Astral Limited (ASTRAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 Earnings Conference Call of Astral Limited hosted by Ambit Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from Ambit Capital. Thank you, and over to you, sir.

Thank you. Hello, everyone. Welcome to Astral Limited's 1Q FY '22 Earnings Call. From the management side, we have with us Mr. Sandeep Engineer, Managing Director; and Mr. Hiranand Savlani, the Chief Financial Officer. Thank you, and over to you, sir, for your opening remarks.

Thank you, and welcome to all on this Q1 results. The Q1, as everyone know, was a very challenging quarter, both in the terms of business and in terms of the pandemic. And I hope and I wish that all of you must be safe, and your families and near and dear ones also will be safe and pass through this second wave of COVID, which was one of the worst wave than the first quarter. I would like to thank our team members for working under this difficult time and supporting the company. At the same time, I want to thank all our key investors, who stood by us and putting confidence in the management in this difficult time also. Now coming to the business. We all know the quarter was full of challenges due to the second wave of COVID, but due to the brand strength of Astral, we were able to grow the business by 63% in the piping segment and 110% in the adhesive segment. The details and the numbers will be discussed by Mr. Hiranand Savlani during his speech. The business sentiment is very good from the fourth peak of June onwards. It has started getting momentum, the market is picking up, the market demands are growing. And because of the reopening of economy in most of the Indian states, Astral itself, as a brand, has been doing much better and even growing at a very fast pace. South's team has some states, which are under the effect of COVID. July was extremely good so the beginning of -- so is the beginning of August. And we are seeing, if the third wave is not coming in the near future and won't be so much affected, then we would be delivering a very good set of numbers in the coming quarters. PVC polymer challenges is known to everyone. PVC polymer dropped close to 15% in the last quarter, but now it has stopped further drop and has started again increasing and it started again in the increasing trend. We have to see how it goes as the months and the time unroll. But in short, there is a huge shortage of PVC in the market, and this is going to support cash-rich companies of the organized brands and players. Similarly on the adhesive also, we were able to deliver a good set of numbers in spite of a lot of challenges. We are seeing a good growth in this business in coming quarters. And July itself has given us a very good growth number. And August also has started with a very encouraging and growth trend for us. And we are seeing the business to substantially grow in the coming quarters. Infra business, which in the last fiscal, in the first quarter was much on the downward trend. It has picked up, has shown a growth, and is doing excellently well, and so we are positive about the infra business segment, too. With newly launched product line, plastic storage tank, where we started off with one plant in Aurangabad and now we added capacities at different locations and new plants have come up, the first month run was INR 1 crore per month. And in no time, we have caught up with the market and our -- we have cost INR 4 crores per month sales from last month, and we are seeing a very, very positive growth in this segment in the coming months and coming quarters. To sum up, all the four divisions have given us very good growth, and we are seeing even better growth in the coming quarters. We have pipe -- we have segments, like we have the retail segment of pipe, we have the project segment of pipe, we have the agriculture segment of pipe, then we have the industrial segment of pipe, and we have the infrastructure segment of pipe and we have the exports division also in the piping segment. Similarly, we have segments in adhesive: one is the maintenance segment, the wood segment, and the infrastructure, the construction chemicals segment. As far as the CapEx is concerned, the outlay of the projects and the group and the -- and where we are standing is at -- Dholka wall project is almost completed and the production in full swing will be starting from this quarter. In Sangli, we have put machines to make agriculture, SWR and PVC plumbing pipes, and they're up and running. Aurangabad, we are adding pipe facilities and the machines are there. The installation is on way. This quarter, we'll be able to complete the installation of Aurangabad machine and the facility will be up and running. Bhubaneswar plant because of COVID was little delayed in the work because of the lockdown in the Odisha -- lockdown conditions in Odisha. The work is going on in full stream and the plant will be ready and operational by the month of November. Plastic storage tank, apart from Aurangabad, we created a facility in Ahmadabad. Now we created had a facility in Ghiloth, which has also started commercially in production from July, and we are also adding capacity in Ghiloth in this quarter. Also, the plastic storage tank facility is under construction. We are doing some building work and the machines will be installed. And by November, the plastic storage tanks also will be made in Hosur. So in short, we will have four locations making storage tanks as of now before this fiscal year. And then we'll be adding more locations one by one in the coming fiscal or in the end of this fiscal. We have just uploaded our annual report of last year on the website of our company and stock exchange, and I'm sure it will give you more information about the growth that we -- of Astral so far. As we communicated earlier, our company is committed to ESG requirements. And I am happy to inform all of you that first detailed sustainability report of our company is ready, and we have uploaded the same on our website. And we are also to put a separate segment of ESG on our website under the Investors Relationship camp. At Astral, we are working for one more product line, which we are planned, which we have ordered machines, and which will be launched by the December '21. This will be one more revolutionary product, keeping in mind economy and environment criteria of India in mind, and we'll let you know the detail once we are ready with this product line in a short span from now. In Resinova, we have launched one more technical upgraded and a revolutionary epoxy product called Bondtite PRO, which has got exceptional acceptance and growth from the market. And it is one of the best products in the category so far available in India. At the same time, adding more chemistries in wood segment, with maintenance segments, and our R&D is operational to give better and more economical and more viable products with better additions. And we are working day and night to upgrade all our chemistries as far as we can and possible. So we'll be launching more new chemistries in this segment in the coming years. We would answer most of your queries and question -- during the question answer. I will now hand over the call to Mr. Hiranand Savlani, to take it further and then we'll address your questions and your -- in the question-and-answer session. So thank you very much all of you. Thank you.

Good afternoon, everyone. First of all, I would like to thank all the participants for joining this phone call, and hope you and your family members are safe. Now press release is with you. So I will take only the few key numbers and the key highlights of this quarter, and then we will open up the floor for the Q&A session. The consolidated revenue in this quarter is up by almost 73%. This is the highest after so many, you can say, the quarter. Though everybody will say that the base effect is there, definitely base effect was one of the reasons. But at the same time, we all know that plumbing business, the first quarter is contributing hardly 18% of the full year volume. So considering that in mind, it was one of the best quarters I can say for Astral. EBITDA compared to last year, it has gone up substantially high from 14.2% to almost -- sorry, 15.8% to almost 22.3%. And compared to last quarter, the pipe business, the EBITDA was slightly dropped mainly because of the economy of the scale. Because last quarter, our volumes compared to the normal quarter, it was low. So we were not able to absorb the overhead. So because of that the -- quarter-on-quarter, some drop is there in the EBITDA. But if you see gross profit margin, we have maintained that gross profit margin, even if there is a drop into the PVC price. So that was the best thing of the previous quarter that, in spite of a drop in the PVC price, we were able to more or less maintain our gross profit margin. The moment now in the coming quarters, the top line will shoot up then this will be -- this overhead will be absorbed, and then there will be a positive effect on the EBITDA side also. So on a full consolidated wages, the EBITDA was up by 14.2% to 20.9%. And similarly, the PAT was up from 5% to almost 12.9%, so almost 270% growth. Now coming to the pipe side. Pipe side, the top line growth was 63%. That was very encouraging growth, and we are expecting even better quarter in the coming Q2, Q3, Q4. Because historically, if you see now the almost 14 years numbers are there in public domain that Q1 is the lowest, Q2 is better than Q1, Q3 is better than Q2, and Q4 is always at the peak. So now we are entering into the, you can say, the volume in this quarter. So we are very, very positive about the number in the coming quarters. Similarly, you can see that the EBITDA has also gone up from 15.8% to 20.7%. So almost 500 bps kind of increase over there in the EBITDA level also. And same thing with the PAT level from 5.2% to 11.2%. Now coming to the volume side. You will see that we have delivered a very, very healthy volume growth. It was not only the value growth, but there was a healthy volume growth of 13% in Q1. So perhaps, it will be the highest in the industry. Now coming to the adhesive side of the business. I think adhesive has given one of the, again, excellent quarter, I can say that we have delivered growth of 110% on Y-o-Y basis. And not only that, if you see the July numbers also in both the business, whether it is a pipe or adhesive, on a higher base of adhesive also, you will see last year the July was the peak in the adhesive. We've grown 26% last year. On this 26%, we have, again, even the growth of 36%. So you can see the kind of trajectory is moving to the adhesive side of the business. It is one of the best I can say, time we are seeing in the adhesive side of the business. Similarly, in the pipe also, pipe side last year, July was dropped by almost 7%. So a little on a lower base, we have grown up 65%. So that was also one of the best growth in the value term as well as volume term. So overall, I can say we are very, very excited about the numbers. And the way July has started and Sandeep bhai has already communicated the way August has started. It is very, very encouraging. And we are very, very much confident that in the coming quarter also, we will be delivering a good numbers. Now coming to the pricing scenario of PVC and CPVC. I think both the segment prices are now, we are expecting it will be in the upward trajectory. PVC has already started increase. CPVC also, we are seeing that in the coming time, there will be upward journey. And based on the pricing, we will keep passing on to the market because market demand is very robust, so there is no reason not to pass on to the market. So we have keep continuously passing on the CPVC price, whatever there is an increase from the supplier side. Plastic storage tank very, very encouraging entry into the new business. Sandeep bhai has already discussed the trajectory from INR 1 crore to INR 4 crores. I don't want to take much time into them. But I can say, give the sense that, it is a category where we are expecting a reasonably good number in the coming time. Once we will be open up the -- our the Hosur plant, then we will be covering almost all the zone of the country, except East, and East will -- we are expecting by year-end. So we already started journey from West. Now we open up the North. And shortly by November, we are targeting to open up the South. So the real number of plastic storage tank, you will see the next year because by that time, we will be ready with all the capacity, and we will be opening up Pan-India, our distribution. And you all know that Astral has a very robust distribution network. We have close to about 900-plus distributor and 33,000-plus dealers. And majority of the dealers are interested in the plastic storage tank. Today, they are selling any other brand of our competitors. So slowly and gradually, we are expecting, we will convince them to move to the brand Astral. Value-added product contribution is continuously increasing. That is why you can see that the gross margins are maintained in spite of there is a drop into the polymer price. So this is the basic main points of, I can say, a summary of the Q1. Now we are opening up the floor for the Q&A session. Thank you very much.

[Operator Instructions] The first question is from the line of Rahul Agarwal from Incred Capital (sic) [Research].

So there are two questions. Firstly, if you could talk about some lead indicators for demand within the piping segment. Sandeep ji, in his remarks said there are the various segments where we are presenting to, which is the agri plumbing, industrial infra, SWR. If you could just elaborate a bit on each of these, as in how do you look at -- and I'm talking about next 12 months, not yearly like a 5-year picture. If you help me understand where the demand is better than the other? That will really help. And along with that, fiscal '22, last year, you did about 137,000 tonnes in volumes. What would be a likely number, or your target internally where you're working with? That's my first question.

So regarding your first question, demand scenario. So I think we have already communicated the demand scenario is excellent. Across the board, we have brought up except agri, but agri, our forte is not there. We are the very smallest player in the agri market. So our contribution from agri is very low. So that segment was low. Otherwise, already Sandeep bhai has communicated, whether you pick up the industrial, we had have shown a good number. Similarly, into the drainage side, also fantastic number. Plumbing anyways all-time best number is coming now. So that is also -- CPVC was one of the best I can say, the contributor in this quarter also. Same thing with the plastic storage tank also. Similarly, the adhesive side also. Across the board, I can say, the demand scenario is good. That is why we have communicated that we are very bullish as far as the demand scenario is concerned. It's not only we are talking about the July number. July number is not the only indicator of the growth, but the kind of feedback we are getting from our dealer distributor community, from the project side people, when we are talking to the developer, they all are giving us a very, very positive commentary. And you can see the kind of booking is taking place, the kind of registration work is taking place from the property side and all. All these are showing a very, very encouraging sign. Only the negative part is that if something goes wrong and we can see the third wave when our judgment may be wrong also. But otherwise, we are very, very positive as far as the demand scenario is concerned, and I don't see any problem to -- in any sector, any all will be growing.

And I would like to add here that agriculture, in core agri, where we are just present from last maybe 4, 5, 6 years has not grown. But agriculture pipe use in the infrastructure segment has given us good growth. Agri has 2 usage: one is pure agri. Agri actually is not agri, but it's an EIS pressure pipe system. So when it is used in infrastructure, we have been doing very good. Second, our new product line, Silencio with Fire Pro then the industrial pipe segment and our newly launched CPVC composite pipe have done excellently well. And the response and the demand from the market for us -- for these exceptionally technological products made by us and sold by us are giving us a good growth and a good value addition to our market. And all this industrial piping and all you -- I'm sure you must be aware that we have developed our own compound. So we are most economy company in the country even as far as the industrial pipe is concerned. And our Fire also. And our Fire is now UL approval. The only company in the -- in India, who makes their own compounds, which are UL approved and the final product also is UL approved. The highest approval in the world.

And we can -- Fire also in-house development. So that is also -- we will be the most cost effective in the country.

Got it, sir. And my second question, sir, was on adhesives. So broadly, it was a good quarter I think pipes versus adhesive [indiscernible], and this has actually ended up with INR 190 crores good strong number. And July is INR 90 crores. Fiscal '22 outlook, anything you mentioned last time, I think, about INR 1,000 crores of top line what you target with increasing margins, but you would give some more color on fiscal '22 adhesive segment, both on top line and margins, please?

I think we have stick to that guidance. So we are trying our best to deliver that landmark number but maybe a few percentage here and there doesn't going to change the life. But right now, our team is working very sincerely to achieve the landmark target, which our MD has put before us. So we have stick to that target.

Sir, anything on the margins?

Margin will be more than 15%.

We will always try to improve and increase our margins. So that is always our criteria to increase margin and number of receivables and the cash cycle also, which you can see all our results from last many years.

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

And many congratulations for a good set of numbers. So first on the CPVC side of business. As you had said in the opening remarks that price is expected to increase. Is there any price hike, already has been affected in last quarter, the CPVC?

So I think we have already taken the first price rise in the Q1, okay? That was in the range of 5% to 7%. And afterwards, we are thinking for the second rise. But right now, we have selective basis, we are increasing, not across the board. Wherever it is required, we are increasing the price. So we will keep increasing the price as and when required and depend on market to market.

So whatever the price hike the supplier is doing, we are passing on?

Yes, yes, definitely.

Those we are passing on or we are working on the way how to recover the same through the channels also. So we would try to absorb the rises from the market, and we would be working on it continuously.

Okay. Second question, sir, is related to the adhesive business. Can you give how is the utilization level of the adhesives plant right now? And also, we have some 1,300-plus distributor and 1.3 lakh dealers right now with the adhesive business. How their geographical mix?

I think we don't share all this geographical number, but I can say that distributor and dealers, we have put up the whole number, but that time, we don't ever often indicated systems with us. But now we have accurate systems with the company. So when our next presentation will be there, we will give you the accurate number, how many dealers and distributors are there. So we will provide that number. But otherwise, geographical distribution, we will not be able to share.

Okay. That is there in the annual report. So that's why I quoted. Second, utilization level, how is that...

I think utilization, as of today, is roughly about 45% kind of level -- is 40% to 45% kind of level. So still we have enough capacity available with us.

The next question is from the line of Sujit Jain from ASK Investment Managers.

Complement on a good set of numbers. I just wondered one clarification you said the adhesive 15% margin. You're talking about the EBIT margin, right?

No, EBITDA margin.

EBITDA margin, okay? And last year, you had about INR 60 crores of inventory gain. And now the commentary is that prices have started rising again. So there'll be no inventory losses then therefore, this year, which sometime back was the apprehension. Then excluding that INR 60 crores, which was 2% from the last year's OPM, that base can be maintained this year. Is that understanding correct?

Very, very difficult to say as far as this thing is concerned because fluctuation is very, very heavy. So sometimes we feel that now the prices are going to drop, when all of sudden shortages comes and the prices goes up. So sometimes your judgmental error can also happen. So under this situation, I think it will be very, very difficult for us to tell you what kind of margins will be there. Definitely, if the polymer will not fall, then the margins will be robust only. It will be naturally much, much higher than the normal margins of 16%, 17%. So we are also expecting a good number in the coming time as far as the margin is concerned. But again, I am repeating it is very difficult to understand the trend of this polymer. So it keeps fluctuating both the side, then it will be difficult to complicate. If it is maintained at some level, then yes, definitely we can guide you. But right now, it is really challenging for us also to guide anyone that what we will be the margin. But we are expecting a good margin because now the polymer drop has already stopped.

And in the Rex, has that business started growing on the top line? And what kind of margins now we are taking there? Now that the commentary is positive.

So like last quarter, there was a growth. We have to see now in the coming quarter, how it is panning out because now everyone is expecting that the government spending will increase because the way GST numbers and all is coming, and hopefully, if the third wave is not affecting then the government definitely is going to spend sizable money on the infrastructure. So in that case, these kind of businesses should definitely give us a good number. Margin is somewhere around 13%, 14% kind of EBITDA margin into that businesses because volumes are low. The moment volumes will start picking up, there are high probability that the margin can go up from the current level. But because right now, the steel is not that high, so because of that, we are not able to grow the margin beyond 13%, 14%.

[Operator Instructions] The next question is from the line of Ritesh Shah from Investec.

Sandeep bhai, 2 questions for you. First is as soon as proposed a scheme of merger to simplify structure to extract the synergies from adhesive and piping operations. So I just wanted to understand what is the scope of synergies? What is incrementally possible, how best we can actually rationalize, make good of the brand and distribution? That's the first question.

Okay. For synergies, we had a very detailed meeting on the cross utilization on -- common utilization of lot of synergies. The first synergy when it comes to help adhesive, the waterproofing and many such chemicals, Astral has a huge number of plumbers enrolling with them. And most of these plumbers do undertake the plumbing work or the toilets, especially, they only do the waterproofing and many chemicals are used here. Secondly, electrical segment also, we are very strong. There are a lot of product lines, which can be used in synergy with the electricians. So that also is going to help a lot. Thirdly, the adhesive has a strong retail presence. And this retail presence for adhesive is very strong in the rural markets or Tier 2, Tier 3, Tier 4 cities also. So this is going to help us to generate the pipe business and to get us the tank business also from these retail counters because many of these retail counters cover complete product line. Secondly, the branding work can be -- a lot of synergies can be established in the branding also. That also can be very useful for the entire adhesive and pipe segment. So looking at a lot of these synergies in the business, ultimately whether it is a pipe, whether it's an electrical pipe, or whether it's a drainage pipe, or whether infrastructure pipe any, any and all the adhesives are used in this four-wall of conception. And this four-wall of conception has -- we have synergized as Astral and are going to use these trends of each of these divisions. I cannot say that company -- division, and we will -- we are seeing that this is going to help us to grow the business in the coming year at much, much higher pace and with much better margins in the -- with synergy which we are establishing. Okay. Any other question?

Sandeep bhai, I just wanted to understand how much is the overlap on distribution right now. So is the piping channel utilizing the adhesive channel and the other way right now? Or is it something which was not happening at all? And [indiscernible] is there.

Distribution is completely kept separate. Retail people are doing it, but we are not crossing it because the pipe distributors are too big, and we didn't want to put all the eggs in one basket and then do the business. So we have multiple distribution channels for adhesive, and the distributor channel for pipe is also different. We did try to synergize in the distribution channel, but we thought it is better to have different channels because the mindset is different. The pipe guy would deliver one chunk of material. And the adhesive guy is to go around in a rickshaw. So distribution is separate and we keep it separate. We don't want to put all the eggs in one basket.

Ritesh, I can add to what Sandeep bhai has shared that the biggest synergy will be the project business. Astral is a very, very strong brand, as far as the project is concerned. And most of the projects are using the adhesive, whether it is the construction chemical, whether it is a silicon, whether any other adhesive. All they are using already, but they are using maybe some other brands. So if that synergy can be worked out within the team, then it can be a big advantage to the adhesive side of the business. So similar to that, there are many synergy cost, saving synergies and all. I think 6, 7 synergies we have already communicated when we did the announcement of our two companies. So if you can go through that press release also, we've already given 6, 7 synergies. I don't have it handy, otherwise I can add to that, but there are a lot of synergies are there.

Logistics, warehouses, offices, a lot of these things. These are very, very small, but a lot of these things would be working as one synergy for the business.

Sure. Sandeep bhai, my second question is, can you give some qualitative reference to which chemistries are growing at a faster rate or which chemistries up, for like 70% of the revenues on the adhesive side. I was just trying to understand how much is B2B and B2C?

No, sorry, I will not be giving all these data because we are watched around by the competition. So sorry, I cannot share this data.

No problem, sir.

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

Sir, my first question is, would it be -- would you be able to quantify the impact of the quantity of inventory losses for PVC, which we have encountered this quarter? And also, if you could give a further color on the demand of rural versus urban?

So I think it is very difficult for us to quantify how much inventory loss, but definitely some inventory loss will be there because there is a 15% drop into the polymer price. So definitely, it should be there. I don't have a handy number. So very difficult to quantify, but can be -- guess work I'm doing, it should be somewhere INR 8, INR 10 crore kind of level. But it cannot be a right number. So don't rely on my number because it's not an exactly calculated number from our side. As far as your second question is concerned, the demand scenario, both the side is good. Rural side also working very well as well as urban side is also doing well, except some part of the Southern India is still not giving the encouraging number because of still some cases are there. And some part of the Maharashtra also, there are still lockdown effects and all those things are there. But otherwise, I don't think any problem is there. Most of the other India has started giving us the number. But selective basis, some states, there were some issues because they were -- some shops are closing at 4:00, some cities are closing at 7:00. So very, very difficult to give you the exact city-wise thing. But overall, we can say that almost 75%, 80% of the India is fully operational and maybe 20% of the India is still affected. And that, we are expecting to open up in the month of August. Some has opened up like Maharashtra and all have started opening up. And then we are expecting that the southern part will also start opening up maybe from September onwards. That is why we -- in our initial remarks said that we are very bullish as far as the number is concerned because we are expecting that once the Pan-India opening will be there, then the number should be better only.

Got it, sir. Sir, my second question is you talked about value-added sales and your overall mix. Sir, could you give us a little bit more color on that as to what is the current mix of value-added? And what are the kind of margins we generally business in value-added?

Sonali, we don't share this numbers how in percentage -- how much percentage is contributed by value-added. But definitely value-added portion is higher. That is why we are able to maintain our growth profit margin. And recently, we also commissioned the wall projects also sizable. I can say the SKUs have already started manufacturing our existing plant because new plant was still not ready, but so much of demand was there. So we already started. So hopefully, in the coming time, that plant will also pace themselves. So that will also add further to our margin side.

Also, we have added the CPVC -- aluminum CPVC composite, which is a good value added and very -- it is attributing lot of benefits in the plumbing. So that also has started picking up.

The next question is from the line of Kunal Lakhan from CLSA.

Sir, my question is on the volume growth side and the piping segment. So we did about 3% of growth in FY '21. And we have done about 13% growth in Q1 of this year. Do you expect the 13% kind of growth to continue for the rest of the year? Or was this -- or there is a -- I mean, you know that there is a serious low base impact in Q1. But just wanted to get some sense on like what could be the growth in -- would it be in double digit in terms of volume growth for FY '22?

So we are very confident that we should be delivering double-digit growth.

Okay. Great. Great. And my second question was, so you mentioned about that demand across segments for piping remains very strong. Would it be -- would you be able to like now split up the demand in terms of like how much demand for the piping comes from, from retail, infra, or construction, or real estate...

We don't share all the individual category-wise number. I think we have communicated way back 2, 3 years before that we have stopped giving all this number because competitive activities are increasing. So because of that, we don't share all this number. But we already communicated the trajectory that across the board is growing, whether it is the infra, whether it's the plumbing, whether it's the drainage, all categories are growing.

But some categories would be growing faster than the others, right? So...

That's why that also I communicated that value-added things are moving faster. That is why our margins are maintained. So CPVC and all is growing faster.

Sure, sure. And then my last question is on the margin side again like we have been guiding that in our long-term margin trajects we would be in the 16%, 17% range. We have clocked higher than that in Q1 despite the PVC price cooling off. And like you said, that the near-term trajectory for PVC prices remain upward. With that context, rate, is it safe to assume that the margins could be higher than what we have seen last year?

So like we have already communicated our long-term guidance of 5 years. So we have already said that we will be on the higher teens, that we already communicated in our presentation, which we uploaded in the last quarter. So -- but quarterly basis, giving guidance or 1 year base guidance, it is really challenging, particularly in this kind of environment. In a normal circumstances, yes, we can extrapolate and we can communicate to the investor at large that, okay, this kind of trajectory is going up. But when so many ups and downs is coming in the system, then it is really challenging for any finance team to work out exit margin. But yes, definitely, your understanding is right that if that is the case, then the margin will be good only. But I can say you with the high conviction that it will be higher than last year. It depends how the situation. If the -- my volume grows very fast, then yes, definitely we can clock the higher margins than what we have delivered last year. So it depends on the market condition, market circumstances, and how the third wave is going to affect. Because if I give you something today and maybe 1 month down the line, something goes wrong in the economy, then you will fell that you guys have guided us like this and today you are delivering this. So in this environment, I think it is really challenging. But in a normal circumstances, yes, we can definitely guide you.

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

When we look at over the last 5 years, I think is a firm we have strategically evolved from pipe makers to adhesive makers, now paints, we diversified our raw material sources and eliminated dependence, we expanded our distribution pipeline, we upgraded our chemistry and range of products. Can we enhance our plant presence in different geographies? So strategically, which of the key levers we kind of have systematically strengthened and fortified? Can we now say, of course, what may happen in terms of pandemic and other's things, none of us can make any predictions. But subject to that, if we look at the coming 5 years, probably this will be the golden period for the Astral in terms of overall character of the business? Or will it be the rate of growth of the business.

So Bharat bhai, you absolutely rightly raised the right question, I can say. At Astral, we are over bullish, to be very honest as far as the coming 5 years are concerned because the way ground reality is changing and the way now GST effect is coming on the ground, a lot of pain is coming to the unorganized side of the people and a lot of supply constraints are going on. So because of that, a lot of small players are getting affected. So all these indicators are suggesting that the company like Astral should be doing excellent number in the coming time. And that is what we are seeing -- actually a number -- forget about this Q1 number. You see the last 3 quarters number also there -- that were also very, very encouraging. So all these things are encouraging us to do more and more things in the sector. So we are not only going to add a lot of new products. We may add verticals also in the coming time. Like recently, we have added the tank vertical. We may add more verticals also in the coming time. We are already working on that. We are -- our team is studying all these things also. And these are -- can be a game changer for Astral in the next 5 years. So keep finger crossed. We are sincerely working. Now company has a lot of cash flow also available with the company. So definitely, we are going to come up with good things for the investor, whereby we can give a good return to our investor. And in the history also you have seen that Astral has never ever disappointed any of the investor. And we are very, very choosy about the -- as far as the capital employed is concerned. So we are working on multiple tasks right now. Our team is very enthu and very, very excited about the current situation. And we'll be giving you good news in the coming time, I can say like...

Bharat, I'd like to add to this. This is your perfect line and predictions. Astral has gained a very firm footing in Indian market in both the piping segment and the adhesive segment with proud and with confidence, I can say this. But today, apart from our cash flows, market, we are working on a very system-based company and which is now spanning up very, very perfectly and nicely. And second, we are bringing the best of the best talents of the industry and many, many good talents have joined us in the last, you can say, 1.5 to 2 years and many good talents are queuing up to join Astral. And these, I can proudly say, apart from the brand, apart from everything the plants, the locations, the manpower is the key to drive the business. And the right manpower, right? And second is right system. And system means whether the globe moves on electronic system, the IT systems, which is the backbone of any industry today globally. These two things we are focusing and we are going on the right path. Absolutely correct that brand, which has now a stronger presence in the Indian market, will become stronger day by day and year by year.

Sure. And therefore, to -- [indiscernible] words in your mouth, but would it be fair to say all the hard work, risk control of -- in the business by diversifying into verticals, into different products, distribution, geographies, raw material and many more to come, not just in terms of the rate of growth, but the character and the solidity of the growth rate, is the coming 5 years probably the most important defining golden period for the Astral?

Absolutely.