Apollo Pipes Limited (531761) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '21 results call of Apollo Pipes hosted my Emkay Global Financial Services. We have with us today Mr. Sameer Gupta, Managing Director; and Mr. Ajay Jain, CFO. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Sanjeev Singh of Emkay Global. Thank you, and over to you, sir.

Good afternoon, everyone. I would like to welcome the management and thank them for giving us this opportunity. I would now hand over the call to the management for their opening remarks. Over to you, sir.

Hello, everyone. This is Sameer Gupta. A very good morning to all of you who are present on the call. I hope all of you and your families are safe and healthy. On behalf of the entire management team of Apollo Pipes, I would like to extend a warm welcome to all of you for our Q1 FY '21 earnings conference call. Q1 saw the full quarter impact of COVID on our business, and it's played out broadly along the lines that we have envisaged. You can see the hit or the demand side impact on our Q1 numbers. I will begin by sharing the operating highlights. Following which, Mr. Ajay Jain will run you through the financial highlights. I'm proud to say that despite challenges where our operations were shut for more than a month, we have reported an interesting set of numbers. In Q1 FY '21, we delivered sales volume of 10,633 tons. Of course, it was a decline of 24% on Y-o-Y basis. However, on Q-on-Q basis, there was a growth of 9%, driven by steady demand revival witnessed across cPVC and HDPE pipes and value-added [ offerings. ] On the operations side, I'm pleased to share with you that our newly acquired plant of Bengaluru of -- with a capacity of 12,000 metric tons has started contributing to our performance. We are hopeful that our utilization level will improve in this plant on the back of various initiatives taken under -- undertaken, and it will help us enhance our overall performance for the year '21. I'm also happy to share with you that we have added a new and highly potential product segment of water storage tanks during the quarter, namely Apollo Life, which will strengthen our building core division as an initiative towards Make In India concept. It is currently available in 5 colors with capacity of 500 to 5,000 liters. Earlier, we have added Solvent Cements and Bath Fittings in our portfolio. The new product is also a lead compliant and meets high international standard used for plastic piping solutions. We will be continuously including new and initiative -- innovative products in our value-added product portfolio and sync with our growth strategy. Further, I'm glad to share with you that our company is going for a greenfield expansion project at Raipur, Chhattisgarh, where initially, we will be coming up with 2 extended lines with 6,000 metric tons capacity of pipes and 1 water tank plant with a capacity of 6 crore liters per annum. This whole project is planned strategically, which has minimal CapEx of around INR 12 crores to INR 15 crores including land cost. This plant will cater to the Central and Eastern India. Both the markets are largely dependent upon agriculture sector and buildings segment will also be a focus. We believe that this will give an impetus to our performance. We plan to start production from this plant by Q1 FY '22. In the long run, we have improved our product portfolio which could help us to enhance our business visibility and drive healthy volumes and profitability. We are also constantly working towards strengthening our sales team, dealers and distribution network and building our brand presence across existing and new high potential geographies. Further, the launch of value-added products enhance our branding activity, and ramp-up in utilization of facility should enhance our productivity and improve business efficiency for Apollo Pipes in the medium to longer term. From a macro perspective, the continuous effort of the Government of India towards water management programs like pipe water drinking -- pipe drinking water to all rural households, agriculture and irrigation should drive demand of the pipe industry. So on the whole, helping across improving demand along with the implementation of our strategic initiatives should help us in delivering a healthy operational and financial performance going ahead. On that note, I would like now to invite Mr. Ajay Jain to run you through the key financial highlights. Thanks.

Yes. Hello, good afternoon, everyone. I will briefly cover the financial performance during the quarter ended June 30, 2020. The company delivered a steady financial performance during Q1 FY '21 despite 1 month complete operation shutdown on COVID-19 guidelines issued by government, simultaneously facing external challenges such as muted demand sentiments in the domestic market and impact of pandemic throughout the nation. Total income from operations for the quarter came at INR 93 crores as against INR 117 crores in Q1 FY '20, declined by 21%. However, in line with Q4 FY '20, top line of INR 94 crores. Our volumes for the quarter stood at 10,633 metric tons as against 13,953 metric tons in the corresponding period last year, delivering a decline of 24%. However, sequentially, volumes are up by 9% as compared to 9,721 metric tons in Q4 FY '20. We are happy that we could manage to achieve these figures within 2 months of production during the quarter. On the profitability front, our EBITDA for the quarter was declined by 52% Y-o-Y to INR 8.33 crores as against INR 17.57 crores in Q1 FY '20 due to higher sales costs. Margins for the quarter were declined by [ 197 ] bps and stood at 9%. Depreciation cost during the quarter was up by 31% in Q1 FY '21 to INR 3.4 crores against INR 2.6 crores in Q1 FY '20. Higher depreciation was on account of newly added capacities. Net profit for the quarter stood at around INR 2 crores following lower EBITDA. Now coming to Raipur greenfield project. We have a CapEx guidance of INR 12 crores to INR 15 crores for the total project, including land and building. Land acquisition process has already been completed. We are planning to start our production by Q1 FY '22. This project will mainly deal with pipes and water storage tanks. The CapEx for this project is funded internally through our cash flows. We believe the payback period for this project is expected to be within 3 years. Last but not the least, I'm happy to share that our company is not leveraging our balance sheet for any expansion project. Currently, we are a net cash company with INR 33 crores. I believe our cash flow to be stronger going ahead with improved demand and productivity. With this, I would now request the moderator to open the forum for any questions or suggestions that you may have. Thank you.

[Operator Instructions] The first question is from the line of [ Nitin Jain from SBI Capital. ]

Sir, I just wanted to know what is the cash on the balance sheet right now?

Yes, the annual balance sheet on June 30, we are having a net cash of INR 33 crores.

Okay. Sir, in Q4, the cash balance seem to be much higher, like around INR 128 crores, INR 130 crores. Can you explain why there is a significant decline?

Actually, due to the lockdown and there was a bit requirement for the cash in our books, and we did not want to go for high external debts. So we felt prudent to use the cash for our business requirements. [indiscernible] Otherwise, currently, we are having an FDR of INR 72 crores in our books. That's against INR 39 crores of total debt. We are telling that INR 33 crores is the net cash available with us.

Okay. And sir, what is the operating cash flow during the quarter?

We'll get back to you. You can ask the next question, please.

Okay. Sir, in the investor presentation, you have spoken about the Sikandrabad unit. So this was not -- like it was not in the Q4 investor presentation. So this was started during this quarter?

I'm not able to hear you. Actually, voice is not clear. Can you repeat the question?

Hello? Can you hear me now? Hello?

Yes. Yes. It has got better now. Go ahead, please.

Yes. So, sir, the Q4 FY '20 presentation did not point out the Sikandrabad unit. So has it been started during this quarter?

Yes, the unit was there since the beginning, but we were not producing any of the, let's say, much production was there. And during this quarter only, we started the tank production. The Solvent business was there, but the quantity in tons-wise, it was very low. So it was negligible, and it has not been shown. Otherwise, we have started recently the tank business over there, which has now been shown in the -- our targets. So it was there in the list, but the production was not actually there. The plant was there with us [ before the share ] was actually there with us.

Okay. Perfect. And sir, regarding the Raipur plant, like it has been under discussion for quite some time now. Like it was first spoken about, I think, in the Q4 FY '18 presentation. So what will be the time line now? And how will the [indiscernible]?

There is slightly different in the earlier position and right now position. Earlier, we were trying to go for Raipur plant with a complete set of replica for the Dadri plant. But right now, we are going with a minimal CapEx expense that is around INR 12 crores only, in which we will be producing pipes and water storage tanks. And the completion date for this project will be somewhere around last quarter of, you can say, this financial year. So we shall be there in the market with the production in the first quarter of FY '22. And right now, we are trying to, you can say, create a stock point over there in the Raipur plant so that all the Eastern markets and the Central markets will be feeded from that main stock point and the fittings and all other segments will be delivered from Dadri plant to Raipur plant.

And sir, the net working capital days, like even before COVID, they have been rising continuously, like for the last 3, 4 quarters. So what -- does the company have any plan in place or to bring them down?

Yes. Actually, company has strategically working over this since long. And post-COVID, we are focusing to reduce our working capital days. So targeting on a lower inventory debtor, thereby, our working capital cycle will reduce. So that's why we are now focusing to reduce our working capital cycle, unlock our working capital which could be used for our CapEx and bring down the external debts.

And sir, if you could quantify the inventory devaluation that happened during this quarter because of PVC price reduction?

Yes, during the quarter, in the first -- you can say, first 1.5 months, the prices were on the downward side. And after that, the prices were slowly and slowly increasing. So we tried to minimize the effect of devaluation of stocks on our sales and profitability. Still, what we have that calculated should be somewhere around INR 5 crores to INR 6 crores for the quarter. So [ totally complete ] the stock loss.

And sir, what is the current capacity utilization, including like all the plants overall?

The capacity utilization should be somewhere around -- right now, we are working around 70% of the -- 70% to 75% of the total capacity we have.

And one last question, sir. How have been the sales in the month of July? Like, have you seen any improvement over June or July?

July month is pretty much as near our target sales that we are targeting pre-COVID. We are able to achieve the same sales that we are targeting pre-COVID. And we are targeting the same in the coming months also. The operations, you can say, that in the plant, and you can say, other things, other places, they are pretty much near the normal. Only problem is that the lockdowns at various places they are only a hindrance right now. Otherwise, from the operations side of the plant, we are pretty much near the normal. And we are also targeting the same type of sales, you can say, that in the July month and for the other ones also in the coming months.

[Operator Instructions] The next question is from the line of Praveen Sahay from Edelweiss.

So I have one query, sir, related to the capacity utilization. You had said earlier that 70%, 75% of utilization of your capacity, so is that for pipe or including tank?

Tank is running at full capacity because this is a new project, but we were, you can say, being a stronger -- very strong brand in the Northern India, so tank is running at full capacity. So in tanks, we are adding more machines at different locations like at South and one more machine in Sikandrabad plant and one in Raipur because of that. Other than that, for balanced pipes and fittings, you can say that we are running at 75% of capacity that we have.

So ideally speaking, if you are running at 75% of utilization, so that's, I think, for the entire year is on a peak utilization? Or is there a scope to further increase from here because there is a seasonality as well?

Actually, yes, seasonality, because of that thing, we are seeing a little bit of dip in bore well demand, that is casing pipes or higher size of PVC pipes demand. That dip is there for the month of July, as we talk about. Other than that, the demand is pretty much, you can say, at the -- near the peak only. We are almost utilizing our complete, you can say, capacities for that. Whatever we can achieve the best, that is we are using right now.

Okay. And is there any sales included in the past first quarter of tank business?

Yes, first quarter, the tank business sales was there, but it was very much -- you can say because we started in somewhere around mid and end of June, somewhere 15th to 20th of June, so only 10 to 15 days of sales was there. That was very negligible. For the month of July, there's -- 1 plant sale was full -- full plant sale was there. But in the month of June, it was only for 10 days. So the amount is pretty much -- very much near, you can say, somewhere around INR 30 lakh to INR 40 lakh of sale was there in the first quarter sale.

So can you give any -- some sense like in the peak utilization for how much is the peak sales you can do for this tank business?

For tank business per machine, we are targeting the sale of somewhere around INR 15 crores to INR 18 crores per annum per machine, and we are targeting right now around 4 machines for this tank business. So put together, it should be around -- for the year -- by the year-end, complete capacities will be there, and the total sales target would be around INR 60 crores to INR 65 crores.

By '21 end, you will -- done with the 4 machines and...

March '21.

March '21, sorry. And these 4 machines would be located in the different locations of your...

1 in Bengaluru, 2 in North India and 1 in Raipur.

Okay. Okay. And on the piping side, is still your contribution from the agri price is higher? Or is that some reduction [indiscernible]?

First quarter, the challenges were there from the labor side. So the building products needed a lot number of players as compared to that, you can say, agri pipes. So we were much more focused towards that agri pipes. But from the July months onwards, you can see from the mid of June, we were back on track with the focus on this building products like fittings and other products. So you can see that we are targeting the same focus of sales for the building products in the coming quarters and for the month of July.

So if I just -- keeping aside the first quarter, what is the normalized contribution from agri and nonagri new business?

Roughly around 50% to 60% should be from agri pipes and balance 40% to 50% from building products.

Okay. And the new capacity which you're coming greenfield in the Raipur, that is what -- that's also a mix of both the things or especially to plumbing or agri?

That will be a mix of both the things, agri pipes, along with that, building products, like tank business and other agri -- plumbing pipes and some more pipes will be there in that project.

Okay. And also, as already the M-to-M losses you had provided, but is there a further scope for any reduction in your other expenses or some variable expenses?

No, we have already reduced too much of our regular expenses. And right now, I don't think there is much scope. Rather, we will be increasing our [ advertisement production ] budgets that we have minimized in the first quarter because of the COVID. But right now, we are again targeting back on that -- those expenses so that we'll be back on track with the planting and other activities.

Yes, I just wanted to inform Mr. [ Nitin ] that he was asking about operating cash flow, it is INR 13.55 crores.

[Operator Instructions] The next question is from the line of Agastya Dave from CAO Capital.

Sir, there was one answer that you gave to the first participant, where I couldn't hear what the question was. You replied INR 5 crores, INR 6 crores.

That was stock loss in the first quarter.

That was what, sir, sorry?

Stock loss, stock loss because of the promoter prices being dropped in the first 2 months. Inventory loss.

Right. So to adjust for getting the proper gross margins, we just have to add that back, right?

Yes, sir. But there was one more thing that [ could be ]. We meet our complete expenses of April month without no sales. That has also be added so that we can come to the complete, you can say that.

So sir, could you give some idea on what is the state of the gross margins as of now? Are they comparable to where they were last year? And raw material as a percentage of sales, is it roughly the same where it was last year?

Yes, of course, leaving the part for the first 2 months, April and May, from the June month, we were pretty much near the normal EBITDA margin that we were targeting in the last year. We are near to that only.

Right. Great, sir. Sir, my second question is, I'm not particularly familiar with the seasonality of the business. So when you say in your presentation that volume growth guidance over the medium term is [ to exceed ] -- is 25% CAGR. So that would mean that your current capacity won't be enough, right, if 75% is the maximum that you can do because of seasonality. So is that understanding right? And second, if you look at the next 3 years, have you changed this view that you can grow at 25%? If not, then over the next 3 to 4 years, what's your CapEx going to look like?

When we talk about seasonality effect, the Building Products segment, that doesn't see too much, you can say, ups and downs because of the seasonal effect because they are used in the construction business. And there is no effect of the -- this, you can say, rains and other things and the winters. But when we talk about agri pipes, these are largely affected by this rains and winter season. So in the first quarter, the season is too high because of the agriculture demand is there. We are -- from the beginning, we are catering to this agriculture demand. And earlier, we were only focusing on -- around 5, 6 years back, we were only focusing on agriculture pipes. So we were supplying almost 80% to 90% of our product to the agriculture demand, whereas in the last 5, 6 years, we shifted our demand from Agriculture segment to Building Products segment so that we can achieve the higher level of utilization from our plant, where we can achieve around 75% to 80% or even higher. So we are targeting that thing only. But because of that mix -- product mix of, you can say, Agriculture and Building Products put together, so we see a dip because some of the machines make only agriculture pipes, they are not capable of making Building Products pipes. So that limitation is there. And we are trying to minimize those seasonal effects in our sales so that we can achieve the higher level of utilizations from our plant. Further, if we talk about this growth pattern, we are targeting the growth of a minimum around 30% to 40% growth. But because of some constraint at our end that we are not able to achieve it because of the polar [indiscernible] sometimes the constraints from the production side that we have not, you can say, have the complete range of the fittings that we are targeting, that we have right now around 800 to 900 fitting items and we are targeting around 1,200 to 1,500 fittings items. So that sometimes becomes, you can say, a block for our -- that growth. Otherwise, if you take our target, that we are targeting every time 30% to 40%, and we are quite hopeful that in the coming, you can say, coming quarters, you will see the change in the number because we are then getting very aggressive with the sales and with the brand positioning and other product availability so that the growth should be there. That main challenges for the growth is that the production capacities and the grain capacity that were continuously increasing so that the market should -- we can speak comfortable with our products.

Sir, you are saying 1-3% to 1-4% or 3-0% to 4-0%?

3-0% to 4-0%. 1-3% is very minimal. So 3-0% to 4-0% I'm talking about.

Right. So in light of that, sir, what will be your CapEx over the next 3 years?

Sir, we are targeting, at least, you can say, around INR 30 crores to INR 40 crores per year on CapEx, apart from these greenfield projects. So right now, for the current year, we are targeting a CapEx of roughly around INR 50 crores, including the Raipur plant. And continuously, if our balance sheet allows, we will go with the same type of CapEx to increase our capacities and the range, mainly the range so that we can increase our sales numbers.

Right. And sir, this Raipur facility, you mentioned that there will be a pipe facility and a tank facility. Tank facility, you said would be 6 crore liters. What would be the pipe facility? I missed that number.

That is 6,000 tonnes per annum.

6,000 tonnes. Okay. Okay. Okay. And this, sir, INR 30 crores to INR 40 crores of CapEx over and above the greenfield, can you break it up in how much would be maintenance CapEx and how much would be growth? And what would that translate in terms of capacity?

Sure, sir. Maintenance CapEx will be very on the lower side. It should be roughly around 5% to 6% of the total CapEx that we are planning. Other than that, we are planning a big expansion in the Dadri plant, where we are almost doubling the capacity of Fittings. That is our main products that we are targeting right now, and it is right now running at almost full capacity. So we are almost doubling our Fitting capacity. Apart from that, we are also putting up the, like I told in the earlier, that we are putting up the tank -- one more tank plant here and some pipe machines are there for the Building Products and some pipe machines in South plant for the Building Products and along with the tank plant. That is the put-together capacity that we are adding.

And sir, just to get the second part of the question. This INR 30 crores to INR 40 crores, if I do a INR 30 crores CapEx, right, how much additional tonnage do I get?

Additional tonnage, sir, that we have targeted, it should be roughly around 30,000 tonnes of this. Put together all the products, it should be around 30,000 tonnes in the year-end for pipes, tanks, fittings put together.

And sir, one final question. I know the businesses are very different, and I'm a shareholder in APL Apollo also. And they have -- during the previous call, they have come out with a very aggressive guidance on how they will be managing their working capital. Are we thinking of -- on similar terms? Or is APL Apollo business model very different and their brand equity in their product is very high and the market share very high compared to us? Will we be following that model cash-only business? That is some time away?

No. Actually, the thought process goes across the group in the same way as [ you're going to ] give the directions almost on the same line to each and every business we have bought. So we are also working on the same pattern. But being a brand leader in steel pipes and not there in PVC pipes, so that's the, you can say, hindrance for us to, you can say, exactly replica that business model of 100% cash basis. But still, we are trying to reduce our working capital cycle by reducing the debtor and the inventory days, and we are working very hard so that we can reduce that cycle to by almost 30 to 40 days by complete, you can say that. And we are -- you can say, we are quite optimistic regarding achieving that thing. Tha we hope that by the end of, you can say, this financial year, we should be achieving those figures given by Mr. Sanjay Gupta so that we can, you can say, both on the minimum debtors and minimum stocks to achieve the high, you can say, efficiency of our working capital.

The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.

What would be the agri mix during the quarter? And if you can sort of specify in terms of how was the performance of the agri portfolio during the quarter?

During the quarter, the agri was almost, you can say, around 75% to 80% of the total, 75% roughly around, you can say, I don't have the exact figures, it should be around 75% or maybe slightly less, you can say that. But Building Products was hit in the first month of, you can say, restart of operations that is May because we cannot sell too much of Building Products because of the labor constraints. We were not able to make too much of fittings and other things. So that was the concern. Other than that, in the month of June, it was pretty much near the normal. So the complete, you can say, that agri pipes should be somewhere around 75% or 70% on the minimum side.

And how was the performance of the agri portfolio? Was there a growth in this quarter? Or how was it?

Sir, if we talk about the complete quarter-on-quarter basis, there was no growth because of the total loss of 1 month. And some part of, you can say, some part of May also was short -- become short because of that labor constraint. We were not allowed to give complete set of 100% of the labor in our plant. And initially, only 25% of the labor were allowed for the first, you can say, around 7 to 10 days. Then slowly and gradually, they increased the number of laborers to our plant. So that was a big constraint. So we were not able to achieve that figure of quarter-on-quarter basis. But of course, if we leave aside the month of April, then we are on a growth.

Okay. May and June, we have reported a growth?

Yes, sir.

And on the plumbing side, how is the demand environment shaping up going forward?

Yes, sir, it's going up, and with the addition of fittings range in our product portfolio, it's definitely, you can see, shooting up. And we are quite optimistic that it should be roughly, around in the coming days, should be somewhere around 50% of the sales the building products.

On the storage tank side, is it possible to know what is the capacity in tonnage terms? And secondly, is it fair to say that margins in this business would be significantly higher as compared to the pipe business?

Yes, of course, it should be higher from -- the margins, it should be higher from the pipe business, and it is roughly around -- that EBITDA margins should be somewhere around [ 20% ] we are targeting from this business going forward. And the capacity per machine should be somewhere around 1,500 tonnes per annum on one machine in tonnage.

1,500 tonnes per machine, and you have 4 machines right now?

No, we have 1 machine right now, and we are targeting 4 machines by the year-end.

So the annualized capacity will be close to about 6,000 tonnes by the year-end?

Yes, sir. By the year-end, should be around -- somewhere around 6,000 tonnes.

And in case we get good response, do we have infrastructure to sort of further scale it before?

Of course, that's not a trouble with us. In case we have a good demand in any of the segments, so we are definitely going to invest in those segments. Even though the tank is there, right, not that we are getting good response from the tank business. So we have started this for the [indiscernible] plant also.

[Operator Instructions] The next question is from the line of [ Vikram Narnolia ] from -- an individual investor.

I would like to know, so that, as you said that your cash balance has reduced from INR 125 crores, INR 128 crores to INR 73 crores. So can you specify what was that INR 50 crores, INR 52 crores used for? And secondly, sir, I would like to know why are you not coming into advertising your products, sir.

As far as the deposits are concerned, actually, what happened due to lockdown and the cash flow was hit. So -- but we had to pay the creditors. So that led to reduction in my deposits.

Okay. And that was to the extent of, sir, how much crores?

Around -- from INR 125 crores, we are now at INR 72 crores. So around INR 55 crores, INR 57 crores that we have invested back in the business. So just not to have a hit on our borrowings, we resorted to reduce -- utilize our funds for that.

Okay. And sir, one more thing, sir, why the company is not getting into advertising for its products? When they're coming up with such building products, then without advertising, sir, how will our product be more visible, sir?

No, no, [ Vikramji, ] actually -- what actually is happening, we are not focusing on any ATL activities. Other than that, our -- we are very much advertising our products with the BTL activities like summer meets, road shows and other things in the market. But like I told you that we were slowed down on that front. Because of the COVID effect, we were not allowed to move our vehicles -- branding vehicles in the market. So that was not for -- in terms of first quarter. But again, we are getting back on track. From -- if you talk about the ATL activities, we are getting that leverage from the steel segment that we are advertising. And we are, you can say, we are getting that leverage of Amitabh Bachchan from them, and we are not -- you can say in any -- you can say sort of such product, you can say, around any use of getting into ATL activities. Instead of that, we are much more targeting on BTL activity.

Sir, with due respect, Amitabh Bachchan ad is there, but, sir, doesn't mention about Apollo Pipes, sir?

Sir, we are actually -- we are targeting that brand as to be -- Amitabh Bachchan as to be a complete brand investor instead of just [indiscernible] to that, you can say, on limited ads only. So we have [indiscernible] got that registered to only for the steel pipes only. So we are using that brand as, you can say, complete brand ambassador instead of making it to one product. But if we talk about the PVC pipes, we are -- actually, he was already engaged with Kisan Mouldings in the earlier days. So we like take into PVC pipes. That was the constraint with him.

Okay. And sir, I like to ask -- understand, so this INR 15 crores CapEx which we're doing at Raipur, that will be internal approval or would be taken at for that?

So right now, we're targeting to get it from internal accruals for the existing loans. We are not targeting any new fresh loans on that.

Okay. And sir, what would be the outcome in terms of revenue from this plant, sir?

It should be somewhere right now to capacity. If we cover the complete capacity, it should be -- at 100% capacity utilization, it should be around INR 5 crores per month, around [ INR 62 crores ] per year.

The next question is from the line of [ Deepak Mehta, ] individual investor.

Sir, my question is that what about the distribution network expansion in this quarter? And what is the demand in Tier 2 and Tier 3 cities because we are seeing tepid and subdued demands in metro, as mentioned in the last quarter? If you can throw some light, sir.

Right now, if you talk about the current quarter, the distributor and dealer that would be added in the Southern and the Western region from the Tumkur plant we are supplying to them, and we have added good numbers over there. But if we talk about the Northern region, we are targeting on the retailer segment much more apart from, again, increasing from the [ state-level ] distributors, we are trying to increase the number of retailers. So we are targeting, you can say, in terms of distributors, we are targeting the North -- sorry, West and the South segment where we have already added a few distributors over there, around 20-odd numbers over there where we have added in the Tumkur plant. And if we talk about Northern region, we are -- right now, we are targeting in the newer areas, but almost each and every area we have covered in the Northern region. So we are trying to, you can say, strengthen our existing distributor network.

Okay. And my next question and last question is that if we consider last 3 to 5 years, we have seen good growth in CAGR. So if we consider this year as a washout, so there will be not much growth, so what can be growth we can expect in the next 3, 5 years, if we assume the tailwind of this [ Har Ghar Jal Nal Yojana ] and all, sir, and our CapEx?

Seeing our CapEx and other business plans, we are minimum targeting to see the sale growth of around 25% per year, minimum growth of that, and we are targeting those growth in the current year also and the coming years also. For that, we are increasing our locations like we have put the plant in Ahmedabad, now in Tumkur and in the current year, we are putting up the -- setting up the plant in Raipur. Along with that, we are also increasing our product portfolio, which is also increasing our sales base. So seeing all those investments and the locations that we have added, we see that we can -- in the coming years, we can very easily achieve the figure of around 25% to 30% of growth in the -- you can say in the total sales.

So we can say that 25% to 30% growth in next 3 and 5 years?

Of course, sir.

And by keeping the same EBITDA margin, right, sir?

We are not leveraging anything on EBITDA margin. In the newer markets in the first few days, you can say -- in the first few months, we have to leverage I think, but we cover up in the coming days.

The next question is from the line of [ Sakshi Kar ], individual investor.

I just want to know, in the last question, you are just targeting a 25% to 30% growth in the coming year for this. How we are just planning for the first quarter get [ lapsed ] due to the COVID-19?

Yes, the first quarter was lapsed, but if we see the run rate of that our sales, we are pretty much near the target only. We are running with that thing only. So first 2 months were hit. Apart from that, the balance is favored near to our, you can see, our target only in the month of June and July. So we are quite optimistic with our figures.

Okay. My next question is that I just want to know what is your CapEx in your water tank project?

Water tank is not -- you can say, the CapEx is not very big. It should be somewhere around INR 2 crores to INR 3 crores per machine.

You have only one machine or more machine is there?

One machine.

Okay. Are any employees affected by COVID-19? Or everyone is safe right now in your organization?

Touchwood, there's no such incident at the [indiscernible] in whether it be head office or any other plant. We have no such incident.

Okay. Okay. Congrats for this condition. And just my last question is that this condition is just going on, pandemic condition is there, are you providing some kind of facilities to your employee or just operating at a full capacity in your plant and head office?

The sanitization in all the facilities are there with that plant, but there is no such thing as residing facility at our plant. Labor and other things, they are coming on their own, but they reside on the very nearby areas only, around 500 meter to 1 kilometer within the area. So that is not much required. Other than that, the sanitization facility is totally there in the plant.

No work-from-home policy is there in your organization?

We cannot work the plant with a work-from-home policy. They have to be present physically. Otherwise, we cannot run the plant from that. Otherwise, [indiscernible] work from office policies there in the office.

The next question is from the line of [ Karan Adelia from Asian Market Equalities. ]

Sir, can you throw some light on the water storage solution, how big is the market? How many domestic players are operating in the segment?

Yes, [ Karan. ] Yes, the market is, you can say, quite big as we are right now targeting. It's a big market and several other players like Supreme, [ Vector ], Sintex, they are already working in the same segment with good capacities for the last, you can say, around -- Supreme is there for the last [ 4 ] many years. So we have seen from the market and for our brand. So we see that it should be -- can see a good venture for Apollo Pipes. The market should be around like we are targeting -- it should be around INR 6,000 crores piece of market that we have. Right now, what figures we have, this should be a market of INR 6,000 crores. So we are targeting right now our capacity of -- in the tank business of capacity of around INR 60 crores to INR 70 crores by this year-end. And if you can say that the results are good with this capacity, we are definitely going through -- for the higher capacity in this product.

And we are leveraging the same dealer network or we have appointed the new dealer distributor?

So first opportunity is there because same dealer network. And in the Northern market, all the dealers, they are taking the product who are already dealing with us. For the newer markets, of course, we have appointed some new distributors for tank business in the newer markets only. But if you talk about the existing market, we are working with the same set of dealers.

Correct. Correct. And sir, also, we've recently entered into faucet where showers and other allied bathroom products. So how are things shaping up there?

Yes, it's good shaping over there. We are also, you can say, in -- during the current year, we are also adding up some of the products in taps and faucets also. And it's growing right now. Earlier, it was very much below the [indiscernible] any measurable figure right now, but we are targeting around 1% to 2% of the total sales for this financial year. It should be around INR 8 crores to INR 10 crores of the total sales.

And what is the investment of our [indiscernible]?

The machines, that ingestion molding machines, they are samely used for big [indiscernibles] which are used for fittings, they are used for these taps and faucets. Apart from this, some molds we have added, which should be somewhere round INR 3 crores to INR 4 crores of total molds that we have invested right now.

Correct. But sorry, in this space, there is a lot of competitive intensity from bigger guys like Ceras and Jaguars. So how do you plan to...

No, we are not into those segments where Jaguar and Cera is there. It's the plastic bulk fittings where, you can say, like if you've heard about water tank, they are big in this business. We are not into glass bath fittings. We're into plastic bath fittings. Cera and Jaguar, they're not manufacturing facilities.

The next question is from the line of [ Ajit Shah from Prabhudas Lilladher. ]

I just wanted to know about any -- are we getting any traction for this multiple campaign, which is adding target to the ground in current quarter, something like that?

Of course, as we are supplying to these projects through various contractors and semi-government bodies. So we have a team which are working with these government projects. Under which, we supply the pipes under Jal Se -- Nal Se Jal schemes. And we are also working with other schemes also. There are several schemes from the government who are working for the irrigation pipes and drinking water and water sewage pipes. So our team is there who are working with these government bodies for the supply.

So, if I may ask, like, do you have any number as in what kind of growth are you -- or like top line volume growth are we looking for that will be benefited by this campaign, this new campaign?

Yes. Actually, we don't directly focus on government business because like you have seen in our presentation that we don't target too much of the sales from this business because we are very not, you can say, sure what exactly the numbers will be and how much you can project this year and how much will be the next year. Like in this quarter, the [indiscernible] is very much there and because of those things, all the government in terms of the momentary demand, they were on the lower side because of the ability of funds with the government. They were totally focused on COVID, and they were not leveraging any funds to these projects. So we do not, you can say, focus our complete business or majority of the business to this such demand. So we are much more focused towards the trade demand and you can see where it will depend upon the regular terms of demands. Instead of going for these such government demands, our company can get badly hit if in case of any no-show from the government.

The next question is from the line of [ Nitin Jain from SBI Capital. ]

I just wanted to understand if you are facing any impact of the migration of labor at the native places.

[ Nitinji, ] can you be a bit clear, louder now?

Can you hear me now?

Yes, now it is better.

Yes. Sir, I just wanted to know if you were facing any impact of labor migrating back to their native places in terms of your production capacity.

No, sir. There's no such impact because in the months of April, we have paid almost full amount to the labor. So they were pretty much, you can say, comfortable with us regarding their own places. So very less impact was here, around you can say 10% to 20%, you can see, drop was there. But you can see that not much of the effect. So that -- our production was hit because of some government regulations. Other than that, there was no such hit from the labor side.

Okay, sir. And sir, in your recent investor presentation, you have shown pictures of systems and seat covers. So are these like new product launches by the company?

Right now, these are the, you can say, these are the products that we are selling along with the bath fittings that we're talking about. We are -- but right now, we are outsourcing it. And as soon as we get the, you can say, good sales number, we will definitely be producing these type of fittings in our factories only.

Okay, sir. And sir, one final clarity, I just want to know the cash position again. Mr. Jain mentioned that the net cash was INR 33 crores. So what was the net cash in the -- in Q4, sir?

It was INR 13.55 crores [indiscernible]. In FY '20, you're talking about?

Q4 FY '20, the net cash position, net of the debt?

It was INR 12.5 crores.

Because sir -- as far as the balance sheet, you had INR 128 crores of fixed deposit and about 60 -- INR 78 crores of debt on the book?

Net cash -- are you talking about cash operating cash flow or net cash?

No, no. Not cash flow, sir. I'm talking about the net cash. You mentioned that it is INR 33 crores in this quarter?

Yes. Last year, FY '20, it was INR 38 crores.

INR 38 crores. Because you said INR 128 crores that went and about INR 78 crores of debt, right? Or am I missing something?

Actually, in my balance sheet, what current maturities are not shown under borrowing. But if you add them back, the total borrowings were around INR 90 crores. So against INR 128 crores, we were having INR 90 crores of borrowings, so leading to INR 38 crores of net cash.

Okay. So that INR 38 crores is down to INR 33 crores, you're saying?

Exactly because we have reduced our debts now.

Okay. You have used the fixed deposits to pay off your debt?

Yes.

And sir, you mentioned that some amount of the liabilities are not on the balance sheet. Is there any reason why they are not on the balance sheet?

I'm telling you, sir, that current maturities are not shown as a term loan -- term lending -- term borrowings. They are shown as in the current liabilities. So that's why you may not be able to add them back. In my balance sheet where financial current -- term borrowings were INR 29 crores in FY '20. But actually, it was INR 42 crores because INR 14 crores was the current maturities that was shown in the current liabilities as for the Schedule VI format.

The next question is from the line of [ Yash Modi from ICICI Securities. ]

Now that you set up the Raipur plant, we will be setting up the Raipur plant by year-end. So just wanted to understand what are long-term aims of the sales mix that we're targeting. So fittings is doing well. Tanks business has seen very good traction. So now obviously, pipe businesses are steady cash cow. But what do you see the long-term sales mix going ahead?

We should be -- in the long term, we should be able to reach the INR 1,000 crores turnover in the next 3 years, we are targeting.

Okay. And the sales mix would be 30-70, 30 in terms of fittings and tanks and 70...

If we talk about INR 1,000 crores, it should be 50-50. 50% should be coming from tank business along with building -- other building products and 50% should be coming from agri pipes.

The next question is from the line of [ Ajit Shah from Prabhudas Lilladher. ]

I just wanted 2 clarifications. One, you said that you were targeting for 20% EBITDA margins for tank business in FY '21, right?

Yes, sir.

And secondly, you said that your -- what would be the average -- annual revenue from tank business for FY '21?

FY '21, it is -- March '21, you are talking about?

Yes, March '21, like annual, total for March '21...

For March '21, the total revenues should be around INR 25 crores from all the facilities, INR 25 crores to INR 30 crores.

Over INR 25 crores. Okay. And one last thing.

Because right now, we have only 1 machine with us, and we have ordered 2 more machines in the -- 3 more machines in the [indiscernible] areas. So we don't think that we will be able to have the complete capacity in the year. So some machines -- some 3 or 4 months only will be there for the production.

Okay. So may I assume that from FY '22 onwards, like if you increase the capacity by adding 2 machines, will this be -- eventually be INR 60 crores, INR 65 crores around of revenue from tank business?

INR 50 crores to INR 60 crores should be there.

Okay. INR 50 crores to INR 60 crores. And last question, sir, what will be the amount of debt that you must have reduced in this quarter, like any...

Yes, actually, as I told to [ Nitin ] also, in FY -- by March '20, we were standing at INR 90 crores debt. But now we are having only INR 39 crores of debt. [indiscernible] working capital borrowings, only term loan is going on.

Okay. So around, say, INR 45 cores, INR 50 crores, you must have repaid, right?

Yes. That's right. Yes.

The next question is from the line of [ Aditya Mehta, ] individual investor.

Sir, I wanted to ask, you mentioned that you're doubling capacity for Dadri fittings capacity, okay. So what is the current contribution of that in our top line?

In terms of turnover, if we talk about, it should be roughly around INR 50 crores of the fitting capacity right now, we are talking to. I'm not sure with the exact number. It should be somewhere around that.

So we are doubling it by this year itself?

Yes, yes, of course, by the year-end, it should be doubled, and we are trying to achieve taking maximum utilization for this added capacity also.

Okay. And what was the CapEx for this?

It is already -- we have targeted around INR 40 crores CapEx we are targeting. In that for this molding segment, it should be somewhere around INR 15 crores, including the molds.

The next question is from the line of [ Vipin Gordian, ] individual investor. As there is no response from the current participant, I have muted the line. As there are no further questions, I would now like to hand the conference over to management for closing comments.

Yes, I thank you all the participants for the meeting. I hope we had been able to answer all your questions satisfactorily. Should you need any further clarification or would like to know more about the company, please feel free to contact us. I thank you once again for taking your time out and join us on this call. Thank you.

Thank you. On behalf of Emkay Global, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.