Astral Limited (ASTRAL) Earnings Call Transcript & Summary

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

Thank you, Margaret. Good evening, everyone. On behalf of Systematix, I would like to welcome everyone on the call to discuss Q3 FY '21 earnings of Astral Poly Technik Limited. From the company side, we have Mr. Sandeep Engineer, who is the MD of the company; and Mr. Hiranand Savlani, who is the CFO of the company. Without taking much time, I would like to hand over call to Sandeep bhai for his opening remarks, after which we can have questions. Thank you, and over to you, Sandeep bhai.

Hello, everyone. Firstly, I welcome you all to this Q3 results con call. And hope you and your family members are safe and doing well, fighting the challenge of the pandemic which we all have faced since almost a year and the whole globe is facing. Under this situation, firstly, I congratulate my entire team to support the organization, not only to take care of their families but to give excellent growth to the company and to improve the company's margins. At the same time, I want to thank all our key investors who have stood by us in putting the confidence in the management in this difficult time, and I'm sure you have stood by us with the expectations of numbers and returns, and we have done our best to match up to your expectations. Coming to the business, I'll give you a brief on the pipe business. As communicated in the previous call that the business has just started picking up from the Q2 onwards and now have accelerated -- the growth has been accelerated in Q3, both in top line and the bottom line. You can see from our press release and from our results and from the quarterly chart we have given in the press release that our EBITDA margin has grown much faster than the top line. The reason is for the better product mix, value-added product and inventory gains because of the PVC price rise. Our expansion plans of Odisha, Bhubaneswar have started as scheduled, and we should be ready with the plant in Q2 of FY '22, and the revenues will start coming from that plant in Q3 FY '22 onwards. Our value-added product expansion is going on as scheduled. The building will be ready by May '21, and the production will commence in the Q2 of FY '22 for the wall manufacturing facility, which we are putting up at our Dholka plant. We are expecting to start the fitting production facility at Hosur for both PVC and CPVC in the Q1 of FY '22, which is also an expansion which we are -- we have undertaken in our Hosur plant. The demand scenario of pipe business is good, and we have not only grown in the value but also able to grow in the volume by 15%. Plumbing product demand is comparatively good, and we see a very good attraction in demand and looks the same will continue in the coming months for this quarter and maybe even beyond this quarter. Our expansion work for new product launching is going on. We are expected -- we are expecting to launch some new products in the first half of the next fiscal, and we'll let you know the details of the same once we are close to its launching and once we are firm up the launching plants of the new products. The plastic tank business, which we just acquired in this quarter, as almost the acquisition process is almost complete, a few formalities of acquisition are pending, which we should be able to complete in this month. But the production of SARITA brand, which is now owned by Astral is under Astral company, Astral Pipes, Astral Poly Technik, and the SARITA brand marketing to the chain which was buying, the detailed chain is now done with the Astral team. The Astral brand which is going to come up at the Aurangabad location, Ahmedabad Saket location, the North -- the Ghiloth location, the project is underway. In Aurangabad, the Astral brand tank will be launched shortly within a month. In Ahmedabad plant, the Astral brand tank will be launched again within a month. And in Ghiloth plant, the Astral brand tank will be launched by the first quarter of the next fiscal. And the Astral brand tank from the South Hosur plant will be launched in the second quarter of FY '22. And the Astral brand tanks from the Odisha plant will be launched with the opening of the plant. So we'll be incorporating the manufacturing facility of the plant with the ongoing project. We are expected to launch complete range of Astral brand tanks in all sizes in next 6 to 8 months from 4 to 5 locations, and the work is underway, the machines, orders have been placed and the infrastructure addition work is being undertaken or is almost under completion. So our expansions are going on practically for the pipe business, for the balancing requirement in the fittings and valve, in the new acquired tank business and for the new product line which is -- will be unveiled in the 1 or 2 quarters from now. Coming to the adhesives business. As we have been communicating since last 4 quarters that we have made many structural corrections in the adhesive business and they are almost complete now, and now the addition to the network of retailers, distributors is going on, which is a continued process. So we are back in track of the business. We are back in alignment of the business. And we have no more to focus on any of the past issues of corrections or any other issues. And this -- you can see from the growth, the results, the margins and the continuous improvement which is coming quarter-on-quarter in the business, and we have tremendous confidence to take this business to new heights in the coming years with the new way the things have been aligned, the things have been aligned, the distributors have been aligned and the network has been aligned and the product line which has been aligned. And the business sentiments of adhesives are very positive. The outlook is very bullish in the coming quarters for this business. And Astral is ready for this in its Resinova subsidiary to take on this growth challenge, and we are about to launch a few new chemistries which are in the final trials in our R&D and which will also add to the top line and the bottom line of the business and the more utilizations of the manufacturing facility. So with all the confidence, I can say that adhesives business is back on saddle. We have a total now understanding of the business. We have a complete grip on this business, and we are completely aligned to take this business to new heights of growth in top line and the bottom line. Regarding our Seal IT U.K., U.K., despite of the pandemic, has done excellently well because the country had never imposed lockdowns on the business or the business -- on the plants, and so we have done excellently well. Not only the demands have grown in U.K. but the margins have grown in U.K. also to a new level. So U.K. business has been growing. The margins have been growing. The business has been growing, in line with the business growth of India. So the growth is very positive in U.K. And the U.S. subsidiary is doing excellently well. It is a positive number. The margins are now -- it has started generating good cash. Margins are encouraging. And we have launched a few products which are made in U.K. and the U.S. market and which is getting a very good response and we are getting very good orders. So at present, we are exporting a few products in the construction industry for the housing roofing products which are made in U.K. and are also equally sold in a good quantity in the U.S. from last 3 to 4 months. Now coming to the expansion plans in adhesives business. We have undertaken a few expansion plans. A few chemistries would be expanded and centralized at our plant at Dahej, but it would be a phase-wise expansion plan. So there won't be a one-go CapEx coming at that level, but we will be going in some backward integration and some balancing equipment expansions in our Dahej plant. In our CSR activities, we have been continuously supporting the wild life, which is something different with Astral. There are many of the parks in Rajasthan, MP, South, in Assam. And also, the company is responsible to support the nature, the environment and the weaker section of the society. So we have been undertaking tremendous positive activities for CSR funds, and our CSR team is doing a great job here in coordination with the top management. As communicated in the last con call, we are also working towards the reduction of carbon footprint. And our solar energy, renewable energy, solar rooftop plants have commenced in Santej and Dholka, and the same will be commenced in the other fronts also shortly. We already have a solar energy in the Hosur. In Dholka and Santej in Ahmedabad now they are operational solar energy rooftop plants. And in Hosur also shortly they will be operational. And other plants also will have the solar energy rooftop plants in coming 6 to 10 months. So that is our positive footprint on the ecosystem by reducing the carbon footprint and carbon emissions. So our results are with you, our numbers are with you and our CFO will share more on -- highlights on this, and then we will take on -- more in your question, answers rather than just we communicating everything. Thank you very much, everyone. Thank you.

Good afternoon, everyone. Thank you for joining this con call, and thanks, Ankit, for hosting this call. Hope you all are safe and wish that the entire world come out from -- quickly from this pandemic and hope that now the vaccinization work is going on at the global level, so quickly, we will get rid out of this pandemic. I think press release is with you. So I don't want to take much time into it and want to give more time to Q&A session. And I will touch base only key issues of last quarter, and then we'll move quickly to the Q&A session. So stand-alone top line were grown by 33.29%, again that the EBITDA was grown by almost 60%. So much, much more than the top line growth. And the PBT was 82% and the PAT was grown by 80%. So we continuously communicating since many quarters that now the Astral focus is not only top line but also to the bottom line, and we will be always trying to see that our EBITDA growth should be better than the top line growth. Adhesive top line was grown up by the robust 41% and the EBITDA by 91%. So you can see the kind of correction which we were continuously communicating to the investor community that we are doing a lot of structural correction and which you can see now it has started paying us, and we are quite confident that in the coming quarter it will going to help us further from this level also. On a consol basis, top line growth was 35% and the EBITDA growth was 64% and PBT was 89% and the PAT was 82%. Volume growth of the pipe business during this quarter was 15%, close to about 36,902 metric tonne versus last year 32,053 metric tonne. Market demand in pipe segment, as Sandeep bhai said, is good in Q2 -- was good in Q2 and further accelerated in Q3, which I'm sure you must have seen from the number. It was a mix of pent-up demand and as well as the opening of the metro cities. Similarly, in adhesive business also, we are constantly doing better quarter-on-quarter, which you can see from the quarterly number. Not only we are focusing on top line growth but slowly we are trying to improve our margin of adhesive business, which you can very well see from the press release number, which we have given in the quarterly chart. Adhesive, both Resinova as well as Seal IT, is growing excellent, and we are happy to inform that both companies are not only giving better top line growth than what we expected and they are equally giving us a good number into the margin front. In the current situation, looking to the polymer price trend, we are not expecting any reduction in PVC price in Q4 because till international market prices are not coming down, and I'm sure recently also Formosa and all has given the price rise, so we are of the view that any reduction will come that can be coming into the Q1, not in Q4. Even if the PVC price will start immediately reduction trend, but still the effectiveness will be in the Q1 because all the material, which now new booking is taking place from the import level, will arrive in India only -- after April only. Under such situation, we are expecting that our normal EBITDA margin, which we are guiding 15%, 16% for pipe, but in this situation it will be much higher than the normal margin in Q4 also. Secondly, Q4, historically, having the higher volume compared to the first 3 quarters, that is a historical trend, we don't know what will be the situation in the current year, but historically, we always deliver a better number in Q4. And this year, Q4 being a lower base compared to last year, so the number should be better and the margin should also be better only. Adhesive EBITDA margin was better compared to last year. And now looking to better growth in top line in coming quarters, we are expecting margin to be maintained at this level, and there is a room for further improvement into adhesive margin from hereon in the coming quarters, but not necessary Q4. But we are giving you the guidance for next 2 to 3 years that we are expecting that there is a room available for the growth of margin in adhesive business from the current level. We are positive for adhesive business in coming quarters, as indicated by Sandeep bhai, that slowly our structural correction has started giving result. We -- with the launch of new products and economy of scale in next year, we are expecting a further good growth in the coming time. Infra business was slow because government projects' work was very slow and they were on hold. Now it has started picking up. Last quarter, we were able to see at least slight growth. Margins are stable in infra business. We are expecting next year, this segment should give good return once governments start allocating funds to infra project. And in recent budget announcement day before yesterday, government has given focus to the capital expenditure projects, which will help our infra business to grow in the coming time. And that too, we are expecting it should deliver a good number in the next year. Cash position as on 31st December 2020 was INR 190 crore against the debt of INR 76 crore. So we are a net cash surplus company to the tune of INR 116 crore. In 9 months, company has done a CapEx of INR 87 crore. CapEx of first 9 months is INR 87 crore, including purchase of water tank business assets. As far as balance sheet quality is concerned, we, at Astral, are always trying to improve the same, which you can see from all parameters. During the current quarter also, we have tried to reduce our receivable days and squeeze the working capital cycle. I am giving you the 9-month debtors of last December, the receivable was INR 237 crore. Against that, this year, December ending, the receivable was close to -- sorry, sorry, sorry, mistake -- against the INR 281 crore, this year the debtors are INR 237 crore. So we have reduced from INR 281 crore to INR 237 crore. And inventory last year December was INR 505 crore. Against that, this year, it is INR 478 crore. In spite of so much rise in the raw material price, inventory is under control. And in spite of top line growth, we have reduced absolute level the debtors. In short, we are trying to improve our working capital cycle in the difficult time without sacrificing growth. Plastic water tank acquisition we have done from internal accruals. So we have not raised any debt for the acquisition of plastic tank business. And I think with this, I'm concluding my initial remarks and opening up the floor for the question-and-answer session. Over to you, Ankit.

[Operator Instructions] The first question is from the line of Saumil Mehta from BNP Paribas.

I have 2 questions from my side. So first is while the volume growth for this quarter in fact was encouraging, but if I recollect, October, we had grown about 60%. Is it fair to assume that there was some softness in November, December maybe due to competitive pressure or some other factors because it looks like November, December, we would have degrown or just posted a flattish volume growth. And how has been the competitive intensity over the last 2, 3 months? And an update on Jan volumes, if you can give? That's my 2 questions.

So I think October, the base was low, that's why it was showing the higher growth. Because last year, the Diwali was in the month of October and this year, Diwali was in the month of November. So because of base effect, I think that was there. But otherwise, I think November and December was also good numbers. But of course, not to the tune of October because October, the sizable element was of pent-up demand also. But overall, I think November and December was good. January, I don't have a volume number, but I think value-wise, it should be close to about 35% kind of value growth. But volume growth, I don't have a heading because month-on-month, we don't break the volume growth. But top line was roughly -- in January, it was 35% kind of level.

And sir, is it fair to assume that competitive intensity will still not that high given PVC prices are high? So there is still a -- maybe -- there isn't availability issue for the smaller guys, and that benefit will continue till you see some sort of global PVC production picking up?

So it may help us. Till March, it looks very clearly. But beyond March, we have to see how the situation is panning out on the ground. But yes, definitely till March, it can support us.

Yes. But when you see this position which has come up since last almost pandemic till here, I think this advantage to the better brands or things will continue. But here, you can see that only PVC is not a forte, Astral has done equally good in CPVC. And the numbers, the top line numbers and the overall margin numbers and all, CPVC is equally helpful or is contributing to it. And PVC, there could be a decline is coming. It has to, but I don't see that it will go to the levels which it used to for at least -- for a longer time this time.

Sure. That's very encouraging. And my second and last question on the adhesives business. While the guidance on the margins should improve from hereon is quite encouraging, but in terms of top line, post the correction in distribution, are we confident or rather calling out that probably structurally, you might be able to see a 20% top line growth on this business now? Because historically, we have maintained pipes growth at 15% and maybe adhesives is a bit faster. But now can [indiscernible] structurally over the next 2, 3 years?

Basically, in the short-term things if you see for at least 1 year, it should be even better than that. That is what we have and what we reached to a level. And we will be, obviously, going and looking at a much better number than '20 on the growth part. But now if you see the longer base, 2025 should be a number which we should keep achieving, and I don't see any issues of not reaching that number. But as our base compared to the bigger brands in the market is much low, we would not be looking at '20, but we will be working on a better growth trajectory for coming quarters.

The next question is from the line of Bharat Shah from ASK Investment Managers.

Deadline is finally culminating where both pipe and adhesives businesses are playing kind of a symphony, where the kind of performance that Astral, I always believe it was capable of. But finally, we are seeing in a very strong kind of a symphony. What I'm looking forward to is your reason in terms of where each of the 3 businesses, pipes, adhesives and new activity on the tanks, where do you see them in 3 to 5 years' time?

Pipes and tanks complement each other. And tanks would help pipe in many, many markets and pipes will help tanks. So I think it is a right synergy where we have done this. But if you see the company at 3 years' trajectory and with the new additions of the plant and new geographies work which is going on with the team and a lot of groundwork has been made, we must at least be doing a double-digit growth continuously in next 3 to 5 years.

In volume?

For the volume only, sir. Volume, I now tell my teams and my -- everyone that I don't want to measure you in the value. I always measure them in the volume. Now in adhesives, as I just communicated in the reply -- a reply just before your question, but we would look at a better trajectory in 3 years for adhesives even than this '20 number, and that we should achieve and we will achieve. And if you go with 5 years also, this trajectory should be better than that because we have to make a -- cover a huge ground to reach a number. And we will do it, and we are confident now and the confidence which has been regained and which has taught us a lot and the business understanding which has come. I'm confident that this could be achievable. So the 5 year's vision is very bullish, and we all are aligned. The whole organization is aligned with that.

Which means Sandeep bhai, essentially pipe business in volume terms should double in 5 years' time. If we grow at about 15%, then essentially we should be anchoring for doubling of our business in volume terms in 5 years, right?

Yes, obviously, yes, yes.

And with a geographically plant positioning and basically improved efficiency and reduced logistic and, say, cost and the scale, that means margins in the pipe business, in general, over these 5-year territory should improve?

See, margins would improve, but pipe business is a business which more relies on the behavior of the polymers. But positively, if you take, the margins would improve, margins would increase as the growth is there, but will remain in a very good positive EBITDA level, which Astral has been working and giving for many years down the line. But one thing is sure that what we communicate and what we tell the market, our transparency is very high. So as we have told in adhesives also from last -- and we have communicated. In pipe also, we are communicating this and we -- apart from this businesses of pipe and the tanks, we are also focusing on value-added products and businesses. A few are already communicated like the valves, but a few are in the pipeline, which we should be able to communicate in coming 1 or 2 quarters.

And on pipes, how do we see the picture because pipes is something which begin now? And to that extent, how do we take a base from here to 5 years -- or 3 to 5 years' time?

So Bharat bhai, normal margins, we always consider 15%, 16% EBITDA is a very healthy margin for the pipe category of the business. But now many regions are supporting Astral for the higher margin. It can be a economy of scale. It can be a decentralization of the businesses because we are putting up multiple plants. So the moment capacity utilization will start growing from each plant, then the margin will going to support us. Third thing, we -- continuously since last almost 7, 8 quarters, we are telling that our focus is growing towards the margin side, not only top line because we are continuously adding the value-added product into our basket. So because of that also margins start supporting. With the normal margins, we are already continuously delivering higher margin. So if this kind of phenomena will continue, then, yes, we can definitely expect more than that. But I think 15%, 16% is the run rate which can be maintained for next 4, 5 years on a longer-term basis, I'm giving you the guidance. But yes, if this kind of new, new addition will take place, then like now we are entering into tank and we are getting a very, very positive vibes from that business because the kind of response we are getting from our dealer and distributor community, even we can't think even that kind of response we are getting from the team. So -- but at the same time, we are in the early stage of the launching. So we will see and monitor and keep updating the investor that what is the ground reality happening because working in Excel is always easy. I'm always telling that. Working in Excel is always is easy. But when you do actual work, the picture is always different. So I don't want to be too much bullish at this stage. But yes, definitely, once we will be working a couple of quarters, then I think we will be able to guide you about the tank business, where also our expectation is high. And unfortunately, because of this COVID, this -- and earlier, the previous company's legacy issues, we are not able to grow at a higher run rate into infra business. Actually, that business is also a very good business and a volume business. So once that will start picking up, then I think there volume will be much, much higher. And the way government is talking about the spending of the capital expenditure side, I'm sure this business is ultimately going to play -- maybe a couple of quarters later, but ultimately, it is going to pay us. And the way we introduced the products in there and the kind of quality we are having, I'm sure that business will go even faster run rate because there the base is still very low. So keep finger crossed that I'm sure that tank and infra business in the coming years will give us a very, very good number. And pipe and adhesive, now we are going into the autopilot mode, so they will keep continuously giving us certain level of growth, like pipe 15% kind of growth, adhesive 20% kind of growth. That will keep continuing to work. And plus, other than that, we are continuously looking for the new products. It is not that there is the end of the journey. We continuously starving for the new product. So we will keep adding that new product, and that will give us a little edge over the normal kind of growth. So keep finger crossed. Again, I'm telling you we are working on many products. And in coming 2, 3 years, we are going to give you a lot of new products from Astral side, and they will also give us a good number.

Bharat bhai, I would like to lastly add to one point, which Hiranand bhai has forgotten that the backward ways of integration in CPVC and the way the purchase of polymers has been done in PVC is also helping a great way in -- to great -- to Astral in not only growing the market, growing the demand at reaching -- improving the margins and the brands which we have created way back, 5 years back in CPVC was a very positive step helping us on the growth path in CPVC and margins. So that is one of the greatest advantage on CPVC. And PVC also, we have nicely managed our stock inventories and buying. Thank you, Bharat.

Yes. So to summarize, if I have understood it correctly, if we are talking of the next 5-year journey, our bulwark and court business of pipes will continue at a healthy pace, good double-digit with potential for on a longer-term basis improvement in the margins from where they stand today, both because of the operating leverage and scale as well as our dispersed manufacturing, giving us the logistics advantage. Second, the adhesive now becomes an accelerator, both in terms of the growth rate as well as improvement in the margin. So it becomes like a force multiplier over these 5 years. The excitement is on the tank business, but it is to be unveiled in some time, but primary picture appears to be positive. And infra business, which has so far not turned in much for us, but at some stage, that can join the party and can take the growth rate ahead. And finally, new products in our integrated planning for PVC and CPVC, this could be additional kind of catalyst to the overall picture over these 5 years' time.

Yes, sir. Your understanding is perfectly all right.

The next question is from the line of Sonali Salgaonkar from Jefferies India.

Congratulations on a good set of numbers. Sir, my first question is regarding the operating margins. Now our core operating margins are about 21.4% on a consolidated basis, is almost at an all-time high. So could you please quantify what is the inventory gain this quarter? And ex that inventory gain, what could be the steady-state operating margin that we should look at?

So Sonali, as communicated in earlier question that inventory gain is very difficult to arrive exact number, but yes, some element of inventory gain in the PVC side is there. But our company is more focused on the CPVC side. So compared to the PVC player, our gain will be much, much lower, I can say. Secondly, we are more dependent on the local supplier likely, that is Reliance. So our inventory levels in PVC are low. So inventory gains will also be low. So -- but exact number, it is very difficult to arrive. Regarding your second question of future guidance, I think, 15%, 16% in the number which is a sustainable kind of margin. But yes, we will try -- I already explained while replying to Bharat bhai's question that we will try to keep on a higher level with this continuous value-added product side and the continuous introduction of new products. So we'll see how it is going. But 15%, 16%, it looks a doable and achievable number for a longer period of time.

I understand, sir. Sir, my second question is regarding the tanks business. Sir, any ballpark estimate as in how much it will accrue to the revenue and the margins going forward?

So I think it is too early because still Astral brand is not launched in the market. So first, we have to launch our product and we have to see how the reaction is coming from the market. Because I told that right now, the encouraging numbers are coming from the interest point of view, inquiry point of view. But once we will launch, then after, we will see how fitting problems are coming, what kind of challenges are coming. After that, I think it will be fair to give the guidance about the tank business. But I can tell you that initial response is very good. So number should be reasonably good in the coming 2 to 3 years origin. First year may not be that much lucrative because first year, we will be going for the setting up. But I'm sure FY '23 onward number should be very encouraging.

Understand, sir. Sir, what will be our steady-state margins for our tanks business and infra business once it runs, sir?

I think, again, once we will launch, then we will come to know exactly. But normally, people -- the other company which brands and all are working, I think 14%, 15% kind of margin -- EBITDA margin can be expected. But we being a new player, we have to see how we are going to position our brand into the market. And based on that, I think margin -- for initial year, I think margin is not that important. Positioning the brand and putting up our company into the market is more important. So maybe a couple of percentage here and there in margin is fine as far as initial years are concerned. But at a later stage, once you become a brand, I don't think margin is a challenge. You have seen in pipe business also, initially it was a challenging time for us to fetch a higher margin. But now with the brand, we are able to do that part. So I'm sure with the time, margin should not be the problem into the tank business also.

Sure. Sir, in FY '22 onwards, what could be our CapEx?

CapEx, I think we have to rework because we are working -- on every plant we are doing some expansion activity. So we have to see finally how it is coming out. Now we are going to start the piping operation in Sangli also. So because Sangli being an ideal location for us because we don't have a plant over that side for the PVC and CPVC side, so we are targeting to put up a few machines for PVC at the beginning stage and later we may think for the CPVC also. Similarly, in Hosur, we are putting up a manufacturing facility of fittings, as Sandeep bhai said. So we are putting a sizable capacity of fittings over there in South. In the same way, now we are putting up a tanker capacity in Ahmedabad, then Ghiloth, then Aurangabad and lastly into the Odisha. So a lot of rework is happening. So I think we have to reverse the CapEx plan. So hopefully, in the next quarter, I will be in a better position to guide you what kind of CapEx will be there. But of course, it will not be sizable CapEx because tank and all business are a very light CapEx businesses. So it will not be that high CapEx. But you -- we will be comminuting to you maybe next quarter.

Sure. Sir, and what is our distributor and retailer strength right now, both for pipes and adhesives?

So there also, we have put up a ALP program. So we are working on that the exact number and geography. So we will let you know once this year will be completed. So in the analyst meet, we will be communicating to you the exact numbers.

Got it, sir. Sir, and last question, just a clarification. Sometime back, you mentioned that the value growth in January was about 35% year-on-year. So just confirming this is for the pipes or for the company as a whole?

I'm telling you consol number.

The next question is from the line of Maulik Patel from Equirus Securities.

Congratulation on very good set of numbers. Sir, I have 2 questions.

I'm sorry to interrupt you, Mr. Patel. May I request you to speak on the handset mode, sir. I think you're on speaker. It's not very clear. We seem to have lost his line, so we will move to the next question. The next question is from the line of Nehal Shah from ICICI Securities.

Sir, congratulations for good set of numbers. Sir, 3 questions. One on the CPVC pipes. Now how has CPVC pipes fared in Q3 considering the fact that CPVC would have become more competitive versus PVC price -- versus PVC pipes? So any update on this?

So CPVC demand was excellent in Q3, and we are expecting it will further accelerate in Q4. That is what we are getting the same from the January numbers. So we are very positive about the CPVC demand.

Okay. So mix would be in favor of CPVC in last quarter?

Yes. Yes. Definitely, it will be in favor of CPVC.

Right. Sir, my second question would be, are we now likely to see CPVC price increases because what we are hearing is that suppliers may say price -- may start taking price increases because of pressure of higher PVC prices. Is that a possibility coming in, in this quarter?

This quarter, obviously, the supplier would change the price to some tune. But the way Astral has purchased and the way we have worked with the supplier, we won't be making any major price change or any price change in this quarter. Our focus will be to get on to the volume and still get good margin.

Sure. That's helpful. And sir, my last question would be on the budgetary allocation which was announced day before yesterday. Now which to us seems very encouraging with the kind of outlay. The Jal Jeevan Mission, rural has got from almost INR 10,000 crore, INR 11,000 crore to 55 -- sorry, to INR 50,000 crore plus. And the Finance Minister has also come up with a new scheme, which is urban Jal Jeevan Mission, which is an outlay of INR 2,87,000 crore over the next 5 years. So this implies a budgetary allocation of INR 1 crore plus, so INR 1 trillion kind of outlay every year. So what kind of investments do you think this will lead to in materials like pipes, HDP or PVC pipes and fittings to that extent?

It will help both HDP as well as PVC. But the allocations which have been made, I think the HDP will also play a major role because at this prevailing price of PVC, these projects could become quite costly. There would be usage. But I think HDP will play a better role, which even Astral is focusing to come in a big way. Our work is on, on that project. Then coming to the -- all these projects, we would be studying, but there are certain needs of specific way of fittings which we are also going to look at this option of working on that. So yes, there -- these projects, we will study in detail in coming quarter. And I think in the analyst meet or if we are lucky, we can meet you, analyst, after March if the COVID situation permits, would be better and we will communicate everything on this vision of the new projects announced in the finance bill and how Astral will be benefited from it. Just give us 2, 3 months more to give you a better picture.

Sure. But sir...

Just I can add what Sandeep bhai has said that numbers are mind blowing. Sometimes, if I do the calculation, even a few percentage of that business will come to the pipe side, it will be a huge business. India cannot supply that kind of pipe, if that is the case. But we have to see actually how the education work is taking place from the government side because based on that, the number will be arrived. But yes, it is a very, very encouraging number the way government is starting to give the focus into that area. And if that is the case and government will sincerely spend that money, then definitely, every industry player will be beneficial, not only Astral, everybody will be getting the benefit, big benefit out of this.

Sir, also a big benefit for top players because considering that the way the consolidation is happening, I think there's more reason now that this business also might go to some of the branded players as well. So that's where the optimism stands at this point.

Yes, yes, that will always be there. Even this year, also, you see that because of this situation of polymer price and all this thing, now tougher implementation of GST and all, even agri business have started moving to the organized player. Even small, small unorganized players are just wiping out from the system. So that will always be there. The consolidation will be there, and that is going to help to the all bigger player.

So that's where it's surprising that players -- big players like you, Supreme, other big players who have reported so far, the volume growth is just about, say, 9%, 10%, 15% and the kind of benefits, probably we could have had because of consolidation and a lot of players not able to source material or their sourcing material at much higher price, I think -- don't you think volume growth could have been far -- what stopping volume growth to be much better considering the tailwind what we have at this point?

Let's see, Nehal. Give us 1 more quarter, let us see how polymer behaves. It's too early to comment on certain situations because some situations have arised not only because of the shortages but because of the pandemic and because of the shipments, the container pricing, the time, so there are not only one factor, there are multiple factors. And these all factors to talk and to be bullish is too early. Let's understand 1 or 2 quarters because everybody is now getting more safer. The numbers are coming down. If you see, India is reporting 10,000 less vaccines are moving part. So in 6 months, we will know how the graph of the polymer behaves. But yes, government spending is encouraging, but who will get what pie and what will be used and how and when and what, it's too early to comment just from the speech of FM. It will -- we need to fine tune, understand and then let you know exactly what we benefit out of it.

And secondly, Nehal bhai you should also appreciate that the metro sales now started functioning properly. So that is the -- and the biggest driver for plumbing products are metros.

Sure. So what is the kind of recovery metros have seen in last quarter?

Yes, it is doing very well. That is doing very well.

I can tell you in nutshell -- in nutshell, I can tell you Nehal bhai, metros are recovering, a lot of small towns are recovering. But a lot of plants are being laid out by Astral to see how and where and what. And I think just give us 1 last quarter, and then we will, I think, come down to Mumbai and communicate to all our analysts and the investor community at large on this.

The next question is from the line of Tejal Seth (sic) [ Tejal Shah ] from Nippon India.

Sir, on the adhesive side, which side of application we are making strong inroads and -- I mean, is it somewhere on the construction chemical side or on the carpentry side or on the retail side? What part of that adhesive is showing a higher uptick for us?

See, carpentry side, the growth is there, but we are miniscule compared to the giants. So it cannot be -- we have to grow from our core products. And at the same time, we have to strengthen the products lines which we need to work on. So our core products are getting better and better day by day, giving growth, giving reach and new variants of the core products are being launched every day, and there is a lot of positive pull from the core products because you cannot avoid the core products and say that I'm growing in a section which is very weak for me and the percentage is high. But at the same time, when we go to the white glue and when we go to certain products in the construction chemicals, yes, we are working on it, and we are growing in that. The number -- is it a growth in percentage terms, if you say, is very encouraging, but those percentages are misguiding because the numbers are very small for us. So the percentage would look high. Once we reach at a reasonable number, the percentage continues, I think we will -- the results would be encouraging, but we are doing good in many chemistries which were left out and many chemistries which we need to focus. And our core products are doing excellently well. So I think the combination, which we are now put the business is very perfect and very encouraging.

Okay. Sir, on the plastic product side on this quarter, 33% revenue growth and 15% is your volume. So 18% comes from your higher realizations. But Hiranandji said that there is not much price hike on the CPV side considering that unlike in PVC. So this 18% is purely -- I mean, higher share of that is because of the product mix? I mean I fail to understand that because we have never seen this kind of...

It is product PVC price and also a good growth in the CPVC. So it is completely not only driven by the PVC. Again, I'm repeating that our Astral is the leading player of CPVC and -- so a lot of things come from CPVC side also when the volumes and things and also PVC, but Hiranand bhai will give you more detailed reply.

So Tejal, basically, you see that the pre-COVID level, the polymer price was just INR 70 a kg, PVC price, and now that price has gone up to almost INR 120 per kg. So that kind of price is there in PVC side, okay? So because of that, that effect will be there. In terms of percentage, if you count, it will be 70%, 80%. So because of that...

Okay. Last year, we did INR 500 crore of plastic revenue. On that, 18% is our realization hike, which is INR 90 crores, right? But our plastic profit growth on absolute terms is INR 56 crores. So I'm just trying to understand if the realization hike is INR 91 crore, it should directly flow to the EBIT level, right?

I think I have to check each and every number, and you can separately call me, I can discuss with you and understand your point of view and then I will be in a much better position if I have a handy number with me, and I can discuss with you.

Okay. Just lastly on this previous question about -- if we take 9 months in perspective, the plastic revenue growth is 3% and the demand for plastic products is more of like a deferred demand or pent-up demand. I mean it can never -- you can never lose that demand from the market, right? So considering that, I mean, 3% revenue growth for 9 months, if we adjust for the price hikes, the volume growth will be still probably flat or negative. I mean that kind of -- isn't there a concern that the demand -- pent-up demand has been not so, so strong?

So that naturally, because you have to understand the ground reality that the metros have started functioning now. So naturally, the pent-up demand or maybe deferred demand will come in the coming quarter, maybe next year. And secondly, you see the situation on the ground for the migrant labor. Migrant labor will come when the train will start. Take the example of your Mumbai city, local train is not working. So how the construction work will pick up? So today, you see the Godrej, maybe Oberoi, maybe other Sobha, all are doing a lot of booking. But the execution is where? Execution will take place now with the lag effect only, maybe 3 quarter lag, maybe 2 quarter lag, maybe 4 quarter lag. I don't know exact lag. Because these things will happen only once the -- all the machinery will start working at a time. So right now, migrant-related issues are still not sorted out. I'm sure Bombay, all the migrant labor have still not come back. Similarly, in the other cities also, migrant labor have still not come back. So once the train and everything will be fully functioning, then everything will be back and then everybody will start working into that. So everything will come with the lag only. It cannot happen overnight. This is what our understanding. We may be wrong in our understanding also. But this is what we are understanding that -- and that is why you see everybody is forecasting next year's numbers better than the current year's number, even current year's last 2 quarters also because everybody know that this positive effect will come with the lag only.

[Operator Instructions] The next question is from the line of Kunal Lakhan from CLSA.

Congratulations on good set of numbers. Just following up on the previous question. So we have been highlighting in the past quarters that there has been a fair bit of pent-up demand which is played out, and it continues to do so, like you said. Is that the reason why we are restraining from upping our long-term guidance of 15% growth in Pipes because we think that once this pent-up demand come down, I think demand may just normalize back? I just wanted to understand the thought process why we are not increasing our guidance based on the performance that we have seen in the last couple of quarters.

We are not telling we don't want to give guidance. These are the standard we are selling. We are not telling guidance.

You cannot upfront like things over 3 or 5 years. So even then, for 3 and 5 years, we have given a guidance, I think you must have heard Mr. Bharat bhai's question-answer on that. And the guidance is always given with all -- keeping all the factors in mind. See, there is no pent-up demand. Again, let me tell you, if there is a pent-up demand, the percentage of volume growth of all these big companies would have been much, much higher. You go with the volume growth. Value growth is coming, so that is a -- demand, actually, is the volume growth. And as you go with the Astral volume numbers, we have given a 15% volume. Value is a phenomena which may continue, which may not continue, which may reduce, which may change, which may effect the pandemic. The world itself is going through a lot of challenges. So I think what we have told Bharat bhai in the 5-year and 3-year plan is the perfect things which we have told keeping everything in mind. We don't say that we are not going to give a long-term guidance, and we have already communicated the guidance in that answer.

The next question is from the line of Sneha Talreja from Edelweiss.

Sir, my basic question was related to -- can you give us the month-wise numbers like how -- you already shared the October numbers in the previous quarter, which was around 60% to 65% volume growth and around -- more than 80%, 85% sort of a value growth. So what was the trend in November and December? And maybe some trend on January also, if you can provide?

So we don't have a ready number. But you separately call me, I will give you. But we don't take month-on-month number because this time, the situation on the ground is very scary. That's why we have given the monthly number. But normally, we don't give the monthly number. But if still you want to understand the number, yes, I will share with you. But I don't have a handy number right now with me.

Sure. I mean, my just understanding would have been on the fact that how are we seeing? Are you seeing month-on-month improvement in demand continuing or has there been some amount of...

You have to understand the base effect also. Because last year, October, Diwali was there and this year, November, Diwali was there. So that base effect will be there. So because of that, month-on-month number cannot be compared because you know -- because of Diwali, how many days holidays are there in India? So because of that, that number cannot be comparable. That is why we say that always compare the number on a yearly basis. Even I don't want to tell you compare with quarterly also, because that also will be a misleading sometimes. This year is an abnormal year, so very difficult to compare yearly number. But we always tell every investor, don't look at the number of 1 quarter or 2 quarters because, ultimately, on a 12-month basis, everything gets even out, even polymer price. Right now, the polymer price has gone up abnormally high. That's why you see all the poly -- PVC-dominated companies are giving crazy top line growth because prices have gone up by almost 70%, 80%. So monthly basis number is, ultimately, it will be a completely misleading. So we request every investor, every analyst, please look at the early number or, right now in this situation, maybe quarterly number. Because otherwise, on a monthly basis and all you will be taking a wrong decision.

Right. Right. That's all. Sir, just second question from my end was related to channel inventory. Is [indiscernible] that you're seeing some PVC resins. Are you seeing some reluctance from the channel for not holding much inventory? Any color on that?

Yes, because channel is the, I think, the lowest in so many years. Because everybody is scared when the polymer price is going to drop. So that's why nobody is ready to keep the higher inventory with them. So they keep only need-based inventory. So very, very miniscule, I can say, the inventory lying with the channel.

[Operator Instructions] The next question is from the line of Rajesh Ravi from HDFC Securities.

Congratulations on very good set of numbers. I have 2 questions, first on the tanks business and second on the Pipes business. You already mentioned that the novel industry benchmark margins are around 15%. But any asset then in terms of revenue to asset, which this business can generate? And [indiscernible] on the tanks business. Second, if you could give breakup in terms of agri, non-agri fittings and CPVC, that would be great?

So normally, in tank business, asset turn is roughly about 4, 4.5x. That is our normal benchmark. It can be depend on the company to company and the location -- how many locations are there. So it depends on every company to company it may vary also. But normally, 4, 4.5x should not be the problem. What was your second question, PVC, CPVC?