Astral Limited (ASTRAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '25 Earnings Conference Call of Astral, hosted by Investec Capital Services India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ritesh Shah, the Analyst, Materials and Head, Mid-Market Coverage and ESG from Investec India. Thank you, and over to you, sir.

Thank you, Albert. Thank you all for joining the conference call. We have with us senior management of Astral Limited. We have with us Mr. Sandeep Engineer, Chairman and Managing Director; Mr. Kairav Engineer, Executive Director; and Mr. Hiranand Savlani, Executive Director and CFO. I'll hand over the call to Sandeep bhai for the initial remarks, post which we'll have a Q&A. Over to you, Sandeep bhai. Thank you so much.

Thanks, everyone, for joining the earnings call for Q3. As you are very well aware, the building material industry is facing challenges in demand scenario during the quarter -- third quarter due to overall infrastructure spending by the government and liquidity challenges in the market. In spite of that, I'm happy to share that on a consolidated basis, our company was able to deliver a marginal top line growth of 2% and a very healthy growth of 9.3% in EBITDA on a Y-o-Y basis. Now let's go through the different verticals of Astral. To start with pipe and bathware, pipe vertical was doing excellent in last year in Q1 for the current year, but post election, some slowdown started, which has created a problem for the industry. In spite of that, Q3, we are able to maintain our volume and grow our EBITDA by 10.9% in spite of huge volatility in polymer prices. Entire industry was waiting for the antidumping duty on PVC, but it got delayed, which also affected the industry volume growth. We are expecting that post-budget, this should be in place, and this will be helping the industry at large. In pipe, our focus continuously is and will be on value-added products and quality products. We are working on that and we'll bring new products in the near term. The good news is that much awaited UL certification for our FirePro Fitting is received recently by us. We were already holding the UL certification, which is required when you sell the fire products, fire pipes in the Indian market. Hence, now our full range is UL certified, which will help us in a big way for the project business and also the export business in Europe and various global markets. I'm happy to share that Astral is the first company in India to get UL certification for fire sprinkler products. Now, PTMT range, as I guided, we are launching it in the market. And we have already launched it in this quarter, and we are expecting good sales from this PTMT range in the coming quarters. The Ghiloth plant has started SWR fitting production in a full scale, and we are about to start the CPVC fitting production also in the full scale at Ghiloth plant, which will help us to feed the Northern markets and various markets in even the Eastern regions. Channel drain, which we used to import from Europe, and now we have started the complete range of production of channel drain in India. And we are the only company making and the first company to make this entire range of channel drains at an international level of standards. And these channel drains are well accepted and used in many infrastructure projects, whether it's a private level or it's in government level or building of airports or various facilities of IIM is our channel drains are accepted and are in use. OPVC complete trials are over. The product range is ready, and our products have gone for the BIS approval to get the ISI standard, and we are expecting the BIS approval and ISI standard certification in a few days from now. So the entire product range is -- will be placed in the market, and we are expecting good -- very good sales number from this new OPVC product line. Coming to bathware. Before that, I'll just brief you that our construction work at Kanpur plant is on, where we will be starting the first manufacturing of water tank shortly. And then we will be starting, especially the PVC pipes from the Kanpur plant shortly. And our pipe production, as we had said in the last call, is already started in our Andhra, Telangana plant. As projected and guided, in bathware, guided, we are targeting in bathware a revenue of INR 120 crores for this vertical in this fiscal, and we are already on the line in our sales to achieve this target, and we have already reached INR 83 crores of sale in 9 months. And we are confident that we'll cross this guided range and guided number in the current fiscal. We are also launching new SKU in both bathware and faucet as per the requirement of the market. And this SKU, we are expecting good response and good market in the coming months as we have done a market survey, shown these new products to the targeted consumers, and there is a very, very positive response on this new range. Slowly, our bathware products are getting recognized in very prestigious projects in India and we are expecting good numbers, good growth and very good establishment of this product line in coming years in this Indian market. Adhesives, our India operation is continuously delivering a good growth. In Q3, it has delivered a very healthy growth of 14.5%, with a very healthy EBITDA of 16.4%. Our Dahej plant is gearing up very fast, which is a state-of-the-art and totally automized plant. And shortly, we are planning to organize the visit -- factory visit of the investors, so you can all see the plant. Mr. Hiranand bhai will coordinate with you on the same. We are also working for few new products in the shared verticals, and we are going to launch these products in the coming time. During the quarter, our overseas operation, Adhesives was passing through a slowdown, but the slower economic activities. We have taken some corrective measures, and we will bring back the growth as well as the EBITDA from Q1 as we had already communicated. But in this quarter, the company has only degrown by 5%, but it is with a positive EBITDA of 0.7% to 1%. So, we are not incurring any minus losses there. We have taken multiple steps in U.K. and U.S. businesses. And all these reflection of these steps in the value terms will be seen from Q1 and Q2 onwards, there will be a very, very positive level of growth, positive level of improvement of EBITDA and a lot of new products are getting launched in U.S. market, which is getting good response. Already a few products are launched -- have been launched in this quarter, which has got good response from the U.S. market. Some corrections are being made in the U.S. business on manpower level, which will reduce our overhead costs. In U.K. also, we are now going backward in one of the technologies, which we have bought over from Europe. So, that is going to add margins, as well as we are going to rationalize the purchases in India and U.K. on a mass level, which will also help the U.K. as well as India plant. And we have made a few corrections in the manpower costs there in U.K., which will be also reflected in coming 1 or 2 quarters. Now coming to paint business. Paint is slowly entering in new cities in Astral brand. In Gujarat, we have done key big cities where Astral brand has started moving to the end consumer -- to the dealers. But we have recently made -- opened the state of Rajasthan, and we have made anpain official launch in Jaipur. The first few months in Jaipur was very positive for Astral Paints. Astral Paints has started going in the Jaipur market and various cities of Rajasthan. We are going to open one by one in the coming months. So, we will be focusing on 2 states at present for next 3 months, that is Gujarat and Rajasthan. And then we will move to 2 more states, Maharashtra and MP in next 5 months to 6 months, established to see Astral Paints reaches all these markets, and we get a good growth. At the same time, in the southern market, we are now core focusing where we are strong in Gem Paints brand to focus and get a good growth from the Gem brand. And that's why in this Q3, we have registered a growth of 7.5% in top line, and we have maintained the EBITDA of 4%. The overall -- the GP is only almost maintained, only 1% or 2% gain. The major thing is that we are launching Astral brand in various markets. So, we are just keeping in mind that we are not getting into any negative EBITDA or negative margins, but the manpower cost and certain launching costs are getting added up to the bottom cost, which has reduced the EBITDA, which, again, we are foreseeing to get into a double-digit number shortly in 1 or 2 quarters in the paint business. We are expecting the post-budget sentiment of industry should improve, and we are expecting good allocation of money in infrastructure from the government, and this is going to boost up the growth of economy and building materials segment in a big way. I will now hand over to Mr. Hiranand bhai, our CFO and Executive Director, for financial numbers. And in the question-and-answer session, I will be always there to answer all your queries and questions. Thank you very much, everyone.

Good afternoon, everyone. Thank you for joining this Q3 earnings. I think Sandeep bhai has already explained that the Q3 was a challenging quarter for the industry. But in spite of that, we were in a better position that we have maintained our margin, whatever we have guided for the pipe vertical, 16% to 18% EBITDA and adhesive India operation between 14% to 16%. So, we are very well on the track. And overall, on a consolidated basis also, we have delivered a 9.3% growth into the EBITDA, while the industry was struggling for the margin. This quarter, even paint has done a reasonably good growth of 7.5% in spite of slowdown and adhesive India operation has also delivered a growth of 14.5%. Now, I'm giving you the individual vertical-wise number for sales and EBITDA. The pipe this quarter was INR 990 crores. Paint, it was INR 50 crores, adhesive INR 280 crores; U.K. INR 77 crores, so total INR 1,397 crores. And bathware, which is included in the pipe was close to about INR 27.9 crores, so close to about INR 28 crores. And EBITDA level, pipe, 18.47%, paint 4%. Adhesive India operation was 16.36%, Adhesive U.K., 0.65%. And over consolidated basis, 16.5%. If you see in our press release, our GP is the highest on a 9-month basis in the history. However, it is because of lower polymer price, we are unable to take the advantage in top line. And consequently, it is affecting to the EBITDA also. But in spite of that, our EBITDA margins are comparatively very, very healthy and within the guided zone. But now due to base effect of lower polymer price, we are seeing a good improvement in top line in the coming quarter because our base is low. So now we are seeing that a little bit increase in the polymer price is going to help us into the top line growth in the coming quarter. As you know, Astral is always believing in the profitable growth, and our focus will always be on a quality product company. Our customers know very well that brand Astral is quality company, and therefore, they are happy to pay us the premium for that. In recent quarter, many companies have deteriorated the quality standard just to push the extra volume and take the short-term advantage. But Astral believes in the long-term story, and we have never compromised in the quality of the products. We can proudly say that today, very few companies are in market, which give the quality product as per the standard and Astral stands on the top in the market on this parameter. Our focus will always be on the value-added product, which you can see in our numbers where industry players are struggling for the margin, we are able to maintain on the highest margin percentage in the industry. This is possible only because of the quality product and increased share of the value-added product. Bathware business has also delivered a good number during the quarter. In Q3, it has delivered a top line growth of INR 27.9 crores versus INR 18.9 crores last year Q3, which resulted in a growth of 48%. And on the 9-month basis also, if you see, we have delivered 64.5% in the bathware vertical. So whatever we have guided that we are going to deliver INR 100 crores to INR 120 crores in the beginning of the year, we are confident that we are going to cross our guided zone of INR 100 crores to INR 120 crores. Fire sprinkler, Sandeep bhai has already explained that now we have got the U.S. certification, which is going to help us in a big way in the coming time in the project business as well as in the international market. So, we are now going to open up in the Gulf region also, in the European side also this product. PTMT has already launched and people are appreciating our quality, and we are high confident that this product is also going to give us a reasonably very high number in the coming time. Recently, company has opened up a marketing office in Dubai, and we are now targeting to the export market for UAE, Gulf and Africa. And we are expecting that this office is going to help us in a big way to enter into the export market for all our value-added products as well as the adhesive products. During the current year, we have increased the capacity by 36,000 metric tons from 334,000 tonnes to 370,000 metric tons -- sorry. Now with this, I'm opening up the floor for Q&A. Thank you very much.

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital. [Technical Difficulty]

Can you hear me now?

Yes. We can hear you.

Yes. Sir, a couple of things. First, on the plumbing volume. So for 9 months, we have done just 4.3%, and we were looking at 10% to 15% for this year. So now what's the revised guidance for this year? And if possible, for next year, how much growth one can look at?

So, I think it is difficult to give the volume guidance exactly under the current situation because we are too much dependent on how this budget government spending and all is happening because a lot of crisis are there into the liquidity side in the system. Secondly, much awaited antidumping duty, we don't know when it is going to be announced by the government. So if that is going to come, then definitely volumes will be very high in the Q4. But if that is not going to come, then volume will be slow. So it depends to subject to that, we will be able to tell. So, we are waiting for that and then we will be able to tell exactly what is going to happen. If both things will happen, then yes, definitely, we can deliver a double-digit number in the Q4 also. But if it is not going to happen, then it may be a single digit also.

Okay. Got it. And second, sir, in terms of the margin in plumbing is for 9 months is very good, 18.3%, though our range was 16% to 18%. So how one can look at -- is there a possibility this margin range, 16%, 18% can be now on the higher side once it starts building in?

No, I think range will remain same only. Now, our focus will be going to be more of the volume than the margin only. I think margin, we are best in the industry. So, now our more focus will be on the volume rather than on the margin.

Okay. Okay. Got it. And in terms of the Adhesives, sir, because though we are seeing a 14% to 16% margin, combine everything. But till now, it is just 11.4%. So, obviously, you have mentioned that U.K. will start now throwing the positive EBITDA. Just trying to see how one can look at in FY '26 itself, one can start looking at 14% to 16% Adhesive margin?

Yes, yes. 14% to 16%, we have given the Indian operation. U.K. has never given that kind of margin. So, our Indian operation will continue to give us that range only. Even if you see that this year number also, the Adhesive division has delivered a margin of, I think, 16.36% in this quarter. And on a 9-month basis, it has delivered 15.97%, so close to 16%. So, India operation is going to deliver the similar zone of 14% to 16%. But U.K., yes, definitely one more quarter we needed for the improvement because we have done the correction. So as Sandeep bhai said, we are expecting for improvement in the Q1 onwards.

So for full year next year, how one can look at the U.K. margin, sir?

U.K. margin, we'll bring back to that 5% to 10%, which has been a historical margin. And that's the steps we have taken would reach there. The market growth and all depends on how these local markets function, but we are sure that we will not be degrowing anywhere, but we are confident to get the margin level up because if U.K. -- U.S. merges with U.K. as a number. And we have also taken many steps in the U.S., but for certain markets, even if you reduce your cost in the manpower or any other costs, there is a cycle where the reduction can be seen. You cannot tomorrow go and say that now today, I have 50 people and tomorrow, I need 40. But there's a cycle where sales-wise, these cost reduces. So, these steps which we have taken to reduce all these overhead costs and certain costs, still maintaining the business will be actually reflected in 1 or 2 quarters from now. And we are categorically saying this that all steps taken, whether there or whether in other businesses will be reflected, and we have always guided the market in the right direction from day 1 from years together. But there are rules of the country, there are regulations of the country, which come into source and that cost reductions of certain levels take 3 months to 6 months and which will be reflected.

Got it. And lastly, sir, is it possible to share the India Adhesive absolute revenue for third quarter and for 9 months?

Third quarter, INR 280 crores.

And for 9 months, sir?

9 months -- 9 months Adhesive revenue. One second. I have to check. We can within -- with our question, we'll answer it. Otherwise, we can move ahead with the other questions.

INR 697 crores.

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

Congratulations on strong margins. Just a follow-up to what you just said that now the focus will be on volumes and margins, you are already doing the highest. Firstly, I would like to understand how did you manage to do the margins on a quarter-on-quarter basis higher given your volumes were flat? And from here, would you be following the strategy of discounting on pricing as done by many other players to gain volumes? And if that's the case, what is the outlook we should expect in terms of volumes?

So, I think volume depends on the industry, how it is going to perform. So, our normal range will be between 10% to 15% in the volume. That is what we normally work. And next year also, we are expecting that we should be definitely going to deliver between 10% to 15% minimum. Because now the base will also be low, because if the current year single-digit growth will be there, then next year base will be low. So because of that, we can easily grow 10%, 15% in volume. But if the market conditions are good, like whatever was there in the last year, we can deliver even 15% plus also. So it depends how the economic scenario is going to develop, how the infrastructure spending is going to be there in the system and how the real estate demand will be there. Based on that, it will be decided. But yes, definitely growing between 10% to 15% should not be the challenge looking to the lower base of the current year.

But this would come along with discounting?

Yes, yes. Carry on.

Sir, I was just asking the same thing. But would this come at the cost of discounting in terms of pricing, which everyone is doing now? Or would you follow the same strategy of being premium?

We are not discounting anyway. Even you see in the past quarters also, we have not sold any of our product at a discounted rate. So, there is no question of discounting the thing. See, ma'am, let me be very categorically very clear about things that if the market is having a size where even by discounting, you have seen results people have not grown. So it's always better to keep your healthy margins because discounting in this consumer industry is like once you discount your product and bring that margins or the discounts down to distributors, dealers. And in past also, we have seen and which everyone will see is to bring back the price level or reduce those discount level is a big process, which if I do it today and even I don't build a volume to bring my discounts back to normal will take me 6 months to 1 year because the market keeps on expecting, whether it's a dealer, distributor, consumer. So looking to the scenario of the market and looking to the -- the basic thing, which is not there is if you see the spending of the private sector is there. We are all selling. We have been doing business. We are growing. But the government segment is a buyer. The people who are supplying to government segment are also coming in the same market. So practically, as the spending comes back, as the economy starts turning, which we'll see after the budget, we don't see any issues of volume growth, value growth and things growing up. And we will stick to maintaining a healthy EBITDA. That will be always there. And we are selling value-added products. We are selling costly products, and we are selling products which carry more value and margins, which is reflected again and again in our results.

That was helpful. My second question is on the exports front. You've mentioned a couple of geographies, Middle East. You have opened up a office at Dubai, and you're planning to do exports to European countries. Currently, what portion of your revenues is coming from exports? Is it 5...

We won't be able to differentiate and give these numbers, please. We have not differentiated and given these numbers, but we are expecting a positive and we are getting positive orders for our certain value-added products, but we won't be able to give you numbers on exports.

Understood. Just a clarity or this is only fittings, right, not pipes?

No, no, no, both pipe and fitting, both.

The next question is from the line of Abhishek from DSP.

So, just a couple of questions. In terms of -- you have grown -- you've basically been flat, but you have maintained your margins well. Is it fair to assume you would have still maintained your market share? Just to understand the industry growth, how should one look at that perspective?

Definitely, because if you see the industry, industry has not grown in this 9-month basis, hardly 3%, 4% growth is there. So, we have maintained our -- whatever the market share is there. So, we will not maintain the margin at the cost of market share. We are not going to lose the market share and maintain the margin. That will never be the mindset of the management.

Correct. So sir, in this light, how should one look at it? Because is it because of channel destocking because otherwise, if you look at the pipe industry, usually grows at 7% to 8% broadly. So, this should also come back over a period of time as Sandeep bhai was kind of hinting at as channel inventory normalizes. Is that the way one should kind of look at it overall growth from next 12 months to 15 months?

No, it should happen in a short time, I feel, because channel destocking is one thing, but the uncertainty of polymer, whether it will go up, it will come down, whether it's -- what is the open market, what is the price of the biggest manufacturer of India, all these ambiguities and the ambiguity around what will be the effect of antidumping, whether it will go up, all these ambiguities which prevail within the market, plus spending from the infrastructure, spending from -- would be settled down in next 2 months to 3 months. There is nothing that remains. Ambiguities always. And then the market will start accepting. Market will start putting material back in the channel, and market will start growing at its normal pace, which we have always guided 10% to 15% around in volume terms.

Okay. Okay. But you are saying, sir, today, there is an issue with primary sales and secondary is still fine. Would that be a fair estimate to make, sir?

Both are going parallel, I can say. Secondary is also doing excellently well. I don't say there is -- these are type of things which is over-panicked rather than -- these are the phases which always comes in the business cycles of business. But there is no over-panic situation, which you can say is a big concern on anything, a flattish. One speedometer guide is there. Slowly you get a good road, clean road and it will bump up to a higher speed.

Got it. Very, very helpful. Sir, just one other thing. At Astral, when you aspire to grow at that 15% to 20%, in that one is, obviously, market growth rate has to support, but do you think there are still gaps as far as distribution and regional presence are concerned? And over the next 2 years, 3 years, you can work around it to accelerate as far as market share gains and growth aspects are concerned? How should one look at that, sir?

Basically, there is -- we are at every nook and corner of India. But there is -- this is a thing, which for years and years will continue. And we are adding good distribution network, where we feel that we need to strengthen this up or we are getting a good distributor, by keeping and safeguarding the existing distributor, as well as we are also keeping our focus on the rural markets. So overall network growth and distribution addition is always continuing and will continue with Astral.

The next question is from the line of Rahul Agarwal from Ikigai Asset Management.

Rahul from Ikigai. Sir, 3 questions. Firstly, to start with January 2025, how has been the start? If you could qualitative comment on plumbing infra demand? I know Astral is smaller in agri, but just your sense, please?

I think demand is good. We don't see any problem in the month of January, and we are growing.

Okay. So it's like -- should be a normal kind of double-digit kind of growth for the industry, I'm saying?

Let we finish January, then we will be able to know exactly what is going to be there.

Let's not get into these things because any scenario which we predict today is not too early to predict. Let's not go month-by-month. Let's see the quarter-by-quarter. And we -- as Hiranand bhai said, things are positive and they are positive in the value and volume terms for the month.

Got it, sir. Hiranand bhai, for 9 months, what is the operating cash flow and CapEx that the company has done?

I don't have a handy number. You can call me maybe post this con call.

Okay. No problem. And the CapEx budget for the full year, roughly if you have fiscal '25 and '26?

I think we should be closing around INR 450 crores or so for the full year.

And for the next year?

Next year should be somewhere around INR 250 crores or so.

We have done most of our plants now. We are not going to add up any new facilities because we are now -- Kanpur is almost completed. So, I think next year, the CapEx cycle will come down drastically on the addition of capacities here as well as in Adhesives. Paint, as we have already said that we have not done any CapEx after this acquisition, except a few here and there corrections. And we will continue with that because we have a good capacity there. Faucets also, we have not done. We just did a INR 23 crores asset buying, and that plant is slowly doing most of our products, and we have expanded there by spending few crores. And so we have a very good state-of-the-art facility to help us. So next year, as Hiranand bhai guided, the CapEx cycles will be trimmed down because we don't need so much addition in new land or in new building, except a few machinery additions will keep on happening.

Got it, Sandeep ji. And one last question was on Adhesives. Qualitatively, if you could help us understand how is the India business behaving? Obviously, the numbers are good. You've grown 14.5% for the quarter. But just in terms of pricing and volumes and Dahej ramp-up, could you just qualitatively comment on how does the market look like next 12 months?

Adhesive, if you see, we have steadily built our brand, Bondtite, in the market. All our products are doing excellently well, whether it's now 0.5 milligram, the ampule is selling well. Our epoxies are selling excellently well. Our white glue is picking up. as well as our product lines of cyanoacrylates, the silicones, the hybrids and all the construction chemical is slowly also ramping up. So overall Adhesive, the saddle is very slowly and steadily going up. Solvent cements, we would be almost the biggest in India. And the Dahej plant for white glue is fully operational. We took all our key dealers and distributors there 1.5 months back, and they were excited to see the fully automized plant. Epoxies, the whole range is made there. We have advantage of raw material, which we now buy in bulk at Dahej plant, which is helping us. And everything is being automized, is saving us the costs on the spillages or things, but especially the formulations have become so standard that our yield also has improved. So, Dahej plant has added a great value to the Adhesive business. We learned a lot from that, and we'll continue to learn. And I think in Adhesive business, the way the growth is, the way the margins are and the way the established things are happening, we see a great future of this business for years to come.

So, I think I can add this that I've given the 9-month number for Adhesive that was wrongly taken the different columns. So the real number is INR 782 crores for India operation for 9 months and U.K. is INR 258 crores for 9 months. So, total is INR 1,040 crores for the 9 months. And this quarter, India operation is INR 280 crores and U.K. is INR 77. So, INR 357 crores for this quarter.

The next question is from the line of Keshav Lahoti from HDFC Securities.

Sir, what is the sense on the ADD, which we are talking on pipe side?

I think we are expecting that this one should come, post-budget should come.

Okay. That is great to hear. And the sense on channel inventory, is it normalized inventory or you would say it is still subpar?

No, no, it is subpar. Because so much of volatility is there, nobody has confidence. So because of that, nobody will be happy to have the inventory.

Sir, I'm asking this question because what we have seen, resin prices has not been volatile in the last 3 months and there are talks of ADD. So the chances of prices increasing is more. So why is the channel not getting back to normal inventory?

Still market is talking about downward trend. So, very difficult to understand that somebody is telling that first some price is going to drop. Somebody is telling me that this basic duty in this budget is going to go up from 7.5% to 10%. Somebody is telling me that in the post-budget immediately, the antidumping duty will come. So, a lot of things are moving in the market. So, very difficult to know what is exactly happening. So, same thing is going to happen with the dealer and distributor. So, everyone is talking the different language.

And channels, every company has a stock. So, even something comes up, it will take some time for anything to be implemented and see the results.

Got it. One last question from my side. What sort of pipe capacity you will be adding in this year, plant-wise and next year also?

I think this year, we have already added 37,000 metric tons in 9-month basis. And I think a little bit more can be added in the Q4. Next year, Kanpur once will be operational, then sizable capacity addition will be there. Another 30,000 or so will be there, minimum. And then some correction at the individual plant level. So, maybe another total 40,000, 45,000 can be added next year.

Got it. Sir, Kanpur total size is 60,000 or total is 30,000 because Kanpur was in 2 phases?

Total will be 60,000. So it will be in 2 phases. First will be 30,000, and then the second will be another 30,000.

So, first 30,000 would be coming this year, right, and another 30,000 next year?

Yes. 30,000 will be coming to FY '26, and 30,000 will be coming to FY '27. If the demand scenario will be good and we get a good response, we can prepone also because there only we have to add the machine. Building is already in place.

Understood. And Hyderabad was 70,000. Out of that, how much is done this year and how much will be coming up?

So, we have already completed, I think, 25,000 metric tons. Once that 60%, 70% utilization will be there, we may add to next year to that also.

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

Sir, can you provide some color on tanks, valves and DrainPro separately, given this were the growth drivers that we had identified a couple of years back? So, what the progress has been, if you can provide some numbers?

So, these products are going as per the plan. And whatever we have guided as them being the growth driver, they are currently doing very well, and they are selling as per our budgets. And individual category numbers, we don't want to share, but all 3 categories have picked up and they are doing very good. And we are ramping up the capacity for valves also. We are introducing some new ranges going ahead. And even with tanks, we are slowly and gradually adding tank machine at every manufacturing location. So, latest was added in Hyderabad and now with Kanpur, it will be also added in Kanpur. So, we have a very good response for all these products, and they are doing very good.

If I had to put the question the other way around, we have been reporting pretty solid profitability on the stand-alone business, which also includes the contribution from, say, tanks and valves. If we had to strip out tanks, valves and DrainPro, what would be the profitability like? I'm just trying to understand the competitive pressure and how are we managing it? Is it more because of value-added products?

It's very hard to give the individual -- that segment-wise number, how can we give? Product category-wise number, how can I give you for profitability separately?

Okay. Let me put it the other way. I think a couple of years back, we had given a 3-year target for the growth engines that we had indicated. I think the number was given INR 1,500 crores something. How far are we on that?

So, we are very well on track, very well on track. I can say it that way.

Okay. Okay.

Without that, Ritesh, how can we maintain our profitability in this competitive....

Right. Sir, so what I was trying to understand is our focus has always been on quality and brand, correct? But we also have this incremental contribution from the new growth engines, which is also helping us on the profitability. So, I was just trying to understand if one had to dissect this, just to gauge on a pure piping business, how are we faring versus the peers? If you could provide some color, it would be great. Else...

We already communicated that we are doing as per the plan. What else I can communicate, tell me.

Sir, I'll take it offline. No worries. Sandeep bhai, you did indicate for U.K., we have done some additional backward integration and we bought some technology from Europe, and it is likely to aid margins. Can you detail this, please?

So, I think we have just signed the agreement. So in the Q1, that will be available to us. So once it will be ready, we will be definitely going to communicate exactly what that technology is there. So right now, we have signed the agreement and things are moving on. So in Q1, that will be available to us, and then we will definitely announce everything. That is going to help the India operation also.

The next question is from the line of Praveen Sahay from PL Capital.

Sir, if you can give how much is the losses in the bathware segment for this quarter and 9 months?

I think hardly any losses are there. We don't now separately work out because it is already merged in the pipe. And secondly, many of the pipe-related brass fittings are manufactured in the same plant. So, very difficult to segregate the EBITDA of bathware. But I think hardly, hardly any losses will be there. What we guided that by this year, we are going to be breakeven. So yes, definitely. So next year, some contribution will come from that vertical also. Positive EBITDA.

Okay. Secondly, on the Paints segment, from the last 2 quarters, second quarter and third quarter, we had seen a lower margin of a single digit. And definitely, I understand because of a lot of marketing activity, you had done. So when you are expecting these numbers, margin front, to improve in this segment?

So like last quarter also, we communicated that this is the launch stage going on. So, we are continuously adding the team also, adding the dealer distribution also and spending a lot of money on the branding also. So because of that, lower EBITDA will be there because our base is very low. If you work out in an absolute term, it will not be hardly anything. But in percentage terms, it looks very high because of the lower base. So, once that part will be over, then definitely, you will see the improvement into the margin. So next year, I think from second half onwards, you will see there will be a good improvement into the margin.

Okay. And related to the Adhesive business, you had done very well in the last 9 months, even the quarter. If you can give some more color, obviously, you had given some. Is there some color on the geographical expansion as well because in your competition commentary, we had highlighted that Gujarat or Kerala market is a little on the slower side. So is that the geographical expansion is benefiting you? Or also, if you can give the Dahej plant utilization as well?

I think we can't share you the individual geography-wise number. We are still a small company. So, I think it doesn't make much difference to us. So -- but yes, definitely, Dahej plant is helping us in a big way. It's a state-of-the-art plant, backward integration is also there. So, really good plant in that. That is definitely going to help us to improve our margin, and that was the objective of putting that plant. And I think we -- Sandeep bhai has already invited everyone to visit the plant. So, we are fixing up the date in the month of February. And I think Ritesh is coordinating for that. So, anybody can come and join that meeting, and you can see live how the world-class plant we have put up completely 100% automized. So definitely, it is going to help us in the coming times.

Sure, sir. We'll definitely visit. Last question is related to the pipe business, sir. I understand there is some demand and the ADD, everything has impacted. But how is the CPVC business as a segment for you and as for the industry is behaving because...

CPVC segment is doing good for us and overall also. Otherwise, this margin profile in the piping business will not be possible also to give.

Right. Because one of the competition is talking about very high growth in this segment. So, that's why I'm just wondering how is the -- being a market leader, how is that behaving for you as well?

We have been doing good. We'll continue to do good, and it always reflects in our working. And we don't want to break up and share because these are our confidential numbers. But yes, obviously, we have been doing excellently well in this segment.

See, CPVC is our bread and butter. If that segment is not going to help us, how can we maintain 17%, 18% kind of margin. So definitely, it is doing well. This particular part of CPVC was the challenge, and that is across the industry. It is not only for us, but across the industry, this challenge was there. And we are of the view that, that will also be improved in the coming time because India is going to grow at 6%, 7% GDP, then definitely pipe market has to grow at 8% to 10%. If that is the case, we can easily grow more than double digit. 10% to 15% easily we can grow. It's a temporary phenomenon and a lot of liquidity challenges are there in the market. So definitely, that is going to be addressed by the government in the coming time.

The next question is from the line of Akash from UTI Mutual Fund.

Am I audible?

Yes.

Just wanted to ask, sir, for 9 months FY '25, what is the gross margin in Adhesives business, India Adhesives business?

Gross profit margin on a 9-month basis, it was 39%. Sorry, 39% is the pipe and Adhesives, it is again 39.6%.

Sir, and same number for 9 months FY '25?

9 months it is 44.9% in India. 44.9%.

Right. And sir, same number for 9 months FY '24?

'24, it was 42.74%. [ 42.7% ]. So, 2% improvement.

Okay. Sure, sir. And sir, also, just wanted to hear your thoughts on how the new Bharat initiative is doing for Adhesives business?

It's doing good. And as quarters evolve, we'll -- but it's doing good. It's doing good for us.

Yes. Sure, sir. And sir, if you can share how much is now rural contributing to Adhesives business?

These numbers are for our interests.

The next question is from the line of Devang Shah from Asit C. Mehta Investment Intermediates.

Congratulations for a good set of number in challenging environment. I have a couple of questions. My first question is we are seeing some kind of muted revenue growth so far, as far as in general, by considering the fact of your overall pace of revenue, historical pace is concerned. So, I just want to see how we can expect the top line to unfold? As you have already mentioned, budget and that will be a key decisive. But as far as numbers is concerned, last year, in FY '24, we have grown top line somewhere close to 9%, while your historical average was somewhere close to 15% kind of band. So moving forward, what kind of growth as a percentile we expect in the coming years?

So, see, if you see the last 2 years, current year and the last year, our top line growth was low compared to what historical levels were there, mainly because of the drop in the polymer price and the chemical prices. So, both our business [Technical Difficulty] I can say, into the polymer price and the chemical price. So now we are seeing almost bottom is there. From here on, we are not seeing a much drop into the polymer price or maybe a chemical price. So it's a question of only time when it is going to go up. But if you see the last year, our volume numbers were fantastic, but that is mainly because of the value was not there, it looks like a 9% kind of growth. But this year, we are of the view that volume should be lower than the value. So, value will be growing faster than the volume. So hypothetically, if my volume growth will be 10% to 12%, then the value growth will be 15%. So this year, because of the base effect, we are of the view that the value should be better in FY '26. That is how -- and we will be back to our normal growth of 15% kind of zone. And if the market conditions are improving in a better way, we can grow even better also. But you can consider that level of 15% kind of growth.

Okay. Second, sir, we have seen some kind of -- in your quarterly numbers, there is a raw material cost that has been inched up. And there is also one exchange rate fluctuation kind of cost that has been there mentioned over there. Can you throw some more light on that, especially exchange fluctuation cost somewhere and also about the raw material, why it is inched up in this particular quarter?

So, like, exchange fluctuation is mainly because we are importing a lot of raw material from overseas. So because of that, the dollar fluctuation, whenever it is there, like -- if you see, leave the last quarter. Prior to that, rupee was stable. So, exchange fluctuation amount will be very low because there was no volatility into the currency. But whenever there is a volatility into the currency, this fluctuation comes. But compared to the earlier years, now the volatility is comparatively low. If you see the yearly basis number, it is not going to be very high, what used to be 3, 4 years before. And secondly, our dependency on imported material day-by-day is getting reduced. So, that is also helping us to mitigate that risk of exchange fluctuation. As far as this raw material plus in that, that is mainly because of the inventory plus minus. If the inventory goes up, then it will be plus. If inventory goes down, it will be minus.

Okay. So sir, then in this particular quarter, we have seen a significant depreciation on the rupee. Will it going to affect in your Q4 FY '25 as far as exchange fluctuation is concerned, this particular way?

Exchange fluctuation, whatever happened till December, that is already reflected in the number. January, I don't see there was a much depreciation. Maybe...

So far volatilities.

And if the volatility will be there, we -- over a period of time, we readjust into the gross profit margin because ultimately, we have to pass through that to the market. It's not we, but the entire industry ultimately has to count the cost accordingly only. So ultimately, this will pass on to the market. But in books of account, it will show like that, the loss or profit. But ultimately, it is passing on to the market only.

And sir, your aspiration to be maintaining such kind of EBITDA margin of 15.5% to 16%, that would be the -- basically your aspiration, right, that you are going to continue in the coming year?

Correct. Correct.

And sir, last question that as you have mentioned, budget will be somewhere key decisive as far as infrastructure spending and domestic growth is concerned. Sir, do you have the tariff war that is something now from the U.S., somewhere we are -- voice is now making loud and loud again and again. So, will it impact us as far as our performance? Because domestic boost will be as per the dependency on a budget. But what's your outlook as far as if there is any kind of tariff war as far as overall business is concerned?

As far as Astral is concerned, we are not exporting anything to the U.S. market. So, I don't think we are going to -- neither we are importing from U.S. So, I don't think it is going to affect our company. If India doesn't grow, then we may be affected. But otherwise, I don't think this tariff is going to affect any way to our company.

The next question is from the line of Amit Purohit from Elara.

Just on the industry growth, you indicated 9 months, the industry grew by 3%. What would be the Plumbing and infra, if you could give some sense on that? And second is there are a couple of new product launches that we would have done. Is it possible to share what is the share of those? Like it could be a PPR or a low noise kind of product portfolio in the plumbing segment?

So see, the industry number, which I have given that I have given tentative based on my internal assessment. It is not a published number so far. Real number will be given only by the year-end, okay? So, I can just clarify to you that thing. As far as the individual is concerned, I think very difficult to work out how the industry has performed in an individual vertical, maybe agriculture or maybe plumbing or maybe other vertical. So it is very difficult to work out that number into that. As far as our growth is concerned, I think low noise, DrainPro, all these products were already launched few years before. It is not that this year, it is being launched. And initial year was the naturally struggling year, but now these products are picking up. So, we are definitely going to deliver a good number in the coming time.

So if I'm just looking, if possible to share some salience in terms of whether it's mid-single digit or low single digit?

Individual, we cannot share.

Sure, sure. Okay. And sir, lastly, you highlighted that antidumping duty probably will help. But this -- even if this happens in Q4, there will be a jump up in Q4 because of the stocking up by the dealers and all. Post that, it will be again back to the demand growth, right?

All depends on when the government implements it. It depends on multiple factors. It depends on when they implement, depends on how much provisional duty comes, what will be the rupee impact, okay? So it depends on a lot of factors and also depends on whether the demand goes up because restocking can only happen up to a certain level. After that, if the demand does not pick up, then people will not stop just because the price of the polymer is going to go up. I think that will be the sentimental wise, it will be really positive for the market. And then the market will be very clear that from here on, the prices will not go down. That is the main thing to understand from the market point of view because then the dealer distributor will get the confidence. That is what needed at this point of time.

The next question is from the line of Rishab Bothra from Anand Rathi Shares and Stock Brokers.

Sir, 2, 3 questions. Firstly, on the Paints side, there's a lot of heightened competition in the market. So, how are we progressing in terms of penetrating the market in new geographies?

Let us be very frank that when we bought the paint market, compared to the size of others, we have never acquired this business to go and create a huge, huge market. We have -- when we acquired Adhesive market -- Adhesive business, the giant was in multi-folds and folds, and we acquired INR 150 crores worth of business where we had similar questions. And we said that we'll continuously grow, deliver at 15%, 20% pace. We kept on doing our pace, maintained margin. And over almost 9 years to 10 years, a category properly is created with a proper margin and slowly and steadily, it is growing, reaching the nooks and corners of India. Now here also, we have acquired a business with a size of around INR 200 crores, INR 250 crores. It's not that we want to reach the India overnight or create any magic with a wand stick. We are very clear that this is going to help us in our construction chemicals division in a big way. The painter segment and our dealer network also will be extended and which is our motto to grow at a normal pace. It should not be below double-digit, which is obviously there, but not at an exorbitant pace by fighting in the market, creating negative EBITDA or overspending anywhere in the cash burning to do marketing. So, I don't understand the panic of Paints business, which is only not even 5% of our business and we are very, very categorically clear that our eyes, ears and our vision is on that. But again, no magic wands. We have opened -- we clearly said in my opening remarks, Gujarat, we are slowly penetrating. Rajasthan, we have opened recently in last month, 2 months, and we will penetrate. Then we will go to another 2 states. If I want to open the pan-India, it would be disaster for Astral, which we will never do by employing so many employees or overstretching in capital expenditures or doing anything for heavy marketing budgets. But give us time. We give us time of a few years, and you will see a continuous growth with a positive EBITDA, no cash burn and a vertical which we created. At a range, we will call it Paints and construction chemicals division. We want to get construction chemicals move into Paints because that's the right segment and the right audience to grow construction chemicals with the Paints business together. So please understand and please don't have any panic that we are doing anything wrong here. Whatever business is, faucet was the same thing, you see after 2 years plus 2 years, we have reached 3 digit plus. And we are there with the capacity to grow, range, understand the business and continuously deliver the growth numbers. And similarly here, we are very, very conscious and we are driving it in the best ways possible. Hiccups do come in new business, learning curves come, pluses, minuses come. The same came in Adhesives. We have always told the market about pluses, minuses, hiccups, up and down curves and the market was always been posted in the right direction, which is the philosophy of Astral family. And please be rest assured that this business for Astral is also equally a prime business, but with no magic wands around, but you will see these results in coming few years from now.

Got it.

Nothing will be negative on margin front, which will be always there in our thing and nothing will be overspent here. And no CapEx is required here for at least a few years from now.

Right. Sir, for understanding sake, in Adhesives, I believe there were lot of players who came in the market and then moved out. What is the uniqueness, which the leader is having such a large market share? And what is our market share in the domestic market? I understand that we..

I would not point to what market share. But if you see 40 years, 45 years, 50 years history and if you see just 8 years, 9 years history for us taking over a company, creating a complete range and making a mark in the industry, it's obviously a great achievement. Because no one at the #2 was being able to stay continuously. Various reasons. I don't want to get into that. But we have -- we were also challenged multiple times, but we have taken over the challenge and delivered. And we have now Adhesives business in our blood, pipe in our blood, faucet is in our blood and Paints, we are taking it into our blood also.

Correct. But can you split the revenue of Adhesives into overseas and domestic market?

We have already...

Hiranand bhai said. Yes, he said. So this quarter, U.K. was INR 77 crores and India was INR 280 crores.

Got it, sir. And last question, sir, what would be the revenue share from UP state? And is Kumbh giving a positive wipe in terms of volumes or it is slightly restricting growth?

We don't have that number there, and we don't want to get into those breakups and numbers because a lot of distribution is done through our dealer and networks. So, we don't get the correct -- how much business is going over.

The next question is from the line of Pinaki Banerjee from AUM Capital Private Limited.

Sir, in the previous quarter, with regards to your U.K. subsidiary, you had stated that you are bringing a one of a kind of a product in the Indian market with respect to the Adhesives. So -- and that will be the first time in India. So, can you give us an update on that?

Give us 2 quarters, at least after this fiscal ending, we'll let you know.

Okay, sir. And last question is, you have a cash of around INR 290 crores. So, considering the fact that there is actually a bit of a flattish trend in the industry, how do you plan to utilize it?

At present, we will be not doing any big things. But if there is something which is positive, okay. But otherwise, we'll be looking at keeping some cash on hand and adding to it and next year and all the CapEx as we have been, our cycles have always been from our cash accruals, which will be seen on -- depends on the market.

So, I think by year-end, we will be able to know what is our next year budget. Based on that, we will work out our cash utilization plan. And if we don't have any such kind of utilization plan, then we will give it to our shareholders.

The next question is from the line of Manan Madlani from KamayaKya Wealth Management.

Congratulations on the margin front. Sir, my question was on OPVC side. So previously, if I'm not wrong, you mentioned we are targeting 78,000 metric ton capacity. So are you still planning on that? And on the pricing front, since a lot of players are starting manufacturing OPVC, do you see any supply-side pressure or still the demand is pretty much high?

I think India doesn't have any capacity of OPVC. So, I don't think any too much capacity is going to be there. And secondly, this machinery delivery time is also very, very high. So at least in the coming couple of years, we are not seeing any overcapacity into the OPVC. Maybe after 2 years, 3 years, it can be, but at this stage, it doesn't look like that.

Okay. So for instance, if we are running at a 60%, 70%, 80% utilization rate and if we are planning to increase our capacity, how much time it takes for us?

We have planned our machines in a series of sequences and its technology is home grown. We have kept our CapEx also for the technology in mind, and we'll be the first one even to make the fittings in-house. Just give us at least 1 or 2 quarters as things unfold and progress with the product line, we'll give you a correct and clear picture.

Okay. My second question is on PTMT taps. So how are we pricing them? Like -- so is it a premium product compared to your regular PTMT taps?

No, no, PTMT taps is not a premium product. And our price range will be close to the market leader in PTMT, which is Watertec right now. Watertec is the market leader in PTMT across India. So, our pricing range and quality will be at par with Watertec.

So, we are booking a good volume from that segment basically?

It is not a voluminous product, but yes, it is a good margin product. So, obviously, we cannot expect thousands of tonnes of sales in that because it's a tape picture. But yes, it is a very good product for the bottom line. And also the response is positive. Very positive, I can tell you, not to get into more deep in that.

And on the bathware side, are we -- like I remember earlier, you mentioned you have a different institutional team to cater the institutional side of the business. So how that segment particularly is doing?

We have started getting institutional business from good projects, builders as well as big contractors. At the same time, our retail presence also is growing and continuing. So, balanced business is happening in a right way.

Okay. Could you quantify?

No, sorry.

Okay. And last question, I mean, we get that the infra side of the business is not getting much traction. But from the real estate side, do we still seeing any contraction or we are seeing any improvement from that side?

We are having good presence pan-India. So, maybe a few markets go plus/minus. But overall, there is a good acceptance and demand is coming along. I think you can take the last question, and then we can close. If anything is left out, we can separately tackle that.

We have no more participants, sir. So ladies and gentlemen, that brings us to the end of the question-and-answer session. I would now like to hand the conference over to Mr. Ritesh Shah for the closing comments.

Thank you, Albert. Hiranand bhai, any final closing comments, Sandeep bhai, please? Thank you so much.

No. Thank you, everyone. And -- as we have answered all the questions related to all the queries, and we are sure that we will meet in person after the fiscal year-ending of Q4, and we are looking forward to that. And as Astral has always come out and given its right pictures and all, and we also eagerly look forward to meeting you. And we will strive to do our best. Thank you, everyone, for the support and the call.

Thank you. Thank you, everyone, for participating. If anything is left out in the question-and-answer session, you can directly reach on my mobile. Thank you so much.

Thank you, Ritesh ji for organizing the call. Thank you, everyone.

Thank you. Thank you, all.

Ladies and gentlemen, on behalf of Investec Capital Services India Limited, that concludes this conference. You may now disconnect your lines.