% in volume terms for exports. In API pipes, we registered a growth of 112% due to the timely expansion of the 3LPE coated facilities resulting into robust order execution for this sector. Our strong order book of INR 827 crores in hand for API coated pipes as on 30th of June 2021 will be one of the key growth catalysts.
The commissioning of the 72,000 metric ton per annum manufacturing facility capacity of section pipe up to 300/300 mm with Direct Forming Technology, DFT, at the Malanpur unit for next quarter will also aid the growth momentum. On the working capital front, we witnessed an improvement to 66 days as June 30th 2021 from 101 days as of June 30th 2020 in the steel pipe division. Moving to performance of Lighting and Consumer Durables division. For Lighting and Consumer Durables, revenue grew by 15% in quarter one FY 2022 to INR 215 crores from INR 186 crores in quarter one FY 2021. EBITDA grew by 31% to INR 16 crores from INR 12 crores. The EBITDA margin for the Lighting and Consumer Durables also saw improvement of 93 basis points to 7.6% in this quarter from 6.7% in quarter one FY 2021.
Sales profit grew by 83% in quarter one FY 2022 to INR 14 crores from INR 8 crores in quarter one FY 2021. There was a sharp movement to 113 days on the working capital front as of June 30th 2021 from 208 days as of June 30th 2020. With aggressive vaccination campaigns by the government of India, falling cases of COVID-19, economic activities are returning towards normality at a quick pace. Demand for paint and consumer appliances is expected to remain buoyant, driven by continuing work from home. Elevated commodity prices are expected to taper off in the medium term, which will in turn help us to improve the margins further. Our growth of 51% in the numerical lighting with strong growth across all other regions demonstrates the strong fundamentals in both the businesses.
We are confident of robust performance in the next few quarters, which will be driven by strong fundamentals across our product portfolio and businesses. I will now request the moderator to open the floor for the questions- and- answers. Thank you.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question- and- answer session. Anyone who wishes to ask a question may please press star then one on the touch-tone telephone. If you wish to remove yourself from the question queue you may press star then two, participants are requested to use handsets while asking a qustion. Ladies and gentlemen we will wait for a moment while the question queue assembles. To ask a questiom please press star then one. The first question is from the line of Kunal Shah from Carnelian Capital. Please go ahead.
Hi, sir. Thank you for the opportunity, and congratulations on the set of numbers as well. I have two questions for two divisions. One is in the pipe and tubes business. You've got an EBITDA per metric ton at INR 5,033, which is one of the best so far, right? We are also seeing good traction when it comes to exports. How should one look at it for the whole year? What is your take? How is the management looking at it for the whole year along with the volume growth in this particular segment?
Next question.
The second question is pertaining to the lighting segment. We have got EBITDA margin of 7.6% when it comes to Q1 which was in Q4 at 11.4%. There has been a revenue drop for sure. Any specific reason as to lighting margin drop? What we understand is in the lighting segment, pricing has kind of bottomed out, right? How should we see margin for the lighting segment going ahead from here? How is the scenario looking out there? Because LED, we understand, is still kind of finding challenge. If you could help understand how our VC interaction when it comes to consumer durable business and also the pricing part when it comes to the lighting segment. That's it. Thank you.
I'll start with the second question about the lighting segment which you asked on EBITDA front. I think in quarter one we have registered 7.6% of the EBITDA.
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[Non-English content] pre-COVID [Non-English content] historical data [Non-English conten] l ast year during COVID[Non- English content] improved [Non-English content] margin [Non-English content] COVID [Non-English content]
[Non-English content] COVID [Non-English content] Otherwise [Non-English content] 90%. [Non-English content] number [Non-English content] COVID [Non-English content] replacement cost [Non-English content] percentage.
[Non-English content] quarter one [Non-English content] 7.9%. [Non-English content]
[Non-English content] LED [Non-English content] 30% volume growth [Non-English content] engine [Non-English content] trade business, consumer business [Non-English content] trade consumer business [Non-English content] growth Q1 [Non-English content] technology [Non-English content] changes [Non-English content] last year [Non-English content] improvement [Non-English content] margins improve [Non-English content] Third, originally [Non-English content] replacement [Non-English content] LED lighting [Non-English content] replacement [Non-English content] time [Non-English content] [Non-English content] lighting [Non-English content] healthy margins [Non-English content] improvement [Non-English content] । That is one thing.
[Non-English content] steel [Non-English content] EBITDA has crossed ₹5,000 per ton [Non-English content] future [Non-English content] guidance [Non-English content] main reasons [Non-English content] almost [Non-English content] double [Non-English content] volume [Non-English content] 36% [Non-English content] growth [Non-English content] value almost double [Non-English content] API [Non-English content] almost [Non-English content] value double [Non-English content] export [Non-English content] reason था, API [Non-English content] reason [Non-English content] Cold rolling [Non-English content] utilization Q1 [Non-English content] improve [Non-English content] overall product mix change [Non-English content] export [Non-English content] focus c
Value added API and coated pipe [Non-English content] maintain [Non-English content] last year ₹3500, ₹3550 [Non-English content] EBITDA [Non-English content] ₹4000 plus [Non-English content] EBITDA [Non-English content] । We will try [Non-English content] 100% prediction [Non-English content] We are trying [Non-English content] gradually [Non-English content] EBITDA improve [Non-English content] ₹4000 [Non-English content] EBITDA [Non-English content]
[Non-English content] sir. [Non-English content] exports [Non-English content] sir [Non-English content] order book [Non-English content] pricing [Non-English content] sir visibility [Non-English content] grow [Non-English content]
Export [Non-English content] 30% plus [Non-English content] volume growth export business [Non-English content] , number one.
Number two, [Non-English content] Canada [Non-English content] America [Non-English content] section pipe [Non-English content] export start [Non-English content] globally, European countries [Non-English content] Middle East [Non-English content] China [Non-English content] China plus one policy strategy [Non-English content] largest exporter [Non-English content] reputation [Non-English content] confidence [Non-English content] quality, supply, customer relationship, after sale service, [Non-English content] volume [Non-English content] number 1 [Non-English content] premium [Non-English content] customer satisfaction [Non-English content] order book [Non-English content] price [Non-English content] cancel [Non-English content] honor [Non-English content] [Non-English content] 30%+ [Non-English content] volume [Non-English content] country add [Non-English content] additional volume growth [Non-English content]
Sir, [Non-English content] lighting [Non-English content] consumer durable business [Non-English content] sir [Non-English content] consumer durable [Non-English content] business [Non-English content] move [Non-English content] growth [Non-English content] second question, [Non-English content] real estate [Non-English content] business [Non-English content] cables and wires [Non-English content] engineering business [Non-English content] directionally [Non-English content] start [Non-English content] sir. Thank you.
In the first quarter our home appliances businesses grew at 80%. A very good growth in all our home appliances business. We plan to continue that growth momentum. We will have a whole slew of new products across categories lined up for this quarter and the next quarter. We expect that growth momentum to continue. It will be a major growth driver for us this year and going forward. On cables and wires, we are in the process of finalizing the plans. We will take it to the board and after approval from the board, we will definitely share it with all the investors as well.
Okay. Very well sir. Thank you and wish you all the best. I'll join back when we queue sir. Thank you.
Thank you.
Thank you. The next question is from the line of Bhavesh Chauhan from IDBI Capital. Please go ahead.
Hello sir. Congratulations on a great set of numbers. Sir, my question is on this Bahadurgarh plant. It's a very old plant, and if I understand correctly, if you do some CAPEX, margins could improve there. Management has paid INR 100 crore of debt and not undertaken CAPEX at Bahadurgarh. What is the reason for that sir?
[Non-English content] Bahadurgarh [Non-English content] call [Non-English content] discussion [Non-English content] plant [Non-English content] technology [Non-English content] fixed cost [Non-English content] as compared to other new plant [Non-English content] open [Non-English content] discussion [Non-English content] Bahadurgarh plant [Non-English content] exit [Non-English content] ready [Non-English content] overall real estate [Non-English content] environment [Non-English content] regular basis [Non-English content] debottlenecking [Non-English content] continuously [Non-English content] Bahadurgarh [Non-English content] investment [Non-English content] overall Bahadurgarh plant cash generate [Non-English content] cold rolling [Non-English content] pipe [Non-English content] API [Non-English content] export [Non-English content] healthy order
[Non-English content] API export Bahadurgarh [Non-English content] Bahadurgarh [Non-English content] export [Non-English content] lending [Non-English content] cash [Non-English content] opportunity [Non-English content] exit [Non-English content] investment [Non-English content] CapEx [Non-English content] regular interval [Non-English content] CapEx [Non-English content] coating [Non-English content] plant Bahadurgarh factory [Non-English content] large pipe, section pipe [Non-English content] mill process [Non-English content] under commissioning [Non-English content] Q3 end [Non-English content] end [Non-English content] operational [Non-English content] basically formula [Non-English content] depreciation [Non-English content] lighting [Non-English content] steel [Non-English content] investment [Non-English content]
Okay sir. last [Non-English content] steel division [Non-English content] margin [Non-English content] INR 5,033, [Non-English content] inventory gain [Non-English content] approximately?
[Non-English content] usually investor [Non-English content] case [Non-English content] inventory gain [Non-English content] export [Non-English content] deal [Non-English content] fixed price [Non-English content] API [Non-English content] fixed price र [Non-English content] products [Non-English content] consider [Non-English content] order [Non-English content] gain [Non-English content] 5,000 [Non-English content] API [Non-English content] reason [Non-English content] export [Non-English content] reason [Non-English content] Cold rolling [Non-English content] utilization improve [Non-English content] third component stock [Non-English content] gain [Non-English content] ₹400-₹500 ton [Non-English content] stock [Non-English content] gain [Non-English content]
Okay sir, that is helpful. Thanks a lot and all the best.
A reminder to the participants, to ask a question please press star then one. The next question is from the line of Mahesh V, Individual Investor. Please go ahead.
Hi. I had a couple of questions. One is regarding this and Ogilvy being appointed. What is the nature of mandate given to them and by when would we see, as in the general public will see the new ads or the new branding, whatever they are undertaking, efforts that they are undertaking, the results of that?
Nirupam ji will reply.
With Ogilvy, it is a full-fledged agreement that we have. They will work on brand building with us which includes advertising across all media, including digital, TV, print, radio, etc. We already started work with them and the first national campaign will be out in this quarter itself. You and all consumers will be able to see the refreshed brand and the refreshed campaign in this quarter itself.
Okay. [Non-English content] approximately. Even from your own talk about your own business, there is lot more optimism today than two years ago. Do you think that we are being a bit too conservative now, the opportunities are bigger and probably the CapEx could be higher than our depreciation?
[Non-English content] routine [Non-English content] Opportunity [Non-English content] market [Non-English content] control [Non-English content] materialize [Non-English content] , board [Non-English content] approval [Non-English content] opportunity [Non-English content] market [Non-English content] India signing period [Non-English content] globally [Non-English content] demography [Non-English content] population [Non-English content] consumption [Non-English content] theory [Non-English content] , no doubt [Non-English content] growth [Non-English content] options [Non-English content] varieties [Non-English content] available [Non-English content] pipeline [Non-English content] assure [Non-English content] opportunity [Non-English content] CapEx [Non-English content] CapEx [Non-English content] opportunity [Non-English content] rate of interest 5% [Non-English content] [Non-English content] rate of interest [Non-English content] prepayment [Non-English content] ₹102 [Non-English content] prepayment bank
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Okay. Thanks a lot. One small question, Maluji. Basically quarter end [Non-English content] term loan [Non-English content] working capital cash [Non-English content] outstanding [Non-English content]
Quarter end [Non-English content] ₹717 [Non-English content] quarter end [Non-English content] ₹712 [Non-English content]
[Non-English content] term loan repayment [Non-English content] Prepayment [Non-English content]
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Okay. Thanks a lot. Thank you very much. That was very helpful.
Thank you. Participants to ask question please press star then one. The next question is from the line of Abhishek Ghosh from DSP Mutual Fund. Please go ahead.
Thank you so much for the opportunity, sir. Sir, [Non-English content] ? That also helps the margin.
[Non-English content] export [Non-English content] absolute terms [Non-English content] overall volume [Non-English content] 22% [Non-English content] volume [Non-English content] export [Non-English content] API [Non-English content] CR sheets [Non-English content]
[Non-English content] 18% [Non-English content] growth almost [Non-English content]
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Section [Non-English content] Okay [Non-English content] water orders [Non-English content] traction [Non-English content] states [Non-English content] slow [Non-English content] sense [Non-English content] movement [Non-English content] from June, July?
Yeah, hi, Tarun Baldua here. water segment [Non-English content] mainly projects [Non-English content] government [Non-English content] Jal Jeevan Mission [Non-English content] slow down [Non-English content] exactly. recently the tender has been finalized for Himachal state where we are also participant and we will get some orders. today our team is there in Jammu Kashmir. There also Jal Jeevan Mission orders are under discussion. there is no slowdown and we are getting orders regularly.
Okay. sir in the lighting segment how is the competitive intensity and the market share?
Yeah, you have a whole host of established players who've been there for several years, who continue to be there. One trend that we've seen is the small-scale players are starting to die out. We've seen that trend over the last couple of years and particularly in the COVID time over the last year, we've seen a lot of the small-scale sector actually die out. That leads to higher market share for the branded players. The second factor is China import. There was a lot of not quite legal imports that were happening, traders going across to China and getting a lot of material. That has pretty much stopped completely because of geopolitical reasons, because of restrictions due to COVID. Really, I think that import component has gone down dramatically as well, again, leading to Indian players like us really gaining market share.
Those restrictions and this whole Make in India initiative that the government has taken and Surya as a proud Indian multinational, is obviously fully integrated into that initiative of Make in India. As we mentioned earlier in the PLI scheme as well, we are trying to invest so that our dependence on components from China also goes down dramatically by increasing the component manufacturing that we do ourselves. All these factors are leading to branded players and particularly Surya being in a very good position to take advantage of these trends in the market.
Okay. Sir, would you help us with what would be the proportion of this imports and small sector in the overall lighting segment? Would it be like 30%, 50% or higher if any sense you can give us?
[Non-English content] conventional [Non-English content] time [Non-English content] China almost 10% [Non-English content] 90% [Non-English content] Indian [Non-English content] LED [Non-English content] technology [Non-English content] technology [Non-English content] scale [Non-English content] scale [Non-English content] price [Non-English content] initially China 90% [Non-English content] 10% [Non-English content] last [Non-English content] position [Non-English content] 50-50 [Non-English content] gradually India [Non-English content] share [Non-English content] China [Non-English content] number [Non-English content] imported products [Non-English content] COVID [Non-English content] time [Non-English content] fast [Non-English content] change [Non-English content] opportunity Indian industry [Non-English content]
Okay।
[Non-English content] initiative [Non-English content] component India [Non-English content] game changer [Non-English content] industry [Non-English content] PLI।
Sure।
Sir, just one last thing. [Non-English content] commodity [Non-English content] price increase [Non-English content] LED [Non-English content] consumer durable [Non-English content] price hike [Non-English content] pass on [Non-English content] second wave [Non-English content] impact [Non-English content] 2Q, 3Q [Non-English content] better [Non-English content]
[Non-English content] question [Non-English content] quarter 1 [Non-English content] price hike [Non-English content] impact [Non-English content]
[Non-English content] engineering [Non-English content] products [Non-English content] improvement [Non-English content] price pass on [Non-English content] COVID [Non-English content] impact [Non-English content] , volume [Non-English content] pressure [Non-English content] almost 60% [Non-English content] cost [Non-English content] pass on [Non-English content] in general [Non-English content] stock [Non-English content] balance [Non-English content] 50% [Non-English content] pass on [Non-English content] generally [Non-English content] cost push [Non-English content] Past history [Non-English content] reason [Non-English content] 1% - 1.5% [Non-English content] margin improvement quarter 1 [Non-English content] price pass on [Non-English content] volume [Non-English content] pressure [Non-English content] volume [Non-English content] quantity
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Correct. [Non-English content] sir, just [Non-English content] last question if I may [Non-English content] April, May, June impacted [Non-English content] . [Non-English content] July [Non-English content] in terms of B2C [Non-English content] business [Non-English content] , consumer durable [Non-English content] demand [Non-English content] that is virtually back to normal levels, [ [Non-English content] after the trade has opened up?
[Non-English content] back to normal [Non-English content] growth [Non-English content]
[Non-English content] 1% growth [Non-English content]
Market share [Non-English content] gain [Non-English content] market [Non-English content] disruption [Non-English content] opportunity [Non-English content] engage [Non-English content]
Okay, sir. Thank you so much for the opportunity. Wish you all the luck. Thank you.
Thank you.
Thank you. The next question is from the line of Rakesh Parekh from Barclays. Please go ahead.
Thanks for the opportunity and congratulations on good set of numbers. Sir, I will first like to understand about this margin from the steel side where we have done a highest EBITDA margin of INR 5,000 plus per metric ton. How far this is sustainable actually?
You know, this question has already been taken up by MD sir and for your clarity I will take up this. The higher margin is basically on account of increased volumes in this quarter 22%, and also the high profit margin products and the markets. Exports has increased by 36% and API has grown by about double in volume terms. CR quantities are more or less three times than of last year. The price margins has already increased in case of CR products. This all has added with slightly the stock gain this margin has come and as told by MD sir that we are expecting about INR 4,000 plus crores EBITDA for whole of the year.
Okay. That's comforting. Second sir, coming to the PLI scheme, what is the kind of opportunity we are looking at and have we participated over there and any investments or what we have planned over there?
Dilip uncle ji.
We are planning to invest as well we shared earlier, we are planning to invest a minimum of INR 25 crores over the next 3 to 5 years under the PLI scheme. As you probably know, for LED lighting it is now purely on components, it's not on the finished product. We'll be investing the INR 25 crores plus on components. This is across categories. There are multiple categories available. We'll be doing it across multiple categories within this set is available. We already have the plans in place and we'll be putting in our application very soon.
Okay. Once that is approved, then we will go forward with it, right?
Yes, absolutely.
My last question is on the means we have talked about this investment into wire and other business. What is the kind of CapEx we are looking at and what exactly we are looking at as a product feature down the line?
Yes. We will obviously have to go to the board as I mentioned earlier. We are looking at an investment of INR 30 crores plus in the wires and cables business in terms of CapEx.
Okay. What kind of business or opportunity we are looking at from the next three to five years? Just a broader plan, what we are looking at.
That's part of the business plan that we'll share with the board. As you know, the market is very large. There is a big opportunity that we see. We'll also be able to leverage our existing distribution. That is a big strength for us and that's the reason we are actually planning to go into that business. Leveraging our very strong distribution, we have about 1,800 odd distributors across the country and we reach out to about 200,000 retailers across the country. Given that distribution that we have, we believe that we are in a very strong position because the same retailers and the same distributors deal in wires as well. That gives us the confidence that we'll be able to grow the business substantially over the next four, five years.
Thanks. That's promising and all the best.
Thank you.
Thank you. Participants to ask a question, please press star then one. The next question is on the line of Kush Tandon from Ananta Capital. Please go ahead.
Thanks for the opportunity, sir. Sir, I have a little basic question. In both of our business units, lighting and steel, how much business would be distribution-led versus project-led business?
Mr. Kush, as far as the lighting is concerned, its B2C segment is about 75%-80%. In steel pipes, it is about 60%-65%.
Okay.
Excluding exports.
Understood. sir, if I see your EBITDA trends, especially in the lighting business, in the last year, we made INR 129 crore EBITDA in the lighting business. First quarter was very soft at INR 13 crore. Similarly, this year also INR 18, INR 16 crore only in quarter one. I just want to understand that Q2, Q3, Q4 last year, the ramp-up in lighting was primarily because of opening of the economic distribution. was there some project business, one-time business also there?
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Correct.
[Non-English content] last year COVID [Non-English content] , 6.6% [Non-English content] improve [Non-English content] 7.6% [Non-English content] 7.6% [Non-English content] 9.25% [Non-English content] expectation [Non-English content] basically [Non-English content] reasons [Non-English content] plant [Non-English content] underutilized [Non-English content] stock [Non-English content] , surplus [Non-English content] plant [Non-English content] furnace [Non-English content] gas [Non-English content] cost double [Non-English content] gas utilization [Non-English content]
Oxygen.
[Non-English content] reason [Non-English content] Oxygen plant [Non-English content] COVID [Non-English content] reasons [Non-English content] Otherwise, [Non-English content] assure [Non-English content] last year 10.3, 10.4% [Non-English content] EBITDA [Non-English content] 11.5, 12% [Non-English content] EBITDA margin lighting business [Non-English content]
Okay, sir. Sir, one more question. Lighting [Non-English content] , in the EESL business, how do returns happen, sir? I mean, can they happen like the business you've done three years back? Do you tend to get returns even after three years in this business?
[Non-English content] EESL [Non-English content] business [Non-English content] further [Non-English content] EESL [Non-English content] lighting [Non-English content] break [Non-English content] focus higher value added products [Non-English content] , value products [Non-English content] Cars [Non-English content] solar, air conditioner [Non-English content] solar [Non-English content] deal [Non-English content] industry [Non-English content] Initially [Non-English content] scale, volume [Non-English content] EESL [Non-English content] enter [Non-English content] overall country [Non-English content] industry [Non-English content] otherwise 90% availability [Non-English content] Otherwise [Non-English content] 50% conventional [Non-English content] deal [Non-English content] EESL [Non-English content] , further [Non-English content] EESL [Non-English content] under
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Warranty cost.
Warranty cost [Non-English content] already provisioned [Non-English content]
Provisioned [ [Non-English content] .
Also a running business [Non-English content] । In fact, [Non-English content] normal business course [Non-English content] lighting LED plant [Non-English content] provisioning [Non-English content]
[Non-English content] back to back warranties [Non-English content] . Okay. Sir, [Non-English content] Investment Promotion Scheme [Non-English content] line item [Non-English content] annual report [Non-English content] , [Non-English content] benefit [Non-English content] because we have set up plants in locations which are little backward and government gives us incentives.
Yes.
Sir, is that going to continue for the next two, three years? What is the view? Because that is a decent amount that comes to our top line every year.
This pertains to Hindupur plant in steel pipes and the Gwalior plant. [Non-English content] and this is about till 2024-25. Thereafter this will not be available.
Okay.
Yes.
Sir, [Non-English content] last year, [Non-English content] number [Non-English content] but FY20 [Non-English content] for example [Non-English content] PLI [Non-English content] incentive [Non-English content] ₹50 [Non-English content] , ₹60 [Non-English content] expect [Non-English content]
[Non-English content] Last this was 19-20, it was on higher side, but the last financial year it was very less. It was below INR 10 crores.
It was below INR 10 crores? </edited_transcript
Yes.
Okay. going ahead it will continue to be below INR 10 crores?
Yes.
Okay, understood. Thank you, sir. Those were my questions. Thanks a lot.
There were two schemes in Gwalior plant. One scheme was already over in somewhat March 20.
Okay. Got it.
That was the major part.
Sure, sir. Thanks for all this.
Thank you.
Thank you.
Participants to ask a question, please press star then one. The next question is from the line of Rajnish Mahindra from Master Capital. Please go ahead.
Hello. Thank you for the opportunity. Sir, I have two three questions. Sir, one is regarding the digital presence like in your consumer vision, I see there is hardly any digital presence. For that I wanted to ask what you are doing because if I go to Amazon, Flipkart, and all these online sites, so now different brands, fans, and all these electricals, LED bulbs are available from other brands, but I don't see anything from your brand there. That is one. Secondly, like in LED, I wanted to know what are the new products that you are doing? Firstly, as we ask ourselves, internet of things, IoT related, lot of LED bulbs and products are coming, which we can use through Google Assistant, Alexa, or through use cases. I don't see any products there. Can you tell us a little about this?
Yeah. Let me start with the first one. As I mentioned, Ogilvy will be helping us with the digital marketing part of it. We've started on our website, you can actually buy consumer durables. That is right now on our website. We are also developing an e-commerce strategy which will enable us to sell on the Flipkarts and Amazons of the world while not disturbing existing distribution. That's been a big thing in this industry, where when you start selling aggressively on Amazon or Flipkart, existing distribution actually gets disturbed. We're going for an e-commerce strategy where we're able to balance selling through the large aggregators as well as carrying our existing distribution along. That will happen in the next few months as well. On the smart lighting products, as you mentioned, we've just launched some products in the last quarter.
Unfortunately, because of lockdown, we couldn't have the full impact of the launch because the markets were pretty much closed till mid-June. We've launched the smart lighting range in June of the last quarter. As I mentioned, we have a whole slew of new products lined up over the next few months. Pre-Diwali and post-Diwali, we'll have a whole host of smart lighting products. We already have a lot of smart lighting products in our professional lighting business, whether it's in street lighting, industry lighting, et cetera. We already have a lot of products because that was a requirement there. In the consumer space, we'll have aggressive launches over the coming months.
Okay. sir, my next question is regarding this, how do you see your competitors, Havells and all, they have just announced that they were more focused in urban, Tier 1, Tier 2 cities. Now they are focusing more on rural, and your market is already rural. how do you see the competition when these people come into the rural market? competitive pressures come in, and how do you see that? the second thing, there's also news in the market that Havells might be taking over Syska. will that change our affinity, positioning, market share, and all? How that relationship becomes?
Yeah. On the second part, we really won't talk about competition and what they're doing. On the first part, yes, our strength is below Tier 2, Tier 3, and rural. What we've done over the last 6 to 8 months is really continuously increase our distribution reach, even in Tier 2, Tier 3, and rural. We're strengthening our distribution in our strongholds in rural and semi-urban. That will enable us, and it's not that easy to enter the rural market. It takes years and years to set up distribution because it's slightly different. You need wholesalers or you need vans. It's a different kind of distribution. It's not that easy to set up. It takes a long time. Having said that, we continue to strengthen our distribution even there. We're also doing the reverse.
We're gaining market share in metros over the last few months because, for example, we grew at about 98% in Quarter One in the metros. We're increasing our distribution and our presence in the metros as well. When I talked about the new advertising campaign that we'll be launching in a couple of months, then we're really going to be going national, and we believe that that's going to have a huge help off in terms of our visibility and our sales in the metros.
Yeah.
we will go into the stronghold of competitors while they try and go into ours, and we'll defend there and expand our distribution, but we'll also attack them in the metros and Tier 1 towns.
Okay, that's good. Are we planning some positioning of some which are like, say, I mean, the competition has Akshay Kumar, Amitabh Bachchan, and all this. Are we looking at that also? In terms of-
The campaign is still under development, so I can't really share more details at this stage.
Okay.
You'll see. You'll see it soon.
Okay. I think that just answers it. I don't have any issue.
Thank you.
Thank you.
Thank you. To ask a question, please press star then one. The next question is from line of Anurag Patil from Roha Asset Managers. Please go ahead.
Thank you for the opportunity. Sir, what's your advertising and branding expense for FY 2022?
We're planning to spend between INR 25 and 30 crores on advertising and promotion in this financial year. It's a substantial step-up from the previous year.
Okay. Do we maintain-
I'm sorry. Could you repeat the question?
Am I audible clearly now?
Yes, now it is. Thank you.
Yeah. sir, do we maintain our earlier guidance of 25% growth in consumer and 12% volume growth in pipe segment?
Yeah. As we said last time that we will grow our lighting and consumer business by 25%.
[Non-English content] maintain [Non-English content] Quarter 1 [Non-English content] 17, 18% [Non-English content] covid [Non-English content] natural [Non-English content] covid [Non-English content] impact [Non-English content] second wave [Non-English content] further [Non-English content] Q2, 3 [Non-English content] volume [Non-English content] maintain [Non-English content] Q5 [Non-English content] 10 [Non-English content] 12% [Non-English content] volume growth [Non-English content] We are stick on it.
Okay. Thank you very much. That's it from my side.
Thank you. The next question is from the line of Kunal Shah from Kotak Mahindra. Please go ahead.
Sir, just add one follow-up question on one of the questions which a participant had pertaining to Investment Promotion Scheme allowance which used to form a very significant proportion of our revenue and in turn profitability. Just wanted to understand when we do our pricing of the product. I would assume that these allowances would be taken into account while calculating the sales price and eventual profitability. Therefore, even if these go away, let's say a year or two, there would not be much of a significant impact on the EBITDA margins or profitability, to say so because then selling price would be adjusted accordingly. If you could share your thoughts on the same a little bit more. Thank you.
Yes. You already assumed right thing. In due course of time, this is adjusted with the pricing of the product. This is not going to affect the profitability, this means EBITDA pattern.
Okay. Just one more question. Does it affect the competitive scenario, affect any market shares then?
We have to understood that why these schemes are granted. These schemes are granted for the accelerated profits. We are already getting it. In due course of time, all these disadvantages of putting industries in backward areas, all these areas are already developed. Therefore, these units become sizable units and become very competitive. I don't think that going forward, it is going to make any difference to us.
Okay. Thank you, Maloo sir. Thank you.
Last year it was just INR 10 crores.
[Non-English content] last time ₹10, 12 [Non-English content] impact [Non-English content] balance sheet [Non-English content] total.
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[Non-English content] quarter [Non-English content] less than ₹1 [Non-English content] ₹10, 12 [Non-English content] impact last year [Non-English content] GST [Non-English content] impose [Non-English content] substantial amount [Non-English content]
Yes.
Already [Non-English content] amount nullify [Non-English content] margins [Non-English content] balance sheet [Non-English content] impact [Non-English content]
Sir, [Non-English content] receivables [Non-English content] sir, [Non-English content] status [Non-English content] light [Non-English content] , if at all any development?
Yes, there are receivables on this account and we are continuously pursuing with the government. We are hopeful that in this year, substantial part of this amount will be released.
Okay, all fine sir. Thank you, sir.
Thank you. Next question is from the line of Rajnish Mahil from Master Capital. Please go ahead.
Hello. Thank you again. Sir, I had a query regarding the wires MCB and cables you had said in last quarter that we'll be going to the board and then we'll be announcing. Now we heard again the same thing. Can you give us a little timeline if it is there? When can we expect that?
We are in the process of finalization of the proposal. As I mentioned, we'll take it to the board and come back.
Any timelines sir, three months, six months, one year?
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Okay sir. Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Roop Narain Maloo, Executive Director, Corporate Affairs and Group CFO, for closing comments.
Thank you. We thank everyone for participating on the call. We hope we have been able to address all your queries. For any further information, we would request you to get in touch with us or with ICICI or investor relations partners. Stay safe and stay healthy. Thank you very much.
Thank you very much, sir. Ladies and gentlemen, with that, we conclude this conference call. We thank you all for joining us, and you may now disconnect your lines.