Apollo Pipes Limited (531761) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Apollo Pipes Limited Q4 FY '24 Conference Call hosted by Equirus Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aman Agarwal from Equirus Securities. Thank you, and over to you.

Thank you, Myran. Good morning, everyone. On behalf of Equirus Securities, I welcome you all to the Apollo Pipes Q4 FY '24 and Full Year FY '24 Earnings Conference Call. So management side, we have with us Mr. Sameer Gupta, Chairman and Managing Director; Mr. Arun Agarwal, Joint Managing Director; Mr. Ajay Kumar Jain, the Chief Financial Officer; and Mr. Anubhav Gupta, Group Chief Strategy Officer. I'll straightaway hand over the call to management of Apollo Pipes for their opening comments. Over to you Sameer, sir.

Thank you. Good morning, everyone, and thank you for joining us on our full year FY '24 earnings call to discuss the operating and financial performance. It was an exciting year for Apollo Pipes in a way we got our direction to double our capacity by FY '26, plus we added 2 super value-added products in our portfolio, which is PVC-O pipe and uPVC window profile. On the organic front, we continued this 20% plus sales volume carried back for FY '24 as the inventory [indiscernible] to expand our capacity to get hold of one of the bidding pipeline in West India, Kisan Mouldings at a price which we believe is very reasonable. An investment of INR 120 crores straight away gave us footprint in West India with a capacity of 60,000 tons and potential revenue of INR 800 crores in 3 years. We kickstarted our greenfield Varanasi expansion with a total CapEx outlay of INR 120 crores, which will add 30,000 tons to our overall capacity. With this plant, we will have a pan-India presence. As we are aggressive in our sales strategy, we are keeping EBITDA margin targets around 10%, so as to keep gaining market share, with almost 2,86,000 tons capacity becoming live in the next 18 months, we have a stage set for 25% sales volume CAGR for next 3 to 4 years. We spent INR 135 crores in CapEx in FY '24 and invested INR 120 crores in Kisan acquisition. We will spend further INR 200 crores in FY '25 and INR 60 crores in FY '26. I'm glad to share that our balance sheet remains debt-free despite such commitments. Our finance and sales teams have want us to improve working capital cycle to 33 days. So our operating cash flow to EBITDA improved to 65% from 40% levels in the past. We expect this to sustain going forward. As far as Q4 FY '24 is concerned, the performance was slightly below our own expectations, mainly due to decline in project sales. Our Home Construction segment increased 15% on Y-o-Y basis. We look forward to achieve revenue growth of 25% to 30% CAGR in the next 4 years. We are also confident of hitting 25% to 30% of ROC despite these proposed investments supported by working capital efficiencies. This is from our side. Now we are glad to take questions. Thank you.

[Operator Instructions] We have the first question from the line of Pujan Shah from Molecule Ventures.

Sir, my first question would be on PVC-O pipe. As you have said that we have launched this new product I just wanted to know like very few companies are making this product and being expertised in this product. So why we have selected this product and what are the -- what we envision for this product? And how potential the market size would be?

So this product goes into water supplies pipelines. And as of now, only 7 manufacturers in the country are manufacturing and there's a good demand for this sector and this is a replacement of ductile iron pipes.

Replacement of ductile iron pipes?

Correct.

Okay. So just wanted to know more about it. So what would be the difference between the price of the ductile iron and this PVC-O pipes?

Come again?

I just wanted to understand the difference between the pricing of the PVC-O prices and the ductile iron prices?

So look, as far as exact pricing are concerned, this is a price sensitive information, and this is related to the business. There is a substantial price difference that much we can say.

Okay. Okay. So potentially, just wanted to know if we are focusing on this product, how potential we are trying to capture in terms of revenue? And what would be the EBITDA potential for this product?

So EBITDA portion should be somewhat around 25%. And this is not a very high-volume product. So it's a low-volume product. So top line could be with all the lines in -- while running the top line would be somewhere around INR 120 crores, INR 125 crores.

And this would be achievable in FY '25 or '26?

FY '26. Full -- all the line turning will be FY '26. We have 1 line running as of.

My next question would be on the Kisan Mouldings as we have said that we are targeting a revenue of INR 900 crores. So -- and -- so just wanted to know how we are targeting and what are the plans we are envisioning for this target? And how we will potentially grow towards it?

So Pujan, if you look at Kisan Mouldings, the current capacity of that company is around 60,000 tons, okay? And at current PVC prices, it can generate that kind of revenue, INR 800 crores, INR 900 crores, the number which we gave. Okay? It is just that for the last 4, 5 years, the company was not running to its full utilization because of the working capital constraints and all the long-term loans which -- when bad NPAs, et cetera, with the banks, so company was struggling on that account. When we acquired the company, we cleared all the loans, right? Now there is a clean slate for the company to utilize its capacity of 60,000 tons. In terms of the market positioning, the brand positioning, the SKU range, the quality of plant and machinery, we found everything convincing that if given the proper platform, this brand can generate that kind of revenue. At peak, it did achieve INR 500 crore, INR 600 crore kind of revenue, right, and that was like 3, 4 years back. And of course, the strength of what that brand carries in the Western Indian markets with support from a group like Apollo, we are -- we were highly convinced that this is going to get achieved over the next 2 to 3 years. And just to add on your question of like first question on that why we go into this oPVC space, I mean Apollo being the sixth-largest PVC company, we are following the trends of what -- the new trends which the industry is following, right, which the industry is coming up with. So we found this opportunity in oPVC segment, which is replacement of ductile iron pipes. This was a theme that PVC industry emerge in India, with the conversion of iron pipes, steel pipes, right? So our balance sheet size gave us the opportunity to invest that much of capital into a new technology, right? We took that, I would say, calculative risk, right? And based on the -- based on the feedback, what we are getting from the potential clients. So we are very excited with this new product line. And yes, as a group, it's our philosophy close to start slow, right? But once we get convinced, once we take the success, then we will go super aggressive in putting up our new lines. So right now, what we can say is that the investment which we put in this line in this product is with a calculative risk so that the ramp-up, even if it takes time, it doesn't drag on our balance sheet or cash flows. But the good news is that the feedback -- initial feedback has been pretty solid from the potential clients, and we are already looking to ramp up this business with addition of more lines over the next 2 to 3 years.

Got it, sir. Just wanted to know -- a quick question on how -- what size of investment we have done in PVC-O pipe?

So if you see like we have added 2 new products to our portfolio. One is oPVC and second is a window profile, which is into home improvement segment put together in these 2 products, we are going to invest between INR 150 crores to INR 200 crores in next 1.5 years.

Okay. And capacity -- if you can give any idea on capacity?

Capacity also that is in our presentation, which we uploaded on the stock exchanges. Altogether, we are adding 11,500 tons for these 2 new products.

We have the next question from the line of Jenish Karia from Antique Stockbroking.

So firstly, the question is on Kisan Mouldings. So the current 60,000 tons capacity, what would be the current utilization level? Where do we see it in the next 2 to 3 years? And with the INR 30 crore infusion that we are doing for capacity enhancements and improvements, what was the potential capacity 2 to 3 years down the line for Kisan?

So if you look at the current run rate, it is around 25,000 tons, okay, March '24, which they closed. Our target for FY '25 this year is around 35,000 to 40,000 tons and then take it up to around 55,000, 60,000 tons by FY '26, right? And then there will be some minor capacity additions, right, processes improvement, lines improvement which may require INR 30 crores, INR 40 crores of investment, but that will come from the internal cash flows, which the company with the business will start generating now onwards.

Okay. So do we see a 10,000, 15,000 tons capacity addition with that CapEx in Kisan?

Yes. So target is to take capacity, which is right now 60,000 tons to 80,000 tons by March '27.

Okay, great. And secondly is on the tax for Kisan. So what is the tax status currently? Will it be a tax paying NTT in the next 2 years with the profits are going in? What is the EBITDA target for Kisan entity? I understand you have given a 10% guidance till FY '27, but for the next 2 years, any clarity?

So regarding taxes also at least for the next 3 years, we don't see any cash outflow as of now as per our calculations. There are, say, broad forward losses and all. Number two, regarding the EBITDA target obviously, we expect by late of, say, Q4, Q3 of '26, we should be generating 10% plus EBITDA in the company.

Great. Sir, next is on the working capital days for Kisan -- In FY '24 the inventory base was sharply down, but normally, Kisan as an entity used to keep 100, 110 days of inventory and higher working capital. So do we tend to streamline it in line with Apollo in FY '25 itself or it will happen over a period of time?

It will happen over a period of time. Yes, you are right that they used to carry a higher inventory. But with the higher sales, obviously, the number of the inventory or the working capital cycle will come down. It will be a gradual process, not an event like, yes. We are already working on that.

[indiscernible] the guidance you would like to get?

So going forward, by FY '26 and I think we should be the working -- NWC should be less than 60 days.

Great. Sir, next is on the Apollo entity level. What is the current mix of agri, non-agri product?

So the housing plumbing segment accounts for around 55% and 45% is agri.

Okay. And sir, just in the opening remarks, we had mentioned that the FY '24 volume performance was below our expectation because of lower project sales. So if that the case -- that the commentary of other pipe players was not in line if it is -- is not in the similar line. So what are we doing separately or differently or which region was impacted because of low product predictors? Any color on that front?

So it was only Q4 of FY '24, which was soft, okay, not full FY '24. In Q4 FY '24, the project sales not in the building materials segment, but in the agri and water transportation segment, where the sales were down, not in the building material project sales.

Sir, just last one, bookkeeping question. What is the plant-wise capacity if you can just provide in FY '24, that would be helpful.

So see, FY '24, the total capacity, including Kisan, for the company was around 216,000 tons.

Yes. If you can break it up to Dadri plant, the Raipur plant and Bangalore if possible?

Can the management hear us? Ladies and gentlemen, we have the management back again. So you may go ahead.

Yes. So I just wanted, if you could just break down the capacity within the Dadri plant, Bangalore plant and Raipur plant.

So this, of course, because of data sensitivity, we are not giving you exact numbers. But what I can tell you is that the total capacity was 216,000 tons, right, as of March '24, Kisan was 60,000 tons out of this, right? Now out of 216,000 tons, 45% is in north, okay, around 100,000 tons is in North. And balance is in south, which is, say, 40,000 tons and rest in Ahmedabad and Raipur.

We have the next question from the line of Ashish from Invesco.

A few questions. I mean. So looking at the number delivery from maybe the leaders that we saw and our numbers in terms of sales growth. Clearly in the past 18 months, we have had challenges on sales growth despite having capacities. There has been kind of a struggle between volumes and margins. So could you explain, I mean, what challenges are we facing fierce competition, difficulties in getting things through in terms of delivery of volume growth. So if some qualitative aspects can be shared, I mean, we'll have a better picture of how things are shaping further.

See barring second half of FY '24, okay, the performance has been pretty on the expected lines, okay? If we look at the business plan, what we built, okay, 2 years back. So from 45,000 tons, we came to 65,000 tons and from there, around 80,000 tons for the full year, okay? And this is what we have been guiding for around 25% volume growth, right? And FY '24 we could do 22%, right? So yes, there is a slight mix because of the second half, which was weaker for us. And the reason for that was like we said that the project sales in the agri side, that's where the traction was pretty solid in the last 2 years. But then a lot of competition comes in, right? And then the people go aggressively bid at low prices and they also stuck their working capital. So as a company, we are -- we always have this clarity in our minds that we don't want to lose. We don't want to deploy too much capital for the government-based projects, right? And anyways, they are low margins. So we just took a back seat there, okay? And that's why there's 3%, 4% slip in the overall growth for the full year. As far as the trade sales is concerned or the home improvement segment is concerned, the numbers in terms of distributor addition, SKU addition and ramp up, we are pretty much on track. And the margins, yes, we have been pretty vocal about it that as management, we took -- there's -- I mean, we adopted the strategy to go highly aggressive on sales, right, and slightly compromise on the margins, which we were in 12%, 13% at EBITDA level range. Now we are at 10% EBITDA level range because as you can see, we have invested heavily into building capacities in the last 2 years and the amount of CapEx, what we are going to incur over the next 2 years, right, almost INR 500 crores CapEx plan, which we initiated in the beginning of FY '24. So idea is to build capacities, which come with a lot of upfront fixed costs, right? So that's why the margins will appear low optically. And then when you gain market share, you compete against strong peers, okay, so you need to give -- offer more sweeteners to your clients, which we are doing. All in all, what we believe is that we are in the super expansion phase, right, for our company. Our gross profit used to be like INR 250 crores, INR 300 crores 2, 3 years back, it will be almost INR 800 crores in the next 2 years, okay? So first is to build such capacity, right? And then spend on brand, which could consume this much of capacity in terms of market pull, right? So that's what we are doing. We appointed Amitabh Bachchan as our brand ambassador last year as well. And yes, at 10% EBITDA margin, idea is to hit 25%, 30% ROCE. So that's what our ultimate objective is that for next 2, 3 years, we continue to grow at 25%, 30% CAGR volume, revenue, EBITDA, and PAT and hit 25%, 30% ROC with all the investments, which right now are going into the business.

So I mean, just as a business, I understand the point that given the kind of white spaces, you may say, or the geographical patches that you needed to cover given you are not focused. As a company, it makes all sense to look at making it a national player. But in the overall kind of chase for doing all that, if I look at the profits have remained stagnant for the past 3 years, and that's where as an investor things look a bit difficult because stock price doesn't move. So all past is okay, but as you said that the endeavor is to grow at 25-odd-percent on all levels, still back. But given the depreciation of fixed costs that will come upfront. Even now, given the expansion phases still on, how do you see the overall profit delivery going ahead because now we are at that 10% margin base that we talked about we might be at a high level of the 13%, 14% 2 years back. Now that correction has happened. Do you really think that I wouldn't have done the numbers in that detail right now, but according to your expectations is FY '25, '26, '27 going to be a bit more linear compared to the only top line delivery and nonprofit growth that we've seen for the past 2, 3 years?

So see -- I mean, I'll put it in this way. If you look at my existing business, right, -- it generated INR 100 crore EBITDA, okay, for FY '24. Now there are 3 new engines what we have plugged in. One is Kisan, which is going to generate INR 800 crores, INR 900 crore revenue with INR 100 crore EBITDA in the next 3 years, right? So this is engine one where we have around 55% controlling stake. Then the second engine is these 2 new super value-added products, which is oPVC pipe and window profile, right? This investment of around INR 150 crores to INR 200 crores in the next 2 years. These 2 businesses -- these 2 new products will generate around INR 100 crores EBITDA put together, okay? So INR 100 crores plus INR 100 crores, INR 200 crores. And then my existing business, INR 100 crores will grow at like, say, 10%, 15% year-on-year, plus the Varanasi plant, which will add to it, right, around INR 40 crores, INR 50 crores EBITDA will come from there. So if you see, I have -- I mean, as a management, we have formulated the strategy to take this EBITDA from INR 100 crores to INR 400 crores at a group level. Out of which Kisan I may own INR 55 crores of INR 100 crores, right? So from INR 100 crores to INR 350 crores kind of EBITDA number in the next 3, 4 years is what we have taken the direction, right? And we have already started putting investments there, right? Around INR 150 crores we put last year, INR 200 crores will come this year, right, and INR 100 crores next year. So yes, I mean, there will be some mismatch, right, because of fixed costs, which come upfront, okay, high depreciation, et cetera. But one thing I would like to highlight is that we have ensured that my profitability doesn't get hit because of high interest cost. So we're not borrowing to fund this CapEx, right? This is all from equity infusion or the operating cash flow, right? And with the working capital rationalization, what we have been able to achieve in FY '24, sustaining that, I mean, even like -- despite this CapEx, we may have surplus cash on the books, right? So the point is, yes, I mean taking EBITDA from INR 100 crores to INR 400 crores, in 3 to 4 years' time line, it will have its fixed cost upfront, right, the high depreciation cost. But yes, I mean, the target seems very, very clear and achievable. And I would say that last 2 years have been like pretty bad for the industry like we did PAT of INR 49 crores in FY '22, right, '23 was washed out because of inventory write-downs for the industry, right? And FY '24. again, I mean -- because at that year, we were doing margins of 13%, 14%, but now we are at a margin of 10%. So I guess from FY '24, we have seen the worst in terms of like every quarter, you will see like a new line getting added, new products getting added, Kisan contributing to my numbers. So revenue by 100% will increase quarter-on-quarter now onwards, right? And in no quarter, I can go below 10% EBITDA margin, right? So I would say that FY '24 has seen the base in terms of the margins and the profitability, okay? And now next 2, 3 years, as we grow 25%, 30% revenue CAGR, it will definitely translate into a superior earnings growth. But yes, I mean, it may not match for next few quarters, right? But the vision, the target is very, very clear.

Okay. If I may continue this one, the only point I'm trying to make is that theoretically, the entire plan looks to be pretty good. Problem is that most of the players in your industry are pretty aggressive. And as you said that margin compromise do take place because you have your volume growth targets in mind. So I mean, should we take it as a certain that this 10% EBITDA margin wouldn't be a downside in the near term plus the volatility in the raw material cost in this -- the product segment that you are. I mean, keeping that in mind, is that 10% would be a [indiscernible] margin that one should look at?

Definitely, yes. And let me tell you one thing that once we do INR 3,000 crores top line, margin by default will come at 15%. That's what the -- that's how the businesses generate margin. Right now, at INR 1,000 crore, I'm at 10%. Even if I do the same pricing, but because of my strength in sourcing raw materials, because of my operating leverage because of my utilization levels for my mills, right, INR 3,000 crores on same infrastructure will give me superior margins. So what we know is that you generate revenue and margins will come on their own.

Okay. And then Kisan, basically, 55% stake that we have. So what is the plan? Because I would suggest that over a period of time, you would like to take full control probably. So if you could elaborate on that, how the mapping of this overall plan is, it will be helpful to us.

So right now, the focus is to bring that business back on track, right and generate INR 800 crores, INR 900 crores kind of top line with 11%, 12% EBITDA margins, right? So idea is to do that first, right? Because we have held on to the existing management, okay? So we are supporting them to achieve these numbers. Let's see how the performance comes in the next 2, 3 years and then we'll revise the plan to what to do further.

Any thoughts at all in this -- to this management in the Apollo Pipes?

So Apollo Pipes and Kisan, yes, I mean, as a group, we are always pro ESOPs. So we are working towards that.

We have the next question from the line of Utkarsh Nopany from BOB Caps.

First, I need a few data points. So there is difference between the stand-alone and consolidated revenue of INR 10 crores because of consolidation of Kisan Mouldings. So can you please provide the standalone and consol sales volume data separately for March quarter? And what is the agri and non-agri pipe sales volume mix for Kisan and Apollo Pipes separately for FY '24? And what is the share of B2B and retail sales mix for us in FY '24?

So I guess you ended up asking too many questions we couldn't note down -- noted but let go one by one. So how many days of consolidation? Yes, there was almost 6 days of consolidation. So within -- as far as the number goes, so there is a INR 10 crore of top line addition and around INR 38 lakhs of bottom line addition in the consolidated results. So since it is year end event, so -- that's okay. So 7 days of consolidation. Any clarification -- further clarification on that?

Yes, sir. For 20,550 tons is the consolidated volume or the stand-alone sales volume?

Stand-alone sales volume for Apollo is around INR 977.1 crores.

Sir, I'm asking for volume?

Volume is 80,440 tons for standalone.

And what would be the consol volume?

81,235 tons.

Okay. And sir, what is the agri and non-agri wise sales volume mix for Kisan and Apollo Pipes for FY '24?

So for Apollo Pipes, I have told earlier as well, 55% is non-agri, 45% is agri. And for Kisan, it will be 30% building materials and 70% agri.

Okay. And sir, what would be the share of B2B and retail sales mix for Apollo Pipes in FY '24?

So we are always 10% B2B. That's what we are maintaining. And you want to know for Kisan also?

Yes, that would to be helpful, sir.

Kisan is also same 15%, 20% B2B.

Then my next question is like our gross margin has fallen down to multi-quarter low level in this March quarter. And for project sales got impacted then why our gross margin has been impacted so sharply by 280 bps on a quarter-on-quarter basis? And what would be the gross margin outlook for Kisan and Apollo Pipes for FY '25?

So if you see that my raw material margin or gross margin is around INR 32,000 a ton, okay? And -- so there are like 2, 3 things, right? Project sales when we say that they are down, right? It's not that project sales, which were earlier, they were of low margin. We said that the new projects, the new orders were coming at low margins. That's why we were not taking those orders, okay? So whatever work we take, we ensure that these are high margins, right? We never take any order which are low margin orders. So whatever mix we had earlier, they were for better margin, high-margin orders, right? But now we are going slow on those orders because we are not getting that desired margins because you have to invest your working capital here. So to get the desired ROC, you need to have a better margin than what you get in trade, right? My trade is like low working capital cycle business. Over there, I can go for say 9% margin. But for project business, which carries a risk. So I need to ensure that they are at 12%, 13% margin.

Okay. So what would be the gross margin outlook for Kisan and Apollo Pipes separately for FY '25?

So see, I mean, the target for both the businesses, we said is 10% EBITDA margin, right? Kisan also, we are seeing 10%, 11%. Apollo right now is 10%, 11%, and it will maintain that. So the gross margin will also be kind of same. We'll have to see Kisan's cost structure, but we look this business at the EBITDA level. So you can assume that both businesses will generate 10%, 11% EBITDA margin.

Okay. And sir, like earlier, we plan to reduce the share of agri pipe sales mix for us. So whether the acquisition of Kisan Mouldings is not likely to derail our earlier plan of reducing agri pipe mix going forward and would also dilute our margin profile as we are targeting only 10% EBITDA margin for Kisan Mouldings by FY '27 compared to our historical stand-alone EBITDA margin of 12%.

Okay. So there are 2 things. One is that when you say that the sales for non-agri will come down, it is a mix, right? Because my building material portfolio will grow faster than the agri portfolio. So the mix will keep on improving towards the building material side. But India being the agrarian structure, right? So there's always a good demand for agri cultured pipes, right? And the industry itself is 40%, 50% agriculture base, right? So as a segment, we will always keep on selling our products in that category. That is one part of it. Second, Kisan right now is 70% agri not because there are lines or they don't have products to sell in the building materials space. Because they didn't have money to spend on the brand to go aggressive in the building material space. So they were selling agri pipes, which is like more easy to sell, okay? So now that they have the relevant working capital in place, they will be able to spend on brand, so they will expand the portfolio or they will increase their sales more towards building the blending material side of it. So Kisan also on INR 1,000 crores, we will expect them to be like, if not 50%, at least 45% non-agri and 55% agri. And Apollo on stand-alone basis will be 70% building material and 30% agri in next years when we achieve this INR 3,000 crores top line.

Okay. And sir, on the branding part, whether we are thinking of continuing with the Kisan brand, for Kisan Mouldings or plan to consolidate this brand to Apollo?

So right now, we believe that Kisan brand is strong enough to drive the targets what we have set for the next 3 years.

Okay. And sir, lastly, after the acquisition of majority control of Kisan Mouldings whether there is any regulatory requirement to come out with an open offer for requisition of another 25% stake in Kisan?

No.

We have the next question from the line of Udit from Yes Securities.

So firstly, on the stand-alone numbers for the volume that you mentioned, so the guiding that you are maintaining is 25% CAGR so will that be excluding Kisan or including the Kisan volumes that you are aiming at 35,000 tons and 50,000 tons respectively, financial year?

So 22%, 23% is without Kisan on stand-alone basis and 30% will be with Kisan.

Okay. So going ahead, the 25% volume CAGR on the base of 80,500 ton odd stand-alone numbers, so that is a 25% growth on that number? Or even you include the Kisan number that you are expecting?

Say it again, please?

So on FY '24 stand-alone exit run rate of the volume and your guidance of 25% volume growth. So should we build in 25% on the stand-alone or including Kisan numbers?

Without Kisan, 25%.

And 35,000 tons and 50,000 tons that you are expecting in the next 2 years for Kisan will be something add on?

That's right. That's right. So we are not changing our guidance, right? Before Kisan, we said that as a company, we want to continue to grow at 25% CAGR. So we continue to do that.

Right? So with this enhanced capacity and of course, 55%, 54% contribution from Kisan's overall performance will be an additional boost. And that's the correct understanding, right?

Definitely, yes.

Understood. And considering that Kisan, you will continue with that brand name. So will that be the case also for the building material side because there Apollo holds a better brand. So will that SKUs be in Apollo brand? Is that the plan also?

So that strategy is being formulated as you see, right? We are working on a few options, right? We're talking to outlines taking feedback from them. So I guess in the next 6 months, we'll be better positioned to come out with the definitive strategy how to brand the building material space for the Western markets.

Got it. And in terms of number of dealers, if you could split how much did we exit for Apollo in FY '24? And how much does Kisan have? And what is the target for '25? What will be the net addition that you would like to?

So Apollo's exit run rate will be around 700, 750, okay? And Kisan should be around 200.

So 900, 950 odd. And what would be the plan to add dealers in '26 -- in '25, '26.

See, it's a continuous process, right? I mean, Kisan obviously, will have to add much more, right? Maybe they'll have to increase number of dealer by 50%, right? And as far as Apollo is concerned, we are going aggressive in these southern markets, okay? And Eastern markets with Varanasi will have to add a lot of new dealers. So I guess, I mean, we could be around 800 at Apollo Pipes levels and 300 at Kisan level.

We have the next question from the line of Jatin Chawla from RTL Investments.

My question is on this new segment that you're planning to enter the PVC door and window profile. So if you could just talk about broadly like the PVC-O pipe, is there a plan to kind of shift from 1 segment to another? Or what is the market size today for this product? And what sort of share are you kind of targeting?

So see, I mean, there is no market size mapping, which has been done for uPVC windows or doors, okay? But what we know is that there is an emerging trend in the construction sector whether it is private construction or government-led housing construction, the developers, the contractors, the architects, they are going after the alternative window door profiles over wooden structure, which are available today. uPVC, of course, finishing wise, cost-wise and aesthetics wise right, it offers a better proposition compared to wooden structures in many cases, right? So there is like this emerging market, which is coming up, right? And Apollo being a strong brand in the construction materials segment. So we thought that it's a good strategy to get into this product segment where right now there are a limited number of players, right? And we know the market leader who started this business a few years back, has reached to a very handsome scale. So there is a big opportunity which we see going forward in this segment. And we took feedback from a lot of contractors, a lot of architects, a lot of developers before we took this call to get into this segment. And we have -- we are also appointing our dedicated team for this business.

The selling and distribution will be done with the same set of dealers or you would have to appoint a different distribution network for them?

No, it's a separate channel, which will get built.

So given that a separate channel has to be created and it is a new product, if I work back the numbers that you were kind of giving for the 2 new products that you are targeting INR 100 crores EBITDA in 3 years. And for PVC-O pipe, INR 100 crores, 120 crores of revenue and 25% EBITDA for, let's say, INR 25 crores, INR 30 crores EBITDA there, it seems for this product you are targeting INR 60 crores INR 70 crores of EBITDA which seems a little bit aggressive. If you could just say in terms of what revenue and margins are you expecting in 3 years to get on whether this understanding of INR 60 crores, INR 70 crores EBITDA over the next 3 years is right.

So uPVC, if you see -- I mean, what Arun Ji said was the number which you gave was for FY '26, right? That's like 2 years. In 3 years, oPVC will be generating much more revenue than that number, okay? So what I can say is that out of this INR 100 crores EBITDA from these 2 products, INR 60 crore could come from uPVC and the INR 40 crores could come from a window profile, which we believe is not an aggressive number at all.

And this is also a higher margin product like will be 20% plus?

No, not as high as the oPVC.

Got it. And so for the next 3 years on the core stand-alone Apollo Pipes business, you said that you're looking to maintain margins at 10%. So is there a plan to get back to the earlier 12%, 13% margins after that? Or do you plan to kind of run the company and focus only on volumes and maintain margins at 10%?

[Foreign Language].

We have the next question from the line of Piyush Khandelwal from Bank of India.

Sir, just I mean correlating or especially last quarter commentary on volume growth and this quarter execution. Last quarter, I said that the volume growth was low because there was low demand, there were other things. This quarter, I mean, you're saying about the project and the press release also mentioned about channel destocking due to elections. But firstly, on the project side, if I look at orders are already in hand, let's say, at least 3, 4 months earlier than our execution. I mean last quarter, you said that you're confident of growing at least 20%, 30% of the volume growth, and you'll surpass the earlier Q4, the highest volume growth that I've done. So I mean, why is this so much of -- I mean, dichotomy in your commentary and execution. And this when I correlated with other players? I mean, I understand about the project side. But if I look at other which are the plumbing focus players, the project side is not that much, they are also reporting a very good numbers. So I mean, is it really the project business, which is hitting? Or is it the higher competitive intensity which is getting into the picture? Because if that is the case, that will not go away in 1 or 2 quarters, it will continue at least for the next couple of quarters.

So Piyush, I mean, we said it very categorically that second half of FY '24 has been soft for us, okay? Q3 demand was weak in the industry right because of weak Diwali, et cetera, right, which impacted the sales. Now in Q4, we were highly optimistic that we will cover up the sales because normally what happens is that these government projects, right, normally -- there is a lot of execution which takes place for the March quarter, right, government contractors, they try to finish as much as they can during the end of the fiscal year. So when we were having -- like when we were having this call, right, in January, so we thought that there will be good orders, which will come in like Feb-March, okay, which we will secure, and we will do the execution. And whatever revenue loss we did in Q3 that we will be able to cover up for Q4. Orders were there, right? But the problem is that the competitive intensity was more in government side than trade side. In the trade side, Apollo is a strong brand. So we are there to compete against any other players. I'm not scared. Okay. But in government, I don't want -- because of my commitment towards CapEx, right? And my own strategy to rationalize my working capital. I do not want -- I don't want to get my WC stuck, right, to get stuck for government projects, right? So we took a conscious call not to go aggressive during late Feb, early March, right, to take orders and secure because there are contractors who want to finish work right during the market giving orders left right center, right? But then the conditions which we did not like. And we said, okay, let's go. Let it go.

All right. But if I look at -- I mean especially this interest spending execution, especially this will also be challenging in the first quarter because first quarter is almost election, all the first 2 months. So that 25% guidance you are giving for the Apollo stand-alone, does that also at rest just because of this and maybe 15%, 20% is a more realistic expectation?

[Foreign Language]

That's what I'm asking, is 15%, 20% is a more realistic expectation for us?

See, we did 22% for FY '24 even with such a bad Q3 and Q4, right? So yes, when we are saying 25% for full year, that is factoring in that Q1 is going to be soft because of election, et cetera, right? But we know our product pipeline. We know our dealer channel sitting light on our stock, right? We know when to gain momentum sales, right, then oPVC will start, right? For us, window profile also will start towards the end of the year, some sales will come there, right? My Varanasi plant, right? So we have a lot of levers, Piyush. We have a lot of levers to deliver this 25% CAGR.

Just 1 data point out of this 80,000 tons that have done in the stand-alone business, what will be this project contribution that you're talking about where you have not participated?

So for the full year, it could be 10%, but for second half, it will be even lower. For Q4, it will be like even lower.

And this had grown at what rate for a full year, just 10%?

Full year is decline.

[Foreign Language]

Yes. all right.

Another question is on this Kisan acquisition, which you've done. So the brand name of Kisan will continue, you'll change the brand name? How does that going to work?

So for next 1, 2 years, we think Kisan is strong enough to drive sales to INR 800 crores, INR 900 crores, Piyush. [Foreign Language]. So we'll see, we'll evaluate, right? But [Foreign Language] Kisan has that strength to drive the sales.

We have the next question from the line of Keshav Lahoti from HDFC Securities.

I want to get a color more on Q4 and how is the Q1 going because normally our understanding is Q4, the demand was strong. Even if the project sales, which is just 10% of your revenue was weak. Still, we see sub par 10% volume growth in Q4. So it has to do something more than project sales also.

For Q4, the project contribution was less than 10%. It was in low single digits.

Yes. So normally, you grew by 25% this quarter, it's like 10%. So there is a 15% growth mismatch, which has happened in Q4 when the demand was strong, so 5% could be attributed to project. The remaining 10% has to do something other than Project 2? And how is the Q1 shaping up?

Do you know what was my contribution in Q4 last year, right? It was like high double digit kind of right? So the project business declined very sharply, right, in Q4. If you're comparing Q4 of FY '23 and Q4 of FY '24, the project sales -- the project revenue declined very sharply, okay? So what I can tell you is that the trade sales, we grew at a decent number for the Q4, right? And because of my lower project sales contribution, the performance appears low. And as far as Q1 is concerned -- 1 is concerned. April, it's been like 1.5 months right into the quarter. The run rate is okay. Of course, because of elections, et cetera, projects having like even the private projects, things are moving slow. And our channel partners, clients, even they are also cautious talking at high levels because you don't -- everyone is like let the election result come and then we see how things move. So I guess after first week of June -- after first week of June, the sales momentum will pick significantly.

Got it. And what is the project sales bifurcation between government and private?

And just to add to it, like Uttar Pradesh is having general elections in 7 phases. Uttar Pradesh is an important market for us, okay, and the main market for us. So our sales got disrupted like 7x for this election, right? But that's okay. Like I said, we'll cover it up. We'll cover it up from -- after the first week of June -- sorry, go ahead.

Okay. So I was asking what is the project sales bifurcation between private and government?

Private projects -- we don't do directly our dealers sell to all the developers, right? So I don't know what you mean by government and private. Private is selling to Oberoi and DLF, et cetera?

Yes. Perfect.

Yes. So that's our dealers who sell.

Okay. Got it. So this 10% is entirely government, what do you say 10%?

Of course, yes.

Got it. What has been your expense for this year? And what are your plans going forward?

Expense remain around [ 1.5 quarter to 2% ] of the top line.

And will it remain at same level or is it going to increase?

There'll be a slight increase or a slight increase in FY '25 to 2%, 2.25%.

Got it. Last question from my side, what was the dealer addition -- dealer addition for this year?

Around 50, we would have added new dealers. 57 to be precise.

We have the next question from the line of Kunal from Kitara Capital.

I just wanted to ask the asset turnover ratio in the [indiscernible] pipe and window profiling business. How much each individually are we putting the INR 150 crores to INR 200 crores. And how much revenue are we aiming in both and the EBITDA margins in both the business?

So Kannan, this is slightly sensitive data, okay, because these are new products. But broad-based, like I said, INR 200 crores is what going to get invested. So 60%, 70% out of this in oPVC and rest in window profiles, okay. In oPVC the asset turn is 1.5x, right? And then window profile the asset turn is 5x.

Okay. And EBITDA margins?

OPVC, Arun ji clarified around 25%. And window profile -- I mean, based on all the expenses of business development branding, we should touch like low double digit.

That was the last question. I would now like to hand it over to the management for closing comments.

On behalf of the management, I thank all for the patient hearing. We hope we were able to explain your concerns. You may contact for any other further clarifications required. Thank you once again for joining the call.

Thank you. On behalf of Apollo Pipes Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.