APAR Industries Limited (APARINDS) Earnings Call Transcript & Summary

Good afternoon, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to this session with the Apar Industries as part of our week-long investor conference. At the outset, I would like to thank the management of Apar Industries for giving us the opportunity to host them at our conference. The management of Apar is represented by Mr. Ramesh Iyer, CFO, I would request the management to commence this session with some opening remarks on the business environment as it stands today, further to which we will open the floor to the investors for the Q&A session. Thank you, and over to you, Mr. Iyer.

Good afternoon, and thank you for this call. To begin with, I'd like to give a macro overview of the environment that is shaping up in that -- as we see in recent times. And overall, where do we see growth opportunities for Apar Industries, followed by a deep dive into each of our division's performance in this year and how do we look forward in the future years. So overall, if you see the current macro environment and geopolitical issues they are prevailing globally is favoring our industry and our business is in fundamentally many ways. To specificate there are 3 broad areas that we see that as benefiting us. The first area is clearly in terms of push towards the renewable energies. You are actually seeing a lot of solar installations, wind installations coming up globally in several parts. And this actually is helping our businesses and all the 3 divisions because all the products in our divisions you actually needed has had a role to play in this renewable energy sources. You will need the cables for the power generation that happens in the solar panels, in the wind mills, where you need different types of cables going into these installations. And also if you see from renewables point of view, the place for generation and the place of consumption is different. So you'll see a lot of generation happening at place X and the consumption happening at place Y. So you need actually to transmit this power from X to Y. And there way -- this way, there's opportunity for the transmission network to come in. And for that, we have our conductor division and the conductor products that actually helps in transmitting power from one place to the another place. And as you see, a lot of transmission network being laid down across the globe for all these projects, you will actually see a lot of transformers also getting stabilize. And once we -- for all the transformers, you'll actually need transformer source. So in our oil business, about 1/3 of our product goes into transformer oil. And as we see more transmission line setting up more transformers leading, you will see an increase in the requirement of a transformer oil also. So the entire area on the push towards renewables into solar, into wind, we'll actually see a good amount of opportunities in -- across all the 3 divisions that we have. The second big area, which you see as a growth driver in future times to come is the spend that is happening on the infrastructure across the globe. And even on the infrastructure, there are specific areas like public transportation where we see a lot of momentum getting picked up. We see railways are spending a lot of money on railways and there's a lot of metro work that happens in India and also in some of the overseas geographies. A lot of electrical vehicles push towards that, that will happen. And you will need a completely different infrastructure, you need the charging station, the power to get into the different charging station. And then from a charging station to the vehicles, there's are a different cabling solution that you need, and also within the vehicle unit, a different cable solution. So the area of public transport and infrastructure spending is clearly something that we see opportunities coming up in times to come, particularly in some of the advanced countries where the transmission line for late way back 4 to 5 decades old and our need for what changes there. So that's clearly another area where we see a lot of developments and a lot of expansion happening in times to come. And the last area is on this -- the space that is happening on the 5G rollout from the countries like U.S. may be fast in terms of rolling out the 5G. And you'll see a broad area of telecom networking solutions really coming up there. So that's one of the piece that we see in future times to come. And if you look at all this in perspective, clearly, we see this is not a country specific, geography-specific or continent specific spend or an opportunity that is coming, it's achievable to happen on a pan global basis. World over, you'll see developments happening. So it's not restricted to some part of the geography that we see spends coming up high. In some years, there could be higher spend in one geography but clearly, as you progress, you'll see spend increasing in other parts of the world as well. So clearly, we see it as not only its India-centric phenomenon, but it's going to be a global led phenomenon. And also what we see is not going to be a 1 to 2 years kind of horizon, we're actually able to see -- visualize it over the next 5 years to 10 years. It's going to be a decade long thing because you'll never see all the spends happening in one year or in a basket of years. But globally, over a period of next decade, we clearly see these opportunities coming up in all these 3 areas. So that's a very macro overview of where we see as opportunities coming up. Now I'll quickly get down to each individual division, deep dive into the 3 divisions that we have and then open over to question and answers. I do have the presentation extract that we have loaded on to website, maybe some of those slides are relevant yet, which is -- just sharing in this. The first division that I'd like to start this conductor division. And if you see the conductor division, basically, what has happened over the -- for the last decade, there has clearly been a transformation journey in our division over the last decade. What started as an ACSR conductor division even in 2014, so the division was set up in 1958 to originate the company was incorporated in this division. And by 2014, we had largely dealt in one particular conductor, which is a conventional conductor or ACSR-type conductor. Over the years, we have been seeing a lot of competition in this particular space with the price becoming as a competitive force. A lot of players coming into the market, and we felt the need to diversify our portfolio. We need to diversify this product portfolio from what used to be an ACSR-type conductor in day back in 2014. And as you see, a lot of urbanization happening, a lot of cities where more populations [indiscernible] into the city and the requirements of electricity going up. The current transmission line has little capacity to transmit power from one place to another space. And therefore, a lot of these premium products, which is our HTLS premium product or OPGW and also copper conductors, more being developed over the years and has started reaping the fruits very recently. So we have [indiscernible] project which has the capacity to transmit high transmission and with a low [indiscernible]. So that the requirement in the city is being high, we're able to transmit high electricity requirements in the same infrastructure or the same corridor that is. So you don't have to know to spend additional amount of infrastructure building new towers, creating new right of pay. But the existing lines, you do a reconductor, you pull down the current conductor and you reconductor the wire and you are able to transmit a much higher electricity over the same corridor. Now it's a bit technical and also it's all design specific depending on the requirement of the conductor customers in terms of reducing the transmission losses, in terms of ensuring the conductor stays for a long period of time. And also, there are specific nuances which are needed in terms of training the labor to the reconductoring. You'll have the contracting line going around mountainous ranges or the railways and those difficult parts where you need very specialist gangs of manpower, design and technology, which actually we have been pioneering it and using in our products. So this is not only a product that we supply, but it's also solution-oriented looking at the design requirements of the customer. And that's how we have this premium product in our basket. So this year, we've been seeing a good amount of traction in the last 2 years, one reason to which our margins have been consistently on the higher side in this division. Similarly, we have OPGW as a product and solution. Typically, all these conductor lines having earthing wire, we are able to have this not only earthing, but also put an optical fiber into it. So it helps us to generate not only the earthing part but also in terms of a data transmission. And for our railways, we've been leading the conductors, we have been supplying conductors to Indian railways, having a higher share into that. Most of the electrification on the Indian railway has been happened with the copper conductors that our industries have supplied. And beyond the Indian railway electrification, once you see a lot of advanced spends in railways in terms of a high-speed trains, bullet trains, [indiscernible] trains, metro rails are coming up, you will see a different type of conductors that will be needed for this railway expansion. And we already have a product, which is a copper magnesium that we have been supplying to this daily metro. And once we see this electrification happening up, then we'll see another round of product usage for conductor industry. If you look at the end of 2022, our premium product, which is HTLS, OPGW and copper conductors were close to about 50 percentage of the business even as of the end of '22, and you see margins kind of going up from what it used to be 10 years ahead to 2022. Now in the last 9 months, what has fundamentally changed in this particular division is that not only -- while half of the product has been premium, but the other half, which is a non-premium product, that margin results expanded exponentially because our opportunities in overseas markets have been increased. So this -- in the last 9 months, we have been looking at export to market aggressively for our non-premium products as well, mainly to the Americas and in Australia. And if you see in FY '23, not only my premium product has increased the share, but the nonpremium product has also increased the share. So suddenly, in this year, you are actually finding that the entire conductor business has not only been profitable, but highly profiting, largely because of the orders that we've been getting from overseas market. And to that extent -- to the extent our domestic conductors business, which has been already competitive with price becoming an issue, we have been reducing our exposure there and consulting more on the overseas market, which is giving us a high margin there. So on the premium part of it, we are largely into India and different countries which sold it at high margin. And on the non-premium part because of the export opportunity that is coming up, we are able to get a high margin there. And if you look at from an export point of view, they not only look at the price, they look at several other factors like the quality of the product and the reputation of the suppliers, the adherence to the delivery time, the element -- the intensity to which we do risk management within the company. So there's a whole lot of things that we see over there beyond the price and for which our margins has been on a higher side there. So that was quickly on the conductor division. I'll move to the -- so if you look at this particular slide, which talks about our competitive advantage in the conductor division. So as I talked about on the premium products, it's not only the product, but it's also the design and the technology and the know-how involved that act as a barrier to it for the competition. There are special sealing mechanism with sophisticated equipment to protect the carbon for which is inside of this HTLS product. Customers here not only look at the price, they look at the life cycle cost to reduce the transmission losses and they need a lot of prespecifications for purchases. And it's our entire solution-oriented ecosystem of training manpower, [ cans ] required to do complex task with minimal power outages. So these are some of the competitive advantages that we have on the premium products of our conductor division. If you look at the non-premium, which is the conventional products and largely in the exports market, which has increased a lot in the last 9 months, they not only look at the price, as I have mentioned, they look at capacity, delivering large volumes in a short period of time, quality and reliability. They prefer parties where they can depend upon the companies that have a very strong risk management framework, especially in the area of aluminum and corporate regime. They don't want to deal with people who don't get into all this hedging, and thereby, they postpone their delivery for aluminum and copper price to come at the right time. So that's something we prefer. So we have a very strong risk management and we do 100% hedging of aluminum and copper for all the orders that we get. And some of these requirements actually help us to make some weak players ineligible and that's how we have a competitive advantage on the conductor division. Quickly moving on to the cable division. Here, we are the largest domestic player in the renewable segment. We have power cables, we have then house wire and cables. We are going to do elastomeric cable which are all the specialized application cables going into railways, locos, coaches, gets into shipping defense line, solar and wind cable or getting to elastomeric cable. We also have this E-beam irradiated cables used for some of our elastomeric cable as well as house wire. And we have this OFC and special hybrid cables over there. So cable also, if you see, fundamentally, what has changed in the last 12 months or so is our exports share has significantly gone up more to about 25% odd in earlier years. If you see quarter 3 is already standing at about 50% share. And here also, we are able to see momentum coming up from the structural growth drivers that we talked about in the opening remarks in terms of requirements of cable from overseas geographies the infrastructure spend. China Plus One Strategy is also helping us with the duty difference between China and India, it's helping us. And our exports there to U.S. has increased substantially from what it used to be almost nil in the first half of the last year. So here also, if you look at the domestic table is what it gives us a low margin. And we are also looking at markets which are giving us a high margin products there. And if you see the trend in EBITDA has consistently increased from mid-digits last year to about 12 percentage in the quarter 3. And by November -- December basis, we are close to about 10 percentage for that. So cable market, we see opportunities even going forward as we see the requirements of infrastructure renewables, increasing in developed markets and developing markets. This is going to be our fastest growing business in times to come. Yes. So branding on house wire is increasing as you also know in our earnings calls, have been said, the light cable business, which was largely into 2 states by March '22, has now on to 13 states. So we have increased our distributor presence from, what, 19 to close to about 100. Our retail count presence has gone up from 300 to about 1,500. We are increasing our product awareness in terms of demos, electricity needs that happened as we have been talking earlier. We have 3 basic unique proposition when it comes to our LDC business. It has a 50-year life. It can carry 50% more current than the other cables that are available in the market, and it is melt resistant. So it takes a long time before the installation gets melted and it has much more ability to withstand all the short circuits over there. So these are some of the key unique advantages that we are creating awareness through our demo and electrician needs. And this business is something that will see growth here close to about INR 120 crores last year. This year is INR 200 crores, going up to about INR 500 crores in 2 years' time, and the expansion is going to -- this growth coming in future years. Again, we have a competitive advantage in Cable division. In terms of E-beam technology, we are the only company with E-beam on the house wiring thing which actually adds to the first more advantage for us to give this unique -- that I mentioned about. We are the leading player in the renewable space in India on the solar and on the wind segment. In terms of U.S. market, we have the highest number of U.S. certificate of compliance for India for sale of cables in the United States. These are the competitive advantages in terms of tapping the market there in the U.S. We have a wide range of cables for an industry that we serve, railways, locomotive, coaches, shipping, trains, et cetera. So some of these advantages are there on our Cable division that we feel, given the structural changes also happening, this is something which is going to be a fastest-growing segment in times to come. Quickly on to coils and lubricants. This is a business that will grow about -- we're talking about a 5%, 6% volume growth in the future. Again, here, 1/3 of the business is transformer oil which will actually grow as your transmission network goes up, as you put more spend on transformers and infrastructure going up. We'll see this transform oil business also going up in line with those transmission networks. Here, we talked about our EBITDA margin, which is in line with the threshold margin, the 9-month EBITDA is about INR 500 per KL, that's the number that we look at continuing in the future here. We do have a competitive advantage in the oil division as well. We have got the third largest global player coming to transformer oils. There are no approvals in both -- with most large OEMs and transmission companies, we have at UAE as well as a plant in India, where we are able to deliver the product side at lower cost to the customer. Telecom, as I talked about, it's something that now is going to be in the future, we have the vision to increase our toll in telecom as well. And with all this 5G and rollout coming up, this is also an opportunity that we see increasing in the future times. This is just a broad mix of our customers, where we are selling about -- exports account for about 47% of our mix. Various industry specific industry growth around for 16 and 9 percentage. Lot goes through the transmission companies, EPC as well as utilities companies 5 plus 8 percentage and we're just about 1.5% share that goes in the electricity distribution companies, both government and private. So that's a broad revenue mix that we have. In terms of quality of receivables, about 45% of our receivables are secured under various means that is available in the market. About 22% goes to transmission companies and sector-specific companies. And the rest 33% is unsecured, of which, about 60% are with entities where we are having business relationship over 3 years. Risk management framework that I mentioned, we have a very strong risk management framework when it comes to customer credit, risk assessment in terms of valuing the customers and their background practices for setting up credit limits, et cetera, now is business legal team to understand and align the contract terms and conditions. We have a very strong middle risk management framework. So we are insulated with the volatility in the price of aluminum and copper because the increase and decrease gets passed on to my customers. And also on the ForEx and interest rate management, we have processes and methodology in place to hedge the ForEx and interest rate. And this actually forms an integral part of the customer pricing to ensure when costs are completely passed on to the customers. So these are the few extracts, which I thought were relevant. Of course, the detailed presentation is already there in the website, but some of this can help you to set the floor for this call. So with that, I open the floor to questions from your end.

[Operator Instructions] Sir, we have a question from [ Mr. Dhiraj Sachdeva ] from Roha.

Just wanted to know your conductor business had probably one of the highest margins, EBITDA per tonne at 50,000. And you mentioned about the premium products at 44%. So basically, what is this driven by? And whether the export market is stronger and whether it is sustainable or the correction in steel prices has led to this kind of number in the quarter gone by or just an element of softer freight cost as well?

There are multiple things that is happening in this conductor in, especially in the 9 months of FY '23. One is that our premium product range has been close to half of your business. And it always used to be there in the last 2 years also. But the other fundamental change that has happened is that the non-premium products, our share of exports is high. So we have been exporting most of our non-premium product to the market, as I said. And that also is happening because the structural growth drivers are happening in some of the developed countries in terms of spends on infra, spends on renewable. China Plus One strategy is actually helping us. People need a reliable [indiscernible] vendor apart from the China market there. And suddenly, what we've been seeing is that there's a good amount of opportunities in the export market. So we are still tapping those opportunities and giving us a much higher pricing and margin advantages. Of course, there are some aliens in terms of freight and steel, but the larger part of this increase in margin is basically due to the exports going up in this division, which is actually giving us a higher margin there. Now going forward, what we feel is that on some of the structural changes that is happening globally, it's not going to be a temporary phenomenon, especially when you look at renewables and infra spends, your China Plus One, et cetera. So these -- largely, as we see here, it's going to be there for a considerable period of time. So as long as this drivers, this geopolitical issues and macro environment continues, definitely, this is going to be benefiting for us, and we will see margins in a healthy number, which is not only my premium product giving a higher margin but also my non-premium product giving a good margins. Now to what extent the margins will get driven by each of these structural changes, we'll -- actually time will tell. But clearly, we feel that on the short term, this momentum definitely will continue. And even for a long term, because of our transformation has happened and the product mix has changed, clearly, we are seeing that EBITDA, which used to be about INR 10,000, INR 12,000 per metric ton now a couple of years ago. That base definitely would have gone back now to about INR 25,000 close to per metric ton. Plus as and when we see this structural changes and those tailwinds coming up in terms of orders from overseas market, faster delivery times, China Plus One that will be an incremental to this baseline margin of INR 25,000 per metric ton. The only thing is that we can't give the sole high margin that we've been getting now in the future because future, we don't know how the policies are going to change. But as you see today, with some of the structural changes are likely to continue. These are not likely to completely turn the reverse way in the short term. So as long as these structural drivers continue, our EBITDA margin would be consistently on a higher side.

So what should we assume broadly as a rough range on a per ton basis?

So if you see by December, we have close to about 40,000 per metric tonne. And in the very short term, which would be about a 3 month, 6 months, we expect the margins to continue about 30,000, 35,000 per metric tonne. And even in the long term, we feel that, as I said, now if you're going to put a model for 5 years, 10 years, now the baseline would definitely be 25,000. But now as these structural changes are going to happen overseas, our margins will definitely be on a higher side that we have been getting on a YTD basis or not short-term basis that will be there. But we clearly look at the baseline, and then we see that how all these structural changes will impact our EBITDA. So directionally, we'll see that momentum continuing on the long-term point of view.

So this first 25,000 has become 40,000. Can we say that because of the structural changes that you mentioned?

No. So I would say that because of the transformation journey that has happened at 10,000, 12,000 that used to be there, that has been gone 25,000. And because of all the structural changes that we've been seeing here, my EBITDA in the 9 months has been close to about 40,000 there. Of course, it has some tailwinds in terms of the freight and steel as you see, but also a large part is because of -- the customer mix has changed, my export proportion has gone up, my premium products has gone up. So those all have been -- they're driving the business for the last time. And as you see things going up in future. It depends on all these tailwinds, also this structural changes that is happening. And therefore, we feel that the baseline EBITDA, we can safely assume to be about 25,000 per metric ton. And then some of these benefits coming up, it would be add-on to this number.

On the Cables business, again, we had a very strong growth in the export market. Again, given what is happening on the export market, can we see that this is also sustainable as a trend in terms of growth or the sales volumes that you're talking about?

Yes. So cables, we feel it would be sustainable in the future also because our addressable market in the cable is much higher. And we are looking at about 25% to 30% growth in value terms on -- over the next 5 years or so. Clearly, we will have that visibility there. And what is also driving this business is always U.S. market and Australian market for metro projects and all the infrastructure spend there, which is clearly driving this market. Clearly, we are able to see that momentum continuing. If you look at last 2, 3 years, we are about INR 1,200 crores, 2 years ago, we've gone to INR 2,000 crores. This year, we'll be close to about INR 3,200 crores. And from there, we're also looking at about 25% growth year-on-year basis consistently.

Okay. That's great. So margin should stabilize around 11% in Cables business?

Margins, we feel it will be double digits. So it used to be double digit, even pre-COVID times. During COVID times, it was about -- came back to mid-digits. And if you see every quarter is consistently increasing. Q3 has close about 11.8 percentage and YTD is about 9.8 percentage. So we feel that it will clearly be in the double digit -- early double-digit numbers. And with all economies of scale, on a long term, it should clearly look at from that level.

Okay. And just last thing on the -- did you have experiences on the specialty oil realization and some inventory losses?

So specialty oil, you'd actually have to see the number over a 12-month period because oil is the only commodity in our basket that cannot be hedged. So what happens is that in terms of high oil prices, depending on what cost to procure the inventory, the margin change. So if you look at the first quarter of this year, we had a very high profit. So though we talk about INR 5,000 to INR 6,000 per KL, the first quarter, we have closed about 9,000 per KL because oil price -- selling prices were high and the costs were. As oil prices costs went on to increase, your second quarter and third quarter selling price actually came around the cost for size. So you see just about lower margin in Q2 and Q3. Now as you liquidate all this high cost inventory, again, you come back to your normal average about INR 5,000 to INR 6,000 per KL. So if you see YTD now December, we are close to about INR 5,000 per KL, which is what we have been writing. And in future also, we look at 12-month guidance about INR 5,000 to INR 6,000 per KL.

[Operator Instructions]

Sir, first is a very basic question. So could you highlight the difference between a conductor, cable and a wire?

So conductor is -- are there -- if you just -- when you look at some of the highways and roads outside there. If you look at all the towers, it gets connected with a black thing, that's what is called conductor, which is without insulation. So it's just aluminum -- conductors are made from aluminum ingots, and there's no insulation over there. Cables is where there's an insulation. So on the cable -- every cable has a conductor, it could be the aluminum or copper. And on that conductor, if you do an insulation then you get all these cables. So you can see -- have cables for some of the high-end applications like specialized all these industry power cables, which were underground or the shipping or defense or railway where different kinds of cable application goes over there. Wire is something which is now you use inside your house and building wire, which is a very thin wire which is there, which also has an insulation. So every cable will have insulation, which actually the protects from all this current and over there. So even if you touch a cable, you don't feel that shock or something. But the conductors never has an insulation. This is a bare conductor. So for long distance transmission and if you look at over the mountains or the railways, which are overhead, everything goes through the conductor over there. So you don't need to protect that because it's beyond the touch of human person or the traffic that goes by. But all the cable would be all your underground and now even if you touch, there is no risk. So that's the very broad difference between of conductor, cable and wire.

Question on volumes of our conductor business. So our volumes were somewhere around 183,000 during FY '19, but they have dipped to somewhere around 107,000 during FY '22. And this year, we are most likely to touch somewhere around 140,000 kind of a mark. So first thing is why there was a dip? And second thing is what is the outlook in terms of volumes for the conductor business?

So the dip has actually happened because the product mix has actually changed. So what used to be that ACSR conductor, it used to be very heavy conductor. So the conductors can be measured either in kilometers or metric ton. So you need so much kilometers to cover like from one tower to another tower if you take some amount of kilometers, the earlier type of conductors had a higher weight. So the rate of the conductors was much higher as compared to the -- for the kilometer reading there. As we have been premiumizing our portfolio as we have been diversifying our product mix to much profitable products, thus the weight to kilometer ratio is much less. You don't need -- for the premium products, you don't need the same amount of weight for the same kilometers as was needed in the old conventional conductors there. So over time, as you've been premiumizing, diversifying, the rate that is needed for this conduct is much less than what it used to be earlier. At the same time, these premium products are having a much higher margin than what the old product used to have. So even if you see the volume getting dipped from what it was like INR 2 lakh earlier to INR 110,000 to last year, my proportion of premium products has gone up. And therefore, even with that less volume -- per volume tons, you are able to get a higher margin per metric. That was the first part of the question. The second part, in terms of going forward, we are looking at about 10% to 15% growth in the conductor volume over the next few years.

So sir, secondly, in the opening remarks, you highlighted that a lot of demand for nonconventional -- sorry, conventional is coming from the export region. Is there a possibility of exporting high premium products into these export regions and thus, our realizations could go even higher?

So we -- so as of now, we are getting good demand from the nonpremium products there as we see the requirements of customers, if there are opportunities, we would even be exporting the premium products over there. Currently, largely, we have been exporting premium products to neighboring countries to India. But if there is demand footings to coming up, we will be even doing that.

A question was regarding the cable segment. So is it possible to give a broad revenue of subsegment of the cables in terms of let's say, LDC and the other, what would be the revenue? And what was the margin profile for each subsegment of cables would look like?

So LDC is something that we are focusing a lot now currently, it is very less about this INR 120 crores about last year and this year, we're talking about INR 200 crores but it's going to be a very specific focus area as you saw in some of the slides that I presented earlier, channels that we're developing, our distribution presence, retail presence that we're developing. So they still grow from INR 200 crores in this year to about INR 500 crores a couple of years down the line. And then broadly, we have the elastomeric cable which is all the specialized cable, which is about some 25% to 30% of our total cable business. OFC business is about 10-odd percentage and the rest would be largely this power cable, which is there for domestic as well as exports. Now the margins, probably what happened is that because these are all specific order base depending on requirement of the customer, the margin profile in different things would be different. So each of this, it all depends on the requirements of the customer, the application which it is used. So it's very difficult to give a particular view about how much the margins will be for each of these business verticals.

Sure, sir. That was very helpful. A question in the LDC part of the pie. So we highlighted that we have expanded to 13 states and our reach has been increasing exponentially. But during the call, we are still guiding for an annual addition of around INR 1.5 billion of top line. Don't you think there should be some proportional increase in the top line from the LDC?

LDC, we are talking about INR 120 crores to INR 200 crores this year as we have been expanding it. So this increase is happening only this year. Earlier, we used to be only in 2 states, and largely the increase in other 13 states largely happened at the beginning of this calendar year. So as we see the channels getting up, channel getting established, the numbers will grow in the future.

But don't you think it will be higher than kind of a 1.5 billion annual addition? So that is what we have been guiding, right, on the call. Annually, we will be adding 1.5 billion of top line on the KOLs, don't you think the growth would be higher?

So we are working on all the fundamentals. So we never had these channels in other states, apart from these 2 states. So a lot of building blocks needs to be created. Once you have that in place then you'll have good feel of how the turnover will happen. And you need to still have the right distributor, the schemes and the promotion, the awareness has to grow up. So it cannot be just a push. As I said, we have a unique proposition in this LDC thing, which the other players in the market don't have on this E-beam thing. So all this has to go in sync. It says that the customers in the demos should increase, the presence should increase. And the collective view is what will drive that business. So we are looking at about INR 100-odd crores. And now if you're able to do well better than this, so it will happen. But once you create all this infrastructure in place, that is a building block for the numbers to grow. But clearly, we are focusing a lot on this. As you've seen, we have a brand ambassador. We are going on air in terms of ad that is happening. There's a special specific team within Apar who are looking at this LDC business. So all these fundamentals will help us to drive growth in the future as well.

So just a follow-up on that. So we are in 13 states. So is there a target of adding more states by end of FY '23 or end of FY '24?

Yes, we will. Our intention is to go beyond that as well. Also to ensure that the 13 states where we are, we'll increase our foot presence over there. So broadly, we look at increasing that presence in the next year as well.

And the focus would be largely in the urban or the Tier 1 cities of the state and not tier -- to Tier 3 cities?

Initial years, yes, but of course, as we want to focus is, so everything will just progress once in a that [indiscernible] we'll then go into much more state, we've already present for a long time. So initially, it would be the -- this pace and then over a period of time, we would be increasing.