BirlaNu Limited (BIRLANU) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the HIL Limited Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Karl Kolah from CDR India. Thank you, and over to you, sir.

Thank you, Janice. Good morning, ladies and gentlemen, and welcome to HIL Limited Q3 and 9M FY '21 Results Conference Call for investors and analysts. Today, we have with us, Mr. Dhirup Roy Choudhary, Managing Director and CEO of the company; Mr. KR Veerappan, CFO; and Mr. Ajay Kapadia, Assistant Vice President, Finance and Accounts. We will first have Mr. Dhirup Roy Choudhary make the opening comments, and he will be followed by Mr. Veerappan, who will take you through the financial perspective. Before we begin the call, I would like to highlight that some statements made on today's call could be forward looking in nature, and details in this regard are available in the earnings presentation, which has been shared with you earlier. I would now like to invite Mr. Dhirup to present his views on the performance and strategic imperatives that lie ahead. Over to you, Dhirup?

Thank you, Karl. Good morning, ladies and gentlemen. Happy new year, and a warm welcome to this Q3 and 9 months FY '21 earnings conference call of your company. I thank you all for taking out this time to join us on this call, and hope all of you are safe. Early on in this calendar year, we got good news on the initiation of the COVID vaccine in India, a pride for every Indian. This, together with the controlled new cases and better recovery rates, shows how we, as a society, have come together collectively to fight this new challenge head on. HIL have ensured our employee safety, health and overall wellbeing by providing them with necessary amenities such as COVID insurance; for all the employees, awareness sessions on hygiene, dispensing norms and even counseling to deal with issues such as stress during such unprecedented and difficult times. Your company too has worked very hard to convert this crisis into an opportunity, and you would have seen significant improvement in business than the pre-COVID level. Our teams have worked tirelessly using advanced techniques to reach out to profitable regions to overcome these testing times, emerging victorious over all the challenging challenges posed. This quarter has been the best-ever performance in terms of top line and profitability in Q3 of any year, both for the Indian and European operations. At an organizational level, we have been extremely agile to adapt our businesses to the current environment in innovative ways to maximize the opportunity laid in front of us. This was made possible by the hard work of our employees, as I mentioned, and with the aid of new age technologies and methods such as smart digital systems, business intelligence platform, heat map, pin code wise customer tracking and connect for acquisition of new customers, daily review processes, rigorous cost-saving measures and many more. We greatly leverage technology to boost our performance and optimize processes. Implementing an end-to-end connect digital shop floor, IoT 4.0 across many of our plants along with the integrated robotic process automation has helped us immensely in this endeavor and our systems that have now become an integral part of our organization. Additionally, our lean Six Sigma model and the zero-based costing that we adopted at the start of lockdown to reorganize the organizational structure and costs have also strengthened HIL fundamentally. It won't be out of faith to mention here that we, as one HIL family, have all contributed in different ways towards the business performance. As a result, we saw a growth of 38% year-on-year in the consolidated revenue for the quarter. EBITDA grew from INR 47 crores in quarter 3 FY '20 to INR 107 crores in this quarter, witnessing a growth rate of 129%. Q3 is a seasonally weak quarter for Roofing segment. However, it has done very well despite the seasonality and the current situation due to the pandemic. Strong rural demand has been instrumental in boosting this segment. We have successfully improved the market share by 150 basis points in the first 9 months and added 700 new retail counters in potent zones. Our products are driven by innovation and Charminar Fortune, our new asbestos-based roofing solution is a prime example of that. Even though the offering has established in the market, our R&D team continued to work on improving the product by means of optimizing its cost and enhancing the product quality. We have already launched a new variance of this product called Humid Cure, and a dedicated new manufacturing facility is now operational in Faridabad. Our roofing products enjoys healthy price realization. And based on that, we are hopeful of a better H2 FY '21 as compared to H2 FY '20. Building Solutions segment, too, is on an upward trajectory with economic activities returning to the previous levels, especially with the real estate sector in Tier 1 cities showing a gradual revival. Despite a subdued recovery in the Tier 1 cities real estate activities, we continue to operate in newer markets of Tier 2 and Tier 3 towns as well as where we have done well in the previous quarter, in quarter 3. It gives us pleasure to share with you that your company has shown a growth in the top line from Q3 FY '20 despite a severe challenge. Our innovative strategy of catering to labor hutments and COVID centers has supported a strong business in this segment. We have also ensured that no compromises were made on profitability. The Pipe & Putty segment has witnessed strong growth in Q3, with strong demand for our brand. Resin prices have firmed up over the past few months, translating into a favorable impact on business. Additionally, high volumes has helped us minimize the cost effectively towards this. We have -- we are confident of meeting the robust demand for this product on a pan-India basis having enhanced our distribution network and presence across India, and have ample capacity to meet our endeavors. With Christmas, Q3 is a seasonally weak quarter in Europe due to holidays, but performance of Parador has been extremely good. As committed to you earlier, we are relentlessly working as a team towards enhancing profitability and improving the business model. We complement our Parador team for sustaining a good performance while the business around them faced severe headwinds, especially for international markets owing to COVID pandemic. We are amongst very few flooring companies which have grown both in top line and bottom line over the last year. Our e-business, online brand store, focus on DIY and brand strategies, which we started implementing last year, have been impeccable and delivered results this financial year. As COVID situation improves further, we will actively resume our work on expanding Parador into newer geographies as promised earlier. Our team efforts have continued taking HIL amongst the top few manufacturing organizations in India as for a Great Place to Work declaration recently. To conclude, I would like to say that HIL has overcome all the hurdles posed by these times on the back of our resilient team that work every day to improve the various aspects of the business, maintaining its status as a market leader. As an organization, we'll continue to deliver our business on quality innovation, sustainability and business excellence. We are confident that the coming quarters would be even better. Thank you very much for your patient hearing. I would now like to hand over the discussion to my CFO, Mr. KR Veerappan, who'll take us through the specific numbers. Veerappan, over to you?

Thank you, Dhirup. Good morning, all. I would like to wish a happy new year to everyone, and thank you all for joining us on the call today. I'll be taking you all through the financial and operating highlights of the business during Q3 and 9 months FY '21. The company's operational and financial performances are better than the pre-COVID levels, with the ongoing pandemic situation improving and the lifting of the lockdown. Thanks to our dedicated and hard-working teams, we have been able to redefine our business model and successfully convert this crisis into an opportunity. The Roofing Solutions business grew by 33% -- 34% year-on-year during the quarter and 15% year-on-year on a 9-month basis despite a seasonably weak quarter. Reaching to newer geographies and digital connect with the customers have helped to increase our market share in this business considerably. Building Solutions has recorded a quarter-on-quarter improvement of 25% for the quarter and a 4% year-on-year. We are happy to see this business back on track and making steady progress. Polymer Solutions business grew 83% year-on-year during Q3 and 37% year-on-year in the 9 months. The passion displayed by the team in expanding the channel network has resulted in significant growth for this business. The capacity utilizations have been improving constantly across all segments for us. While we remain focused on minimizing our cost and maximizing margins, we are exploring opportunities to add capacity for certain segments. Parador completed a smooth acquisition and integration last year. This year, it has integrated our Six Sigma model, zero-based costing and lean manufacturing processes very well, and the impact is clear to see in the company's improving profitability and cash flow. The consolidated EBITDA from continuing operations came in at INR 107 crore for Q3 compared to INR 47 crore in Q3 FY '20, and INR 312 crores from INR 200 crores for the respective 9-month period. During this quarter, the consolidated PAT increased to INR 53 crore from INR 9 crore and has grown by 506% year-on-year. For 9 months FY '21, it came in at INR 152 crore, growing by 99% year-on-year. In 9 months FY '21, we have surpassed the PBT and PAT numbers of 9 months FY '20, showing how robust operations have been this financial year. Having tracked the economic conditions closely, we do not anticipate any major impact on our carrying quantities of inventories, intangible assets, trade receivables, investments or any financial assets. We have a very stable and robust liquidity position, ensuring a relatively smoother sailing in these times. We have ensured that we made the best of opportunities available through various measures. Both HIL in India and Parador enjoyed healthy cash flows during the quarter. Debt-to-equity ratio stands at 0.52x as compared to 1.0 as on 31st March 2020. The long-term borrowings were further reduced by INR 23 crore in the quarter, resulting in a total reduction -- debt reduction of INR 241 crores for the 9 months under challenging circumstances due to COVID uncertainties. The long-term debt in India stood at INR 94 crore. We expect to prepay a majority of this debt during Q4 FY '21. As you all are aware -- as we all are aware that we had borrowed INR 273 crores in India 2 years ago for the acquisition of Parador. We have repaid majority of this debt by now. And by end of this financial year, we would have fully repaid this loan against the original plan of repayment in 5 years. The net worth of the company has improved to INR 961 crore at the end of December '20 from INR 743 crore as on 31st March '20. The EPS from continuous operation came in at INR 202.57 crore, having grown by 99% year-on-year in the 9 months period. We constantly strive to maximize our profitability and, in turn, boost returns for investors. I'm happy to conclude that this has been an exceptional quarter for HIL. With this, I would like to conclude my opening remarks. I request the moderator to open the floor for questions.

[Operator Instructions] The first question is from the line of Baidik Sarkar from Unifi Capital.

Many congratulations on the phenomenal set of numbers, especially given the environment in Germany and India. Mr. Choudhary, my question is, how does one gauge these numbers between being 1x pent-up phenomenon versus organic resilience of rural demand? And do we, in some configuration, run the risk of witnessing a very high base effect for the next year, and in effect making the FY '22 numbers look bad than they actually are?

Mr. Sarkar, thank you very much for your appreciation, and thank you for your question. Mr. Sarkar, I would say, if someone says they know next year very well, I am not one of them. We would definitely anticipate next year to be as tough as we had anticipated this year to be. But I'm -- I can consciously contribute by saying you have a team in your company which will make every difficult situation to its benefit. This year also, we started off with a lot of concern, but the numbers have been reasonably good as yourself say. Next year, also, we'll make the -- get over these numbers I can comment that to you. As far as the question of how much of this is pent-up demand? Yes, there was a pent-up demand after everything opened up, and we don't want to shy away from saying, yes, it was there. But more than the demand, HIL made a good benefit of it. And thereby, you can see for routing, for instance, as I mentioned, while the demand came up, HIL has gained far more market share and the differential today between HIL than anyone else has only widened because we have been able to take shares far in advance. Building materials was stopped. And therefore, there wasn't a pent-up demand at all on that, and we aren't seeing any at the moment as well. But we have gone into greener pastures and taken businesses which were never supposed to be ours or where we are not focused earlier. So the business team has completely innovated themselves and moved to pastures where they felt earlier possibly that the business was not there, but they have been able to stretch out business back to in advance terms and therefore -- and good profitability, and therefore, that business has sustained very well. And Polymer, of course, there is a slight benefit that you would see this year, as I mentioned in my opening remarks, because of the raw material price that Reliance has continuously improved, and everyone has got benefit of that. But the growth that we have achieved in Polymer is though a small base, but it has -- it is definitely much, much higher than anyone else. And we are absolutely on track for our goals -- long-term goals on Polymer. So -- and Parador, I mean, look, the entire model was same. So I won't say there's anything to do with pent-up demand. There was certain bit of it in Germany for sure, Mr. Sarkar, where people in Germany were not going for holidays, and they were spending more for renovations of their homes, and that demand came up. None of the flooring manufacturers could utilize this. We did it because we have gone into online brand store. We have gone to into e-business. We had vendors in Europe, which is very difficult. Our point-to-point shipment, so we were supplying to customers individually to their home from our factories, which is very rare in European companies. And we have taken all those leaps last year itself -- and last to last year itself. So last year, actually, it got benefited during the COVID situation. So this should continue, I would think, even next year. Therefore, yes, we have got benefited by using this calamity to our benefit this year, and we will continue to do that and reinvent ourselves if the situation becomes tougher. Your company will continue to perform.

That's very exhaustive, sir. And that answers a lot of my follow-up questions. If I may just end with one more. I remember from our previous conversations that the R&D initiatives of Charminar are coming to an end by the end of March this year. And in effect, utilizing the cost of asbestos-free sheets to parity with where pricing is today. And that could be a huge opportunity as the consolidating market share. Any updates on how you're progressing there?

So R&D has done wonderfully well to reduce the cost. We had a slight negative impact in one way because we have shifted the fiber to Brazil -- back to Brazil. And the exact type of fiber or the higher end fiber that we wanted to bring from Brazil was not available because they had limited permissions for taking out the fiber. But R&D has worked. And so last quarter, you would see our margins were slightly down on the AC sheet because we have lost a little bit of money owing to higher fiber utilization, but R&D has worked out a very good systematic process around this. And from quarter 1 next year, we'll start getting benefited. The cost of fiber in Brazil is substantially lower by what is being offered by Russian and Kazakh. Therefore, we'll continue buying from Brazil, and the benefits truly will come next year, in quarter 1.

And just a bookkeeping question for Mr. Veerappan. So how should we look at leverage playing out in India business the end of next year? I think we've generated enough free cash to completely neutralize over the next 12, 15 months. So your thoughts on that.

We have brought down to 0.5, and we expect that to continue. So it's not going to be more than that figure.

Okay. So the prospect of complete deleveraging may not be possible is what you're saying? We might continue to carry a certain amount of debt.

Yes, there will be some growth -- no, there will be some growth opportunities. So it cannot be made to complete 0.

So Mr. Sarkar, the long-term debt will be continuously reduced by us. And at the moment, as it stands, it's at about INR 90-odd crore, which will be reduced by another INR 50 crore by the end of this quarter. So that's our biggest focus. The customer -- loans are all against working capital. We don't have a concern on that. Parador loans are at very low rates, and they are even getting prepaid by Parador because of excess cash that is getting generated there. So that's not our concern. If there are good opportunities to invest further, we will invest and we'll come to you at that time.

The next question is from the line of Amit Vora from PCS Securities.

Many congratulations on a great show. Congrats to the team of HIL. My question is on the Humid Cure technology. If you can give some more color on what could be the potential from here on? And when is it that we look at it that utilization reaches optimum level?

Amitji, thank you so much for your question, and thanks for your appreciation. Amitji, on Charminar Fortune, let me tell you very transparently where we are, I would take a pause and say, yes, we have taken a little more time than I had anticipated in developing this technology. I'll tell you where. We had a first indication of developing a product which can completely derisk us in case asbestos goes out of the market. That we developed very well through the autoclave mechanism. And that product was fantastic, but slightly expensive because it was using autoclave, plus, there was less possibility of generating higher volumes of that because autoclave had a particular restriction, so you can only add a finite number of autoclave. With 4 of them, it can only deliver about 150 metric tonne a day. So there were all these limitations that we have, which also compounded to the cost of this product. So while the product was great and is great, the cost was very, very high. So R&D continuously worked then towards making another product of Humid Cure, which is far lesser sensitive to all of this because it doesn't use autoclave. So you can virtually make this product from any of the factories. It's a small CapEx using non-asbestos material. So this product is now at a very ripe stage of R&D development and production. We have already exceeded INR 1,000 crores -- we have 1,000 metric tonne of this product in the market. We were constrained because we didn't have a clear manufacturing facility. We only have to use part-time facility from our South Kondapalli plant. And now that we have a full-fledged manufacturing facility in Faridabad, this is a brand-new state-of-the-art line, this development will take even further pace. The whole idea of developing Fortune Humid Cure is that the cost will be lower, the strength will be higher, even higher than autoclave. And therefore, this will have a far better reach in the market. And I'm bullish that at the moment, strategy is 60,000 metric tonnes in Faridabad new line, I'm bullish in the next couple of years, we'll be able to go further.

That's quite helpful. The second thing is on our ad spends. Have they come back to the normalcy? Whether it was on digital platform or other modes? Have they come to normalcy? Or we are still holding back some of them?

So we -- you are talking about the marketing spend, am I right?

Yes, yes, absolutely. Yes. Yes.

So this year, holistically, we have taken a call to keep at a bare minimum, and we have done that miraculously well. Quarter 4, we will then start spending a little bit on BTLs. We have not decided to go with -- on BTL at all. There will be no synergy with anymore cricket and IPLs and all, which were big-ticket items the last 2 years before last year. So we are not going to get back to that in a hurry. So therefore, the marketing spend will be bare minimum as much as it's needed for the regular business uptick.

Okay. Last question, and then I'll jump back in the queue, is what would be our approximate CapEx plan for next year?

I would like to answer that question a few months later, once I'm ready with the budget. But yes, there will be some investment that I propose to bring in for building manufacturing solution by adding new CapEx for block panels and bolts because we are 100% full up on the capacity, and the business has come back to normalcy from December or November of the last year. We have grown last quarter as we have seen. This quarter also should be reasonably well. And therefore, we have to add capacity. Profitability has gone up in this segment, and there is good reasons for adding capacity. That will be one capacity that we will definitely look at, the exact numbers can be told to you as soon as we are ready with them. And other than that, no big-ticket item is being planned at the moment, but all of this will be met by our cash flows, so there should be no problem.

The next question is from the line of Ritika Gupta from Aequitas Investment.

Congratulations on a fantastic set of numbers. Sir, my first question is pertaining to the Roofing segment. If you could give us how has the industry grown in this quarter? And what was HIL's volume growth?

Ms. Gupta, very nice to talk to you again. Thank you for your question. The Roofing segment after muted Q1 has grown in Q2 and Q3 in the market. But on a 9-month basis, they are still at basically the same levels as last year, maybe a 1% growth. We have definitely grown in this market. On a quantity basis, we have -- volume basis, we have grown 20%. And on a revenue basis, we have grown 34% over last year -- last quarter, which means the prices have been better than last year same quarter in Q3. And market share-wise, we have gained market share 150 basis points. And the differential between us and anyone -- others have only grown, therefore.

Sir, you mentioned that in quarter 3, our volume growth was 20%. Is that right?

That's right.

Okay. Sir, regarding raw material prices, you did mention that next year, our fiber prices would be lower since we would be sourcing from Brazil. But in general, how do we expect our raw material prices to be trending as cement and other raw materials are also looking upwards?

Raw material prices is a perennial problem in this division, but the team has found ways to handle it. Every year after year, raw material consumption rates are kept muted or rather efficient by the R&D intervention. Our biggest challenge apart from fiber is fly ash and cement. And I'm saying even though fly ash as a percentage is lower than the total raw material, it is having a severe impact because of both availabilities, the power plants are getting switched off, switched on due to lower power demand in the country and in some of our factories, we are taking this problem, plus the cost because then we have to go to other power plants and get the fiber, which is leading to a higher transportation cost. Cement is a concern. Every one of us are knowing and I think South, their lobby is very strong. Prices are extremely huge there. So those concerns will continue to remain, but I think the market realizes it. We have seen a good NSR contribution this year, raise in the NSR because of the costs. And therefore, the profitabilities have gone up. We continue to hope that with the market looking up next year because the monsoons have been great last year, and farmer are getting their benefit from the government in various aspects, I hope that next year, the market will be great for Roofing, and we will be able to continue this profitable modes for Roofing.

Okay. So my next question is pertaining to the Polymer division. So would the revenue breakup between putty and pipes be 50% in quarter 3?

Yes, more or less there.

Okay. And if you could give us what were the inventory gains that we enjoyed in the Pipes division in quarter 3, if that's possible?

Inventory gains?

Yes. We would have gains from -- as the resin prices firming up, right?

Yes. So I mean while the prices were firming up, the market was not giving us that kind of prices. So market was slower to realize the NSRs than the raw material price firming up, that I'm sure you found in the market. So we had done certain strategic planning for the material and try to find ways of getting it competitive, and that has definitely helped us in the overall profitability.

Okay. In the Building Solutions division, we had record EBITDA -- EBIT margins this quarter. Do we see them sustaining going forward? Or do we see any improvement?

Building Solutions is the only segment where growth will be more driven by selling price increase because we have reached our prime capacity there. We have explored in taking up newer capacities, which should have been ideally done last -- this financial year early because we took a pause due to COVID, not knowing where it's going to go. So yes, that segment growth in top line would come more from getting your market from better regions, which gives us better NSR. And therefore, I assume that the profitability definitely will continue to grow. We have also teased out our [ cost base ] cement in this segment, and that should continue for us.

Okay. Sir, regarding Parador, sir, I wanted to know, we've not had much volume growth as our capacity utilization has been hovering around the 70% level. So have our realizations grown considerably? And what is the reason for that?

Yes. To be fair and [Audio Gap] The Roofing Solutions business, sir, what is the split between -- I mean what is the split between the residential and commercial real estate? And what is your strategy to increase our penetration in the commercial real estate part if at all we have...

Roofing is B2C primarily. And the Roofing segment is all about retail through to the Tier 3 rural -- Tier 3 and towns and rural cities. So I think Roofing does -- we don't monitor it that way. We don't do enough of B2B institutional business because many of the big institutions have gone away from that sector. So Roofing is primarily for the B2C rural sector.

So when I mean commercial, so I meant the manufacturing facilities being set up, those kind of opportunities. So one should just think about Roofing Solutions as a B2C and that too the rural construction housing, right? I mean is that the right way to think about this? Or we also cater to the manufacturing facilities being set up, and we have an [indiscernible] market share.

No. So we don't supply to manufacturing facilities that much with asbestos because very few customers want it. But that's where, I mean, our fortune comes in, which is the non-asbestos. And many of the chemical plants are taking this product for their manufacturing facility because there's big erosion climate there and steel doesn't hold good. So that's the manufacturing part, which is being catered by our non-asbestos roofing.

Okay. So in our Roofing Solutions, our revenues have overall annual run rate of around INR 360 crores in the last 4 years barring FY '20. And this year also, we are somewhat likely to do a similar revenue run rate, more or up, a little bit here and there. But do you think that, given the tailwinds that you have been seeing in FY '21, increase in the market share and other initiatives that you have already spoken about, that business will now deliver a sustained growth on this INR 360 crores from FY '22 onwards? Or do you think that the growth -- I mean the numbers would hover around this for the foreseeable future? I mean how are you thinking about overall growth?

Let me answer your question in 2 ways. One is the market for asbestos. Market for asbestos is highly cyclic and is dependent on the monsoons of the earlier year. So if there is good monsoon and good harvest for the farmers and cash availabilities with them higher, and therefore, the spend is higher the subsequent year. I definitely see next year, again, the business will be very good because the rains have been very good, 2020. And even the harvest -- all their product harvests have been very good. Plus cash has been made available by government through various initiatives. And I think all of that will help the rural sector. So that's about the asbestos market. Therefore, I definitely feel that asbestos market will grow next year as well, over even this year growth. Our growth will -- in the next 2 years, our growth will start coming from the non-asbestos in a big way. That's why the new capacity in Faridabad has been added because that's the segment which will not cater to the rural sector alone. It will cater mainly to the institutional sector. And there, we will go head-on with steel, and we will take away market from them. That's exactly how we are doing. Indian Railways is highly appreciative of our products. They are buying in big numbers. We are also selling to a lot of industries. As I mentioned, chemical industries, and industries which are near the saline atmosphere, and saline atmospheres are using this product more and more. As we become more efficient in this product with the [ humidifier ] costs come down further, this business will pick up further. So our growth in the Roofing segment will come from all of this. Plus, we are now looking at increasing new products in this sector using our retail spread, which could be in the construction chemical win, it could be in the [indiscernible] win, it could be even looking at in a small way bringing in [ things ] as an element into this segment. So all of that is being looked at by the company so that we are able to grow utilizing our extensive reach.

Okay. Wonderful. Just one last question in the Building Solutions side. I just wanted to, again, understand the tilt between the residential and the commercial part. And with the government interest on taking up the domestic manufacturing facilities [indiscernible], et cetera, so is this business likely to see tailwinds over the next few years?

The answer is yes. And we have -- we were highly exposed to commercial textiles earlier, but COVID has taught us to have a meaningful contribution to all sectors. And I think that has taught the business to be extremely agile and look at wherever the business comes from. So we will get a tailwind definitely in this business, and we are very hopeful that this business will continue to do well. And therefore, we are now seriously looking at expanding this business further.

[Operator Instructions] The next question is from the line of Bharat Sheth from Quest Investment.

Congratulations, Dhirup and your team, on a stellar performance. So on this Roofing Solutions, just to get your sense, since we have started commercial factory, I mean, and we are talking of [ humidifier ] to make it this product more efficient as well as -- so how -- at what stage of, I mean, this whole progress -- and we are -- and as you rightly said, because the economic benefit of Charminar Fortune vis-à-vis steel roofing, which can open up a big industrial application. So if you can give some sense, I mean, from 2, 3 year perspective?

Very kind of you, first of all, for your appreciation, Bharatji. It means a lot to me and the team. So far as Charminar Fortune is concerned, I mentioned to you our first priority was to have a product in place so that in case asbestos gets switched off by Indian government for some reason or the other, we would be the only company having this product. So that was established to the autoclave, but now R&D has come out with stainless steel, which will be far more economical and much more robust. So there will be higher strength, almost equivalent to AC sheet -- asbestos sheet, which is what the customers normally like to see. And therefore, that product is -- we are very consciously getting the IPs done all around that we are getting into IPs for nearing countries to sell. In the next 2, 3 years' time, INR 100 crores or more is definitely on the cards, and we'll see how to expand this product further into institutions. But this product will be the only product in the country in case asbestos is switched off... [Audio Gap]

Expansion of geographically for sustainable growth and sustainable EBIT margin that we are looking. I mean now with this expansion, further improvement is possible or not?

101% answer is yes. We have got a slight set back with the international circuit because of COVID, sir. This was not our aim. But this has happened because boundaries were sealed. People just couldn't travel. And all the commercial activities, whether you talk of big hotels or malls or everything, in different parts of the world, they were absolutely at stand still. Therefore, there was no way that we could have sold Parador to the international market. Given it to a normal base in any European company and in any other flooring company except Parador in Europe, you would see the business has completely collapsed because they did not know how to still continue the business in Europe, while everything was closed down. What we had done last year was migrated from a 3-layer status of a distributor and then retailer and then consumer to a DIY structure, where you are supplying the material to do-it-yourself stores. And then we went into e-business, and we went into online brand store for Parador. All of that was put in 2019. And 2020, we've seen that, that has all benefited when COVID came in. Parador has sustained and done better than the previous year last year, only on account of all these initiatives that they have. Now when the market -- this quarter, they are facing a bit of a challenge because of COVID situation in Europe, but they're still managing very well. I'm very hopeful that as soon as COVID vaccines are through and things return, you would see the growth. You would see the growth in China. Incidentally, amidst all these challenges, China JV is growing this year over last year. And we have grown immensely in Nordic countries where we have acquired several new customers. We have grown in Spain. We have grown in France. We have grown in New Zealand. U.K. has been slightly muted, again because of high COVID cases. But we've grown in Europe immensely. Now we will grow in international markets as soon as COVID relaxes. My dream and your dream of taking Parador to the new level doesn't get diluted at all. It may have been slightly dented because of COVID, but it's not going to go away at all. Parador will grow, and Parador will grow profitably.

I mean, sir, will there be -- once the international markets become again more, so because of logistic cost as well as intermediary involvement, currently, what we are more or less like doing B2C, so -- get some kind of impact on the EBIT margin?

No, no, no. I don't believe in it at all. See, sir, I've always said this, and I'm repeating, we will not do anything in HIL which compromises profitability. The growth in HIL will come profitable, and that's an underachieved statement that I'm telling you. There were a lot of concerns earlier by all of us, all of you as well because of Parador because you are not sure whether that's the right acquisition we have done. I was sanguine. I was confirmed. I was very sure. And we are moving exactly in that direction. The profitability will be even further enhanced in Parador because you would be able to use the base load by increasing the sales. So in Europe, the fixed cost is very high in any companies, and that will get equated over a bigger base once the revenue grows up. So Parador profitability, which we took Parador at 7% EBITDA, now is hovering much more than 10%, I think it's about 12%. I can easily say, and I never give very high estimates ever. So I'll say, take 10% and further, we will enhance it.

Last question related to this only. So over the next 3 to 5 years, do you think that Parador can become a globally online seller?

Yes, it will be a mix of both. It will be a mix of DIY and online, sir. In Europe, there aren't many, many people who want online. They have gone to it today because of COVID situation. International, yes, online will be a great way. Parador will grow. Parador will grow. We have taken Parador at EUR 140 million top line. I think we should be hitting the EUR 200 million in the next 2 years' time. And then moving further to EUR 250 million, EUR 300 million. Parador is definitely going to grow. And wherever we need, we will add further CapEx. We are bullish on this. This is the right investment that HIL needed to make. We have done it at the right time. We have got it at the right value, and we'll convert it to a far more profitable product.

[Operator Instructions] The next question is from the line of Shantanu Basu from SMIFS.

[Audio Gap] and finally, with respect to Parador, what was the sales contribution from outside of Germany and Austria?

Okay. So some of the data, I may not be having it immediately with me, Shantanu, so I would request you to reach out to us directly on the SalesConnect of polymers. That data is awfully clean. For blocks and panels breakup, I can say blocks is about 2/3 and panels is about 1/3 of the revenue. That's roughly how it is. And so far as Roofing is concerned, I think your -- sorry, your question on Roofing was on capacity utilization. We have about 70% utilization as in quarter 3. Parador, we have definitely utilized the available opportunity within Germany and Austria extensively during the COVID situation because opportunities of going international was as low as nil. And therefore, about 58% to 60% of the volumes have come from Germany and Austria during this time. And the rest of them has come primarily from Europe and a part from international service. So Germany, which was normally about 60%, has gone up by a few percent during this time. And -- but Europe has also gone up because -- and that's how Parador has grown, while internationally we haven't grown.

What was the figure from rest of Europe?

So Germany and Austria was -- from about 50%, we went up to about 58% this year as a total of revenue. And from the others, we came down from about 50% to about 42%.

The next question is from the line of Nikhil from SiMPL.

Am I audible?

Yes, very clear, Nikhil.

Sir, congratulations, and great set of numbers. And I think the efforts of last 4, 5 years has clearly shown in this quarter. And congratulations to the team for that. Just one question I have on Parador. I think you are much more confident on the growth and the margin trajectory in Parador now versus what you've been communicating over the last 2, 3 years. And on the -- do you believe that the new product changes or the new product introductions, which the company has brought in, can change the way the growth which we were seeing for Parador globally can accelerate much faster than what your idea was during the time of acquisition? If you can share any thoughts.

Okay. So first of all, let me just polish your question a little bit by saying I was always very bullish on Parador, and I continue to be bullish on Parador. The reason -- that was the reason why we went for Parador. The reason is very clear. They are a very, very high-end brand. They have a fantastic product, which is well established. They have some wonderful interior designers that are working with them continuously to develop newer products. And the likes of [indiscernible] and others, I mean you get into the net, you will know they have the world-class designers who are working with Parador. And therefore, that product and that business is definitely something that everyone should eye for. So I'm still bullish, and I was. Now the question is, have I become more bullish? Am I giving higher trajectory on Parador? Look, my intention is that, first, we utilize the full capacity within Parador. We are about 70% utilization there. There is a far more capacity available. But that -- for that, we'll have to get into international regime. And those were halted for the last 9 months owing to COVID. That was not desirous, but we couldn't do anything about it. But now we will do it as COVID relaxes, and this growth is definitely going to come. And any new product that is normal process in Parador that we continue to develop, as I said, 50% of the revenue, every 3 years changes and comes from new products. So Modular ONE was 1 new product, which was launched after we took Parador in the year 2019, and it has always worked miracle for us in the growth and actually taken away a lot of losing market that we have from other products because of competition. And there are plenty of other products that we are making. For instance, in other countries, they want highly sensitive products to water, termite and all those things. They do not want similar products. So we are developing those products now, and they'll soon be launched and you would hear about them if you're following Parador. They are very active in digital media. You can follow them. We have launched a new digital medium called One World -- sorry, Ajay, can you correct me, is it One World or...

It is One Ground.

One Ground. And if you get into again Parador, you will see it. One Ground is a fantastic digital proposal that we have done there. We've gone into different pockets of the world and gathered speed in understanding what their requirements are and the products are being designed for that. So all of that is getting done there. Believe me, we have a very, very exciting future for Parador. But COVID has halted a little bit, but will soon come back.

Okay. And last one thing. On the revenue target of $1 billion, you mentioned, would it mean that you would have to add 1 more product line? Or probably with Polymer and Building Solutions and Parador, we can easily approach that $1 billion kind of revenue what we have been [ planning ] to achieve? Because the potential...

This is a subject we are -- yes, this is a subject we are continuously debating. $1 billion is not my target, thankfully. It is a target from the team, and I own it as much as the team. And therefore, I have no reasons to believe we'll achieve it. Roofing can do finite growth for us, but we are trying to add a few more products in that. That's, again, in the strategy of work at the moment. You will soon hear as we come to the street with that. Building also will grow. And Polymer will grow exponentially. And our aim is to take Roofing ahead of INR 1,000 crore; Polymer to INR 1,000 crore; Building Solution maybe about INR 700 crore, INR 800 crore; parador will definitely grow immensely. And then wherever there is a need, we will add more because our dream is to become one-stop solutions for building. That dream will take us to wherever we want to.

The next question is from the line of Kush Gangar from Care PMS.

My first question is on Roofing. So considering we compete with steel sheet and considering the rise in steel prices, do we anticipate a favorable environment in terms of price hikes for the upcoming season?

Absolutely yes is the answer.

Okay. And the current differential would be significantly higher versus normal considering this rising steel prices?

Sorry, your question is how much would be the increase?

No. Yes. So the current differential between steel sheets and asbestos sheets would be significantly higher than the normal difference in previous years?

So very difficult for me to project the rise in steel prices as it settles, as it will be next year. But definitely, if steel prices rises, our asbestos prices also rises and volume also comes more to us.

Okay. Okay. And the second question is on the Flooring division. So basically, what we understood was that at full capacity utilization, you would be able to do INR 1,600 crores of top line. But current quarter, the top line is around INR 400 crores, and we are still at 73% utilization. So is there -- has there been any significant increase in [indiscernible] there?

No, no. You're getting it absolutely right. You're right, about EUR 200 million would bring us to full capacity in this, which is about INR 1,600 crores in the present context. We have got a better price realization because of the product mix that we have changed, as I mentioned. So therefore, if that product mix can be pushed further, and that's where we are going for. We are trying to take Parador into a far more efficient model than it -- what it was historically last 10, 15 years. And I think that will continue. Therefore, we can generate more revenue from new products, and that will continue to help us in the profitable growth of Parador.

And because that INR 400 crores for the current quarter top line, and it is multiplied by 4, then we are at full capacity. But -- so basically, the price realization has been huge and if we continue that, then we go to about EUR 250 million [indiscernible].

We will hope for the best, sir. Yes, you're absolute right. Numbers say that. Let's see how we are able to grow, sir. It all depends on the product mix. And when we go into international market, it also depends on how that market absorbs the product.

And my last question would be on Polymer. So basically, the current margin has increased significantly, partly due to scale and partly due to the benefits which the industry has got. So my question was, once we increase our scale and top line, do we expect the margins to improve even from current levels?

Our anticipation is when we are able to reach a INR 400 crore level, we should be at least at 15% EBITDA margin. And that's how the team is trying to move forward. As we push more material, Polymer is all about putting more material, making it more efficient, margins definitely go up. All small players who are at INR 200 crore, INR 300 crore are less -- very less profitable, while the big guys who are INR 1,000 crore are high profitable. We have to reach those levels and we will.

And considering, sir, the gains from the pressure which the unorganized players or smaller players are facing in Polymer division, do we expect the -- to scale up swiftly versus our earlier targets because that has become a little easy to all branded players to gain scale and market share?

Our attempts will be to ramp up the production as much as possible and the business. We are speaking ourselves very well aware of the market, and we'll take all opportunity that comes our way.

The next question is from the line of Viraj Mehta from Smart Investor.

If you can throw some light in terms of what is the proportion of colored sheets? And how has it moved in the last couple of years?

No. So -- Mr. Mehta, we -- I mentioned the colored sheets in response to the non-asbestos roofing. We have just launched asbestos colored sheets from January this year, and that's only a very small part of our business. So that will need to be ramped up further.

The next question is from the line of Adabi, individual investor.

Congratulations on the excellent results. I'm quite happy. Now I just wanted to know the China country is not impacted that much by this virus -- COVID virus. The economy is doing quite well now. How is our business doing in China?

Our business has grown already over last year by about 20% in China. And China will take another quarter to stabilize is what I hear, but we are very bullish about it. A few things that we have done in the China model are as follows: number one, we have made a joint venture and, therefore, the investment for POS, which is point of sales, which is very much needed for the retail flowing segment, is all being done by the joint venture. And therefore, we are not spending any money more in China. That is point number one. Point number two is, as the business is growing, it's now profitable in China, and therefore, we are not -- we are absolutely in a profitable model. Point number three is we have already gone ahead and set up 4-0, 40 POSs in China in different cities, which means that the brand is being looked at very well there. Point number four is they have an excellent middle class mix there in China, and middle class is proud there, looks forward to brand, and therefore, we have a good [ expedition ] for ourselves. We would grow in China. We have a fantastic railway track, which is from Germany to China, direct railway line. And therefore, our product supplies are flawless from Europe. This is a very good model. I'm very hopeful that this JV will pick up very soon as COVID gets better.

Okay. [indiscernible] do you have any plans for marketing these products in countries like South Korea, Japan or Australia, like -- and New Zealand like that?

Australia, we have already jumped in. And I think as we sit today, we have taken 16% market share in Australia already. We are looking at other Southeast Asian countries as well. And we are not going to feel shy getting into any as we get a profitable business there.

The next question is from the line of V.P. Rajesh from Banyan capital.

Congratulations on your [Technical Difficulty] your target is to [Technical Difficulty]

Sir, I'm so sorry to interrupt you. You are not clearly audible, sir.

I'm missing your voice, Mr. Rajesh.

Hello? Am I audible now?

Yes. You were audible even earlier, but it was just breaking down.

Yes. Okay. I'll try again now. So my question is when you were talking about a target of $1 billion revenues by 2025, are you assuming all it to be organic growth? Or are you assuming an acquisition somewhere between now and then?

Sir, everything may not come from organic growth. We will definitely try for organic as much as possible, but inorganic will not be ruled out.

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Over to you all.

Thank you very much, everyone. Thank you very much for taking this call and coming over and asking questions about your Company. We are always very transparent to discuss everything that you need to know about your own Company, and our investor cell is very much there to answer every bit of it. We value your continued interest and support in HIL. And hope that you keep yourself safe, and all the best and look forward to seeing you sometime soon. Thank you.

Thank you. On behalf of HIL Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.