Astral Limited (ASTRAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 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.

Thanks. Hello, everyone. Welcome to Astral's 3Q FY '20 Earnings Call. From the management side today, we have with us Mr. Sandeep Engineer, Managing Director; and Mr. Hiranand Savlani, the CFO of the company. Thank you, and over to you, sir, for your opening remarks.

We all welcome you to the Q3 results conference call. And firstly, we wish that you and your family members are safe. As we all are passing to this third wave of COVID, which has been equally challenging, but much safer and much smoother, I can say, than the first 2 waves. And we hope that this would be the last wave so that the business has become more normal, and the globe comes to the normal days it used to be. As it before in Mumbai, the Ahmedabad has the same effect of COVID going on, but it is on its peak in Ahmedabad, and we hope that the same will normalize in coming few days. As you know, there are challenges of COVID across the globe and equal challenge of supply chains and disturbance is created there, which is affecting the prices of raw material, polymers, chemicals, which are used for our adhesive then in the plastics business. And this volatility and the disturbance, we hope that would normalize in 2022. And at the same time, we have challenges on running the various locations and taking care of the people at the various locations at various offices and head office. But with all these challenges, facing the challenge and facing the time if we prove we are passing -- everyone is passing. Astral team has done a reasonably good job taking the company to a new height. As you are aware that we are working with multiple tasks in the current environment and adding new products in both categories and adding new businesses, verticals, expansion activities across all the plants is at its peak. And now let me take you one by one to the things which we have accomplished and the things which we are in the plant, which will be accomplished by this fiscal end in 2022. The Bhubaneshwar plant in Orissa (sic) [ Odisha ], in the East is ready, and we are just waiting for the government in the final connection of the power. Till then, the commercial activities -- Till the commercial activity starts, we have started trials of all our machines and also started to apply for the approvals with the Indian standards for the products which we are going to make. There, in the first and the second phase. Similarly, at the Hosur plant in the South, we had communicated that we'll start our water storage production facility. The same has started its production and its streamlined and the supply of the water tank will shortly start for the south region from our Hosur plant. Coming to Ahmedabad Dholka plant, we have been talking about this Valve project since long, but I will be happy to let you know that the Valve project is complete and many sizes of these valves have been launched in the market and still a few more are in the pipeline to be received, and we launched the new SKU. But the range and the launch will be completed before 2022, and this plant will be completely operational with many, many different sizes of valves and different qualities of valves and different applications of valves being made at this plant. Coming to the Santej plant in Ahmedabad. We have started production of blow molding tanks. We were first making the tanks with the rotomolding technology. There are 2 technologies to make tanks. One is the rotomolded technology and second is the blow molded technology. So we have installed our first blow molding machine, and we have started manufacturing of tank both by blow molding and the rotomolding. The blow molding technology gives advantage of faster production, better strength of the -- equally better strength and saving of the raw material, making tanks which are used in economy range in the rural area. We were working on a special product line for a PP drainage system. And the product line, Astral Drain Pro has been successfully launched with all the sizes, all the fittings and a complete range just a week back. This is -- this product line is for the first time made in India. It is a very innovative product range. It has many advantages. It is launched with a high-end technology. And it also gives equally price advantage to take on the conventional systems but gives many, many advantages. The highest advantage is that it has a very high intake strength. It is a maintenance free, noise insulating properties and many other properties which we have listed down in our press note, which has been put on the site. And this has been successfully launched after effort of almost 1.5 years as we wanted to launch the complete range at one go, it took time, but we have a complete range, which can supply the complete requirement of the drainage funding by this new product line. Coming to the Rajasthan plant. We have started blow molding of tanks, 2 in Rajasthan apart from the rotomolding tanks made there. The need of blow molding tank, especially in Rajasthan and North region is very high, and we will be able to capture more markets in the region with making the tanks and the blow molding technology. So the last quarter has been a quarter of -- the last quarter has been a quarter of execution and expansion activities. And now as we start to generate the revenues from the new products, we hope that we would give a better growth and a more better market coverage will take place with all these new products in line. Coming to Resinova, the Adhesive business. The construction of the new plant at Dahej is in full stream, and it is actually going as per schedule or a little before schedule, and we intend to start certain chemistry manufacture in Dahej in 2022 end. Recently, we have launched a new solvent cement products under the name [ Pipe Fix ] brand for rural India market. This will increase our market share, expand our market and will be more effective and would capture the rural market for Astral for the solvent cement business. So we will have multiple range of solvent cement starting from the most premium one to the mediocre range to the range which can be even catered to the lower end of the market. I would be pleased to let you know that we have recently got the accreditation of Great Place to Work by a survey, which was done in our organization by the Institute of Great Place to Work Institute of India. So Astral is now one of the recognized places that the satisfaction of work and the people who work with us are greatly satisfied to be with us for a long-term basis. And this has helped us to increase our bandwidth of manpower, to increase our manpower strength and to get more professionals to work for us in the company. In the sanitary and faucet business, which we have announced, and we have discussed in the last con call. The team has completed the design work of the product, identified the vendors for outsources. We are going to launch the product -- a complete product line. Again, we are waiting to launch at one go, the complete product line in the month of May 2022. Initially, we will be working on outsourced model and parallel. We will be working on putting up our own facility in India, which would be equally coming at a very fast pace. As you know, everyone knows that in the recent budget, a lot of emphasize has been given on the allocation of CapEx on water and housing. And ready inventory of the developers are also following very sharply. This is all indicating a future is very bright for Astral products in the coming time. I would hand over it to Hiranand-ji for the financial numbers and go in more details through your question-and-answer session. So thank you very much, and over to Hiranand.

Good evening, everyone. Thanks for participating in this con call. I think before I go to the key highlights of this quarter, many of them are already Sandeep has explained and communicated, but a few more I will communicate before that, let's go to the number. Q3 number, we all know that the industry was passing through a huge degrowth in the volume. But compared to other leading players in industry, the performance of Astral was quite better, and we were just down by only 4%, while other industry players are almost in the double-digit down. Even if you see the 9 months with this number, we are still much, much better position of 9% volume growth and which is one of the highest in the industry in the listed player. We all know that challenges of the market in Q3. So I don't want to again repeat on all these challenges, but I can only say that thanks to CPVC demand, we were in a good shape. And because of that, our margins are still better, and our realizations are better EBITDA margins are also equally strong. We all know that now, globe is moving towards focus on the ESG requirements. And Astral is equally vision to deliver quality product to our customer and through sustainable value creation and demonstrate ethical leadership. And to continue our goal to on that direction, recently, we have carried -- this S&P Global has carried out this CSA Score for all the corporates and in which I'm very happy and proudly say that Astral score on the ESG, which was just 11 points in last year, which had increased to 38%, which is a substantial jump we've taken in the ESG scoring. And further, I can say that we were the much better than the average of the industry into this segment, that is the building material category. So we are equally serious about that side. And being a growing company, we always -- our focus will be that we should give -- take care of all this requirement. If you see our press release in which we have given the information of ready inventory of housing, which clearly suggests that the sizable drop in the ready inventory in India, and there will be a good growth in the coming time for construction industry and that in turn will not only help our one category, but across all the categories, whether it is a pipe, tank, adhesive, sanitary ware, faucet, all the products demand will increase in the coming time, which clearly indicated in the graph presented in the press release. And that graph is thanks to this, I can say, [ Deloitte ] who have shared this data to us. The biggest positive side we see during this quarter is that we were working for many expansion projects. And I think we were repeatedly talking about the expansion activity and Sandeep has rightly said that we were acting on a multiple tasks. So that part is finished now. Majority of the expansion projects are going to end this year and all these new expansion activities, including this faucet and sanitary ware which are we are going to launched in the month of May 2022. I think the revenue will start flowing from this expanded activity from the next year onwards. But still, I can say, we have to keep a little patient because initial journey will always be a challenging part. So the real number, which we want to see, that will be FY '24. Because by that time, I think all these new products will settle down in the market, whether it is a tank, whether it is a faucet, whether it's a sanitary ware, whether it is SWR new products, all will be matured and accepted by the market in next year. So the real number will come in FY '24. Earlier, I also communicated to all of you that the piping state or maybe you can say our other products state in the building material category in the construction phase comes very last. So once the structure of the building will be ready, then only the requirement of pipe, faucet and sanitary ware will come. So today, if any developer do the launching announcement, our turn will come maybe 18 months down the line. So now I think in the last 1 or 2 quarters, the launches are picking up. So I think still we have to wait for a couple of more quarters, 2 to 3 quarters, which I complicated last time also, that we are expecting that the real demand in the construction side, ancillary products like pipe and all this category will come from second half of next year, which I have communicated earlier in my many communication on media as well as in the con call. So we are continuing with that, that we are expecting that from second year next half onward the demand should start picking up for these all products. Also, Sandeep has already cleared, communicated that the recent announcement of this budget, which is a huge, huge allocation of CapEx which is going to support our -- most of the products. And particularly, I can say to the Rex product, that is the infrastructure product, which was not giving us growth in last 2 years. We are communicating continuously in every con call that our infrastructure business is not doing well what we originally planned at the stage of acquisition. But now we are confident that the way government has allocated the fund, the infrastructure boom will be there in our country. And all these products of Rex is going to give us a good number and which we can see in the previous quarter also. So already some uptick has already started, but it is just I can say, beginning of the journey, a lot to come in the coming quarter. So with this, I think I can only say before I start the Q&A session that our water tank expansion, valve, SWR, sanitary ware, faucet, all is completed now. So keep little patient, we can assure you that the FY '24 number will be really a blockbuster number for us, and we are eagerly waiting for all products to settle down in the market once we will come out from all these initial fitting problems of the product, we all know that initially some problems will always be there at the launch stage. So we'll sort out in this coming 4 quarters, and the real number will flow in FY '24 onwards. So with that, thank you very much for patiently listening. And now I'm opening the floor for the Q&A. Over to moderator.

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

Congratulations for a decent set of numbers given the volatile environment. Sir, 2 questions. Firstly, starting with question on lower-margin adhesive. Could you help us understand how is the demand and pricing on the finished goods side of adhesives as well as the same on supply side and pricing of raw materials? What are the trends what you saw in third quarter? And what should one expect going into fourth quarter in terms of revival of margins?

Basically, the prices went abruptly high of all the chemicals which we had to use to make the adhesive. And the environmental scenario competition and plus the price increase in adhesive is done at a lag effect because you have to have the MRP on the product line. And everyone was not moving at that pace. So we could not, in last quarter, pass on the complete price rise of the raw material which has resulted in this margin issue. At the same time, as we were growing at a faster pace, and we have to keep the pace with the market growth and take the decisions as per the prevailing conditions of the market where everyone acts one by one or starts acting first. So we had some decisions which we had to take at the later stage. And if you come to this quarter, the price increases have done, have been implemented, done in the market. Product is going with an increased price. At the same time, there is our support from the raw material pricing, which has softened out very fast. And that increase also was very fast. So that cycle of fast increase and late communication to the market because of many other issues, revenue in the market. And plus, the product already been committed and, in the market, resulted to this lower margin issue.

So I think I can add to this. We originally in the beginning of the year, we communicated that we are targeting to be an INR 1,000 crore company this year in the adhesive. I think that we communicated last in Q4 last year. So I think more or less, we are on the track. So we are close to about INR 708 crores in this 3 quarters. If you see the run rate of last quarter also, it was INR 256 crores. So I think we will be close to at that mark, which we originally forecasted. Margin was a little bit disappointed in this quarter. One of the reasons was our U.K. company's performance was very subdued because they -- unfortunately, they couldn't wait their key raw material during this quarter. So because of that, there was a degrowth into that company. So that was a very disappointing thing for us in this quarter. And because of that, the margins are also under pressure. Otherwise, I don't see any problem into the India operation. But because of this U.K. company, they couldn't get the silicon. So because of that -- and their major product is silicon. So because of that, they were not able to fulfill the targeted number. But now, we are confident that now they have got the material. So January was excellent for them because of the pent-up demand also. So I don't think we will be away from our landmark figure of INR 1,000 crores, which we have originally forecasted. And margin may be a little bit here and there, but our bigger picture is that we should reach INR 1,000 crore mark. Margin may come even after one quarter also down the line, but that's okay.

But this quarter, even the silicones are better off, the $2.5 silicon went up to $7 to $8 and even $9. And then now it has softened out due to various reasons. But I think even U.K. is doing excellently well now. January was great, and the same thing will continue. The Indian operations also is doing great.

Got it, sir. Secondly, sir, this supply of resins in the country, right? Has been creating a lot of problems and volatility. Obviously, COVID was one large reason. But I just wanted to get your sense in your intel as in on any domestic capacities coming up for PVC and CPVC? Do you foresee that next 3 years, the situation of short supply or demand supply as much as continue? Or you think there is some company, which is like Reliance or Chemplast or Birla maybe trying to put some manufacturing capacity, which will help our domestic suppliers on PVC resins as well as on CPVC resins? Any thoughts on that, please?

CPVC, I am aware that everyone is working on it, and there would be new capacities coming into India. But we don't know when this capacity will be coming and where it will be operational because such communications have not been done to us actually by all these giants. But yes, they are working on it. PVC remained volatile globally. It's not in India, which is only affected. So please get that this is a global phenomenon of PVC volatility. PVC volatility is something which is old, but this time, it was very uncertain and very on high peaks. Or still these volatilities will continue with PVC. As far as CPVC is concerned, as far as I know, at present only is the capacity and the capacity is very, very, very less compared to what India needs. New capacities planning are there, but I don't know at what stage we are, and what stage that we will be bringing in CPVC. Even if the CPVC is brought in by the plants to stabilize the product and to deliver it to the market will take its own time. But as far as Astral is concerned, it has a strong hold of supply of PVC, Reliance is greatly, greatly supporting us, and we have never had a shortfall in our PVC. And rest, we mitigate by imports were also we have great support from clients. Similarly, CPVC also -- Astral has strong ties with its suppliers, and it has always met the demand needed by Astral. And at the same time, Astral has met the demand. It just come on from its distributor in the market. So we are closely planning and closely monitoring and closely looking to the situation as far as we are concerned. As far as the production planning in India is concerned, yes, they are there, but I don't know the time line when it will be up and running for all these products, both [indiscernible].

[Operator Instructions] The next question is from the line of Sonali Salgaonkar from Jefferies India.

Sir, my first question is regarding the current market scenario. How do you see the trends in demand inventory? And also, if you could quantify the price hikes, we have taken in CPVC over the past 9 months?

I think, Sonali, we are continuously taking the price rise into all, whether it is a PVC or whether CPVC. I don't have an exact number how much we will take 9 months. I think that we can share in off-line once this call is over, you can call me. But this is a phenomena continuously happening because PVC still, there is some class almost like in the 1 month and 1.5 months, the drop has already started. But CPVC there is no drop. It is a continuous 1-way journey because if you see the PVC price rise compared to the CPVC price rise is much, much lower. So we are expecting that the CPVC price to go further higher from year on also. And that is what indications we are getting from the suppliers also that PVC price will go up from here on also. Two reasons. One is that genuinely PVC price has gone up. So raw material of the CPVC is PVC only and chemical prices are also high. So generally, their cost has also gone up. Secondly, there is a shortage, as Sandeep said, that there is a globally supply disturbance happening. So because of that also, everyone wants to make money. So in both fronts, we are seeing that the CPVC will go up from here on also, and we are continuously taking price right from the market. And that is why you see in this 9 months also, we have maintained our margin what was last year. So we are continuously passing on to the market. Being the leader in the market, we have to pass out this in the market, and that is what exactly we are doing. PVC also, both types whenever price rise is taking place, we are passing on to the market. Whenever there is a drop, we are reducing the price for the market. So that phenomena is well accepted by the industry since many years. So we don't see any challenge into that side.

Right, sir, in the first part of the question on the demand and the inventory and where do you want to see the volumes and margins going in Q4?

So demand, I can say, it's a moderate. It is not still picked up in the month of January. So we are, I think, plus by almost double-digit in value terms, a little higher double digit, I can say. Volume terms, I don't have a handy data on a monthly day and number. But I think it should be either flat or maybe 3%, 4% kind of volume growth because January beginning was weak and secondly, everyone was expecting that the price growth to happen in PVC, so many people didn't start that thing. But I think now slowly and gradually, the second half of January onward demand is picking up, and that is why we were able to grow double digit in January also. But yes, we are expecting that in the coming time, demand should start picking up because now I think COVID cases have started reducing and things are trying to settle down. But this -- that doesn't mean that the challenges are not there in the market. There is a huge challenges out there in the market. So nobody expected that the month of November will be washed out. So October was fantastic and November, all of a sudden, what happened post Diwali and everything becomes stand still. So this kind of volatility will be there in the market. So very, very difficult to predict it. So we don't want to misguide anyone that we are going to do this. We are going to do that. But we have worked within this kind of uncertain environment, as far as we've never seen in so many years of our working. So keep finger cross. Things will be better only, January was good. So I think February, March, we will try to cover up whatever the lost volumes are there.

Right. Sir, my second question is...

That our teams and we are -- we are doing the best effort. So I personally feel that we're able to do break in this because the teams are completely geared up with the market and distribution. We are trying with our work, and we are ready with the inventory part we have us .

I think inventory, we are more or less on the line. We don't have an abnormal kind of inventories also because the reason is that we -- PVC sizably we are sourcing from Reliance. So because of that, we have a reasonable inventory level. CPVC was a little higher inventory, I can say, because of this uncertain environment we kept. So -- but overall, I think our working capital days, which is in the range of 30, 31 days. In this quarter also, we are somewhere around 31, 32 days of this.

Understood, sir. Sir, my second question is regarding sanitary ware. If you could just give us a broad-based understanding of what are the kind of revenues, margins that you are expecting in the first couple of years post the launch? And also your overall CapEx number, including the CapEx for sanitary ware, since you mentioned that initially, you will be working on the outsourcing model. But as we advance you've been investing in own manufacturing as well? That's it from my side.

A lot of things are volatile here, lots of things have to be frozen. Lot of things are in the pipeline of getting things in order. So we would be currently telling you to give the exact picture after this quarter when we have the next call. The reason behind this delay is COVID effect, which has come in Ahmedabad. And from last -- almost the 20, 25 days the working in our office has been completely disturbed. So I will not give you ballpark numbers or ballpark things. I would give you a complete -- I know that as to let all of you know about the whole plan, and we'll let you know with the numbers in next con call when we had this fiscal and last quarter con call. We would also try to come down this time to Mumbai and have a personal feel if possible and if COVID permits, otherwise, we have a very extended con call.

I can add here what Sandeep say, that the CapEx plan, we are not still freeze out for this because we have clearly mentioned that we are going for the light CapEx model. Right now, we are not going for any CapEx at this stage. Let us first, we launch the product. We understand the market. We understand the products properly. And afterwards, only we will decide what kind of CapEx we should come in. So I think CapEx will take some -- a little more time. But until that time, it will be only outsourcing model. So no further big commitment to that business, except does the inventory side commitment.

Right. Sir, what about the CPVC price hikes you took in Q3?

Q3, I think we took around -- roughly about 10% kind of level.

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

My first question was in terms of the Rex, I heard your statement in terms of the allocation. We see that the allocation has gone up from INR 45,000 crores to INR 60,000 crores for the Jal Jeevan Mission. If you could help us understand, out of this INR 45,000 crores, which is there for FY '22, how much is that really is attributable or allocated to require for these product categories at the industry level? Would that be 2%, 5%, 10% or?

We don't have authenticated data. So I think we will skip this question because we don't have numbers with us. No analyst or no one has published this kind of data, so we can't comment on that. So we don't have an authenticated number. But see, we are not focused only Jal Jeevan Mission. The Rex products are not for the Jal Jeevan Mission. Maybe 1 or 2 may be there, but maximum product will be the infrastructure side, so road construction side, railway side, port side, airport side, these are the big projects where this Rex products will move for the drainage application and the railway applications and all. So I don't think it is restricted to only a Jal Jeevan Mission. There are many such projects where this Rex products are going to go. So we are expecting number should be much, much better in the coming time because afterwards, the Board, I think announcement is being done by the government. Now only challenge is that how much they are going to execute, that is where the challenge is that. If they will rightly execute, then I think our number should be much, much better, much, much better, I can say.

Okay. Okay. In terms of the contribution from these categories, how much would that be at present? I know it's hard to give a perfect number, but broadly, if you could tell us the range, how Rex contribute in terms of volume or value. And any order book number you would like to share?

Volume, we would not be sharing, but I can in short, say that the Rex had a little slowdown in some of the months where the pandemic was high because you can understand these projects where and these are drainage and sewage products plus a lot of other applications for the overhead railways and things like that, the macro projects. But last few months, we have seen the things that are back on track, and it has been doing -- is getting slowly back on track and doing much better up than when it was on the slower side. But rest, we cannot share all the numbers.

Understood. And the second question I had, in terms of the market share in CPVC category, would it be possible to get some sense in terms of what is our market share at present? And how was it, let's say, 3 years ago?

No, we don't have an idea. But I think from clearly, I think before we start the con call, I just received WhatsApp message from one of the analysts, I will share that to you also that you see in the last 4 years, 9-month basis, he had done the analysis and the CAGR volume growth for Astral was 9%, which we have already published in our number, 9.7%, so close to about 10% kind of growth. Compared to the other players, no one was there -- a couple of players were in a negative growth and one player was only 2%. So clear, clear message that Astral is gaining the market share. And you all know that Astral is predominantly a sizable player into CPVC market. So we definitely must have gained the market share in CPVC. Other way also, you can see that our per kg realization is also highest in this quarter. So that all indicate that we are gaining the market share in CPVC major than the other products. Our market share is continuously going up. But because of the competitive activity, we don't want to share all these numbers with you. But otherwise, we can communicate clearly that we are gaining the market share.

Okay. And just industry level, if you could highlight how much is the CPVC tonnage on an average annually, let's say, FY '21?

I don't have authenticated numbers. But it should be on the positive side only.

No, absolute numbers at tonnage in terms of would it be about 200,000, 300,000, 500,000?

No, no, I don't have a data.

We have .

We don't a data, we don't have the exact data. Some people are tracking from somewhere from customs, but I don't have an authenticated data. so I will not comment on that.

[Operator Instructions] The next question is from the line of Sneha Talreja from Edelweiss Securities.

Congratulations on a new sets of numbers. Sir, 2 questions from my end, you started with FY '24 will be kind of a blockbuster. We do understand you've already achieved like an INR 1,000 crores turnover in your adhesive business, almost there for this year. Could you tell us that the FY '24, I'm not asking in near-term numbers, what are the growth rates that you're looking at segment? Is there any new target that you have put in place for adhesive? And especially where you see a sanitary ware and water tanks segment going?

Sneha, that last year, we have given a broader power growth trajectory. And we have clearly mentioned in our presentation that our aim is to double the top line in next 4, 5 years. So I think that has already been communicated last year. So every year, we cannot change it in a way. I'm telling you the long-term picture. Quarter-on-quarter will be different, half yearly numbers, maybe plus/minus, yearly, maybe plus/minus. But broader picture, we have already shared that we are targeting to double our top line in next 4, 5 years. And I'm very happy to say that in first 9 months of this year, we -- our top line growth was 44%. Of course, to some extent, polymer price has played a good role. So to that extent also. But -- so we can say that we are ahead of the schedule, what we hope communicated. And we have stick to that number only that we are doubling. Minimum, I'm telling you, doubling the revenue in next 4 to 5 years' time. And adhesive side, I think we have already communicated INR 1,000 crores ballpark number. So we are almost close to that level this year, and then we will give you the road map of INR 2,000 crores top line and how many years, that we will communicate to you in a yearly con call. But we are aiming to be an INR 2,000 crore company. But how many years it will take 4 years, 3 years, 5 years, I think once we will be ready with our budget for next 3, 5 years from our team, we will communicate to you.

So that clarity was better. So anything such on the sanitary ware and the water pumps, or is it too early to talk about those segments?

I think Sandeep has already replied to this question. It's too early. Let firstly initial fitting problem is always there for any new product. So giving good number or a big, big number is very easy to say, but practically to achieve is always challenging. So we don't want to unnecessarily misguide that we will do INR 1,000 crores or we do INR 500 crores or INR 100 crores plus year. We don't want to give any false commitment. Let us first launch, we have to understand first the market. Unless until we will not understand the market, giving a number or anything, it will be too early, and it will be too premature also. So let us make us wait with finger cross, give us a couple of quarters' time, we launch, we take the feedback from our channel partners, how they like our products? How they like our pricing? How logistics systems are getting settled down? Once all these things will be settled down, then only we will be in a position to do some, I can say, number game. Till that time, I think whatever we will complicate to you, it all will be in air. No concrete base will be there on that side.

Sure. Got that, sir. just one clarity, which I needed on the inventory positioning. You definitely said that your inventory is at a moderate level and channel inventory is at a low level. What -- how would it be spreading across CPVC and PVC, we do understand PVC inventory levels are at this point of time the lowest. But what would be in case of your PVC-based distributor? I mean, would they have a moderate inventory or again, those inventory levels are pretty low at this point because of the shortages?

So I think the inventory levels are pretty low, I can say, sizably low because everyone was expecting that the prices to drop. But CPVC inventory was a little better than the PVC, I can say. Because CPVC, everyone was expecting that the price drop will not be there. So there, the peer sector was comparatively less than the PVC plan. PVC across the board, inventory was low. That is why January was comparatively good and February beginning has been started with robust numbers. So I'm of the view that still inventory levels are low. So some restocking will take place in this quarter. And once the more confidence on the PVC side will be there or maybe a little upward cycle, maybe one would be price rise can take place from the Reliance side. I think then the confidence will be more in the street, and they will start restocking very fast. So hopefully, that base will come in the coming time. And then the distributor will be again back to that normal event. But as of today, definitely, the inventory levels are low. And secondly, everyone is passing through the tough time. So dealer and distributors are also passing through tough time. They also don't want to take a risk because so much of volatility there in the system. So everybody want to be away from the inventory losses. So because of that, they are also sitting on a light inventory. And that will continue for some more time, unless there will be a clear message to them that now from here on, there will be no price growth, then only they will come forward and they will start picking up the contract -- volume. Till that time, we are of the view that dealer and distributor will shy away, and they will keep light inventory only. And once this -- resin trade will again start or some negative news comes on the polymer side, then only they will start picking up the inventory. Until that time, there will be light only. You can take the channel check also whenever we talk to our partners, everybody is afraid, so they don't want to take a risk.

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

My question was on the volume side. The core business volume for the 9 months is about 8.8% growth. Now just wanted to understand in the context of like last year's Q4 was quite strong. Considering that, how do you -- how do you expect to end the year at? And secondly, on the follow-up, basically, FY '23, you said that the expansion will start actually showing results from FY '24 onwards, but on the existing core business, what kind of volume growth are you expecting in FY '22?

I think we have already communicated that we will be maintaining our double-digit mark of volume for next 4, 5 years that we have already communicated in our last communication. And we are continue standing on that our communication that we will be able to maintain double-digit volume growth in the coming times. And now it looks that the real estate will start picking up, then in that case, it can be a higher numbers also. But till that time, I think, today, you see when the industry is degrowing, our industry is hardly any growth. Under that environment, you are delivering close to double-digit mark, I think that itself is a good number according to us because we already internally when we sit, we compare with the industry ballpark figure, or the industry is growing. If we are better than industry, then I think our team is doing a good job. But if we are lower than the industry average, then there is some problem with our team. So I don't think any problem will be there in the coming time. But again, I'm repeatedly saying that in a business ups and down will keep coming. So don't see the quarterly number only, always look at the yearly number and Astral is always believing in the consistency of number, and we repeatedly telling that we are always believe in the consistency. And that is what require on a yearly basis, not on a quarterly basis consistency will be a big, big challenge to us to maintain. So we will maintain the consistency of this number of double-digit growth in the coming time also. If the market sentiment will change, industry will start improving, then in that case, we may deliver a better number. But till that time, industry is not picking up, we will be maintaining this kind of volume only. Again, it depends on ups and down on the polymer also. It is not only that polymer volatility is also equally important.

But if you see last year, the second wave started after March. This time, this certainly third wave is going on, but fortunately, people have put it on side and people are working, but still there are certain disturbances coming and going in many areas. So we keep our fingers crossed that things come down after February. And the way things are going with our sales, we would be -- as I earlier told that we and our teams will be working hard to know our best as possible in the month of March -- in the month of February and March and the Q4 quarter. So things are on track. I think they should remain on track, and we keep fingers crossed that they would remain on track. Then we would be able to give sustainably good numbers till the Q4.

So just to follow up on that. Like, I mean, how much of a demand -- pipe demand comes from like direct B2B sales to developers?

The certain numbers now we are not going to come out with because of lot of competitor eyeing on the new market initiatives, and new market development, plus market share. So I think we will not be letting you know about the .

And regarding your question of developer, we don't directly deal with the developer. We give it to our distributor and distributor in terms sell it to the developer. So we don't have an authenticated number also that how much it is going to the developer, how much it is going to the small teams or how much it is going to the retail side. So very, very difficult to bring the exact number, but we don't directly deal with the developer.

So the reason I was asking was that you mentioned in your opening comments that the housing sales have been good, but largely, it's been driven by reducing inventory levels and the new launch cycle has just started, which will start reflecting in the pipes demand about [indiscernible].

There are 2 types of distributors. Certain distributors are project suppliers. And from their growth, we can come to know that the supplies in the projects and through the direct industry is picking up. And we also go on market. We have a team who does retail and projects. So we do a benchmarking, but to give out the exact number and give out the bifurcation, obviously something which is not handy, one. And secondly, we have certain distributors who are dealer focused. So from their sales we come to know that the dealer network and the strength is increasing. But going directly to the supplies to the builders or the dealers, which we don't do, we do through a chain of distributor. And we keep a tab on the numbers where we come to know how the things are reacting in the dealer network chain and in the builders. So -- we and our teams also equally keep a tab on it and try to get converts and work on various projects with the builders and with the .

Sure, sure. That's helpful. Just I want to...

Sir, sorry to interrupt, but for any follow-up, maybe request you to rejoin the queue, please? [Operator Instructions] The next question is from the line of [ Rishab Bothra ] from Anand Rathi.

Yes. Congratulations on the good set of number and containing the margin contraction. My question is since one of the analysts already said that FY '24 would be a robust payer, I would like to know which segment would we like to highlight that will contribute maximum in this growth-oriented year?

Can you repeat your question? The initial, I was not able to hear. 24, you say that -- but I couldn't get the complete question. Can you repeat question?

Yes. What I'm trying to ask is in FY '24 seems to be a good year, a robust year because of all expansion coming on seen in FY '23, which segment according to you will drive the growth maximum?

I think all the segments. All the segment will drive the good growth, whether it is a pipe, whether it is an infra, whether it's a tank, whether it's a sanitary ware and faucet, where the base will be very low. So I think across the board, we are expecting should deliver great number.

And absolutely, the business is also equally good, will be at a good size and level in the next 1.5, 2 years. And we did see the creation of the market would be even better. I think most of you must have seen the new initiatives and the campaign we are running is amazing. And the new Bond Tite Pro, which has been launched, it is the first of which type of the product launch globally, actually. Let me tell you, this industry has been globally launched for the first time in and we have a campaign running, I think most of you must have seen the campaign.

So I'm sure you must have seen the Bond Tite ad which is already aired right now. It is going on many channels.

Secondly, sir, what I was trying to come to know is, since we are almost across all categories in the space in terms of finished products. Is there any left out which we are eying for going forward once these new capacities are supplied? Or are we trying to backward integrate in order to secure raw material availability? Is there a backward integration process in mind, PVC resin?

In our adhesive chemistry, some of the chemistries when we come up in line in the Dahej plant, we would be going in some chemistry a little backward integration. I cannot say complete backward integration.

Okay. But not for PVC resin as of now?

No, no, no. No way PVC resin.

And sir, what kind of quantum of debt can we pay off in FY '24.

There is no debt on the balance sheet. We don't hand -- maybe INR 30 crores, INR 40 crores debt will be there.

Do all expenses are internal accrual funded, right?

Yes, yes, yes. All will be from internal accruals.

Actually, major chunk of the expansion is complete, going to complete this year. When you say that many are already. So next year, there will be some expansion, maybe then you know, plant in the Dahej and maybe some more big, a little bit come. But other way sizable expansion, we are going to complete this year in a little bit, whatever left out in there for next year. And we have enough cash available with us. And plus, we are generating a sizable cash flow every month. So I don't see we need any money. On the contrary, there will be a problem of where to utilize this cash flow.

That is what I was coming to. So since cash flows would be significantly large once all these sites become operational. So utilization of the available free cash, I was coming to that only. If you could throw some light to the investors as to the utilization of the [indiscernible].

Right. Even today also, we are sitting on a [ INR 300 crore ] plus cash still in spite of so much of inflation in the -- you can say the raw material side, whether it is the [indiscernible] or whether it is the pipe grow, but across the board inflation is there. After providing this inflationary inventory also, we are sitting on INR 300 crore of cash. So definitely, we don't need that much of care. But because of this COVID situation, the Board is of the view that let the situation settle down, then we can communicate to the investor at last that what we are going to plan for this additional case, what is existing available with us. And what is going to be generated next year. And based on that, we will communicate whether we are going to increase the dividend payout ratio, whether we are going to take the buyback route or whatever. We will communicate the disposal plan. Plus, I can say that we are having expansion plan on hand with us, like faucet is there, sanitary ware is there. So how much we are going to provide for that also. Plus, we are working on a few more product categories also. So -- with the time only, we will be able to communicate it. But right now, because of COVID, we are not disposing of the case. But next year, definitely, we will communicate the plan.

We have already taken new product lines at some point, we have -- we will have avenues where to invest, and we will be rightfully investing this money for the expansion of new segments in the construction, in this field of industry.

Okay, sir, got it. I'll come back in the queue if more questions are there. But lastly, can you quantify -- I'll come back into last one. Can you quantify the impact of business loss owing to COVID and the income tax side? I guess 1 week was completely lost out on the corporate office side. So if you could mention that, and I'll come back in queue.

What -- can you repeat question?

Sir, can you quantify the business loss on account of the COVID impact in Q3?

No, no, very difficult to work out that number because some loss will be there, some months, some pent-up demand will be there. Very, very difficult to identify how much is because of the COVID or maybe some other regions, at least I will not be in a position to work out exact for that.

COVID, everyone has faced the same way. So there's no way to quantify this at all.

And sir, lastly, on any update on the income tax side?

Sorry to disturb, Mr. Bothra, please return to the queue.

I think income tax side, we have already given the verification on the stock exchange website. That is not exactly communication from our side. They carried out the search and it was our responsibility, our duty you can say, to support the department, whatever they have a question in their mind. We have clarified everything to them. And as of today, there is no liability being freeze out anything on us. And if in future any liability will come, we will be the most vocal company to communicate to you because this is the process. Department will take its own time to work out. But as of today, we don't see any liability, they will identify and communicated to us. We have clarified every rare answers. So let's wait for the time because that process is very lengthy. So let them complete the process, and we will complicate to that, if any. As of today, absolutely no liability.

But one thing I'd tell you is that we did not lose 1 day of production or 1 day of sales.

[Operator Instructions] The next question is from the line of Madhav Marda from Fidelity.

Yes, sir. I just had one question that is on the sanitary ware, faucets business once we started in FY '23, do we plan to use the same Astral brand? Or do we plan to have a different banding strategy considering it's a different line of product, which is used in different part in the house? Or would we plan to go to the same?

So let we launch in May, you will come to know. At this stage, I think it is too early. Let us -- we are working on that. So I think once the launch party will be there at that time, we will communicate to everyone.

The next question is from the line of Rajesh Ravi from HDFC Securities.

My question pertains to the industry resin supply, both on the CPVC and the PVC. Could you throw some light on upcoming any big domestic capacity expansions, which could improve supply for the regions across both the business segment and reducing volatility? Anything which you are aware of?

This question, somebody had asked, I think you were there?

Okay, maybe I would have missed it.

I think Sandeep has already replied that. Few PVC players have done the announcement but very difficult to know exact date when they are going to come. But definitely, India is adding the capacity of PVC and that too also sizable capacity. CPVC side also capacity addition being announced. But as of today, we don't know exactly when they are going to come. But yes, both the polymer capacity addition work is going on in the country.

Okay. And January month or any price hike which has been taken across both the segments or any price correction in line with the resin price fall in PVC?

No. I think PVC said on the quarter in January, there was a reduction.

Right. So even pipe prices have come down?

Yes, yes, definitely. It's a market phenomena. Whenever an increase it pass on and whenever there a decrease, we also pass on to that also. We criticized continuous price recurring.

Okay. And we get to from other players that CPVC demand is quite strong while PVC was hit significantly. Is the trend similar for you too?

Yes, definitely. That is the right understanding you have got. That too is because the polymer price of PVC is very high, so gain between CPVC and PVC would earlier wider, now it has come down to narrow. So because of that CPVC demand is increasing and that is what we are seeing on the ground. And that is what advantage we are taking being a larger player in the CPVC side, we are taking the highest advantage of that.

Okay. Any -- could you broadly guide that how much would be your non-agri portfolio or maybe the building material portfolio, your impression for total revenue ballpark number?

We don't share all this internal data. We have stopped sharing since last 3, 4 years.

And in the adhesive segment, now the things have improved. You mentioned that the issue which was there. So can we expect the margins to rebound to the preceding quarters?

Yes, it will definitely should rebound, but the problem is that whatever we pass on and then again, the chemical price goes up. Because of that, there is a continuous pressures on the chemical side. So because of that, once it will start stabilizing a little bit reduction, trade will start, then you will see there will be a shot in the margin. But until that time, I think margin will be always under stress. And I communicated that because of the U.K., some loss in the sales because of nonavailability of raw material. That has also given us the pressure on the margin. So hopefully, it will ease out in the coming quarter.

Next question is from the line of Ravi Mehta from Deep Financial.

Just wanted to understand whether you were a little opportunistic in the pipe segment like you were in the second quarter. Like for volumes, you might have kept prices a little benign?

On what ground you can say this? I don't think so. .

No. I mean you shared that you were a little opportunistic in second quarter. Looking at your volume, you've done actually very well vis-a-vis the industry.

Let's us put about the price. We talked about adhesive on this thing to take the growth opportunity. And that also the price pass-on was not because of any opportunity, the chemical strive objected and it takes time in to pass because it's an MRP-based product. So you cannot just overnight raise the MRP and again, it's coming down. So we have never talked about price on the opportunity.

Okay. Okay. And one more question is on the branding. So you shared about getting into blow molding water tanks, which is at the low end of the market. You also shared about getting into lower end of solvent cement to cover the product portfolio. I just wanted to understand how would you be positioning and branding these lower end of the products? Will it be brand dilutive? What are your thoughts on this?

It won't be diluted, everyone does this. So it's not an exception of dilution or anything. There are certain -- we have a product line which is high end because of the technology of U.S., and we pay out certain premier royalties are on. And we have a certain product line, which we made. It's not a low end, but it's a mediocre price in with the price is prevalent by the competitors and it would be more going to the rural market or the smaller cities and even the bigger cities. So it's not going to dilute the brand in any way. It Is not going to hurt the brand in any way. And also Astral doesn't make any product which is either sold in any nook and corner of India, which is not as for these standards. That is our first priority. But some products are made are about standards, which take more costs, and this is also made with all the technology, but in par with the standard.

Okay. And very little overlap with these products at the same outlet you see because the target audience is different, so...

The target audience will be different. It will not be on same outlay.

Basically, in all adhesive if you go on site also has 7 variants or even more. This is very, very reveling we are getting into this. Even if you go in [indiscernible] even the -- all the companies have various variants.

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

So like you mentioned that we are bullish on our Valve project and also our PP, SWR, drainage pipes. So just wanted to understand the total addressable market? And what market share are we targeting in the medium to long term?

Give us one quarter and we'll let you know. It's just launched a week.

Right, right. And last thing from my -- sir, we keep hearing from the channel partners that many plastic companies have given commissions and discounts in the month of November and December when the PVC prices were volatile. So all these schemes and all that is still applicable in Jan, Feb or all that is done and dusted?

I don't understand what .

Let me reply. I think you will never ever listen these kind of argument or maybe comment from the general payer partner about the Astral brand. There may be many brands in the market who are doing all this activity. Astral never ever do this kind of activity to give absolute discounts in the market. We always believe in consistency, and we will never do all this kind. We are a brand. We don't want to compare with other players. So we will never ever do this kind of activity. And I request you please check from the market as far as they have ever done in the past.

The next question is from the line of Ritesh Shah from Investec.

Sandeep, I have one question for you. Over the last 2 years, we have launched several products. Can you highlight which were the key ones which have actually -- which are actually doing pretty well in the marketplace? And second is there will be products which are actually moving slow as compared to what we would have desired.

.

Ritesh, but your voice was very, very -- I request you to speak loudly and repeat because half of the time I could not listen clearly.

I'll repeat it, Sandeep. Sandeep, my question is it's becoming increasingly difficult to appreciate what Astral does, given we have been launching several products across different categories. So for an outsider for an analyst to appreciate what Astral is doing, it's becoming difficult. So my question was, which are the products that we have launched in the last 2 years, if you can give some indication on how the ramp-up has been, that would be very useful. And any specific products where you think that the ramp-up has been less than desired. And any specific reasons for that, that would be quite useful.

Basically, let me start with we were the first one to bring the low noise system not 2 years, but a few -- 4 years back. Today, we are doing excellently well and accepted. Everyone follows what Astral has -- is doing. If you go with the industry and if you understand the innovation and creation of market in what Astral does. That is -- there are so many players from years. They say we have history of generations in this business. But if you go and ask them what has been created, what has -- what technologies have been brought, what things have been done to create this infrastructure market and to modernize the infrastructure market of India has been the prerogative. I cannot say that we are the guys, we have done it, but we have done it. We have brought products right from CPVC as well has been a benchmark of innovations, and we continually bring products with a lot of study. We don't just bring products for the sake of a medal we want to carry. Now our low noise product is growing substantially fast and is doing excellently well. Our CPVC -- aluminum CPVC product relaunch has been done a few months back, which has started doing excellently well for us. Now we have brought in valves, the latest valves technology. Valves can be used in India and export market is huge for valves. And nobody in India actually exports valves globally also. And Astral has now the capability and the quality to exports. Similarly, if you go now the PP drainage system, which we just launched. I tell you, in no time you will see 10 PP drainage systems and telling better than Astral or competing Astral, giving a product which has increase Astral only banging on the pricing. We as the technology player, go into the product, study the market, study the complications, study the pricing, I know India will not accept any product, which is going to be so premium and has too many advantage. But if they are using CPVC, PVC, SWR, they would not pay me more than PVC . So I have to keep first thing in mind is pricing, and then the product, then the technology and then go for the launch. So we -- whatever products we have brought in have succeeded and are doing well. We have not ever gone back foot in any of the product lines, which has been -- because a lot of homework we personally do as a family involvement from both of my sons. As our team involvement, plus involvement of Hiranand-ji, who is now more of -- so we have too much homework before we launch a product. And if you see the initiatives with Astral, it keeps on healthy always following the leaders who are leading from years and years. And these innovations and initiatives will continue. CPVC, aluminum is also going to be a great product in the future for plumbing. It's the -- it is a product which is the best available product globally for plumbing. And we have already started its exports also. All new products, if you want a greater presentation, I think next time if it is in person, we'll do a greater presentation on the new product lines, thrown in last 2 to 5 years and how they have grown and how we have ramped up these product lines.

Sir, absolutely, no doubt on your commitment and what the company is doing. Just a follow-up question. When you say that these products have been factors for, is there a financial metric that we look at, like it clocks INR 100 crores in 3 years. Is that how you will put it under a successful category?

We to take it -- how much it can grow in 2 to 3 years, you are correct, that has to be the first initiative. How do we cover our expenses has to be the second initiative? Third, I look at the global horizons where India is lacking and what India would need as its construction industry modernizes and has more buildings, which will be 20, 30, 40 stories, and we will need a better products to serve this country. And to see the -- when the infrastructure is growing so fast, when the multi-stories are coming up, you need better products to serve this country, as you need to have these products in line.

And Ritesh, this conceptual marketing for new products always take time. Sometimes you may feel that we may be having INR 100 crore mark in the next 3, 4 years. But sometimes it doesn't materialize also. It may take 6 years also, sometimes it may take 5 years. Conceptually, we also see that whether the people like the product, what technology we have brought in the past. Whether people like this technology, if they accept it, sale may not grow immediately. Sometimes it may take time also. But if the product is good, people like the product. I think one day sale has to come. There is no reason that sales will not come. Now CPVC, aluminum, Sandeep rightly said that we have started exporting that product. And now we have both the repeat order also for the export. So these things will -- sometimes it takes its own time. But if the product is good, we don't bother about the run rate, what we are getting in the first 2, 3 years or 4 years. We are not here for 2, 3 years or 5 years. We are thinking for 10, 20 years. So I don't think there's an INR 100 crore mark or INR 50 crore mark is a success or failure. No, no, no. We never evaluate the product on that point of view. We only see that customers would like, users would like this product, that is more important for us rather than only number game. Number game has to come. Ultimately, the product is good. People like the product, right pricing is that number will come.

Ritesh, in short, I would just summarize that '98 to 2004, it took me to just reach INR 14 crores in CPVC. And I was targeted by all these big companies who are now talking in CPVC that this is never going to succeed in India. And today you let me know why these companies was talking about CPVC . So this cannot be repeated now being a public company and we see all the responsibilities. But yes, vision of every product we think is very, very clear in our minds. And we target audience, the markets we have to address and not cannibalize any of our product line is also equally for us important.

Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. Over to you, sir.

So thank you, everyone, and thanks for joining this call. And again, we look forward to seeing you or joining through the call after our Q4 results and the fiscal end results. Till then, take care, be safe, be healthy, and we wish you a healthy life against -- fighting against this COVID virus, which is very strong at present, more strong in Mumbai, but now everyone is safe. So I -- we'll know about it. Thank you.

Thank you, everyone, for participating in this con call, and thanks to Ambit team for hosting this con call. And we know that Astral had done a lot of work in this past, so many quarters. So once this COVID situation will normalize, we are planning to have a plant visit, maybe in Q1 so that by the time you can see all our sanitary ware, faucet, our new launches of SWR, CPVC, aluminum, all -- lot of things we have done in this last 6, 7 quarter. So all these things we are going to showcase all of you, maybe in Q1, if the situation will permit and hopefully, it looks that now this should be for us the last wave, and we all will be coming back to the [indiscernible] what we were having earlier. Thank you very much.

Ladies and gentlemen, on behalf of Ambit Capital, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.