Astral Limited (ASTRAL) Earnings Call Transcript & Summary

Hi. Good evening, everyone, and thank you for standing by. I would like to welcome all of you for the Investor Meet of Astral Poly Technik. It's a great pleasure to have with me Mr. Sandeep Engineer, who's the Managing Director; and Mr. Hiranand Savlani, CFO. I hand over the floor to Sandeep bhai. Sandeep bhai, over to you.

I welcome you all, and I apologize for doing the meet to where we live. Otherwise, we could have met personally. But I know that the world and all of you are passing through a very challenging time. And many countries, many companies and many economies are also passing through the most challenging time of the era. I wish everyone a happy and a healthy life before I start my presentation. I would start the presentation and the financials will be then presented by Mr. Hiranand Savlani, our CFO. So as everyone knows, Astral is in piping business as a business and piping business for infrastructure business. Astral Poly Technik has ABPL, the biochem business, but it is an environment business; Resinova Chemie; Seal IT U.K.; Seal IT U.S.A.; and the Kenya venture. These are the businesses which Astral Poly Technik is in and its subsidiary units. Kashyap bhai, next. Kashyap bhai?

Yes, Sandeep bhai.

Next slide, please. Astral is present in 4 countries with 12 manufacturing locations, and we have 4,500 plus employees and one of the India's fastest-growing piping company. Astral in plumbing is in CPVC, PVC and now in Pex; and drainage, SWR, low-noise drainage system, the sewer system for storm water; agriculture; industrial; fire protection; conduit and cable protection; ancillary; infrastructure; DWC, double-walled corrugated, pipe; ducting; Telerex; and also some of the innovative agri products which are made through Rex. In adhesives, we are in epoxy adhesives, putty, silicone sealants, construction chemicals, PVA, cyanoacrylate, solvent cements, tapes, polymeric filling compound, anaerobic adhesives, industrial adhesives and [indiscernible]. Next, please. Kashyap bhai, can you take me to the next slide, please?

Yes, I am on the next slide, but it's just taking a bit of time, I think, slowly.

Okay. Astral has plant in Sitarganj for the structural piping, Ghiloth for CPVC and all the PVC piping.

Sandeep bhai, can you speak? I think we've lost him, I guess.

Sandeep bhai, you can speak.

There seems to be an interruption. Hiranand bhai, why don't you just echo what is Sandeep bhai saying?

Okay. I think Sandeep bhai is just coming to you. So basically, this is India, just mainly where the Astral presence is there. We are into the western part of the India, I can say southern part of the India and northern part of the India, and now we are entering into the eastern part of the India. So practically, we have covered the entire geography of India. And besides the geography of India, we are having the plants in the U.K. We are having plants in U.S.A. and having our joint venture company in Kenya. But this just shows basically the global presence of Astral's various plants. Next.

Next, please. The new piping plant coming up at Bhubaneswar, Odisha to cater the north and the east market. We've just acquired the land. We have made our plans. We're about to start, and we would also discuss in our CapEx plans how we are planning to go ahead with this. Next slide, please. So as you see, these are Astral piping plants, piping depots, offices and branch offices and adhesive plants, adhesive depots, adhesive corporate offices, adhesive branch offices. Astral's core competence and advantage of Astral is seamless backward integration. We have wide and deep distribution reach, strong brand equity, product innovations and value engineering, world-class manufacturing capabilities, technical tie-ups, and we are the best in the quality segment in our -- all the products which we cater to the market. Next, please. Astral [Audio Gap] ALP, Astral Loyalty Program we have and want to bring great advantage [Audio Gap] tie-up and relationship with so many plumbers across the country, all the plumbers across India. Astral also has got this program [Audio Gap] dealer network. Astral [Audio Gap] the program is extended for the dealers and the plumbers across the country. Yes. Next, please. The line is not good, I think. So...

Sandeep bhai, you can go ahead.

Sandeep bhai, please go ahead. Hiranand bhai, can you...

Yes, yes. Let me take over the -- Sandeep bhai's line is in trouble. So these are basically a branding initiative at Astral. We are across all the sector you can see, whether it's a TV, whether it is a radio, whether it is a trade exhibition, dealer shop branding, outdoor branding, in-film branding. We are [ busting ] also the Salman Khan movie. We are doing the in-film branding also and -- plus dealers meet, plumber meet, consultant meet, architect meet. And now recently, the trend is toward this social media. So we are doing a lot of digital marketing activities there for our products in different categories. Next, audio problem, one-off problem. Okay. Okay. So these are the few pictures of our branding initiative, which you can see. We have done the in-film branding with Salman Khan. We are developing the Saaho movie also and many more. Akshay Kumar's movie also we have done the in-film branding. So many stars of India. Even Ranveer Singh also we have done the in-film branding. Recently, we did the Badshah live concert in Ahmedabad and -- which showed, I can say, one of the great success. And we took the highest advantage of branding the entire crowd. You can see the lights and all. Everyone was holding the Astral pipes and all these things and one of the best events I have come across during my career with the Astral. This was one of the best successful events of Badshah night in Ahmedabad. And we've got a very good response for this event. And we section a sizable budget for all our dealers, distributor, architect, builder. We've given them all the free passes to them. So everybody participated with their family and make this event a grand success. Next. Now as you know, we have already done the announcement of joining of Mr. Ranveer Singh as our brand ambassador. And when this slowdown will be over, we will be talking to him, and we'll see that how best way we can start the branding activity with him. So this will be the new entry of a celebrity, which is the most upcoming celebrity of India. And he's going to now start shortly the branding activity of Astral. You know that Astral is spread across the country. Today, we are having 800-plus distributors and 31,000-plus dealers. Adhesive, we have done the correction now. Earlier, we were giving the approximate number of active as well as non-active, our dealer distributor. But now we have developed a robust system whereby we can track all the distributors' account as well as dealer also, we can track on a regular basis. So now based on the active participation of distributor and dealer, we have revised our number. And now these are the perfect number of 1,300-plus distributors and 130,000-plus active dealers. We already communicated in our earlier communication, Sandeep bhai has already said that we are doing a lot of structural correction into adhesives. So one of that structural correction was that we wanted to understand the market dynamics. We wanted to understand what exactly our presence is there, how many right dealers we assume our team is handling. Earlier, it was through the -- I can say the stock list. So it was very difficult for us to arrive. But now we have developed a software system whereby we can control all these distributors' activity and the dealers' activity also. So that's why we have revised these numbers compared to the earlier. And this is a continuously growing number for us. This is the Resi Shield, which is the new instant hand sanitizer we have launched. We started just premarketing of this product. And on very first day, our entire quantity was sold out in the prebooking itself. Because I look into the size of our Astral dealers and distributor, it's so high that we underestimated that we manufactured a very small quantity to test the market. But the initial response was so good that in the prebooking state itself, the entire quantity was sold out. And that quantity was roughly about 35 lakhs to 40 lakhs kind of in value terms. It was, of course, a small quantity, but we were of the view that it will take time to be accepted by the market, but market has given a good response to us. And we are somehow able to launch at a very, very right time and with a good quantity to start with.

Hiranand bhai, I'm back. So I can now take on the floor.

Okay. Okay. Sandeep bhai, you can carry on.

So the major reason for bringing this sanitizer is -- was -- first is to see that we give it to all our dealers and distributors and even plumbers and masons and carpenters who needed this in this hour, when everyone has to take care of their health. And secondly, we have a vast retail network where we can give this product, sell this product and help them also. So we brought this product just a few days back and launched it. This is an innovative dispenser, which was made by one of our distributors from a very small town, and then many of the companies -- other piping companies also have started making it. But we have launched it in the market to help, again, the country. So next slide, please. So in this pandemic, we came forward for the PM Funds, the Chief Minister Relief Funds, the other funds for the state level and the -- our district level. We give cash vouchers -- we are the first one to give cash vouchers to plumbers across the country through the app because we are directly connected with this. Took care of meals of daily wagers who are stuck in our plant at Santej. We disbursed the salaries, and we have done the best possible to help the community and people around us. In CSR, we have this yoga center, which was built by Astral Charitable Trust and where we take care of health through yoga and meditation, and a naturopathy center also runs here. Next, please. We just have started giving ICU on Wheels in Ahmedabad and other cities in Gujarat, and we'll be extending this program across the other states shortly to help the community, especially the old-age people. We also have started giving ration kits to the blind couples, distributing hearing aids through the kits. Next, please. We have donated vehicles to Ranthambore Tiger Reserve. We have given -- installed solar pumps in various national parks across the -- across India. We have taken many CSR activities of sanitary pad ration kit distribution; community water harvesting systems; contributing through our foundation for the wildlife and Wild Life Trust of India in Assam; Ujala, lighting in the tribal village of Karnataka; providing insulin; and various such other activities. I think it is jumping. The slides are automatically jumping, or I don't know, Kashyap bhai. Yes. So these are some of the other -- water purifiers donated, carry bags donated. We have taken 15 government schools to help and modernize them, contributed to the health care foundation for ophthalmology. We have partnered with Gujarat government to create the Khoj Museum on the riverfront and contributed to Rotary Club for the Prosthetic Hand Camp. Now please next slide. Financial highlights. I would request Hiranand bhai to take over from me.

Good afternoon, everyone. I just wanted to review the disclosure that this presentation will be shared to all of you. We are shortly going to upload this presentation to the Bombay Stock Exchange and National Stock Exchange. Plus this presentation will be available on company's website also. So you need not to worry or copy these numbers at this time because this entire, complete presentation will be available to you [Audio Gap] to the financial side. If you can see the number that [ the revenue ] for the company is consistently growing at double digit. So you can see the graph of last 5 years, the CAGR growth of top line is 11.6%. Again, if you see the EBIDTA growth, the EBIDTA growth is much, much ahead of the top line growth which is 22.9%. In spite of this year, EBIDTA was highly affected because of this COVID, our EBIDTA growth, we still maintained at a higher rate than the revenue growth, the top line. Next slide. Kashyap bhai, next slide. You can see the PBT CAGR is 25.4%. And if you see the PAT CAGR, PAT CAGR is roughly about 28.8%. So this is much, much ahead of the top line growth. You are seeing this PBT growth of 25.4% because this year, PBT increased 16.7%. But in spite of that, the CAGR growth is 25.4%. Similarly, the PAT growth is 28.8%. Next slide. Similar to PAT, this EPS growth is also 28.5%, and the cash profit growth is also 28% of last 5-year CAGR. Next. You can see that consistently the debt we are reducing. Even in this year where the top line of the most of the company is more than that actually, we have tried and reduced our debt. We would be constantly progressing our balance sheet quality and working capital cycle, which you can see that because of that, only our 2020 ratio is constantly coming down. You can see the contributing data in the below slide that the sales growth is around 14%. You have seen in the value term, it was 12%, and the volume term is 14%. So it is not an inflationary growth. Whatever the growth we have delivered, that is an actual volume term, out in term -- value terms only. Similarly, if you can see the capacity utilization, there also, you will see that CAGR growth is around 17% and the actual utilization growth is around 14.9%. Next slide. This is a very interesting slide to understand because most of the investor community will be surprised at how, what happened, all of a sudden, that the inventory days has gone up from 57 to almost 75 days. This is nothing but mainly our peak months, that in the month of March, how hard are we -- our industry works, that normally in the month of March, first 15 days, we try to focus on our collection site. And we try to store maximum collection at year-end. We can supply maximum to our distributors. So first 15 days, we focused on the collection, and then we reduced our receivable drastically. And then all of a sudden, on 19th, 20th, this 1-day lockdown was announced by the Prime Minister. And then all of sudden, the economy starts standstill, and trucks started to be not available. All the trucks and logistics systems was not available because everybody comes to the [ program ] and this lockdown will be a longer period. So the logistics system started solidly. So from 20th onward, with the whole country in lockdown, from then onwards, the sales started strong. Actually, we planned our complete dispatch in the last 14 days. During this flexible dispatch period, this lockdown was on us. So because of that, what happened is that whatever inventory which was readily available for us to be shipped was completely in line with the company. So because of that, the inventory days have shot up. And you can see very, very -- from the debtors days also that the debtors days has come down drastically from 43 to 25 days. Actually, debtors days has not come down from 43 to 25 days. Is it mainly because last INR 175 crore of orders, which we lost? Because of that, the debtors days have come down. Actually, debtors days would have come down to almost 37, 38 days. Instead of that, it has come down to 25. You can see constantly receivable days, we are reducing from 66 to 51, 51 to 43 days. And this year, we were targeting somewhere around 37 to 38 days. But actually, it has come down to 25 days because we lost in the year-end sale. So that's the reason that you can see that [ falloff ]. But in spite of that, if you see the net working capital days, net working capital days here improved. So it is a very clear thing, what we have communicated in past to every investor, that Astral from hereon will be focusing on 2 parameters. One parameter is the focus on the balance sheet quality and within balance sheet quality and into the working capital cycle, which we are consistently communicating in every communication to our investor community and which you can see we have maintained these territories again in this quarter also. And secondly, we don't want them to sacrifice the receivable side. So we are reducing the receivable days also, which can also, you can see that consistently, we are reducing our receivable days. And that is why you can there also the receivable days is down. Next slide, Kashyap. This is a very interesting slide to be seeing that last 5 years, the gross margin of piping industry has increased by almost 10%. 10% is not a small amount. Any company can increase over if you take out 5 years. From there, you can see how consistently Astral had better brands and how companies in a commanding position control its margins. It can be a reason for a backward integration. It can be a reason for decentralization of the unit. It can be a reason for an addition of the value-added product. So there are multiple reasons whereby Astral is in a position to consistently improve its gross profit margin. In this graph here also, you can see that we have improved our growth from the margin by 3.4%. I am again repeating here in this point that there was no one-off thing. We have provided everything. We have not taken any discount cut to any of our distributors, or we are not taking any, you can say, the benefit of the inventory gain. So this is a natural kind of business. And you know that this quarter is peak [Audio Gap] and our CPVC because the biggest chunk in the last 15 years, which we lost. Otherwise, this margin could have been better in this quarter. And we were expecting close to about 21% kind of EBIDTA in the last quarter. I mean historically, you have seen in the last 5, 7 years number that the last quarter is always peak in our industry, and we are consistently delivering the higher EBIDTA in our last quarter because of the operational efficiency [Audio Gap] last quarter is contributing roughly about 29% of the top line. That is why we have an operational leverage available to us, and we have very much a higher EBIDTA number in last quarter. Unfortunately, accidentally, that quarter is affected this year. But that's okay. This is what [Audio Gap] we cannot resume every year the biggest EBIDTA. Next slide. Next slide, Kashyap. Yes. Now this is coming to the adhesive side of the business. Now here, I won't get intentionally through the line of CAGR. Kashyap, can you go to the next slide? Can you go to the next slide? Yes. Thank you. So here, you can see that I have kept the 2 line. I would intentionally get to the orange line. So you can differentiate. And so far, in adhesive business, Astral was growing at a CAGR of 17%, a new business, a new category, which currently was growing at a 17% CAGR. It was one of the best growth I can see. But in this quarter, this year, I can say, we did a structural correction, which we have communicated in last 3, 4 quarters [ to the investors ] this year where we are doing a lot of structural correction. So this year, we may not be able to grow. But we did it for us for a long-term benefit. How long-term benefit, I'm coming to the next slide. I will show you and I will prove to you why we needed this kind of correction and how it is going to help the company into the long term that I will explain to you in the next slide. Here, you can see that so far, we are growing at 17%. And because of this year de-growth, our dealer growth has come down from 17% to 10.3%. Similarly, EBIDTA growth also, you can see we were growing at 26.8%, which is much, much higher than the top line growth. And because of this year de-growth, our CAGR has come down from 26.8% to 16.2%. That's why I intentionally gave these 2 lines. So you can differentiate that this year is one of the years where the company had the structural correction, so this will not be considered as a base year. And going forward it is going to help the company in many respects, which I will discuss in the coming slides. Next slide. Yes. This is what I wanted to highlight to you. Now you can see that in the last 5 years, when we regrouped the business, our gross margin was almost 51%. And from that, we have consistently increased to 36 studies -- 26% kind of level for last 2, 3 years. And now with this structural correction, our gross margin has crossed 40%. So this is what we were communicating that if we will remove one layer, the stockist layer, which we're taking away from us, 6% to 8% of our margin, which we wanted to remove and which we would remove. And now you can see that this advantage is available to the company, that our gross margin has expanded. Another silver lining is that chemical prices have started falling. And that advantage will come in the coming quarter, maybe Q2 or maybe Q3 onward. Because right now, we have the inventories available with us. So new purchases will be limited because of the slowdown in the demand. But when the new purchases will come back into the system, that will be at a lower price. So then there will be a chance that the margin -- this margin can be maintained. We cannot say with a high conviction because the time is not good. So we don't want to be overbullish. And we don't want to misguide you that this will be a permanent kind of feature. But just I wanted to highlight to you that, look, that because of the structural correction, this is the benefit company has got. And this is not after getting, we are communicating to you. We have communicated to you well in advance that because of this one layer we will remove, the margin will expand, and which is what actually has happened in this financial. Next slide. This is the breakup of adhesives and pipe. Our pipe has still maintained a higher chunk, that is 77%, and adhesives is 23%. Next slide. This is a net revenue graph of the consolidated, adhesive plus piping. So you can see here that this year, growth was only 2.8% on a consolidated basis. But if you see the CAGR growth, CAGR growth of last 5-year on a consolidated basis was 11.3%, and the EBIDTA margin were doubled in that. Again, the CAGR growth of 11% EBIDTA growth, CAGR was 22%. So constantly, we are trying to improve the EBIDTA margin. Next. Similar to this, PBT growth is 23.5%, and the PAT growth is 25% CAGR in spite of this year there is slowed negative growth of adhesive business. Next. Kashyap, next slide. This is the -- yes. This is what we discussed for the piping business. Similarly, you can see this not a number of consolidated basis. You can see from here that we have the same trend repeated. The net working capital cycle has dropped. Then the debtor cycle has come down and the inventory has gone up. The reason is the same what I explain you in the piping industry, same and repeated into the consolidated number also. Next slide. This is, again, the GP ratio of consolidated basis here. Also, you see that on a consolidated basis, in the last 5 years, we have improved our GP margin by 10%, which is one of the best, I can say, year for Astral, that when the GP margin is the history high, that is the 38%. From 28% to 38% in 5 years, which is one of the, I can say, big achievement of the company. Next. Yes. This is the slide. It is very interesting to understand. I think I will try to explain in the press release also. But press release, I've given the number of January and February. And then I put the number of March. Then I thought, let me put the number of 11 months so that the market can come to know how the entire year Astral was performing, and all of a sudden, the accident took place in the month of March and number just stopped. So you can see from this number that in first 11 months, Astral was growing at a robust 17.5% on a volume basis and similar percentage into the value terms also. But because of March number, it de-grown by 50%, the revenue we lost in the month of March. Because I explained the reason that first 15 days, normally, we try to focus on the collection. In the second half, we try to focus on the logistics side. Because first 15 days, from 1 to 15, we normally try to fill up all our depots from the head office by way of stock transfer. And then by 15, our depots are full with the inventory. So from 15 onward, our depots start billing to the -- our distributor. But unfortunately, because of this 19 and 20, all of a sudden 1-day lockdown had happened. And after that, the complete country goes -- went into the lockdown. So we lost our 50% of sales in the month of March. If you remove this March, you can see that we were growing at a 17%, not on 1 month, 2 months or 3 months. These numbers are on 11 months. So we were growing at a very robust run rate, but this is unfortunate that this happened. And also, you can see we were having a flat growth because of the structural correction. And all of a sudden, in the month of March, we lost 60% of the sale in adhesive also. So because of that, on a yearly number, some profit there. But again, on a full year basis, still after a drop of 50%, 60% in the month of March, our full year numbers are still much, much better. There is a sizable growth into the EBIDTA level also and the sizable growth into the PAT level also. So this is what I wanted to explain to you, and I can deal with this question if anybody has a question or further clarification. I will deal with this question into the Q&A session. Next slide, Kashyap. So this is the long-term borrowing and short-term borrowing and the cash position of the company. You can see almost we are just now left with the INR 55 crores of net debt. And hopefully, we will be a debt-free company by year-end. This year-end, we will be a debt-free company. And then after, what we have communicated earlier that we will increase our payout ratio also, and we will see that how best way we can utilize this cash flow. Last year, as a part of the utilize -- with the expectation that we are going to get a sizably good cash flow, we started finding out the avenues where we can deploy our money. So one of that deployment, I already communicated in part that we have put closely about INR 30 crore -- INR 25 crore to INR 30 crore into the solar rooftop panel in our old plants, which is going to start generating the revenue to the company from the 1st of July. Actually, we were expecting this revenue to start from 1st of April because this plant was almost on the verge of completion, and this lockdown announced. So because of that, the project team could not complete the last 10, 15 days' work. So now we have taken the -- we are taking the permission from the government to allow us to finish this. And hopefully, we are expecting that this will be completed in next 1 month time. So simply, this revenue will start coming to Astral from 1st of July. So we already started deploying the cash flow where we find there is an opportunity to the company where we can generate a reasonably good return out of that deployment of cash flow because we don't want to be on a cash here which can generate a 6% return, which we don't like personally. So we will try to see that we will deploy the cash flow where we can generate a higher return. Otherwise, it will be the best that we pay debt or better still to the investor by way of additional dividend. Next slide. So basically, these are the -- ultimately summary of what we have discussed, what Sandeep bhai had discussed and what I discussed during our initial presentation, that company was consistently growing at the double digit, but because of March only, the scenario being developed. Secondly, the good advantage in this COVID situation is that the companies which are having a multi-location, they will be having benefit because you don't know when anything comes wrong and some COVID positive case comes to any depot or any plant or anywhere in the office, government is trying to lock down or seal it. So in that situation, you have -- this can be highly affected. So in this scenario, if -- any company which is -- having a multi-locational facility will be the biggest advantage to that. So I started the biggest advantage of that, that we are having multi-locational manufacturing plants, multi-locational depots. So if anything, eventuality happened, we pray that this should not happen. But suppose it has happened, then we will be able to supply the goods to our distributor from a different location because logistic was, in this environment, it's not that important, 1%, 2% extra or 3%. Supplying to our customer, supplying to our distributor is very important in this environment and maintain that demand scenario. So this is the big advantage to Astral. We're constantly communicating that the focus of our company will be the balance sheet quality. We are not only focusing on the P&L quality. P&L -- anyway, we are growing. It's not that we are not growing the P&L. We are constantly increasing our EBITDA, PAT margins also. But we don't want to increase testing at the cost of balance sheet. So we want to constantly monitor the quality of the balance sheet, which we are not telling now -- last 3 years, I have communicated to every investor that Astral's prime focus will be the quality of the balance sheet, which you can see very well in the numbers. Now you have the numbers of balance sheet also in your hand, so you can calculate your level. And you can see that, constantly, Astral is trying to improve the quality of the balance sheet and particularly the working capital cycle. We don't want to compromise with the working capital cycle. Even in this stark environment, also, we have tried to maintain the working capital cycle. It's a part of our strategy. Sandeep bhai will always tell us in our management meeting that whenever there is an adjacent land available to our plant, we should capture, whether we require immediately or we may be requiring 2 year down the line, because getting the adjacent land is a [ highly challenge ]. And if you put up a new plant, the administrative cost and the management and everything will be very, very high. So we always try to see that whenever there is an adjacent land available to our location, we've always tried to purchase it. And as a part of the same strategy, this year also, we have added a sizable land bank with the company to all locations. We have added a land in Sangli because it was available adjacent to our plant. So we have added into that. Hosur, we have added another land. We have completed the second phase of expansion. We may come up with the third phase of expansion, maybe a couple of years down the line, if our Ahmedabad capacity is fully utilized, like last time, our capacity fully utilized, we'll double the capacity of Hosur. But now we have acquired the additional land near Hosur plant. So we may come up with a third phase of expansion of -- whenever our second phase of capacity utilization will be over. Hunting a small portion of land was available to our existing plant in Ahmedabad, Santej, so which was also needed for our R&D facilities and all. We are putting up a high-tech R&D facility also. So for that also, we needed a land. So luckily, we bought the adjacent land. So we have acquired that land also. We have acquired this land into the Ghiloth also. So Ghiloth, we have completed the first phase of expansion, and now we have acquired the adjacent land into that location also. So across the company, I can say, we are talking to the West Bengal -- or sorry, just Orissa government also to give us the adjacent land. And they have also, in principally agreed and we have given the token money for that land also. So we have acquired, practically speaking, I can say, the land across all our plants, which was available adjacent to us and which is going to help the company in a very big way in the coming year. May not be in a 1- or 2-year basis, but on a long-run basis, this is going to be a very, very big cost saving. And you can see, we are consistently improving our margin because of this decentralization. Constantly, we are increasing. Now once we will be entering into the east, you will see there will be a further advantage of the decentralization. We will be saving a huge logistic cost, shipping product from Gujarat to the east or maybe from Hosur to east. So we have spent sizable money into the land also, roughly about, I think -- I don't know exact number, I have to check, but roughly, we have spent around INR 25 crores on acquiring these lands also, parcels also. Company solar plant, I already discussed, it is going to be ready by 1st of July, operational. So we have put up an 8.23 megawatt plant, which you can calculate how much savings will be there. I would not calculate the exact number as of today. But when I did the initial -- I can say, the cost/benefit analysis, when we put the order to the solar company, it was roughly about INR 8 crore to INR 9 crore kind of saving into the power every year. So the payback period was roughly about 3.5 years. So we have spent roughly about INR 25 crore, INR 30 crore. So 3.5-year payback, I can calculate, but roughly about INR 8 crore kind of minimum saving will be there every year, which will start from July onwards. I'm very happy to say that, because of the robust system at the head office level, which I communicated in my last analyst meet, if you'd remember, that Astral is not only focusing on the business growth and the top line and the bottom line. But Astral is equally serious about strengthening the capacity of its head office. And as a part of that strategy, we have strengthened our system. We have implemented SAP [ and all ]. We have developed [indiscernible] software for ourselves. Today, we have our own software to connect with team member, each and everyone. And I can proudly say that, today, 100% of Astral team is working from home as good as they are working at the head office here. So if I'm working at home, we don't feel that we are not in the head office. So whatever work we can do at a head office level, today we are working from home, we are able to do, whether it is a banking, whether it is a credit control, whether it is a -- you can say the sales-related activity, HR-related activity, everything we are able to monitor from home. On the contrary, I can say we are giving more effective hour because everybody is saving the transportation time also, and they can come on the video conferencing as and when it is required with a short notice also. So that is the advantage of having the robust system installed. And that is why the -- immediately after the lockdown lifted, we have started doing the sales. And initial response of sales is also great, I can say. So this is the advantage of having the robust system at the head office level. Next. Kashyap, next. Yes. So gross margin, I have already discussed that, consistently, we have tried to improve that thing. Then one more things I wanted to discuss that there are a lot of, I can say, levers available to us for reduction of the cost. So we -- at a head office level, we are debating within us also. We have not come to the conclusion finally because we are not revising our budget for this year. But yes, definitely, with this change of the environment, we are going to revise our budget. We are going to cut certain costs. And certain costs are, by default, they're cut down. Like administrative cost has come down because everybody is working from home. Logistics, I can say the transportation cost has come down. Traveling cost, one of the biggest element of the cost to Astral because our sizable marketing team is there and plus our head office team is there, we keep regularly traveling abroad also. So that cost had drastically dropped. And there are certain costs related to the branding activity and other activity, which is also we can control. So we are debating within us that how does lockdown -- post lockdown journey is shaping up. Based on that, we will try to control that cost also. IPL, one of the biggest costs which we spent last year, it's close to about INR 20 crore to INR 30 crore in the month of April last year. This year, almost at 0. So there are so many costs which is, by default, that we do, without our efforts, I can say. And there are certain costs which we can control. So we are going to communicate to you once we will be ready with some number homework, maybe hopefully, in the Q1 numbers when we will publish, we will communicate to you how much cost control that we can do at our level. Secondly, as Sandeep bhai mentioned, the loyalty program for plumbers and dealers, I think one of the best program in the industry we introduced. And through this program, I can tell you the data management will be very, very excellent. And the high level of transparency will be there within the marketing team. We can -- sitting at the head office, we can monitor every person, and we can see the performance of every -- our marketing team member. We can design this, you can say, the incentive plan based on this loyalty program. We can know the individual dealer's performance. We can know the individual distributor's performance. So there will be a lot of data bank available with us, which is going to help the company to take a lot of decision sitting at head office, which was practically not possible for us to monitor the pan-India operation on a so close leeway. We were monitoring. We were preparing the MIS system earlier also, but that was not that robust what today we can do with this -- support of this new loyalty program here. So this is going to help us in a long journey, may not be evident, may just be a while to be beneficially. But next 5 to 7 years, this is going to be a big, big, I can say, help to the organization to grow its volume. And now last, my point is that you all know that the piping industry, unorganized portion is very high, which is roughly about 40% of the market. And many, at least, have already started reporting their different organized plan, which are strong at the regional level also. They all started passing the problem because of the balance sheet quality or because of the working capital cycle or because of the liquidity or because of the GST, because of the COVID. All these things have started popping up. So this is going to help us on a long-term basis. I am not keen at this given the immediate [ sales ] from this quarter onward or next quarter onward. But yes, with the horizon of 5 years, we are quite confident that we will be able to take some market share and we -- which is going to help Astral to grow in a faster [ way ]. So with that, I want to thanks -- and now I'm opening up the session -- or question and answer session. Back to -- Kashyap, to you, maybe we can start the question-and-answer session.

Thank you, Sandeep bhai and Hiranand bhai, for a detailed presentation. I request the participants to please type out the questions in the Q&A box. I will announce the name of the gentleman asking the question and read out the question alongside the name. However, before we begin that, I already have some questions which participants have sent out and even what SAP needs, basically certain investors. So I'll just read out a few questions, and then we'll begin the questions on the Q&A box as well. Sandeep bhai, the first question is for you. The question is that if you look at the previous economic downturns you've had, maybe say 2008, '09, the company's size was largely smaller. The business was not so very spread out. And we were neither in international locations or neither the product range was so wide and neither was the geographical footprint that wide. Now incrementally, at this point in time, [ adopted a second house ]. We have a wider product range, presence across multiple geographies and international locations. So what is your thought process in terms of handling the current downturn? How are you kind of navigating for this?

See, talking about the international operations, the good thing about the international operations in U.K., U.S., they have no shutdown of the business. U.S. actually gave growth in the month of April. U.K. also did 70% to 80% of the business in the April and still continuing -- doing much better in the month of May. In Kenya also, the operation was fully running, and they have also done the numbers, which they actually regularly use while doing so. Internationally, we never -- did not face the challenges which came in India because of the complete lockdown. The Indian operation, if it was small, had pluses, and if it is big, also has pluses and minuses also. If we add 1 or 2 location, and tomorrow, say, or forbidden, something happens, we would be totally out of market. Today, having operations throughout India, different locations, the best thing is that if any adverse thing comes upon, we are now ready to serve the market, to give them what they need. Though we don't have fitting productions at some of the locations, we have enough stocks at every depot. We have transferred enough stocks at our south plant, at our Hosur plant. And we have kept inventory standard at every location. So in any adversity also, we would supply to our customers. Continuous supply can happen. Secondly, having multiple locations also will give us advantage in this time when the transportation is tough to cater the market. So if there is a huge demand in south -- and today, if I don't have a plant in south, to send and get trucks to move from Ahmedabad to the south of India will be a very tough position. So overall, if you see, today, if I take it the other way, I see that having multiple plants at every location is going to help us in a big way to serve the market, to get back on the growth again and to again speed up the numbers of growth and take care of all our expenses very fast, and which is actually we are seeing in the month of May and even we did some sales in the end of April. So we actually started when the new procedures of taking permission and starting the unit scale. And one by one, we started all our units, and there in the norms, which were set by these central government, the state governments, and restarted supplying in the month of April, and here we are doing businesses from all our plants. Most of our depots are operational. Our offices are partly operational. Our teams are partly operational. But the business is completely operational, if I can say the other way around. So Kashyap bhai it has helped us in a big way.

Sure. Thanks. The second question, sir, is that can you share your thoughts in terms of broad demand breakup or contribution for Astral from urban real estate, split between, say, Tier 1 and non Tier 1 cities, rural real estate and infra? So in a scenario where Tier 1 cities are closed for a longer while and the rest of India opens up gradually, how much can be the impact of demand? How would you kind of answer that one?

See, basically, our demand for Tier 1 cities and the Tier 2, 3 and the rural, I don't have exact handy numbers. But Astral is strong in Tier 1 cities, 2, 3 and now also in the rural market. Let me say that we, last year, have gained a good market share from the rural market. We have extended our distribution network vastly through India, through the rural India, so which actually is helping us as of now. Now coming back to the Tier 1 city, if you see Bangalore is functional, Chennai is functional, Hyderabad is functional, Delhi is partly functional, Ahmedabad is partly functional, so most of these cities are either fully functional or partly functional. This has also been -- so these cities are also giving us business there. That's not completely 0, except Mumbai. So we are getting business from the rural markets. We are getting good orders. We are supplying. We are getting good orders from the urban market, and we are taking up orders from medium towns, the bigger towns. So I think the -- there is -- overall, if you see the mix, we are gaining share in the rural as well as supplying to where our networks are. So when the supplies in the business have started, again, the advantage for us to move fast here into multi-location, an advantage. Okay, question.

Sure. And Sandeep bhai, what would be the business outlook in May, now that plants have started? So what would be our run rate for utilizations currently? And how do you see this shape up over the rest of the year?

See, the utilization will be not too huge because you have a restriction of number of laborers you can bring in set by the state governments and the central government. The one major thing, which helped us to push numbers and get back on the track was, we are sitting on a good inventory, which in March looks scary. We were also thinking we hold a good inventory. But now when you are only given a limited number of people to start your operations, follow all the norms, keep social distancing and the sanitization, maybe many times in the day, our inventory has helped. Our production is on with the number of people we have for the fast-moving products, slowly gearing up, slowly increasing it. We also had a lot of automization done at our Santej plant, on our molding operations, which actually is now helping us. We have auto packing systems. We have robotic systems. And this system, which we actually implemented in our Santej plant last year, is also helping us in this time of challenge when you have to work -- you have to run your plants with limited number of people. So overall, if you see -- classify the utilization, I cannot say any number at present, nor I can say the utilization. Everyone knows it is very transparent that all the plants in India have to run with very limited number of people as permitted by the governments. And still, we are using -- completely using the number of people we are allowed. And we -- that task, we are doing our best to maintain the maximum production out and the maximum dispatch. So we are doing much better off in all our plants on that. We are taking care of all the needs -- yes, please.

So the next question is that what would be -- what are the threats, opportunities and risks you see emerging out of this crisis for Astral? So what would be the new products you would be thinking about or any opportunities you are thinking about at this point in time? An extension to this question, which is also asked by someone else as well, is what are we doing to leverage the plumber relationship? From a new -- what else can we sell using that relationship or leveraging that channel?

The question is that there are challenges actually. I cannot say that -- what is going to happen tomorrow. Today is good, that is what we want us to think because this disease and the cure to this disease is not predicted by anyone. As of now, we are back in track. As of now, we are running good. As of now, we are doing good. And with all the challenges in the infrastructure industry, in the housing industry, in overall in the country, I think the advantage which Astral carries is multi-locational plants, strong financials, able to deliver, sitting on raw material stocks, enough stocks to sell next 1 or 2 months because certain chemicals -- to import is tough. Certain chemicals, certain raw materials, to import is tough. So if you see these smaller units will face many challenges, I don't say anything will happen. I don't want to criticize on any of the companies or smaller units, but they will have major challenges on supplies, on raw materials, on financials. And with all these trends which we have, we see a very good -- a ray of hope in this time in a positive manner. And we'll be doing excellently well, giving the time in our businesses in the coming months, except, again, I say something happens where, again, we all go for a lockdown or something, which every industry is going to face. And what was the extension, the other -- the same question extension? I just missed one.

It was -- the extension was that what are we doing with the plumber channel? Like how are we...

The plumber channel is going to help us to sell not only the plumbing material, but also some infrastructure materials, which we are there and plumber channel is going to extend us in many, many ways to make us reach to the homeowners for our adhesives. And I think that the content of plumber channel will help us in a big way. And I cannot comment as of now, but after a year from now, when I run this program robustly, I can give you more information and details.

Sure. Sir, before I move to Hiranand bhai, a couple of financial questions. Just one question for you would be that now that the correction in adhesives is done, are we fairly confident to grow this business in double digits over the next few years given that the base of this year has also kind of come off?

Yes. I know the base. I communicated throughout the -- all our calls that this year, we would be turning flat. And we could have done that. Unfortunately, we lost almost -- we lost the credit days of the last month of March where we did our collections on the right path, but when we had to deliver -- and we have -- we are sitting on good amount of orders in adhesives and pipes. Good means really a big number, which we actually could not deliver to the market. And we don't say that is something what is what -- which anyone or any country had to do and it just has been done. We all have to take it in a positive way and just move ahead. But today, with the adhesives business, I'm 100% confident we'll be back in double-digit. We have not done correction. We have done massive corrections, right? From the teams, we have now 3 divisions, the construction chemicals, the maintenance division and the boat divisions. We have excellent manpower. We have brought the new heads of these divisions who have come from the adhesive business, worked with multinationals, big companies. And we have actually these 2 -- 1.5 months give the new heads and us to form many, many systems, do a lot of structural corrections, which now, from last 10 to 15 years, and our teams are in the market, when we are approaching the market, we are seeing a massive change in the way the business is done and a massive change in the way we are addressing the market. Secondly, we wanted more to organize this business, which we have done. But Resinova was very strong in the rural market and that strength today is helping Resinova and will help Resinova in this whole year. And I -- with these corrections in the structure, in the manpower, in the system, the distribution network, the retail network, approaching the clients, the computer programs -- and also we have programs for carpenters in there, and also we have programs for [ mason ]. And also we have programs for every category of the person who end uses our product. So with all these things, I am not only confident, but I will be back in double-digit, both in the top line, and I'll deliver the best of the bottom line. And it is improving and it will be [ for the replay ].

Sandeep bhai, one of your large shareholder, specifically the question asking, is there an opportunity for us in exports in terms of increasing international sales given that China Plus One sourcing strategy by global sources is likely the way forward? So do you think that we have an international business play somewhere in this one?

We have unfolded one strategy, the pipe business as of now, but I think it is too premature to discuss as of now. And this would be a very big strategic move for Astral. And I think, at present, we would like to keep this under the carpet because I might see unwanted competition if this strategy unfolds. But we have started working on this for now on, and there are teams who have taken a lot of work on this. And I think within next 3 to 6 months when we have on fall, if things materialize, [ it will be ] 100%. But we have initiated this, both in our pipe business and in adhesive business. Adhesive, already we have started making a few products for our U.K. plant, and in the first of its assignment just before the, I think, lockdown. So we will be making some cyano products and some other adhesive products for U.K. And their branding, their packing will be made in India at the Santej plant and will be delivered to our U.K. plant, and U.K. will be selling it to other markets which they sell. And at some point, the same will be launched in the United States also. We are also making epoxies for them -- for under their brand. So yes, this strategy is on.

Yes. I'll move on to Hiranand bhai.

Now my voice and all is clear, no issues?

Yes, better than before.

Better or it's still -- it is clear for everyone?

No, no, it's clear. No. Hiranand bhai, a couple of questions for you. So one is there has been a sharp increase in employee costs for the year. How do we deal -- see this trend going forward? And second was what is our monthly fixed cost run rate and breakeven volume for Astral?

We, last year, analysts basically said that Astral is doing a lot of structural correction at the head office level as well as at the market level also. So because of that, you have to add a few seniors into your team, so like we added a very senior person into our IT team. We added a very senior person in our HR team. So these are the onetime kind of cost which we have incurred last year, and that is why cost is higher. In business side also, we did this vertical kind of concept. Like pipe also, we are down now to 2 verticals. One vertical is headed by one Vice President, which is taking care of plumbing side; and other vertical is the agri pipe, column pipe, plumbing pipe, industrial pipe, that vertical. So we have splitted in the middle because with every growth of the company, 1% cannot handle everything. So we have to verticalize this business. Similar vertical structure we have developed in adhesives also, right? There is a maintenance kind of vertical, which is headed by somebody. There is a PVA, which is headed by another person. And then there is the construction chemical. So there are a different vertical and there are different heads leading to that. So onetime cost of appointing this kind of head will be there to the organization, but I'm sure this kind of expenditure will not be repeated in the coming year. And now, every year, when your company is growing at a double-digit, you see in the first 9 -- 11 months, we were growing at a very robust run rate. So this kind of run rate and that this kind of expenditure absorption will not be a challenge. And now in this kind of environment, I'm sure the new recruitment will be hardly anything. So in coming year, if we start again growing at a double-digit, then I don't think this will be the big cost to the organization. Secondly, when the company is running at a higher growth trajectory and doing a good profitability also, then naturally, the employee is also part of your team and they are also incentivized in a better way. So a lot of incentive schemes were also running in the system, and then you can say the ESOP plans were there. So all these things right there. So these are the things which can be changed also with the time if the situation required, and if the performance is not there, that this kind of thing can be curtailed also. But as long as company is performing and doing a structural correction and adding a few senior people into the basket, I think this is a welcome stay. It's a onetime kind of cost. But long term, I don't see any problem into that one. And from here on, this cost will not going to increase much. Secondly, your question was regarding to the breakeven thing. So I think the...

Regarding monthly costs, yes.

As far as a whole, as a group, I am telling you, consolidated wages, whether adhesive, whether U.K., whether Astral India, I think we have roughly about INR 20 crores we saw monthly fixed overhead. And we -- to achieve this, I think if I started running this plant at 30%, 35% or 35% kind of run rate of sale, we can easily achieve the breakeven. I don't think even today also in the month of May also, I don't think it's a question of breakeven. We are talking about the growth. So I don't think that a company like Astral can change about the breakeven kind of thing. So we are much, much ahead of that breakeven, except in the month of April, I can say. But other than April, all plants are working fine, except adhesive, which has started late. U.K. is fine, but Resinova has started late because that was not falling under the essential commodity. So we have got the permission very late for the adhesive plant, and that is why adhesive was started very late sale. Otherwise, pipe business are much well ahead of the breakeven point. So I don't see breakeven is a problem to overcome.

Okay. So I'll take questions from some participants. So [ Prashan Cuti ] is asking what is the extent of replacement and new demand in the piping segment, if you can give that granularity?

So I think it is very difficult to assume to exactly around that number, but our calculation says that roughly about 50% is the breakup between replacement and the new customer.

Sure. And [ Dhruv Jan ] has posted a question. How do you -- do you think the mix will change in pipes business considering that real estate is slowing down so -- and it will be more of agri pipes that you will end up selling rather than real estate or housing, which would kind of imply a bit margin pressure?

No, I think we won't be doing that. And we have got demand on agri. We are selling, but agri for Astral has a little higher price and still we are fully booked on that segment. And we are selling more to agriculture market as well as what is going on the infrastructure market. But when you are pan-India and when the -- when even the construction market is challenging, I don't see everything will be robust in just a month or 2 months. It may take 2 months or 3 months to -- for the businesses to get back on their cycles if everything goes smooth. But being a pan-India market and being strong now with the retail channel also, which we have worked in last 2 years; and also the rural market, which we worked in the last 2 years, we are getting demand for our plumbing products on all -- from all India. We are supplying. And we see that because of these challenges of COVID-19, the big cities may not get back on track on construction, but there is a good demand in the rural market for even plumbing. And Astral will be focused and we will remain focused on its plumbing product as a prime and we'll sell agriculture pipes in the market, fill in the gaps. There is a very good demand. Our stocks exhausted for many products in no time, but we will be selling most of these products at our pricing, which is selling as of now. So I don't see there will be any big -- any effect on the margins as of now and in the future also.

Yes. Hiranand bai, just one question was on the branding costs. Given the current situation, would you be kind of drawing back on stranded costs or continue to invest the same way that you've been going ahead?

So I think initial remarks, I said that there are -- in the presentation also, I would say there a lot of costs structures, assets, which by default, it has reduced, and some cost structures are such that in control that. One of the biggest element, like in the 3.5% kind of cost in branding and promotional activity, 3.5% to 4%, we are spending into that activity. So that is a big element, which we can try and control [ that thing also ]. But we will evaluate that situation ground and we will consistently monitor our volume growth and all these things. And if need arises, we are definitely going to control this cost because that is the substantial for our company. And this will definitely, we have to control. How much and to what extent, I think we will be in a better position to communicate to you once everything is normalized, 100% lockdown is lifted. And as this comes to the normalcy, then we will be in a position to tell. Right now, that cost is negligible. Right now, we are not doing any activity to that area. So I can say that the branding cost in Q1 will be marginated. But going forward, we have to evaluate. We have to see the ground reality. We have to see our growth. We have to see our volumes. And based on that, decide how much budget cuts can be given to the branding. But definitely, there will be a cut to the branding cost.

Sure. Sir, I have a question from [ mother ]. He's asking, can you comment on a recent portfolio, product portfolio and distribution network? So qualitative comments on the business. And what are the competitive pressures in growing our revenues and volumes in adhesives? Also, while we said we can do 15%, 20% growth trajectory, what are the sustainable margins in this business?

So basically in adhesives, the sustainable margin can be very well achieved. Now commenting on the distribution network, actually, we went with a [ CNF ] type of model and major stockist and then we put all the distributors under them who actually were working with us and not where are -- now working with us. But going through one more channel added, the pressure came on margin and a lot other pressures came. And we did go a little drift away from the market. Now we have gone back to this distribution channel. It is completely established, completely working with all the stocks, financial cycles, demand, and retail network also is being connected now. The end customer also is connected. So we had a huge challenge last year. We went through it, and I was very transparent. And you were to expect to anyone that why this is happening, what is this or any misguiding or misinformation. And today also, I'm very categorically correct that -- and I'm telling everyone that we actually could have done better in the month of March, at least to flat out the growth and come back to the double-digit growth. And actually, what we communicated, we have improved our margin, which also can be seen. With the new structure, with the new systems, with the new network in place, with the new way of working, with the product line -- many product lines, we don't have competition from big products. Epoxy, we are the leaders. We do have competition in certain product lines. Cyanoacrylates, we are doing very good. We have done a lot of improvements in the quality of our products. We have increased our R&D strength. We have now 3 or 4 senior R&D scientists working. We have done a lot of things which need -- which are needed for improving the business, improving the market, improving the quality. And everything in place today, we would be doing both top line growth in double-digit and further improving the margins and keeping the margins safe and [ stagnant ] for years to come. Again, except there is a huge -- some disruption because of COVID and all the businesses get disrupted, not only us, but everyone. But as of now, we are doing much better.

Sure. I have a question from [ Lakshmi Narayanan ] of ICICI Pru. What has been the growth of CPVC industry in volume terms? And how has our market share moved in the last 3, 4 years? And also a further extension to this question, how do you see competition? Are they getting stronger or weaker?

Hiranand bhai, can you take this question?

Yes. So CPVC, per se, the market in last 4, 5 years might be growing at 7%, 8% kind of volume growth. And market share-wise, yes, the bigger players are in the market share of smaller players as smaller players are day-by-day [ gutted ] from the first half. Particularly post to this antidumping duty, I think the market share to the bigger player is moving very fast and it is a big advantage for all the organized players. And going forward also, we are of the view that this antidumping duty is going to continue for 5 years. So this shift will continue and day by day, smaller players are getting away from the system. But in India, such a big country that you cannot overnight kick all the unorganized players. So this unorganized player will also be there in the system, but now the price competitiveness has gone away because of GST and because of the antidumping, the China material is not available. So because of that, the costings are very high. So it will be very difficult for them to fight with the organized player. It is not that I'm talking about Astral specifically, but I'm just telling you about the industry basically. So the smaller player will be having a big challenge because their cost of raw material is going to go up and in that situation, selling the product at 10%, 15% or 20% cheaper, then the organized player will be a bit challenged. So under that situation, I think smaller player survival is very difficult. And there, the customer will not like the smaller brand unless until he is not getting 15%, 20% kind of discount. And in this environment, giving 15%, 20% discount is not possible for an unorganized player. So because of that, this market is going toward this organized side.

I would like to add to this, Kashyap bhai. I would like to add one point to this. Today, the -- when we made this change of CPVC PRO 5 years back, there were a lot of questions, a lot of challenges, people also thought what will happen, but I have grown in CPVC from there on in a good number, both value and volume. Secondly, I've been able to deliver a world-class product at good margin, which can be reflected in our graph, which Hiranand bhai showed on the increase of margin. And going forward also, as Astral, we have our own technologies. We have our own way of formulating. We have put suppliers on hand. I assure you that CPVC will continue to give good growth numbers and margin numbers for us.

So I'm sorry to be repetitive here, but this is one of the most widely asked question in one form or the other. So I'm again taking the risk and repeating it. And that question, maybe you can put it to rest once and for all. And that is that given the urban India and particularly project construction will take longer time to recover, will this impact our largest profitable segments, CPVC pipes? So while you did mention something on it, I think maybe you can just contextualize just a bit.

Kashyap bhai, now CPVC is not used in only urban areas. If you go to a small village, when I travel to many places in India, especially even I go to a national park in Ranthambore or I go through many smaller villages, I went to a very small town recently in Rajasthan, very, very small town. Everywhere, I could see CPVC used for plumbing, and at every place, I could see either our brand or other brands reach there. So CPVC is now not a product of only the urban uses. CPVC is a product which is used pan-India and in all the places across India. Today, if you see Rajasthan, we get more business out of Jaipur from smaller towns than Jaipur itself. Similarly, it has happened in Gujarat, similarly happening everywhere. So we are not at all feeling that our CPVC sale would come down and actually, which we have seen in this month of May. Month of May itself, we have been supplying, sending and delivering CPVC to the rural markets and many markets of India where the big towns are [ not there ]. So CPVC is going to be used and will continue to be used pan-India basis, whether it's a small village or it is a town like Mumbai or Pune or maybe Ahmedabad or anywhere they be. So there won't be a challenging situation.

Kashyap bhai, as Sandeep bhai has said, that if you call the plumber, you yourself do the analysis of the market. You, one day, call the plumber into your home and ask him whether are you going to do the plumbing in my home with the metal pipe. I'm sure no new generation plumber will be interested to do the plumbing with the metal pipe. So people are used to with this CPVC product, whether it will be the rural, whether it is the urban, people need CPVC. It's a -- no choice whatever today. Either they have to go to the PPR for their hot water applicator. And PPR, we all know, have a lot of issue of the joining and everything.

Hiranand bhai, I'll give a reply. Forget, Kashyap bhai, hot water. Cold water, also CPVC half inch, 3/4 and 1 inch is almost equal or cheaper than white PVC because people will think -- people will move to PVC, but because it is in copper tube size, the weight of CPVC is much lesser than [indiscernible] PVC. So if you take the 3 widely used, 70%, 80%, you will see CPVC pipes are almost equal to PVC or even, at some markets which use premium PVC, are cheaper than PVC. So it is not the cost which is going to be a hindrance here also.

Sure. Sure. There is one question, Sandeep bhai for you, which is more qualitative, is what has Astral done in the last couple of years to increase our moat, our business moat or to increase our competitive advantage?

See, basically, if you see Astral in the piping business, let me [ first here ]. Astral has continuously expanded its range. Now Astral is one company who has complete ranging. We were not there in structural or our infrastructure piping. Now we have complete range, which no other company in India has. We have huge capacity. DWC, we have in our machine in [ Vellore ]. We have a machine in Uttarakhand. We have machine in south, in Hosur. We have machine now coming in Ahmedabad. So we have -- pan-India, we can deliver these products. Secondly, in the telecommunication, which is now the tomorrow of the world, which is going to come with -- I'm seating in my drawing room and you're sitting in your home, so all this is the business we've come, telecommunication cables. We have a huge range of piping, which we have given to telecommunication, and we are increasing the range. In agriculture also, some specific needs, we have specific products. That also, we are now the only company to do it. Perhaps, we are the first one to launch. We are getting good orders. The [ silent pipe leader ] division we launched. So Astral has been continuously innovative, launching and getting the market and getting the conversion. Now coming to the adhesive business, when we acquired, we have [ new varieties. We have ] huge range. We can deliver complete product [ of new order form ], anything enjoining, you can say Astral has mixed it, delivers to the market epoxy, [indiscernible]. Cyanoacrylates, we have a huge range. We've increased our range in rural. We have increased and completed our range in construction chemicals. So we are continuously innovative, bringing new products and servicing the market. Now we -- you can say, because of this COVID, we have hand sanitizers. And we have huge orders, but it is not for any major business. Our major purpose is the expansion of the brand, which would happen to such a huge retail network of almost 200,000 plus counters and much plumbers and many carpenters. So Astral always wants to get products, innovate, get the right pricing and reach the customer. And now the connect with the end user is going to be the next thing, which we need to be connected with the end user continuously, and what is that we have taken and working on.

I think Kashyap bhai, I can add a little more. You said that what Astral had done new things in that. The biggest thing, I think, we have done is the decentralization of our manufacturing facility. The piping industry, the logistic cost is the biggest hurdle to any manufacturer. And particularly in the PVC category of the product, the cost runs between 4% to 14% in a different location. So if you are having a decentralized plant with you, you will be close to your market. And that is the biggest advantage you can gain in the market and you can capture the market share. We started with south first and then doubled the south capacity and [ continued ] the north market with a sizable capacity. Now we are entering into the east also. I think going to the close to the market with the biggest trend, and that is why you can see we are consistently improving our margins also because of this decentralization. So I think that is the good thing which we have done in last 2, 3 years.

Kashyap bhai, one thing I want to add is I would request everyone that one of the -- all years of the business cycles, which happens maybe rarely, should not be benchmarked for the results or what has happened. But with the way I'm involved in the -- and as -- when the pipe business and the way my eldest son takes care of pipe business in the -- not only branding, now he extends himself completely there. And the younger son, Saumya, is completely handling the adhesive business in totality, and I'm there guiding and involved equally with our team, Hiranand bhai and all the backbone teams which we have. One of the odd years, I do understand, we lost in March a huge number of orders in hand. We were flat in adhesive, which we are continuously [indiscernible]. The vision I have and the way I'm looking at things and the positive [ most here ] I'm looking, making corona my friend. It is going to stay with us and I have to make him friend and still work. And the way we have started our work, the things how are unfolding for us in the month of May, again. Except something drastic happens, I'm confident that in next few months, we will not be only on track, but we'll be delivering growth and we'll be even doing much better off in the coming months for this fiscal. No, now because we have lost some time, I cannot assure you what numbers of growth will come, but I assure you that if everything's solved on my corona friend, next fiscal, when it comes after next March, it will be a main -- in a huge double-digit growth. But at least this fiscal, we'll do all possible to keep the best numbers and best growth possible.

Sure. A couple of questions, which are there. One is about the margins, gross margins in piping. Is the improvement sustainable? And can we structurally sustain 34% to 36% gross margin in piping? And second is payable days are shot up, aiding better working capital. Is this better sourcing through [indiscernible]? Or is it something else?

I think margin, I think maybe 1 or 2 quarters because of the abnormality going on in the market, so very, very difficult to say what will be the scenario. But otherwise, I don't think margin will be a big challenge to us because still we have a distribution plant in there, [ the power ], which we are expecting to be completed by March. So that is going to help us. Now the capacity utilization of the plants will increase. Now the CapEx cycle will reduce. All these things are there still in the system, but right now, the time is not good, so I don't want to be over-bullish and say that, yes, everything is doable. So we have to see the situation on ground. We have just started the journey from 7th of May, our plants are operational. So we have done just a work of 3-week, I can say, even less than 3 weeks of our production in the sale. So in a 3- or 4-week basis, I think it will be too early or premature that we can tell you so many goody-goody things at this stage. So I think we have to be cautious. At this point of time, we don't want to unnecessary risk any of our investors to take a call on our 3-week number basis or 3-week performance, but on a longer-term basis, yes, I can say the -- there are 5 bright chances that margins will be good. There should not be any problem, brand is getting -- strengthening day-by-day. And with this kind of environment, I am sure that the brand will be further strengthened because very few company in the countries are there, which has a very good balance sheet, which have a very good brand and which have a product rate, which have multiple locations of manufacturing, multiple location of distribution. So very few companies are there in piping sector. And the piping sector per se is a INR 13,000 crore industry, and we are only few players out there. So I am sure that Astral will also take some benefit, but it will be too premature and too early to say that what is going to happen in 1 or 2 quarters. If you ask me what the next 5 years, I'm very bullish about the industry and I'm highly confident about the industry, but coming 2, 3-quarter, what is going to be there? It is very difficult to say. What is today's situation? Very difficult to predict about that tomorrow situation, what is going to be there. So I think we should not be over-bullish or over-pessimistic in this environment. I can only say that our team is dedicated. We are hardworking to come up and bounce back [ as quickly as ] possible, early and we will try to see that we will be at a minimum loss. And we will be doing our best. But I am, again, repeating that May month is extraordinary, should not be considered as a benchmark for the full year. We have to wait and watch. We have to see how the things are shaping out going forward, how the real estate scenario is going to take place in the country, how the GDP is going to be affected for our country, how the migrant labor issues will be sorted out because there are a lot of ifs and buts are associated with the growth. So I humbly request that 1 or 2 quarters, you should not consider this one-off number as a benchmark for the March as well as May. So March was extraordinary bad and May is comparatively very good bounce back, I can say, but I'm again repeating should not be the benchmark for any long-term number. 5-year and plus, yes, I'm very confident, but for a 1 quarter or 2 quarters, there will be a lot of surprises will come on the positive side also, on the negative side also. So keep patient. We, being a transparent company, we will keep continuously updating you all investors. You all know Astral very well that we are a very vocal company. We keep continuously updating our investor. And every quarter, we are talking to every investor. And in between the quarter also, we are talking to every analyst community. So keep faith on us. I can say only that word at this stage. We will try our level best, but it is too difficult to predict and project the profitability number, top line number at this stage because we have just started 3 weeks only. So we have to see on the ground reality and maybe we will be in a better position when we'll come back with the Q1 number.

Sure. I think I have a couple of more questions, and I think I will then hand it over to you. So one is about this is more of a hygiene number. What is the CapEx that you have budgeted for in FY '21 and FY '22? And also, a couple of analysts have requested for numbers of Rex, if you can provide the Q4 and FY '20 numbers of Rex in terms of top line, volume, EBITDA.

So Rex is now merged with Astral, so it will be very difficult for us to give you the separate number. But I can say that Rex is back to the normal margin level, what Rex was having earlier, about 15% kind of EBITDA margin. Last year, it dropped to a 6% level. Now we are back to close to about 15% kind of EBITDA margin. So that is a good part of the Rex. Growth-wise, I think separate number will be difficult because now every Astral plant is also manufacturing the products of Rex. So it is a mixed range of all the plant. Earlier, it was only one plant so it was very easy for us to identify and segregate the separate numbers. So it will be very difficult for me to give that number. But margin-wise, I can say that we are back to the normalcy. Regarding your question of CapEx, I think this year will be a very light CapEx because we are targeting to complete our east plant. So that CapEx will be there, about INR 35 crore to INR 40 crore kind of debt and another being INR 20 crores. So I think around INR 60 crore kind of CapEx we are expecting in pipe. In adhesive, I don't think any CapEx is planned at this stage. And even if it is planned, I think we will try to prefer to defer this year because of looking to the ground reality. We will see, monitor 1 or 2 quarter number. And if that quarter, coming back to the normalcy, then we may be a little bit aggressive in the CapEx plan into new products and other things. But at this stage, I think there will not be a higher CapEx for FY '20 and '22. '22, we will update you once we complete the '21 number. It is too early to comment on '22 number. But I think this couple of year will be a very light CapEx. And that we have communicated earlier also this year, CapEx was high mainly because of the land, which we spent around INR 20 crore, INR 25 crores on the land acquisition. Around INR 25 crore to INR 30 crore, we spent about this, I can say, solar plants and all this thing, rooftop solar. That's why CapEx is showing high. But from next year onward, I don't think it will be a sizable CapEx for us.

Okay. Great. On CapEx, there's one related question from Nehal Shah. Could you update on the status of CapEx relating to setting up of an industrial valves facility?

Most of the CapEx on that in the construction part is almost done. And some of the machines also what I -- so I don't see big CapEx coming in this fiscal that would be -- because even malls partly have arrived and pipe CapEx already has been booked and going ahead. As Hiranand bhai has said, the CapEx would be in the number in the zone he has given. So I think we'll be able to do it within the number he has indicated. And as he has told, we won't be overaggressive in doing any big adventurous things for this fiscal. We will see how things move. We have capacity. We have product lines. We have everything to deliver. Even adhesives, we won't be doing any aggressive things this year itself all year. And then we have everything in place. So we will first focus on reaching market, delivering the product, getting back to the growth and then looking to the new horizon after this fiscal, and we'll communicate to you quarter-on-quarter as we speak. But to answer Nehal's question, much of the CapEx part of the valve has been initiated last year and has been done. Part left will be completed in next 2 quarters within the numbers Hiranand bhai has specified.

Sure. A couple of questions. Again, these are certain common questions, which is could you just give your overview on the trend in input cost prices that you're seeing, be it PVC, CPVC and even the resin or even certain chemical on the adhesive side?

Well, I can tell you, Rishab, that PVC dropped heavily by roughly about INR 11 in the lockdown duration. But the company -- as a company, we decided not to pass on to the market the reduction. So we pass on only partial reduction to the market, almost to that you know roughly about 50% kind of reduction we passed on to the market. Because demand was good in the May beginning started, we were getting a reasonably good order so we decided not to pass on the reduction to the market. And then now the PVC price have started increasing. In last week alone, the INR 4 had already increased the price and still in a gray market towards INR 3 premium is there. So because of that, right now, no one is in a mood to reduce the price of finished good in a big way. So everybody knows that if they will reduce they will...

Actually, everyone has increased Hiranand Bai. They have increased their price.

I know. So PVC price, just now we have started increasing -- everyone had increased their percentage price, right, in last 2, 3 days. In fact, Astral has also increased the PVC price by 5%. So whatever we dropped, I think mostly we covered up the drop. Or we reduced by 6% and now again 5% increase we have taken from the market from Monday onwards. As far as the CPVC is concerned, I think CPVC price, right now, there is no much change because there is no new lifting taking place from the overseas market because every company is sitting with their inventory. But because of the currency, prices are going up, and our competitors have already started increasing the price to the tune of another 5%. Earlier also they increased 3% kind of price rise, which Astral has not passed on to the market. And now a few of the competitors have increased the price to the tune of 4%, 5%. So now we are also thinking that, shortly, we may also increase the price to the tune of 4% to 5% in the CPVC basket looking on the market condition and the situation on the ground. But everyone has already increased, so we will also increase that price rise. That is mainly because of the currency depreciation. And people want to cover up the losses that they have incurred into the PVC market. So we will see and we'll see monitor how the situation on the ground, how is the demand in that based on that, but 4%, 5% price rise is expected and anytime, it can come from Astral. And others have already increased.

Sure. Hiranand Bai, just last question to you on the working capital side. So there are 2 questions here, which are related. So one is how are collections shaping up? Are we seeing any liquidity issues given that our end user industry, which is real estate and projects, are struggling in these times? So are you seeing some risk on the receivable side where you might be basically going through more of channel financing? So it might push up your finance cost but still result in lower receivable day on the reported side? So that is one. And second is that you lost a sizable order in pipe business in March. So as such, what is the status of inventory at channel level? Do you see the channel is overstuffed? Or do you think there is room for channel filling during Q1?

So your question is in 2 parts. Let us first answer about the liquidity challenge. As a company, I don't think we have a liquidity challenge. The company is sitting on INR 130 crores of cash, which you can see in our published number. Even when the lockdown was announced, I did that one call with the investors and communicated Astral is sitting on INR 115 crore to INR 120 crore fixed before yield. And the same is maintained even today also. So liquidity challenge at the Astral level is not there. Now coming to the liquidity challenge to our channel partner. So whatever the channel financing support, which we have extended to our supplier in last 4, 5 years, that is in on a nonrecourse rate. So tomorrow, my distributor is doing any default. Astral is not answerable to that. Astral is not going to pay a single penny to them back. So Astral is not taking risk of that side. That is the risk taken by the bank because my business is not a financing business. Financing business is -- belongs to the bank. Bank is charging interest to them and bank is taking the risk from their distributor. Astral is not taking that risk. So that risk is not there. So even if my receivable days are coming down, that is the natural drop in the receivable days not because of the omnichannel financing support Astral has extended to them. Now secondly, coming to the receivable cycle in this challenging market. I fully agree that this is not a good time. It is a challenging time. And in which receivable cycle is going to be affected to every company. But Astral is different compared to the other company. If you see my March number, I lost INR 175 crores of business of piping business and almost INR 50 crore, INR 60 crores of business on the adhesive business. So my -- I lost a business. So because of that, my receivable days are already down. So you can say it's a blessing in disguise. So my receivable days have already come down. And out of the outstanding receivable of 5, which was there on 31st of March, I can with -- confidently say that almost 80% we already recovered as of today. When I'm talking to you on 26th of May, 80% receivable, we already recovered. So there is no risk to the receivable cycle as far as the piping business is concerned. Adhesive business of Resinova, I think now that business has started for last 1 week, so that will be taking some time to recover the old outstanding. So we have to evaluate that, but that outstanding is hardly INR 40 crores. It's not a big money over there. So I...

So retrieval, INR 12 crores, INR 15 crores have already been received in next -- last 2 weeks.

Yes, correct. So I don't think any big challenge into the receivable side to both the businesses into that where we are there. Now your other question was relating to what channel? Which one?

Inventory at the channel level. How do you see that?

Yes, inventory at the channel level. I already communicated that I lost INR 175 crores of pipe business and INR 50 crores of adhesive business. So there is no probability that inventory is in-line at the channel level. The channel, which normally used to take the inventory at the month end, they have not taken that inventory from us. So inventory at the channel level is very, very light, I can say. So that is also one of the reasons that May month we are seeing a very good numbers coming from the market because channel is dry. Secondly, channel doesn’t have a free cash flow available with the distributor -- or the dealer, I can say. So today, they are buying whatever they need. So most of the distributors are just fighting the truck. They are collecting the truck from Astral. They are just changing the invoice, and they are giving it to the dealers or they are giving it to their project. They're not keeping the inventory also because, in this segment, distributors are also -- work to remain at a light inventory. They don't want to venture into the inventory stocking. And secondly, they are testing the challenges of the liquidity also. So they don't want to do the stocking. So today, whatever the demand is coming to us, that is the natural demand of the market. So I can highly confidently say that the inventory in the channel is very, very light. And even today also, 26 stock B is light because nobody wants to take the inventory at the warehouse level or the stock level because they don't want to take a risk because people are still not I think confident whether this lockdown will be extended or another lockdown will come or what is going to happen. And Astral is a very strict company as far as the receivable is concerned, so we don't want to give them the extended credit and all these things. So whatever we are not pushing also them to do the higher sales, we are openly telling every our distributor. Whatever demand is coming you will pay inventory that went. We don't want to give you extra inventory just for the sake of increasing our sales number. So right now, they are taking the inventory, whatever they have to get, but inventory is very well light, I can say at the channel.

Great. Thank you so much, Hiranand bhai and Sandeep Bai. I think I have taken up a lot of your time. So most of the questions have been covered here. So thanks so much for asking all of them. And request Sandeep bhai to maybe contextualize and give a closing comment to just summarize the situation and the trajectory ahead.

Firstly to -- I again take the opportunity to wish everyone a safe and a healthy life ahead due to the ongoing challenge of this virus. And secondly, I would wish the financial capital of India to come back thriving in short time from now. All of you have done a great work sitting home. The country has done great. There were challenges. There were decisions taken by the government, which were positive, and we can understand in this situation, the right decisions are taken, and we all pass through the challenge of business and other challenges also. But I feel that this country will bounce back, will be thriving back on good business, will be doing great business with the international world. And at Astral and the way that things are, we are taking utmost care of all our employees who come to work. We are taking utmost care. We have now 7 doctors at every plant. We have employed doctors at every plant for health and safety. We have a senior doctor at HQ who monitors health and safety of every worker, every person working at the plant and different offices, no doubt, but still having so many people, you cannot say that we can keep everyone safe, but we are trying to keep everyone safe. We are doing good business. We are taking care of the communities. We are taking care of the distributors. We are helping them where help is needed. And I see a positive future and a ray of great hope for Astral in the days ahead for both the piping business, and I see a great ray of hope and future for the Astral business. And we'll move ahead and march ahead in this -- with this challenging time, keeping it behind in no time. And we assure you to do good for our country and we need to be more Atmanirbhar and we are therefore doing everything which India can do for Atmanirbhar Bharat. So thank you very much, everyone. Sorry for a small disruption. I think after that there was maybe disruption. But thank you very much, and we'll remain in touch. See you all soon in person. Again, be safe, be healthy, take out yourselves. Thank you, again, Kashyap bhai for hosting this. And Hiranand bhai for joining us as our team member, a great team member and to you all, thank you. Thank you.

Thank you. Thank you so much. Yes. On behalf of Axis Capital and Astral Poly Technik, I now conclude this, and thank you all.

Kashyap, I can put a one line only that I think we are trying to reply every question. And if anybody is left out with a question, we are extremely sorry for that of the time. If many question is unanswered, my mobile is always available 24/7 for all analysts and investors. You can directly access to my mobile number. I'm always available to reply your question. Thank you very much to everyone for attending this call.

Thank you.

Thank you. Thank you. Bye-bye.