APL Apollo Tubes Limited (533758) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to APL Apollo Tubes Limited Q3 FY '22 Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this is being recorded. I would now like to hand the conference over to Mr. Anupam Gupta from IIFL Securities Limited. Thank you, and over to you, sir.

Thanks, Jannis, and welcome, everyone, to the 3Q FY '22 call for APL Apollo Tubes Limited. From the management, we have Mr. Sanjay Gupta, Chairman and Managing Director; Mr. Deepak Goyal, Chief Financial Officer; Mr. Arun Agarwal, Chief Operating Officer; and Mr. Anubhav Gupta, Chief Strategy Officer. I'll hand it over to Mr. Anubhav Gupta for the initial comments, and then we can have the Q&A. Over to you, Anubhav.

Thanks, Anupam. Good afternoon, everyone. We welcome you all for APL Apollo's third quarter FY '22 earnings. It was a mixed quarter with volume falling a bit short of expectations. However, our performance in terms of value-added product mix, EBITDA spreads, working capital and cash flow generation was in line. So we sailed well in a difficult quarter, which was impacted from destocking from our channel partners and slowdown in the construction activity post Diwali. Before we get into detailed discussion on Q3 results, a few highlights we'd like to make. Number one is our upcoming 11th greenfield Raipur plant, which is going to be the largest manufacturing facility for the group. It is important for us from 2 perspectives: number one, all of incremental 1.5 million tonne capacity, which is divided among 3 products, is 100% value-added products, which will eventually take our sales mix to 75% in favor of value-added mix products. Also, the second perspective here is that the 100% of 1.5 million square foot of industrial space is constructed using Apollo Tubes, which is part of our heavy structural sections. So this strengthens our thesis that there lies a vast opportunity for our heavy structural tubes, and once operational, this would be India's largest industrial complex built on tubes. We have also given pictures and photographs in our investor presentation for the reference. We expect this plant to become fully operational from -- partial operations from first half FY '23 onwards. We've spent around 50% of the total budgeted CapEx of INR 8 billion and the rest INR 4 billion would be spent over the next 2 to 3 quarters, and this will be funded from the internal cash flows. The contribution from this plant is key to our FY '25 sales volume target of 4 million tonnes. Second update is on Apollo Mart, which we have set up a 100% subsidiary to develop a new related business line. This venture has 3 objectives: One is to strengthen APL Apollo's positioning in Indian building material space with the commencement of trading of steel building material products like TMT bar, et cetera. This gives us access to potential INR 2 trillion market size outside structural steel tubes. We -- initially, we -- the business will be developed by leveraging APL Apollo's existing distribution network, and then we would start expanding beyond 800 distributors to penetrate deeper into the markets. The ultimate goal is to become India's largest tech-enabled B2B platform for steel building material products. To start with, we have identified 4 locations pan India to set up large warehouses cum fulfillment centers. The initial investment into Mart would be done through infusion in form of equity from Apollo, which will be funded from internal cash flows. The third of update is that we appointed another Bollywood celebrity, Tiger Shroff, as our brand investor. We are using this association to promote our product Apollo Column. The campaign has been quite successful so far with 5 million views on social media, which we launched on digital platform. And at the same time, the campaign was run on business news TV channels in the third quarter. Fourth update is on our prestigious Delhi hospital project, which is again being built using Apollo Column. The work has almost 10,000 tonne of tubes already dispatched. The first site [indiscernible] seen erections work almost being completed. Now this is one of the fastest construction of the superstructure for a multistory building with area covering more than 500,000 square foot. This has given us tremendous confidence that our tubular technology has potential to revolutionize the construction industry in coming years. We are in discussion with many architects, government agencies and private developers to promote this product. We shall keep sharing positive developments on this product from time to time. Again, we have shown some live photographs and pictures in our investor presentation for your reference. Fifth update is that we have appointed Mr. Anurag Mehrotra as our Chief HR Officer, who brings multiyear experience from MNCs and manufacturing background. This is in line with our chairman's vision to further strengthen our organization to support growth for many years to come. Sixth update is that we are glad to share that APL Apollo stood at 56th percentile in the first-ever Dow Jones Sustainability Indices scoring. Our overall score was 25, which improved from 5 in 1 year. The best part was that the score improved in all areas of environmental, social impact and governance. We are committed to work even harder now to achieve our FY '25 ESG goals, which we articulated in our first-ever ESG report 2 quarters back. Now coming to the third quarter results. Like on volume, they were slightly way off versus our expectation. The main reasons were 4. Number one, being destocking in our channel partners because globally, the steel prices had started coming down. But in India, steel prices were still firm. So there was anticipation that prices will come down. So there was some destocking from our channel partners. Secondly, there was a pricing gap between the primary and secondary steel, which benefited the unorganized sector and took away -- some market away from primary steel tubes to secondary steel tubes. We almost lost 100,000 tonne of sales volume last quarter. We expect some to recover as the channel has started destocking. There has been decline in steel prices over the last 2 months, and now there is enough confidence in the market on the pricing front. And anyways, the underlying demand from construction activity was strong. So we should be able to recover the lost ground in the coming quarters. On margin front, our EBITDA was in range above INR 4,500 to INR 5,000 per tonne. The good part was that we are sticking to our strategy to improve our value-added product sales mix constantly. The raw material costs were up by INR 24,000 per tonne. But against that, our net selling realization was up by INR 27,000 per tonne, which again has 2 reasons. One is our product mix, which improved to 65% versus 53% and also some benefits we are getting due to backward integration for some of our processes. So overall, EBITDA per tonne was INR 5,000 per tonne. And we are confident of sustaining our EBITDA around INR 4,500 to INR 5,000 per tonne in long term. Thirdly, on quarterly performance, the working capital remained intact around 10 days with net debt near INR 1.5 billion. This suggests that the operating cash flow was strong enough to fund our ongoing CapEx spends in Raipur. We target to finish Raipur CapEx by Q2, Q3 of FY '23, post which there will be a solid free cash flow generation. This will further boost our ROE and ROCs, which already touched 30% on September 2021. This was pretty much on the third quarter performance. Lastly, we would like to reiterate that we maintain our FY '25 sales volume guidance of 4 million tonnes. This confidence comes from the fact that the new Raipur facility will start operations, and we will ramp up the production at the earliest, as we see good demand for all the 3 product categories over the next few years, plus the existing 2.6 million tonne capacity, we'll see double-digit demand growth year-on-year. On margin front, we shall be at a minimum INR 5,000 per tonne by FY '25. That's it from our side, we'd like to open the floor for Q&A.

[Operator Instructions] We take the first question from the line of Sujit Jain from ASK Investment.

If you look at your volume guidance, it's almost 25% CAGR from here and incremental volumes per year [indiscernible] are probably equal to or higher than the next competitor. So if you can spell out your business development initiatives of the 3 new divisions that you'll target using your Raipur plant?

Sure, Sujit. So -- all right. So, if you break down our 4 million tonne FY '25 sales guidance, okay, every year, we are saying that we're going to add 700,000 tonne. So this year, 1.7, 1.8, the next year incremental 700,000 tonne and so forth in FY '24 and so forth in FY '25. So there is incremental 700,000 tonne, 200,000 tonne is -- which will come from the existing capacity of 2.6 million tonne. Here, we are assuming like early or low double-digit volume growth, right? And then 500,000 tonne will come from Raipur. So there are 3 products. One is Apollo Column, which is part of our heavy structural tubes where we are going to start producing products tubes up to 500x500 mm diameters. And we are also working on even bigger sizes, right, which are being produced only by 1 or 2 players globally, right? Now for Apollo Column, the strategy we started working on 2 years ago, where we have started creating demand for heavy structural tubes, which are replacing conventional construction methodology metrology, which is RTC base and conventional steel base, right so we believe that 500,000 tonne of this capacity can be consumed within 3 years by FY '25, given the fact the market development initiatives we have taken so far, right, we are doing mass marketing through advertisement campaigns. And also, we are doing one-on-one marketing where we are going to each government agencies, structural consultants, architects, engineers, developers. And we are pitching this idea that they should switch to faster way of construction, which is tubular technology, right? And God willing, once these hospital projects in Delhi would be completed, it will act as an automatic demonstration of this technology, right? I mean, you can do your channel checks with the contractor who is doing the work here, the kind of work -- the kind of speed he has been able to achieve due to the tubes, you are -- I would urge you to do that. Plus, there are live sites, which are ongoing in Delhi. The photographs which we showed in our presentation, they belong to Shalimar Bagh, which is in North Delhi. You are welcome to visit these sites and see the success of this technology so far, right? So we believe that -- I mean, because of our initiatives on mass marketing on one-to-one marketing and demonstration of such projects, we are confident that we should be able to achieve 500,000 tonne of sales volume over the next 3 years. This represents around 200 standard buildings, which will be built on steel tubes in India, which we believe is -- should be achievable given the success we have got so far. Now coming to color-coated products, the coated products, right? Again, I mean, these products would be replacing conventional construction products like aluminum profiles and steel angles and channels, right? If you give a color -- if you give a quoted solution to the fabricator, he saves a lot of time in sending the end product for color coat, et cetera. So his efficiencies would improve significantly and he can do [ aesthetic ] work with steel sections, which right now are being taken by wood or aluminum or angles and channels, right? Thirdly, on coated products, again, that 500,000 tonne of products would be sold in our existing distribution network. There is already an established market in the roofing sector and wall cladding, right? So we have strong distribution network who are anyways selling these products for other brands. Given the brand positioning Apollo has, we are confident that, again, 500,000 tonne of volumes could be achieved over the next 3 years. So all-in-all, this gives us confidence, Sujit, that 4 million tonne is very much achievable. With -- I mean we know that Q3 was a bit off, but that's the short-term phenomenon, which we've seen many building material sectors. So same impacted us. But overall, the strategy, the vision, the game plan, the business plan, everything remains intact.

And the difference between steel tubes made from scrap and from HRC had increased, as you'd mentioned. And post that, there was expectation that, that difference will come down. What is that difference currently standing at? Has there been a cut in prices by your suppliers in HRC?

Sujit, earlier, this difference in the month of December -- November and December is almost close to INR 20,000 tonne. Now there is some decrease in the flat product price in the primary and the increase in the long products prices. Now difference is close to INR 7,000, INR 8,000 tonne. It's fair [indiscernible] due to good quality material. Now I think all the things are on the track. And the other thing is there is 2 new lines of HR coil started in India. One is in Dolvi of JSW Steel, and one is of the Steel Authority in Rourkela Steel Plant. I think the HR coil availability is also now good in India. I think what happened in the month of October and November, maybe this will not come again.

Sir, which means we'll still get some of our market share in commodity segment, right?

Yes. We need it. We need badly, I can say.

The next question is from the line of Rahul Agarwal from InCred Capital.

I hope the family is safe at APL Apollo. Sir, 3 questions. Essentially, firstly, you highlighted that the volume declined because of 3 reasons: destocking, rains and price gaps. Price gap you already explained that has come down. Obviously, we don't have unseasonal rains now. So could you help me understand what do you -- what's the outlook for fourth quarter in terms of volumes in the next 12 months? Broadly, what is the plan in terms of sales volume? That's the first question.

Rahul, good afternoon. If you see there is a lot of reasons of the decline of the volume in the Q3. If you see our revenue, our revenue is up by almost 24%. And our volume is down by almost 17% in the -- year-on-year. If you see the total impact of this is almost 40%. We are selling -- stopped the selling of credit sales. Our channel partners are also not prepared of this type of financial arrangement. [Foreign Language] Earlier, our plan is for 2 million tonne for this year. But after corona, we revised our plan to 18 -- 1.8 million tonne. I'm hopeful our team [Foreign Language].

Got it, sir. Sir, secondly, HRC prices I thought corrected during the quarter. Two questions to that. One was, is there -- could we quantify inventory loss, if at all, which happened? I know that we don't have more than 1 month inventory, it doesn't happen. But if the prices -- if the price fall was sharp -- sorry.

[Foreign Language] Right now, can't say anything.

Okay. But there was some inventory loss during the quarter, is that correct?

[Foreign Language]

Okay [Foreign Language] And sir, hypothetically, the second part of the same question was if, let's say, HRC normalizes and falls by another 20% hypothetically, what happens to the EBITDA per tonne for the company? Like, let's say, next year, fiscal '23? [Foreign Language] will we sustain that?

I don't think [Foreign Language]

Even if HRC corrects by 20%, is that correct?

[Foreign Language]

Rahul, what will happen is that the demand for structural steel tube will increase because we are competing with other established products, right? So our product will become more competitive if prices fall. And then as Sanjayji explained that the financial arrangement, which our channel partners have to do, right, on the overall value that will come down. So actually, it will be very good for the demand for structural steel tube if prices come down by 20%.

Got it. Because this quarter, I can see the realization per tonne has almost gone to INR 80,000 when the HRC actually fell. Any specific reason for this?

No, no, this is on average basis. HRC fell in the last month. So the average of Q2 versus Q3, Q3 is still high.

Got it. And lastly, sir, what is the monthly EBITDA absolute run rate we aim for, for next year, given the change in sales mix we expect from Raipur value-added sales? Any number you would like to guide for? That's my last question.

Rahul, I mean, see -- I mean, we'll not like to break up the EBITDA per tonne or EBITDA on a yearly basis. The guidance, what we are giving is that 4 million tonne sales volume by FY '25, so you could build your spreadsheets accordingly. And EBITDA per tonne every year, we expect INR 250 per tonne of gradual improvement. Last year, we did INR 4,200 per tonne EBITDA. And we are guiding for INR 5,000 per tonne EBITDA by FY '25. So there will be gradual improvement of EBITDA per tonne also.

Yes. I was actually more coming from -- we're trying to get INR 250 crores per quarter of EBITDA. So I was just trying to come from that angle, like is there a number in mind for next year?

See, next year, Rahul, we are targeting [Foreign Language] So I don't think there is an issue [Foreign Language]

The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.

Sanjayji [Foreign Language] which is one of the lowest [Foreign Language]

Yes. [Foreign Language]

Okay. So [Foreign Language] Is that the right understanding?

[Foreign Language]

Okay, okay, okay. [Foreign Language] And sir, [Foreign Language] you will trend to move towards [Foreign Language] EBITDA per tonne, but with higher volume [Foreign Language]

[Foreign Language]

Correct.

In Q4, we are targeting almost close to 50,000 tonne.

[Foreign Language] Okay.

So [Foreign Language] We are basically playing on in this sector, [Foreign Language] my full focus on new Raipur plant and heavy structural tubes [Foreign Language] volume and market share is almost [Foreign Language] Right now in the primary steel [Foreign Language] If you check the channel, you find out -- if I'm not mistaken [Foreign Language] my market share is almost close to 80%, 85%. [Foreign Language] 20,000 is 40%, almost 30% to 40% gap [Foreign Language]

Okay. Okay. [Foreign Language] of the Apollo Mart and [Foreign Language] in terms of capital and [Foreign Language] this new initiative?

[Foreign Language] 100% money will be taken care by our distributors. [Foreign Language] We are not going to invest any money in this business. Only but on the tech we can invest INR 5 crore, INR 10 crore, I can say it. Mart, right now, we just [Foreign Language] I can give a clear picture after -- in the second half. Right now, I can't give any clear picture.

And Abhishek, on your first question on the mathematics like how EBITDA per tonne will behave if commodity sales go up? I mean see that simple math, you can also do, right? If commodity sales will go up, so blended EBITDA per tonne may appear low optically, right? But our strategy is how do we increase the absolute EBITDA, right? I mean optically, it may look INR 4,800, INR 5,200, but we are more focused on how we achieve INR 250 crore of quarterly EBITDA, then we move to INR 300 crore, then we move to INR 400 crore and eventually INR 500 crore.

The next question is from the line of Ankush Agarwal from Surge Capital.

I'm I audible? Hello?

Yes, you are.

Yes. Sanjayji [Foreign Language] absolute?

Yes.

Hello?

Yes, yes, yes, Ankush.

Yes. So [Foreign Language] sir, absolute?

[Foreign Language]

Absolute basis. [Foreign Language] Hello?

[Foreign Language]

Right. [Foreign Language] if I see the EBITDA per tonne between various products keeps changing every quarter and [Foreign Language] and this is what I believe, right? [Foreign Language]

[Foreign Language] See, I mean, our product range, like you are seeing these 4 product categories, right? Now these 4 product categories have 1,500 SKUs, okay? And the EBITDA per tonne varies from INR 1,000 per tonne to INR 10,000 per tonne today, okay? So within heavy structural also, we have like value-added products and super value-added products, right? Within light sections, we have patented products, which are like super value-added products. right? In TriCoat, it's a mixture of 3, 4 products. Again, there the margin would defer, right? So because the SKU range is so wide, 1,500, and the range is from INR 1,000 per tonne to INR 10,000 per tonne, right? So -- and this EBITDA per tonne is calculated not on a conversion basis, right? We are not supplying to a B2B customer, OEM customers, okay? We are selling these off-the-shelf products to our 800 distributors, right? So the market price gets determined on demand and supply for various products, right. Products which are monopolistic for us, right, which only APL Apollo is making, not only in India, but the whole world, right, there the margin would be upward of INR 6,000, INR 7,000, INR 8,000, INR 9,000, INR 10,000 per tonne, right? Product where we are getting competition even from the run-of-the-mill operator, there the margin will be INR 1,000 per tonne, right? So I think if you want to monitor or track our margins, you should look at the blended EBITDA per tonne, which is the function of our value-added portfolio sales mix improvement, what we have done from FY '16 onwards.

Okay. But the point that I was trying to understand is, for example, now the HRC prices last quarter was very high. In the last year itself, it was very high, right, compared to last now 4, 5 years, right? Now 4, 5 years down the line when you are saying that we're going to do 4 million tonnes, right, and you're targeting basic INR 5,000 per tonne, so I was trying to understand if HRC prices go back to normal that it was like 3, 4 years back, how does it impact your EBITDA per tonne? That is what I was trying to understand. So what you are saying is it won't affect our EBITDA per tonne, right, when HRC prices correct...

No, no. See, we work on pass-through policy, right? When the HRC prices are revised. Normally, they are revised once in a month, 12 times in a year, right? Within 10 days, we also revise our price list for our distributors, right? If there is a revision of INR 10,000 -- of INR 1,000 per tonne upwards, we will revise our prices accordingly. Again, there will be some products where we can command better pricing, right, which are monopolistic, right? If prices go down by INR 1,000 per tonne, we will revise down our prices accordingly. Then again, there could be some products where I may not reduce the pricing by the same quantum, right? So it's a function of the demand-supply scenario for my various SKUs. So when we say INR 5,000 per tonne in FY '25, this could be at HRC at INR 40,000 per tonne or HRC at INR 60,000 per tonne. I mean we have no say in that.

Right, right. So, it -- unless and until HRC goes ballistic or like some extraordinary level, we would be able to do it INR 5,000 per tonne.

Yes, that's right. I mean, see, that is true for every building material product category, right. For PVC pipe, the resin plays the role. For paints, the oil plays the role. I mean that's the business risk, which every business has.

Okay. And, sir, secondly, Sanjayji [Foreign Language] right?

Yes.

So [Foreign Language]

[Foreign Language] I don't want to commit this type of anything. But no doubt [Foreign Language]

Right. Right.

[Foreign Language] A lot of things are there. But no doubt, we're also seeing [Foreign Language]

Right. So Sanjay sir, [Foreign Language]

[Foreign Language] I'm investing almost INR 800 crore in the fixed assets. And [Foreign Language] I need 2 lakh tonne of inventory in debtors. So 2 lakh tonne [Foreign Language] so total investment is -- capital implied is INR 1,500 crore.

Right. What you're saying is true that even at lower margins, you're still making better ROC.

[Foreign Language]

Right. Right.

[Foreign Language]

Right. Important, sir. Important.

[Foreign Language] total my capital implied in Raipur plant is INR 1,500 crore, if I earn 15 lakh tonne, INR 5,000 tonne, INR 750 crore I earned.

Right. Right.

[Foreign Language]

Right, sir. Got you. Understood. Well taken -- the point is well taken.

The next question is from the line of [indiscernible] from JPMorgan.

Sir, [Foreign Language] basically, there was destocking in the system on expectation [Foreign Language] earlier this week [Foreign Language]

[Foreign Language] the price has come -- the blended price of HR coil in India is close to INR 69 per kg in the market. [Foreign Language] I don't think this type of any increase in the system right now in the next few months. [Foreign Language]

[Foreign Language] so that should also be positive?

[Foreign Language] positive for the demand, but [Foreign Language]

The next question is from the line of from Ritesh Shah from Investec Capital.

Sir, in the earlier calls, you had indicated that we look to outsource the commoditized part of our business. Any update over here, sir?

No, sir. Right now, my capacity is almost 5 million tonne, 6.7 million tonne back end. So [Foreign Language] then I'm going for outsourcing.

Okay. And sir, any update on the plans for UAE? Basically, we were looking to set up a plant overseas? Any thoughts over there, sir?

Yes. We opened a small company in UAE. And we have -- in the next few months after maybe in month of April or May, we're going for applying of land [Foreign Language]

Sir, how much will be the indicative capacity over there? And...

So right now, we have no plan. But in our mind, we have to do some business in UAE. India [Foreign Language] my whole focus is on the Raipur plant.

Sure, sir. And sir, what was the thought process behind setting up a small facility in UAE? Is it like servicing the local market or how should one understand that?

Boss, sometime India [Foreign Language] due to the import restrictions, India [Foreign Language] There is no any duty in UAE market for the coil. [Foreign Language] I think the company need a plant in UAE.

The next question is from the line of Abhijit Mitra from ICICI Securities.

Yes. So I have 2 questions. First one, just to understand, suppose, in the likely scenario that HRC prices drops anywhere between INR 5,000 to INR 10,000 over the couple -- next couple of quarters, which is where the expectations are setting up to be. So how would our pricing for heavy structural, say, compare with on a per square foot basis to, say, RCC? Any maths on that? That's question number one. Yes.

So, Abhijit, I mean, when we compare RCC with the steel cubes, the difference is around INR 150 to INR 200 per square foot, right, for the superstructure. So against that, the benefit -- there are 3 benefits. One is that when you move to steel tubes, the area covered by the vertical sections get reduced, right? So the carpet area gets increased by 2% to 3%. Secondly, the time that you will save on the construction of the superstructure, that is like 1 year of interest cost saving, right? And third is that you can preadvance your cash flows. If it's in a [indiscernible] building for hospital, hotel or school purposes, you can preadvance your cash flows. So I mean, like I said that in the last 2 years, we have started marketing this concept to the contractors, developers, builders and architects. I mean on pricing front, we have not seen too much of resistance, right? What resistance we see is that it's a new technology, so people want to see some demonstration, right, that all the architects consultants, I mean, they ask questions on the sustainability of the building, et cetera. So I guess pricing, we are not too much bothered. It's more of like demonstration of 2, 3 of such buildings in India. And then we expect this to spread like wildfire, which we are confident of.

Okay. Okay. Great. That's comprehensive. Second question is that typically, till now the expansion has been across different locations, so there are 10 locations now. For the first time, we are seeing an aggregation of a large capacity, almost 1.5 million tonne to a single plant. So I think last quarter, I think there was some reference as to how to control the freight cost investments of -- investment in EVs and all. So any update on that project because freight cost can increase and that can be a potential factor to manage in the EBITDA trajectory?

So Abhijit, see Raipur -- I mean, Raipur, why this large plant coming up is that -- I mean, Raipur was our 10th plant, which we started also, right, apart from Hyderabad, which came during those days. So Raipur -- what we see, Raipur as the hub for Indian structural steel tubing, right? Because you can feed all the markets in India as it is centrally located, and the raw material availability is also -- I mean, compared to -- like if we have to put a scoring on 10 locations, so Raipur will be like among the top ones. So this is the reason that why we believe that we should make Raipur as the hub for structural steel tubes. And secondly, on improving the efficiencies for the fright, logistic, et cetera, yes. So that exercise is ongoing. We have done a lot of shuffling reshuffling between the plants, right, and the demand -- for example, for coated tubes, the demand was being -- the market was in West India, right, and the product was coming from North India. So we put -- we shifted the mill from North to West plant, right? And we also introduced the coated line there, right? So those kind of shuffling reshuffling took place, and we are confident that you will see these efficiencies bringing our margins up. and reducing the freight and logistic costs.

The next question is from the line of Nakshita Mehta from Credent Asset Management.

So on this call, you mentioned that by H1 FY '23, partial -- Raipur plant will be partially operational. So how much of sales can we -- or how much visibility can we expect in H2 FY '23? If you can just put some light on that.

Around 4 lakh.

Around 4 lakh tonne of quantity we are targeting from the new plant from Raipur in the next FY '22-'23.

Okay. Okay. Perfect. So my another question is on our debt position. So as of now, we have INR 1.6 billion of debt, which is on a revenue of INR 32.2 billion, right? So are we planning to go debt free in coming years? Or how is -- how are you planning the debt position? Because we have, I think, enough internal accruals as well, I mean operating cash flow. So are we planning to go debt-free?

Yes. I mean if you see that our operating cash flow to EBITDA is more than 90% currently, right, and given the 2, 3 quarters of EBITDA would go to complete the Raipur plant, once that the CapEx gets over by September, October, so second half of FY '23, there could be good...

You'll require working also in the Raipur in 2 years.

Right. So -- but yes, I mean, in terms of the net debt, we are confident that FY '23 -- towards the end of FY '23, we should be near 0 debt position.

Okay. Okay. And just one more question. How much incremental EBITDA are we expecting because of the Raipur plant?

So 400,000 tonne, which figure we gave...

I think with an EBITDA margin of INR 6,000, INR 250 crore we are targeting this year from -- next year from Raipur new plant.

Okay. Okay. And -- okay, sir, just one more thing. How do we -- I just want to understand how we calculate the portfolio mix? So in your presentation, it's said that earlier it was 57% and right now it's 65%. So can you just explain me how we calculate that mix?

So the general category, which is the general category, general structures, that is a commodity, that is standard, that is non-value-added. So 403,000 tonne of quarterly volume and you -- and the 139,000 tonne from general structures is 35% of commoditized and rest 65% is all value-added.

The next question is from the line of [ Vikas Mistry ] from [ Moonshot Ventures. ]

My question is that we have ventured into new Apollo Mart and what will be the contours of this? Whether it will be in a inventory-based model, marketplace-based model? And how we will really try to make money out of it by transaction-based money or something, what a subscription-base money? How do we try to personalize this?

To be very clear, we are not going to B2C. We are going to only for B2B. This is like a marketplace. And maximum we are going with our own brand materials, private labels. Our Apollo label, like just we identified 4 items like welding log, tall steel, meshed nets and [Foreign Language]

The inventory risk is with us or inventory risk...

No, we can't go with the debt and inventory, boss. [Foreign Language] back-to-back arrangement [Foreign Language] once we complete the Raipur plant. In between [indiscernible] then we'll decide it. But we are not in favor to take the inventory and all the things. We just want to use our brand.

Okay. Okay.

See also because we will start with selling these products to our existing clients, existing distributors, so they are already switched to cash-and-carry model with us for structural steel tubes. So we believe we can carry the same arrangement for these newer products. So on receivable side, there shouldn't be much of a stretch. And on inventory also, I mean, if we buy in bulk and sell to distributors, so we would like to ensure that the inventory levels don't go up.

Business model [Foreign Language] We'll back out.

Okay. Okay. Okay. Fine, sir. All the best for the future endeavors. And we hope the inventory remains light only.

The next question is from the line of Dhruv Jain from AMBIT Capital.

Sir, I had a question on the Raipur plant and outlook of 15 lakh capacity that you are putting up, about 10 lakh is of color-coated tube and sheets. So as you had given out the benefits of using Apollo Column versus the traditional structures, if you can give some of the benefits that the channel partners or the intermediaries will draw from this product. And what is the current market structure like? Are there existing players? Is there -- what's the market size like at this point of time? If you could just throw some light on it, considering it's the biggest expansion in terms of the overall CapEx that we are doing.

Boss, I just explained about the Raipur plant. We are making a 0.5 million tonne capacity for the column pipes, up to 500 square -- mm diameters. And we are -- another, we are making 0.5 million tonne coated tubes capacity. This coated tube is not only 1 color-coated tube, this is a capacity of 1 lakh tonne for the door frame, 1 lakh tonne for the precision tube also, automotive tube you can say, right, this type of tube. 1 lakh tonne is galv alum tube. Galv alum -- now we are making pregalvanized tube. Now we innovated one new product in galv alum [Foreign Language] This is a capacity of 1 million -- 1 lakh tonne. 1 lakh tonne is [Foreign Language] This is not a only 1 color-coated. This is the -- I mean, 1 lakh tonne is color-coated tube. This is the 5 lakh tonne capacity for the coated tube. And third one 5 lakh tonne is roofing sheets is mainly in the -- in this roofing sheet [Foreign Language] 3 capacities 5, 5, 5. [Foreign Language] this is the bifurcation of -- 1 lakh tonne is color door frame, 1 lakh tonne is precision tube, 1 lakh tonne is galv alum tube, 1 lakh tonne is [indiscernible] tube and 1 lakh is colored tube.

Okay. And sir, [Foreign Language] what are the marketing activities going to be like...

[Foreign Language] there are a lot of players.

Okay, sir. And in terms of marketing activities, are we looking to hire more people? What's the outlook there on this part?

Yes. We are already in the process of making the organization more strengthened. [Foreign Language]

The next question is from the line of Utsav Mehta from Edelweiss AMC.

Just one. Our target is to grow volumes by more than 20%; EBITDA per tonne, 4.5-plus, will that impact working capital in any way? Will that go up as volume push comes back?

No. Because what we are taking the growth, we are taking the growth in the new sectors. [Foreign Language] We are taking new, new sectors. So I don't think [Foreign Language]

So sir, [Foreign Language]

[Foreign Language] I back out. [Foreign Language]

We take the next question from the line of Arpit Shah from Stallion Asset Management.

[Foreign Language]

[Foreign Language]

[Foreign Language]

Deepak, you can answer better.

Yes. In the [indiscernible] we had creditors and shareholders' meeting. After that, we submit the document for the final hearing and that will be completed by first -- Q1 of FY '23.

Q1 of FY '23. Okay. Okay. Okay.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for closing comments.

Thanks, everyone, for joining in. I would like to thank IIFL again for hosting us for this quarter call. Hopefully, everyone would be safe, and we hope to see you soon next quarter. Thank you so much.

Thank you.

Thank you. On behalf of IIFL Securities Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.