Apollo Pipes Limited (531761) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of Apollo Pipes Limited hosted by Systematix Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Gor from Systematix Institutional Equities. Thank you, and over to you, sir.

Thank you, Steve. Hello, everyone. On behalf of Systematix, I welcome all to the Q3 FY '21 earnings call of Apollo Pipes Limited. From the management side, we have Mr. Sameer Gupta, who is the Managing Director; and Mr. Ajay Kumar Jain, who is the Chief Financial Officer of the company. Without much ado, I would like to hand over call to Sameer-ji and the management participants for the opening remarks, after which we can open floor for Q&A. Thank you, and over to you, sir.

Thank you, everyone. This is Sameer Gupta. Good afternoon, everyone, and thank you for joining us on our Q3 and 9 months FY '21 earnings call to discuss the operating and financial performance for the quarter. I trust that you and your families are safe. I hope you all had the opportunity to go through our results presentation, which provides details of our operational and financial performance for the third quarter and 9 months ended on 31st December, 2020. To begin with, I'm happy to share that we have reported an encouraging performance during the quarter, led by strong recovery and robust consumption across markets. Our total sales volume has marked a steady improvement of 7% Y-o-Y to 11,445 metric tons per annum -- sorry, for 9 months -- in Q3 FY '21, mainly driven by a healthy contribution from our cPVC and value-added product segment of Fittings. In addition, our latest product launch, Apollo Life water storage tank, had also assisted volume performance during the quarter. On the whole, we are seeing increasing traction in demand across our product categories. On the operations front, all our greenfield and brownfield manufacturing expansions across facilities are progressing as per schedule. The operationalization of our greenfield facility at Raipur is also marking healthy progress, and we remain on track to commission this facility by March '21. The plant with a proposed capacity of 7,200 metric tons will provide a strong impetus to our overall volumes. All our facilities are also now operating at stabilized -- stable utilization level. And as operations further normalize, it will help us boost overall volumes going forward. I'm also happy to share that inquiries and wins for our latest launch, Apollo Life water tank, is seeing a strong buildup in the domestic markets. In order to address this increased demand for the product, we have already doubled our capacity for this product at our Sikandarabad plant and 1 unit at Tumkur plant. We remain confident that this product along with our other value-added offerings like fittings, solvent cements, bath fittings and accessories will enhance our reach and strengthen sales going forward. We are constantly working towards augmenting our presence across existing and new potential geographies. The operationalization of our Raipur plant in FY 2022 will enable us to grow our footprint in the untapped market of Eastern and Central India. Further, the launch of value-added products, enhanced planning activities and phase-wise capacity expansion across our facilities should further build the momentum going -- for us going forward. On the whole, we are confident for the future growth potential and opportunities across the domestic market over the medium and long term. On that note, I would now like to invite Mr. Ajay Jain to run you through the key financial highlights. Thank you, and thank you for joining this call. Thank you.

Yes. Good afternoon, everyone. I will briefly cover financial performance during the quarter and 9 months ended 31st December 2020. The company delivered healthy operational and financial performance during the quarter, led by an uptick in demand and consumption in the domestic markets. Total income from operations for the quarter stood at INR 128.1 crores, up by 28% as compared to INR 100 crores in Q3 FY '20. Sales volume for the quarter grew by 7% and it stood at 11,445 metric ton per annum as compared to 10,712 MTPA in Q3 FY '20. Total income from operations for 9 months FY '21 stood at INR 343.9 crores as against INR 313.8 crores, higher by 10% Y-o-Y. On the profitability front, EBITDA for the quarter grew by 139% at INR 25.5 crores as against INR 10.7 crores in Q3 FY '20. I would like to highlight that here that there were notable price increases in raw material price of material during the period, due to which there has been a onetime inventory gain. This has resulted in sharp increase in EBITDA margins, which stood at 20% in Q3 FY '21 as against 11% in Q3 FY '20. However, we anticipate EBITDA margins to normalize going forward. EBITDA for 9 months FY '21 stood at INR 47.2 crores, higher by 32% as against INR 35.8 crores in 9 months FY '20. Margins for 9 months FY '21 stood at 14% as against 11%, up by 232 bps. Though depreciation cost stood at INR 11.8 crores in 9 months FY '21, in Q3 FY '21, it stood at INR 4.4 crore as compared to INR 3.4 crore in the same period last year, higher by 32%. PAT for the quarter stood at INR 16.3 crores, up by 145% when compared to INR 6.7 crores in Q3 FY '20. PAT margins for the quarter also stood at 13% as compared to 6% in Q3 FY '20, higher by 609 bps. PAT for 9 months FY '21 grew by 25%, stood at INR 27.8 crores as against INR 22.3 crores in 9 months FY '20. PAT margins during the period stood at 8% as compared to 7% in 9 months FY '20, higher by 101 bps. From this quarter onwards, we have discontinued sharing the segment-wise revenue details because of the sensitivity of the data. I hope so -- and hope we can provide the details in due course. On the balance sheet front, our net cash position stood healthy at INR 29 crores. Our CapEx outlook remains steady, and we expect to fund the same through internal accruals. On the working capital front, additional raw material requirements at newly commissioned capacities may moderately impact inventory levels in the near term. However, our endeavor remains on maintaining our overall working capital cycle at stable levels. 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 Bhargav from Kotak Mutual Fund.

Congrats for a good set of performance. Sir, my first question is that we've seen a significant increase in PVC prices. So just wanted to have your thoughts in terms of what is the impact of this on the volumes per se?

Yes, the prices are almost at the peak right now, and the industry is witnessing the same. But as you know that there is no much alternates to this product. So the volume may be deferred for a short time, but it cannot be avoided. So we don't foresee any much, you can say, volume impact on this product going forward despite the prices are high, but the market will stabilize and the volumes will be, you can say, again, back to normal once the, you can say, prices are, you can say, they are in the -- stabilize in the mind of consumer.

Okay, understood. Secondly, sir, any views in terms of where can these prices sort of stabilize? You mentioned that they are at all-time high levels. So, essentially, what are your thoughts in terms of where these prices could stabilize in the medium term?

Yes. Yes, right now, because in India, if you see that almost 50% or 60% of the demand for PVC product is catered through the imports. And because of logistic issues of COVID going across the world, so the material ability is real problem. Once these thing stabilizes, then, we can see that the prices will be stabilized, but we don't see too much, you can say, drastic change in the near future for this product. Minor changes may be there, but we don't see right now too much drastic change. So you can say that the prices will be, you can say, stabilize, and going forward, around 6 months or 9 months down the line, it may go back to normal stage.

So in these uncertain times, how are we planning our inventory? Because are we sort of resorting to reducing our inventory levels, given that we expect a correction in the price? Or how are we doing it?

Of course, with the prices to be all-time high, we are very much cautious regarding the inventory level of our plants, and we are trying to work on the minimum level that will benefit us on the both side. First is the working capital cycle will be low and other, the inventory loss will not be there too much. And of course, we are seeing the strategies for purchase because we are mainly dependent upon imports for our purchases. So we are, you can say, planning in such a way that the minimum impact should be there on our, you can say, product lines.

And lastly, in terms of our water tank business, is it possible to share our manufacturing capacity? And have we tied up with any outsourcing partners?

Yes. Right now, we have not tied up with any outsourcing partner. The -- during the third quarter, only 1 machine was available and 3 more machines were under installations, in which 2 machines have been installed in the last month of, you can say, late December, somewhere around last week of December. So from this quarter onwards, we will be seeing, you can say, numbers for next 2 machines and the fourth machine will be coming in Raipur, so that number will be coming from the quarter 1 next year. So -- and right now, we don't have any tie up with any other, you can say, service provider.

The next question is from the line of Madhav Marda from Fidelity Investment.

My first question was that our volume growth for this quarter has been 7%. Broadly, at the industry level, what would it be for PVC pipes?

We are not very much sure because the numbers from other companies are yet to come, but there has been a pressure on the volumes because of the all-time high prices. The dealers and the retail networks, they are trying to reduce their inventory and working on day-to-day basis on need-to-need basis. So because of that thing, a little bit of pressure is there on that, you can say, volumes. But going forward, we don't see too much, you can say, that backlog on this account because as the inventory level will go down, then they have to purchase their needs, daily needs and, you can say, the projected needs of their demand from us. So going forward, there will not be any much impact on the volumes. And as -- concerned about the -- we talk about the rest of industry, it should be at par with our volumes, I think so.

[Technical Difficulty] so the smaller unorganized [Technical Difficulty].

I cannot hear you. Please repeat again.

Mr. Marda, we are unable to hear you.

Yes. Is it better now?

Yes, sir, we can hear you now.

Yes. My question, sir, was that given that PVC price is a bit high and we hear of smaller PVC players struggling either to get raw material or to fund working capital. So because of that, can there be more consolidation in this space in 2021?

There can be, because for the smaller players, it has been a tough year because of the all-time high premium also on this product and the material was not available and premium was too high, so they were not able to sell their products. So there may be some cost consolidations in these numbers. But right now, we don't have any such data with us that how many such players have been stop their, you can say, this production activities and what is the exact impact on them. So we cannot comment right now on them.

Okay. And sir, in our reported results, is it possible to give us a broad sense as to how much of the inventory gain contribute towards the margin expansion versus the product mix improvement that we have achieved?

Yes. Of course, there is an inventory gain in this quarter. But it is very difficult for us to determine because of the regular movement of material and we have been regular selling our products. So it is not very easy for us to calculate. But we are actually very much focused to have a sustainable, you can say, EBITDA margin of 12% to 13% of our product. And we are also working on the value-added products. And that is also supporting us a bit in our EBITDA levels improvement. So it should be a good, you can say, numbers. And some part of this profit margin is from this inventory gain, but it is not very easy for us to calculate the same.

The next question is from the line of Agastya Dave from CAO Capital.

Congratulations on good numbers. Sir, [Foreign Language] if I look at the quarter-on-quarter numbers compared to Q2, our volumes have dipped. So how should I look at it? Because I am not very sure how seasonality plays out. And this year, Q2 was impacted because of corona. So how do I look at that? And you mentioned that there is volume pressure [Foreign Language]. Can you quantify that? How much -- I mean, is there an estimate to that?

Yes. First of all, there has been a volume contraction, if you see quarter-on-quarter. But because of that we have started, after COVID, in quarter 1 in somewhere until late of May, and there was a lot of demand backup was there in quarter 2. Ordinarily, quarter 2 is, you can say, is bad on the demand side. But because of the backlog of the quarter 1, we saw a good, you can say, demand from quarter 2. But because of that good demand, the demand shifted a bit, you can say, from July to -- from June to July and August. So because of that, we saw a good, you can say, good jump in demand in quarter 2. But if you talk about quarter 3, we were mainly focused on building products and you can say, value-added products and because of, you can say, all-time high prices, the impact was there on some of the agri products. But being a building product, we were much more focused on building products and the cPVC and other bath fittings and adhesives. So we were getting good response from there. So that help us in improving our operating margin as well as that the top line was also very much, you can say, has gained because of that thing. And there was some impact on this agri products, which we see that it should be back on track by -- in this quarter because the inventory levels are again going down with the dealers and the retailer network.

Sameer-bhai, I know it's a very tough thing to estimate. But how would you gauge the demand as of now, the strength of the demand? Because I understand if prices are high, you'll see basically people are maybe postponing a bit. But are you satisfied with what you are seeing? Is it encouraging? Or do you think we will see some sort of a slowdown?

No, as Apollo is -- we are in a growing stage, and we are increasing our, you can say, product SKUs, along with that, we are also increasing our geographical markets. So we don't foresee any much challenge on our side. Maybe industry may see something, but being a very small size in numbers, you can say that the industry -- of the total percentage of the industry, we are almost at 1.5% to 2% of the total industry. So we don't see any much challenge to us. So there may be a slowdown across the industry, but that -- not to that level. Because of the high prices, the inventory level with the dealers and retailers are also at very low. So the demand will be -- should be continuing in the coming quarter.

And sir, the PVC price spike, could you quantify how much the prices went up by last quarter compared to Q2?

I don't have the exact figure for quarter -- at what prices quarter 2 ended, but it should be somewhere around 30% to 40% price hike should be there on PVC.

Quarter-on-quarter. And sir, has it stabilized? Or has it -- is it still going up, let's say, last 15 days?

No, right now, it's stabilized, and a bit of correction is there of around, you can say, 2% to 3%. But that is not again impacting because of the availability of the material. It is not available in ample. Because of the COVID situation, the transport and the vessels are not available. So that challenge is still there.

So sir, you mentioned that you will be reducing inventories, better inventory management. So can you like throw some light on how are you managing it? Because if you overcorrect, then probably you will have material shortages? So how are you exactly managing that?

Yes, I understand that thing. Because of that thing, we are trying to have some local sources for our procurement for at least next 5 to 6 months, so that the inventory problem should not be the at our plant. Along with that, again, we are, you can say, optimizing the stock levels. Because of that, I think we can also manage some inventories over there.

Right. One last thing, sir. Last call, you mentioned that your target for existing assets -- with the existing asset base, you were targeting 3x asset turnover and a 12% EBIT. Now obviously, the prices have gone up, so the asset turnover obviously will be impacted. So that I understand. But on the EBIT side, do you think that long-term 12% is sustainable? Or slightly more than that, are you changing that view?

No, we are focusing that thing only because we are trying -- also trying to increase our market share along with that. Because we have -- in this quarter, we have seen a good demand from the cPVC and the Fittings segment, and there's a good growth on both the sectors. So going forward, the margins could be minimum 12% to 13% in the coming, you can say, quarters.

EBIT level?

EBIT -- I'm talking about EBITDA level.

It would be around 10% to 11%.

The next question is from the line of Punit Mittal from Global Core Capital Limited.

Couple of questions. One is, I think you mentioned in Q1 that you're targeting about INR 60 crores to INR 70 crores of revenue from your water tank business in FY '21. Is that -- does the target stay? Or does it change with the demand?

No, right now -- I still remember, but in FY '21, INR 60 crores to INR 70 crores from tank business, I don't think it is right now possible because the capacities is not that much. We have only 1 machine at Sikandarabad, in which we will be achieving somewhere around INR 15 crores to INR 20 crores on annual basis of this tank business. But going forward, in the next year, we can target this amount. Because of the capacities will be available from this quarter onwards, Q4 onwards. So after that, we will be able to achieve that number.

So let's say, from FY '22, annually from each machine, how much do you target? What revenue base do you target from each machine?

Roughly around each machine will be around 1 point -- you can say around INR 1.5 crores -- roughly around INR 15 crores to INR 20 crores per machine will be there. And if you multiply it by 4, it should be around INR 60 crores to INR 70 crores.

Okay. The second question is, would you be able to give some color on your geographical distribution and revenue now? I know you were very strong in North and some West -- western part and you're trying to expand into East and South. So how -- what is the distribution of revenue now? And how do you see that panning out going forward?

Going forward, we -- like we have installed in this capacity at Tumkur plant for PVC and this tanks and fittings, and we are getting good response over there. So going forward, we think that the South will also be a good base for Apollo in the coming days. Along with that, we are also getting good response from other markets, like markets like Western India, like -- and you can say that from Ahmedabad plant, we are feeding the western -- northern of Maharashtra and Southern of Rajasthan, along with some parts of MP. And going forward, from the Raipur plant, we'll be feeding central and the eastern, you can say, India mainly. So right now, much more focus is on the Southern plant because Tumkur is a big plant. And we see that in the next year, we'll be seeing, you can say, a good market presence in those markets. Along with that, in the -- you can say, in the 1 or 2 -- next 1 or 2 years, we will also be seeing some good footprints in this Eastern India.

So currently, how much percentage of revenue is coming from like North versus other regions?

Tumkur is roughly around right now contributing around 10% to 15% and along with that, other -- mainly this plant -- Dadri plant is mainly focusing towards the northern market. And along with that, from Dadri plant, we are also supplying to all the parts like in Maharashtra or in Gujarat or in Tumkur also, the Fittings and the other range of the products because all the products are not being manufactured all across the, you can say, plants. So a bit of stock transfer is also there. So put together, you can say that the South should be around, you can say, 10% to 15% minimum. And going forward, it should be around 20% to 30% in the next year.

Great. Great. And the last question from me is that you mentioned that your -- due to the extensive distribution network, your delivery time is reduced to 48 hours from 10 to 12 days. How does that compare to the competitors in terms of the delivery time?

I'm not exactly aware what -- how many days we are taking to deliver the goods. But 48 hours delivering the goods is good time in the industry. And if we are able to maintain this 48 hours delivery, we'll be getting good response from the market.

Do you think -- I mean, given the current situation where you just mentioned that our dealers are trying to reduce the inventory, this 48 hour delivery time gives you some advantage because you're able to replenish the stock very quickly with the dealers?

Yes, of course, it will.

The next question is from the line of KVRS Babu from Vishar Portfolio Investment Private Limited.

Fittings is almost 20% of our revenue last quarter. And at what level you want to see the Fittings? Is that same as our main product? Or at what level you want to see Fittings in the next 2 to 3 years?

Fittings is still our main product and the level right now, it is around 20% to 25% only, and it will be around 25% to 30% at peak level also. And at this level also, Fittings is or you can say, will be contributing mainly -- will be a main contributor to the top and the bottom line. And going forward, if you increase the sales volume of Fittings, then it will also have the impact of, you can say, on price also. So not -- if we increase the sales of Fittings, it will be added, it will also be adding the sales of pipes. So percentage will be around this thing only going forward.

And what is the margin for Fittings?

It depends upon -- yes, it depends upon -- because we have lots of SKUs on the Fittings and it is, you can say, changing from product to product like agri fittings or uPVC fittings or cPVC fittings like we have been diversifying in all the 3 products. So they have got a little bit of different margins, but it should be somewhere around 20% to 25% of EBITDA margin.

Is there any market share gain from unorganized sector because of COVID or with raw material price increases, they're unable to produce? Is there any [Technical Difficulty]?

Yes. Of course, there is certainly, you can say, market gain from the unorganized sector because of the all-time high prices and the premium was too much and the unorganized players were not able to feed the market because of the sourcing from open market was very high. So definitely, the organized players have gained in this account.

And what is the industry growth you are expecting? I mean, presently, government is giving lot of things to this -- mainly agri people, farmers who are agri people, and our main product is uPVC. So you're expecting any big change in industry growth or it will be same as previous years?

No. Actually, if you see the industry growth, it is right now stable and a bit of impact of COVID is there because of the unorganized sector not able to perform well because of the high prices. And along with that, the government is also supporting us, so for this product by agriculture or the housing plans that is going on in India. So we see that there should be a good growth in this product of uPVC or cPVC because all these products are going in this sector. So there should be a good growth, you can say, of around 7% to 10% in the, you can say, industry.

The next question is from the line of [ Abhinav Sood ] from [ ZM Investment ].

Sir, I wanted to know how are we seeing the PVC price momentum going forward for the next 1 to 2 quarters only, not beyond that, because beyond that, you obviously mentioned that the prices will normalize. For the next 1 to 2 quarters, how do we see the prices?

There should be a pressure of, you can say, on prices of PVC because it is all-time high. But along with that, in the next 1 to 2 quarters, the main PVC season period is also there. So a little bit of confusion is there in the market whether to stock the material or to banish your stock and just run around the plant with very low inventory. So a bit of confusion is there. That call we have to take and industry is also, you can say, cautious regarding that thing. So in the next 1 or 2 quarters, we don't see too much, you can say, drop in the prices and along with that, because of the robust demand in the quarter 1 of FY -- next year, so because of that, we have also to, you can say, keep the inventories with us. So depending upon -- seeing that, the prices should not be impacted too much in the, you can say, 1 or 2 quarters. But going forward, after June or July, there should be an impact. But international market behavior is also, you can say, are important thing to watch in this aspect because of material -- if the material is not available and the vessels are not available. That, again, will be a challenge for us to procure the material and the prices will remain on the same level.

Okay. That's very clear explanation. And sir, 1 more question. And EBITDA levels you mentioned, what are targeted EBITDA normal levels which we're are targeting? Is it 12% to 13%?

Yes. We are targeting this EBITDA level only right now.

And we are mainly dependent upon imports whereas our some established competitors are sourcing it from Reliance and other local domestic companies. So why aren't we not sourcing from Reliance and other domestic sources?

No. We are also sourcing from Reliance because after -- earlier, we were mainly depending on imports. But from last quarter, we have shifted our -- some of the purchases from imports to domestic market. And almost, you can say, around 10% to 20% -- roughly around 20% of our right now purchase is from the domestic market, which we are keen to increase, like I told in my earlier question also that we are increasing this percentage to roughly around 30% to 40% from the domestic market.

Okay. And sir, import prices, are they higher or lower than the domestic prices?

Right now, they are, you can say, roughly around equal to the domestic prices. There's no much gap right now from the import prices and the domestic prices.

Okay, sir. And sir, last question from my side. What is the capacity utilization levels right now?

Right now, capacity utilization level is roughly around 50% to 55% across -- all across units.

50% to 55%?

Yes.

And what are the peak levels we can achieve?

It is roughly around 70%, you can say, 65% to 70% is the peak level that we can achieve of the total [Technical Difficulty].

So on a 1 lakh MTPA capacity, we can achieve around INR 700 crores to INR 800 crores of revenue?

Of course.

The next question is from the line of [ Ankit Shah ] from Stallion Asset.

Yes, I just wanted to understand what was the differentiated margins for value-added products and PVC pipes? And what would be your long-term revenue share from these 2 products going ahead?

Right now, we are much more focused on value-added products like Fittings, and we are getting a margin of something around 20% to 25% from PVC products. And on the pipes, if you talk about, this is roughly around 5% to 10% of the, you can say, EBITDA margin. And going forward, we will like to maintain the same level, you can say, because we are much more focused on the -- you can say market increasing rather than increasing the, you can say, bottom line of -- because of these PVC pipes, it may hit us if we increase the bottom line in PVC.

So what was your long-term revenue share from these 2 product lines? Value-add and PVC, what would be the long-term guidance for that?

Roughly around 50% to 60% will be coming from pipes. And you can say, around 5% to 10% will be coming from, you can say, other products, and these Fittings will be somewhere around 25% to 30%.

Okay. And I just wanted to understand how many distributors of Apollo Pipes and APL Apollo would be same? Like what percentage of distributors would be also with there -- be there with APL Apollo as well as with Apollo Pipes? And what percent of distributors are yet to be covered by Apollo Pipes who're already catering to APL Apollo?

Earlier, I also told in my earlier calls also that right now, we are not much focused upon that to target the Apollo Pipes distributors, rather we are targeting the dealers and the retail networks so that the retail and dealer networks should be the same or we may have the, you can say, benefit from there. Some dealers or distributors of Apollo Tubes, they are big and they are quite substantial, but they are not focused on plastics. So if it go through them, then it will be not good for our business. So we are much focused towards the market side, where we do have a good brand presence and you can say -- and you can say the branding of Apollo Tubes should complement us in this product. But if we go through that same distribution network, then that could hamper us. So we are not much -- we can say very much focused towards the same distributorship. But the markets we are targeting, it'll be same, and we can enjoy the benefit of APL Apollo's branding.

But would you have distributors who're already part of APL Apollo currently?

Of course, there are some distributors who are shared -- who are common in both the companies, but we don't have such numbers with us.

Okay. And just a bookkeeping question. What were your inventory gains this quarter, if you can quantify the number?

It is not easy to quantify, I told in my earlier that it is not easy to quantify, but it is good. Because we are selling on a regular basis and the material movement is also there on a regular basis. So it is good. And we are trying to maintain the EBITDA level of 12% to 13%. We are working out as per that only. So you can say that because of that thing, you can -- it can go.

Okay. And when do you expect the capacity to be completely utilized? We are -- I think so it's going to be around 125,000 MTPA by March '21?

'21, yes.

And currently, we are at a run rate of 45,000 to 46,000 MTPA. So -- and how many years do we expect to be completely utilized?

We don't know. Actually, it's a seasonal product and in the season time, we are always running short of the capacities. So running 100% capacity of 125,000, right now, it's not possible because if you see that, going forward, we will definitely increase the capacity of all the products again if we firstly reach this 125,000 and we reach a turnover of INR 1,000 crores. Then going forward, we will be increasing the capacity of all the products again. So going forward, the capacity utilization will be good, and we are targeting good, you can say, operational efficiency at our works also. So it should be, you can say, roughly around 60% to 70% at the peak level, I think so.

The next question is from the line of Achal Lohade from JM Financial.

Congratulations for the great numbers. My first question is in terms of agri versus non agri, could you give some color on that? Is there any agri mix for us? And if yes, what is that mix?

No, I could not understand. What is -- what do you...

The agriculture, agri pipes, fittings for us is -- yes, what is their revenue contribution?

Okay. The breakup. The revenue -- the breakup is almost the same. We are working almost on the same events, right. A little bit of decline in the current quarter is there on the agriculture pipes because of that, you can say, high prices and some impact because of this extra inventory with the dealers and distributors. But you can say the percent is almost same with the last quarter.

Could you please help me with the numbers, sir? Sorry, I don't have the number in front of me. Would you have that number? Agri, what is the mix, revenue mix or volume mix?

It will be difficult for us to disclose this thing.

Okay. But you said the agri -- the channel inventory was higher in agri, and that's why less of primary sales in the quarter, is that what you said, sir?

Yes, it is also impacting. Along with that, high prices -- because of high prices, a bit of demand is being deferred. So that is also impacting. Both the things are, you can say, hampering the demand.

Understood. And in terms of the cPVC, possible for you to share how much -- how large is cPVC products in terms of the mix?

Yes. cPVC is, again, growing. It's on the growing side. And although you can say that if you see that the growth of our company in quarter-on-quarter basis is roughly around 30% -- sorry, year-on-year basis is roughly around 28%. So you can say that the major contribution is there from Fittings and cPVC.

Understood. Understood. And you mentioned that 7% is the volume growth for us, and that would be -- industry should be similar, volume growth at the aggregate level? So how do we tally this unorganized to organized shift if the industry growth is 7% only for the quarter?

I don't know actually, because the -- we cannot right now because it's just -- it is just the quarter has ended, and we don't have the figures from other competitors and other, you can say, players. So we don't have what exactly the industry has performed. Going forward, we will have the figures from other players, then only we will be able to calculate that how exactly the industry has performed. But right now, as per our assumptions, the industry should be in this line only.

Understood. And just last question, if I may. In terms of the competitive intensity from the large players, has that gone up or gone down or remains similar?

It is right now for Apollo, it is almost similar, as you can say, as the last quarter it was, the competition was almost similar.

Right. And given the agri season is coming up, have you started seeing more inquiries or things are as they were in the last quarter in terms of agri given the high PVC prices?

No, this should be quite -- because last week, you can say, first or second week was festivals in the western and southern India because of Pongal and other festivals there. And north because -- was a bit impacted because of extreme cold. So going forward, we are very much optimistic regarding the demand and, you can say, sales for agri pipes.

Achal, On the agri-building material mix, please note that we have been giving a revenue-wise breakup till first half of FY '21. So you can look at our last quarter presentation, you will have some idea for the split between agri and building material.

The next question is from the line of Karan Bhatelia from Asian Markets Securities.

Contribution from metros was very dull when we talk of first half of FY '21. So for the quarter, have we seen like good recovery from the metros side? Or are we still back on a Y-o-Y basis?

No. If we see our recovery from metro side, there has been, you can say, good demand from the metros along with the rural areas also. So put together, I think the demand is recovering if you see that. And along with that, we are also focusing on our -- increase in our SKUs of our product portfolio. That is also helping us a lot in increasing our sales.

All right. And sir, we keep hearing that the plastic piping segment is seeing a lot of market consolidation. So have you seen a good dealer addition in the last 6 to 9 months?

So we can -- yes, of course, because of that thing, we are definitely seeing, you can say, addition of -- good number of addition of dealer and, you can say, distributor networks. But right now, we are not able to comment upon this because we don't know how, you can say, regular they will be or how long they will be running. Once they are regularized, then we will definitely add them in our numbers.

Got it. And sir, last question, if I could proceed. Sir, if you can give us plant-wise utilization levels, what at Dadri, at Ahmedabad and what levels at Tumkur?

It is -- at Tumkur, we are seeing good utilizations, but it is all -- amongst all the plants, it is roughly running between 50% to 60% from all the plants.

The next question is from the line of Dhiral Shah from PhillipCapital.

Sir, what kind of Fittings growth we have seen in this quarter?

It is roughly around, you can say, 30% to 40%.

Okay. Okay. And sir, when you say that cPVC, HDPE and value-added segment have grown, so is it a pent-up demand still in the system? Or are we also seeing a fresh buying?

No, it was not pent-up demand. It was regular buyings from all the, you can say, dealers and we are working across in increasing the distributor network along with the geographies also. So altogether, it has helped us in increasing our sales for these products.

Okay. And sir, how much dealer distribution network we have added in this quarter or maybe 9-month FY '21?

Like I told in the last -- to Karan also that we have been increase -- we have been getting good inquiries and increased our, you can say, sales to new dealer and distributors, but we don't know how long they will sustain. So going forward, we are -- right now, we are working on yearly basis at how much -- how many exactly or sustained numbers we have added so that the figures don't go up and down every quarter. So we'll been disclosing this number every -- working on this number every year so that there should be some, you can say, base of those numbers for the investors and others, you can say.

Okay. And sir, lastly, when you said that maybe by March '21, we are looking for 125,000 ton kind of a capacity. So where we are exactly adding this capacity, which facility, sir, on which product?

Yes, we are adding capacities across, you can say, across all the locations. We are like -- and mainly, we are focusing on water storage tanks and the Fittings, along with that, the pipes is also being added. So all the products and all the, you can say, segments we are adding the capacities.

But this will be probably for Dadri or we are looking at even Bangalore and Gujarat also, sir?

So, right now, we are not, you can say, putting too much, you can say, focus on Gujarat. Other than Gujarat, we are investing on Dadri and Bangalore and Sikandarabad, along with new plant coming up in Raipur.

The next question is from the line of Aasim Bharde from DAM Capital.

Sir, just wanted your view on agri pipe growth in an environment of high PVC prices? So you are optimistic, you mentioned, but how does the farmer react to high PVC prices? Does it lead to continued deferment, which in this case, could mean the entire season that could be lost and demand getting pushed to the next season, post October?

The demand -- if you talk about demand from the farmer side, they are a little bit, you can say, cautious and the finance is also a problem for them. But if you see that the options are not too much available with them for this product. If they have to use this PVC pipes, then they have to go for this product only. They don't -- they cannot go for steel or you can say any other polymer or any other cement pipes for water transportation or bore-wells. So there is only 1, you can say, material available for them for this bore-well or you can say for water transportation level. So they can only defer the plant, and that is also, you can say, they can do to some level. They cannot defer it forever. So I don't see that there will be too much, you can say, delayed in the demand from the farmer side. They have to go for this product. And you can say that because of this COVID and other things that the prices have gone up really high. But right now, it has been a little bit stabilized. The premium has been stabilized by, you can say, almost 10% in the last, you can say, 1 month. So a little bit of, you can say, relaxation is also there in their mind, and I don't think that there should be any good, you can say -- there should be any hamper on the demand, and there should be good demand in the coming quarters from them.

So you don't anticipate too much of a demand disruption, if I can call it that, for this particular season? There should be some decent agri demand from...

Yes, because the inventory levels are also very down. So there's no much, you can say, scope left at their end to work on the demand side because they have to take the material if the demand is there from the dealers or retailers. And the farmers, if they have to do farming, they have to go for pipes only.

The next question is from the line of [ Amit Soni ] from PwC.

Sir, I wanted to ask about the different cost optimization measures which you have put in place. In the presentation, you said that improved margin is because of: One, growth of value-added products; and second, because of raw material and because of different cost optimization measures.

Yes, on the cost optimization level, we are continuously working on the capacity utilization of the machines and increasing the productivity of the machines along with low scrap rate. So because of that thing, we have been, you can say, getting good, you can say, results. And going forward, we will be seeing some more, you can say, good results on this front from our plants.

Okay. [Audio Gap] products which are planned, sir?

Pardon?

Any new products which are planned?

Right now, we are only increasing the SKUs of our already running segments. We are not adding up new segment, but many, you can say new SKUs are being added on a continuous basis for all the segments.

The next question is from the line of Ajay Sharma from Maybank.

I just want to check, your return on equity numbers are still on the lower side. So what is the company's strategy or plan to really try and boost the return numbers over the next few years?

So Ajay, if you see that the first parameter what we look at is return on capital employed, which is in -- if we utilize all our capacity over the next 2 years, we should be touching 25%, 30%. As far as the ROE is concerned, it is slightly low because of our inflated network because the company had -- promoters had put in funds, they had infused new equity 1.5 years ago. So as we touch 25%, 30% ROCE, we should be touching ROE of 20%, which we believe is good. And given that all the future CapEx will be funded from internal cash flows, there won't be any requirement of new equity infusion. You will see that ROE also improving to 20%, 25% levels in the longer run. But we are quite satisfied with the kind of ROCE which the business is generating, which is upward of 20%, 25%.

And what will be your annual CapEx basically over next few years?

So this year, we are targeting around INR 50 crores, INR 60 crores, out of which 70% has already been spent for FY '21. FY '22, '23, we are expecting like we should be spending 20%, 25% of our EBITDA towards the new capacity addition, towards new value-added products, high-margin products. So that's what we have capped our CapEx spends at, 20%, 25% of annual EBITDA.

The next question is a follow-up from the line of Madhav Marda from Fidelity Investment.

My question has been answered.

The next question is a follow-up from the line of [ Abhinav Sood ] from [ ZM Investment ].

Yes. Sir, just need a clarity on a point that by March '21, will we be achieving 1 lakh metric ton per annum or 125,000 metric ton per annum?

With the Raipur plant, it will be 1.25 lakh ton.

Okay. With Raipur plant, it will be 1.25 lakh ton.

[Operator Instructions] The next question is from the line of Ajay Sharma from Maybank.

Yes. I just want to check on your guidance. I think somewhere in the presentation, you mentioned that you will -- you're targeting 25% CAGR and volumes over the next 3 years. So -- and what gives you that confidence, considering your volumes has been below that, both in '20 -- FY '20 as well as FY '21?

So Ajay, if you see that our current infrastructure, which will be ready by March '21, 125,000 tons, we believe that this has potential to generate around INR 1,000 crore revenue, okay, which shall come over the next 24 months. And it will have 12%, 13% EBITDA margin. That's our business model we are working towards. And it will be mix of agricultural and building material segments, which will be boosted by our water tank business and solvent business, which both are growing equally well. So all-in-all, we are confident that we could touch INR 1,000 crore top line over the next 2 years.

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

Congratulations on a great set of numbers. Most of my questions have been answered. Just wanted to check on our ESOP policy. I see that you guys have given ESOPs for the first time to your employees this time. And the ESOP Trust had purchased shares from the secondary market, and that is the model you are following of giving away ESOPs. I just wanted your take on the ESOP policy going forward? And how do you see the employee count? And what will be your basically HR policy of the company going forward?

Yes, [ Yash ], like we have been growing and trying to increase the, you can say, capacity, sales and all the, you can say, across all the, you can say, business in our group, so going forward, we need to have a good set of people with our company who can trust on the company and work towards the growth of the company. Foreseeing that, we have introduced this policy of ESOP. And by adding this, we will be able to, you can say, join good people with our company. And going forward, it will help us in the growth level because it will also help the personal growth of those employees who are working for the company, and they will also see some benefits on their path because of the ESOP policy. And going forward, there will be some more ESOP policies coming on in the coming years because if -- because we are getting a good response from all the employees and they are also very much keen towards the growth of the company. So it should be, you can say, a good initiative from the company's side to have this policy in our company, and it should give us good result in the coming days.

As there are no further questions, I now hand the conference over to Mr. Ankit Gor from Systematix Institutional Equities for closing comments.

Thank you, Sameer-ji and team at Apollo Pipes Limited. Any closing remarks, Sameer-ji, before we close the call? Thank you.

Yes. Yes. Yes, I thank you to all the investors and market research team, and I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or you would like to know more about the company, please feel free to contact our team. Thank you once again for taking time to join us on this call.

Thank you. Ladies and gentlemen, on behalf of Systematix Institutional Equities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.