BirlaNu Limited (BIRLANU) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the HIL Limited Q3 FY '22 Results Conference Call. [Operator Instructions] I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you.

Thank you. Good afternoon, ladies and gentlemen, and welcome to HIL Limited's 9 months FY '22 Results of investors and analysts. Today we have with us, Mr. Dhirup Choudhary, Managing Director and CEO of the company; Mr. Karuppan Veerappan, CFO; Mr. Ajay Kapadia, Vice President, Finance and Accounts. We will first have Mr. Dhirup Choudhary to give the opening comments, and he will be followed by the CFO, Mr. Veerappan, who will take you through his perspective and the financial progress. Before we commence, I would like to state that certain statements made on today's call could be forward looking in nature and details in this regards are available in the earnings presentation which has been uploaded to the company's website and mailed to you separately. I should like to call upon Mr. Choudhary, to present his views. Over to you, Dhirup.

Thank you, Siddharth. Good afternoon, my HIL family and welcome to quarter 3 and 9 months FY '22 Earnings Conference Call of your company. I thank you for taking out the time and joining us today and hope that you and your loved ones are in the best of health. We have successfully achieved a 17% growth in the first 9 months of FY '22 over a 19% growth, which was achieved in the last financial year on a consolidated basis. The growth in our Indian business achieved in the last 9 months is 33% over the same period last year. While the supply side issues continued to provide huge headwinds, we have escalated our sales across verticals to drive our growth. We also continue to produce innovative ways to overcome the challenges faced and maximize our performance. I'm very excited with the benefits we are securing from IoT 4.0 implementation in [indiscernible]. This brings in transparency, preventive maintenance, our share of ownership for all to drive best performances in the factory and aggressive adoption of Six Sigma profile functions has further brought our family closer and is committed to deliver better efficiency and lower costs across all countries. Let me now share business size update commencing with the Roofing Solutions business. The quarter under review seems to be robust quarter, public vertical despite being a relatively off period, delivering a strong performance with sound volumes. Despite huge price pressure from competition to gain market share as a testimony to the salience of your brand. We continue to further improve our market shares with better realizations by maintaining grassroot connect and gaming council. Our teams have been performing advanced mapping of customers, and we have been emphasizing influencer activity to reach the consumer. While the market share and the volumes stayed guarded, the stress in the bottom line was inevitable owing to material costs being at an all-time high. Our asbestos pre-leasing solution, Charminar Fortune continues to garner customer appreciation and is well poised for growth owing to superior quality. It retains its edge as a promising alternative to steel sheets by virtue of its superior characteristics, robust manufacturing processes, and strategic prices. Needless to mention, this solution provides well-needed alternatives to our effective proofing for the future sustainability of your company. As you are aware, we had a lockdown in the Balasore roofing plant operations for a short time and the same has been resumed from the 19th of this month. We have amicably resolved the labor issues without any loss to revenue or profitability. The plant is very strategic to us and contributes 10% to 12% of the roofing revenue, and it is our chosen location for the latest announced CapEx for Building Solutions segment. Let me now come to Building Solutions segment, where the entire sector continues to take raw material-related issues, did well on the back of a clear strategy by registering a 57% growth in top line and 2.7x improvement in PBT over the same 9 month period last year. We are confident to grow further in this business by entering new geographies. Our capacity expansion in Orissa will greatly enable us to meet these extended goals, though the project stands a bit delayed owing to COVID. While the raw material prices in this sector remains inflated and did dampen our profitability in Q3, we are confident that the company will be able to maintain its profitable revenue growth movement coming forward. December has been a good month for this segment, and we hope that the same momentum continues in Q4. In the polymer solutions business, we have a big challenge owing to reduction of PVC price, creating uncertainty of demand, and reduction in selling prices in the primary market. Our challenge is further enhanced by the increase in CPVC price, high seafreight and constrained availability. The putty business continues to face challenges on its top line and bottom line owing to competition. However, the business took committed actions in HIL towards expanding the sales or geography and have been able to achieve 46% growth in top line and 80% growth in PBT over the same 9-month period last year in this segment. We are well poised to reach INR 500 crore top line this year from the Polymer Solutions business. Our flooring solutions business, Parador is continuing to face severe headwinds owing to raw material issues. Truly providing our belief of together, we build the teams in India and Europe have made comparable efforts towards getting the availability of materials appropriately. However, the input costs are still considerably high. The team is making committed actions towards improving selling prices and promoting non-HDF/NBF products to mitigate this crisis. This has enabled expansion of sales in European countries, and we are confident we witnessed quarter-on-quarter improvement, matching our greatest aspirations of this business, both in top line and bottom line going forward. With the prevalence of the third wave we are maintaining vigilance and maintained cognizant of the change in business impact. We will stay ahead of any and all developments and there is a resulting outcome to ensure that our business continues to function smoothly, maintaining its growth momentum. Combined with our experience from the previous 2 waves, we are confident of maximizing the productivity and minimizing the impact of the third wave. To conclude, we are well on track towards becoming a $1 billion one-stop building solutions company in the next few years. Our business teams have displayed the temporary resolution to keep the family together, be resilient and agile and grow the business both in India and Europe despite several challenges. Lastly, I want to thank all the shareholders for the continuing faith and support that they have shown in us. Enabling us to serve your company in the best possible way. Many times for your patient hearing. I would now like to hand over the discussion to my CFO, Mr. Veerappan, to take us through the financial performance of the quarter under review and easily look forward to answering your questions as transparent as ever. Veerappan over to you.

Thank you, Dhirup. Good afternoon, everyone, and thank you once again for attending HIL Limited's Q3 and 9 months FY '22 earnings call. I pray that you and your loved ones are safe and healthy. I will now take you all through the financial and operating highlights of the company in Q3 FY '22. We continue to witness a robust financial performance and its several headwinds in yet another contributed quarter. Standalone revenue grew by 15% year-on-year for Q3 FY '22, coming in at INR 450 crores. And for 9 months FY '22, it grew by 53% year-on-year, coming at INR 1,428 crores over an exceptional last year. Roofing Solutions revenue grew at 11% year-on-year to INR 203 crores on a quarterly basis and on a 9-month basis, it stood at INR 803 crores, having grown by 21% year-on-year. While the price pressure, coupled with increased input costs have put some pressure on our margins, we have seen an improvement in our market share and thereby in the revenues. We have further cemented as leaders in the roofing solution in India. Building products saw a robust growth of 25% year-on-year in Q3, with revenues coming in at INR105 crores. The revenue for the 9 months was INR285 crores, registering a growth of 57% year-on-year. Margins were not impacted by the high raw material prices in the first 2 months of Q3. However, by a strategic call around action, including significant improvement in selling price has enabled December to be a far better month for us, which is expected to continue in Q4. The Polymer Solutions business experienced a robust growth of 14% year-on-year for Q3 FY 2, recording a revenue of INR 140 crores and on a 9-month basis, it grew by 36% year-on-year to INR 384 crores. We consistently introduced new SKUs in the market and improving operating efficiency of our plants, we expect this vertical to continue delivering robust growth in the forthcoming quarters. As Dhirup mentioned earlier, this business is poised to cross the INR 500 crore mark in top line by the end of this financial year. The flooring solutions business grew by 10% year-on-year to INR 373 crores in Q3 FY '22 owing to raw material issues. On a 9-month basis, the business grew by 1% year-on-year to INR 1,095 crores. The fabric of Parador is extremely protected and in line with the other business verticals under HIL and now has an aggressive outlook towards growth. We have given the revenues for the business and expected profitability to follow suit as the metal costs start coming down. The health of the company's balance sheet is a good importance to us. We have reduced the debt further by INR 33 crores in Q3 and by INR 135 crores 9-month period. The debt now stands at INR 275 crores. On India level, HIL continues to be a net debt-free company for the third consecutive quarter. The total debt to equity ratio has improved 0.34% as on 31st December 2021 compared to 0.21% as of 31st March 2021. The network of the company stands at INR 1,131 crores, having grown by 18% year-on-year. In conclusion, I would like to reiterate that we are making strong progress towards our $1 billion goal despite facing some pressure on the profitability time owing to the inflated input cost. However, we are certain that these issues are only temporary and once normalized, the company's profitability will improve meaningfully. With this, I would like to conclude my opening remarks. I request the moderator to open the floor for questions. Thank you.

[Operator Instructions]. The first question is from the line of [ Amit Vora ], an individual investor.

Congratulations on a good set of numbers in a tough environment where all raw material prices have been going up. You have done an excellent job in even reducing the debt, which shows the strength of our execution. So great work on that aspect on execution. The question that I have majorly is on the Parador flooring segment. One of our Indian leading supplier for MDF has indicated that they have increased MDF prices by around 17% in Q4. So how are we mitigating this? And if we have taken price increases, what have those been? A similar question is on the roofing side as well because we're seeing inflationary pressure on raw materials on the roofing side as well. So what has been our strategy there, if we have taken price increases, what quantum has they been?

Thank you very much, Amit Ji for your kind words. Means a lot to us. Coming straight to your questions. Let me take them one by one. Parador, as I mentioned, is continuing to face severe headwinds owing to raw material issues, primarily now on prices. The team's efforts made in the last 2 quarters has ensured availability of material to a great extent. However, the input costs are still at very high level. The team is taking committed actions towards improving selling price and promoting non-HDF/MBS products to mitigate the crisis. This has enabled expansion of sales in European countries that we have seen over the last 9 months. We have grown outside Germany by registering a 23% growth in Spain, 19% growth in United Kingdom, and 14% in China amongst other growth. This will augment very well for our growth plans in Parador in the coming quarters, and we expect to grow quarter-on-quarter, both in top line and in bottom line. Selling prices have already gone up by 13% in Parador, and this quarter, we will talk that up further. And we will take all actions towards further reduction of controllable costs and efficiency model for Parador to get higher revenue and higher profit to sustain ourselves and make better profitable growth going forward. Yes. I mean.

Yes, go ahead. Go ahead. Sorry.

You have a supplementary question on that, I can answer that and then take on this thing.

No, no, you complete on roofing and then I'll talk about a follow-up on flooring.

On the roofing segment, of course, there is considerable pressure by our competition to reduce prices because our temporary efforts in quarter one on gaining market share, which has gone up to almost 25% in quarter one, wanted to be created. We certainly depended upon our last leg connect. We have testimony to the salience of our business, continue to further improve our market share. Market share in quarter 2 and quarter 3 always comes down for HIL because we don't want to strike on prices. Our brand stands for it. The difference of prices between our competitor has only gone bigger, but we have not let our market slide, which is potentially at 22.3%. We will continue to maintain this market share over quarter 4 itself. But quarter 4 is a favorable quarter for roofing because we start preparing for our next season. And we are very hopeful that the next season will also be very good coming forward. And therefore, we have already started ramping up all access as prices will go up this quarter further. And hopingly this business will deliver very good results in quarter 4 as well.

One follow-up on roofing is that this quarter, we have been profitable compared to last quarter. And our profitability will only continue to improve is what you are indicating. Is that the right way to look at it?

Quarter 4, definitely, the profitability will be better than quarter 3, considering that we have taken a lot of action in integrating the cost aspect to R&D contribution as well as our selling prices are expected to go up immaterial of whether our competitors raise it or not. So you see the question on the bottom line for lack of work every material, cement, fly ash, seafreight, everything is pushing the bottom line. It's going to be a foolish business stance not to pass on part of it to the customers. We will do it based on our brand and connect I hope that our competitors also do that to make this market a better place for all of us as producers.

Understood. Understood. And as you have just mentioned that Q4 and Q1 are the outlook remains pretty strong. If there is a quantum that you're looking in terms of price increase that you have taken up in Q4, if you can give for flooring and even roofing, if that is possible.

Amit Ji, as I mentioned to you, in flooring, we have already taken 13% price up to quarter 3 and this quarter also, we are planning to take a further price rise with our customers. In roofing, this is a quarter we will see a good jump on our selling price once again, and we have started already taking those levels. We will be able to discuss this better once we have been able to achieve it across the country.

The next question is from the line of Baidik Sarkar from Unifi Capital.

Mr. Choudhary good evening and congratulations to you and the entire team on a very safe quarter. If I can request you to breakdown the supply chain issues in Europe in some more detail [indiscernible] how much more we need to cover in terms of feedstock availability, I would really appreciate that. I know in your opening comments, you've mentioned a power possible change in stock mix. But if you could just break down the issues that you're facing right now? It will really help us cover down on that aspect?

Your line was not very clear, but I guess I got your question probably and you can correct me always. In Europe, as I mentioned, we have worked very hard to bring the materials to our shop floor. We had a big problem in Q2, and that was all of a sudden. And this has nothing to do with Parador. It's to do with the entire flooring segment, which is Lamington because there's a sudden boost of demand for the furniture segment in Europe and a lack of availability of raw material, primarily HDF/MDF. So we have sorted that out now. So material is not an issue in Parador anymore. We already have mastered enough. Price is an issue of our raw material, and that's at the highest peak level. If you ask me, honestly, I do not see that coming down yet. But as we understand from our competition and I think our speaker before this, Amit Ji, mentioned that HDF/MDF in India are taking for the price high. We do not see that in Europe. We definitely can see that it's going to some extent. I'm not saying that it's coming down, but we will take all actions to ramp up our production further. We have taken up an extra shift in Europe, considering that raw material. We are at all-time high order book backlog because we have been able to get across the new customer, acquire them in Europe, as I mentioned about some of the numbers that closed in 5 countries. And we have been able to match our stock also for [indiscernible] products, which are needed for the DIY in Germany. So DIY in Germany are not so good at realization, but very good at volume, and we don't want to lose that. So now that we have taken actions on availability of materials, which are all in red against last year, but that's the price part of it. From availability, we have sorted it out, now it is a matter of looking forward and getting quarter-on-quarter benefit on that. So I confirm to you that you have stood by, thank you for your patience. We are working very hard. So quarter 3 has been better than quarter 2, quarter 4 will be better than quarter 3.

So the fact to zoom out the current quarter and invite your comments on how do you think our execution is likely to be in the existing segment this summer. That is Q1. In general, how's the pricing environment and the competitive intensity. And I know these are very early days, but is that a ballpark volume growth range and you think exists in the market for us to take given where fiber prices are? Your comments on that, please.

You're talking about the roofing are not you.

That's right.

Roofing, we will continue to lead the market. We are #1. We will not let that go away by any chance. We have taken a different route altogether. If I draw because you have been speaking to us for a long time and you've been associated with our company for long enough, sometimes in quarter 2, quarter 3 of 2020, I think we went down on our market because we were unable to capture the market at a price we wanted to, while the competitor was lowering price and wrapping on the shares. We did not allow that subsequently. We have gone into the last net connect and let me assure you that the digital connect, the pincode connect actually are doing, working with the masons, it’s really adding value. We've taken at least 1,673 counts away from our competitors, and we are securing our position in the market. So I'm looking forward to an excellent quarter one, much better than even a bumper that we had this year.

That's very helpful. Can I just squeeze in one last question Mr. Choudhary? I understand acquisition had a very important part of your $1 billion journey. Is there a segment? Is there an adjacency we have identified we would like to get associated with inorganically?

So let me tell you totally how we are planning this $1 billion so that you have a clarity far better than earlier. So we are looking at all adjacencies. So there will be 3 basic drives of our growth plan other than the normal growth in the business. One will be Amazon. So we are already in very good progress in discussing with some of the key influencers in Europe, if I may say also taking help from big 4. The clients see how we can get Parador to the $350 million range. We are at about $170 million at the moment, $170 million, $180 million, and we want to double from there. So that's the top line. And with that, the profitability improved in Europe, once you have the top line then the bottom line definitely smoothens out because there's a lot of fixed cost that gets apportioned. So I can tell you, I feel far confident than before, even with the prices of materials and other things that are haunting us that I feel far comfortable that Parador will grow. And most so because we are seeing the traction that we are getting in the order backlog and our revenues have been by far very good in Q3, which were excellent last year, but we have met up the revenues to a great extent and Q4 will be, I think, one of the highest is what we are trying to do in Parador. Coming to the second vertical that we will prep up will be the pipe. So as I mentioned in our opening remarks, we are hoping this segment crossed the INR 500 crores this year. A lot of effort has to be done in that. There are a little bit of a slide down in the market owing to PVC prices going down, the temperaments are low. But I think this is just a temporary phase. We are going to match this up. And the deep guide that we are doing to Tier 3, Tier 4 is clearly supporting a little bit of planned activity that we are doing. So overall, this business will become INR 1,000, INR 1,500 crores, including putty, it is for certain and that's what we are aiming for in the next 2 to 3 years' time. And then there will be the normal business of roofing and building solutions where we would add more factories as we go forward, but it will be like the logos, you'll have to add factory and then get the revenues out of it. But we found a profitable model there. Q3 was slightly dumped on profits in this segment because material costs at December was a fantastic month, and hopefully, that will continue in January, February, March. So you'll see the results. The next big are adjacency. So a lot of work has been done by our team on the adjacency and last time, I had alluded to it a little bit. We are looking at water tanks. We are looking at new SKUs of 5 including some of the newer things that we don't have it in the present call. We are looking at construction chemicals like tile adhesives, primers, et cetera. A lot of effort is being done. I'm presently monitoring there is almost every deal. And I can tell you that this team is bullish on this. There's a lot of synergy that we have with our deep dive retail connects that we have. So hopefully, very soon in the next quarter or 2, you will hear some good news about this traction picking up. So there's a lot that is happening, I can tell you. The team is absolutely excited and this will be a one-stop building material -- building solutions company is my word for it.

[Operator Instructions] The next question is from the line of Sagar Jethwani from Phillip Capital.

Sir, a couple of questions on capacity utilization across the business segments and secondly, your effective tax rate was around 37%. So can you give a reason behind that?

Capacity utilization for AP, that is the king segment is highest in quarter 1 and then it becomes high in quarter 4. This quarter 4, we'll go all out from February onwards or middle of February onwards. At the moment, I can say Q3 was about 75%. And on a 9-month basis, we were 84% Quarter 2 and quarter 3 are always less on the capacity utilization. On the block side, we are absolutely full up to the extent that we can, 95% to 96%, we can't go beyond that. Panel side, we are absolutely full out, roughly about 93% to 94% is what we achieved in quarter 3, I guess. Board is 100%, and you know we have set up a new plant for boards in Faridabad. So that and the Hyderabad plant, both are 100% full out on board. BNF that is pipes and fitting is doing very well. It has already come up to a 53% capacity utilization with Faridabad almost 85%. So we will ramp this up further as we expand this business. And fitting is also about 59% in quarter 3, and we will ramp up further where that is need, but a lot of fitting is bought out also by us under our brand. So Parador is doing extremely well in quarter 4, they will be full up actually on their capacity since we already have noted the material. The tax rate. So dear Veerappan, may I request you to just answer this question, please?

Yes. So this tax rate is we have taken some solution in Parador. In Parador what happens is the tax is always calculated [indiscernible] provisions and once in 2 years, there is an assessment happens. And this is prior to certain based on the assessment, certain expenses [indiscernible]. So these demand has come, and this has been in the future. So it's also a nominal amount, but will be settling out March. So there are some provisions we have taken conservatively in the tax which will get offset in the next year.

Next question is from the line of Subham Agarwal from Aequitas India.

Sir, my first question is regarding the Roofing division. I wanted to know generally in terms of demand, how is this dividend shaping up given that competitors are planning to come up with new CapEx over the next 6 months and also that we are getting slight mixed news as far as the rural health is concerned. So I would like to know your views.

Roofing segment, Subham, the other thing, sorry, I'm being extremely bold on that. We dictate the market and we love to do that. We are price leaders, we are quality leaders. We are distribution leaders. We are the connect leaders with the customers. And I think what you're seeing here is a dividend of a very, very resourceful strategy that we have put in and the commitment from the scene. So we see that business going very favorably to us. Yes, we definitely hear competitors scaling up their production capacity by adding I don't think you have money in your company to spend INR 80 crores, INR 90 crores in setting up a new line for sector. I'm sure as a promoter of this company, you won't like to do that. and we definitely won't. We have other means of improving our capacities in the plant by automation, by Six Sigma, by IoT, Internet of Things. We are doing all of that, that is required to ramp up our production. We are absolutely capable to meet up any demand that the market throws on us in quarter 1 and remain on top of it. So we don't need to add any capacity and we won't in a hurry in roofing segment term. We will not let go the market share that we have grown over the years and the brand we have grown over the years. So I'm very bullish on that.

Fair enough. And secondly, can you also give us some numbers regarding how is the traction in the color roof and non-investors part?

Yes. So non-asbestos primarily was made to basically safeguard any eventualities of asbestos getting banned in the organization. We have got the [indiscernible] now well-established its quality dominance and witness. It's a small base, but we have grown 3x this year over the last year. And this product has been well accepted by the client. And this year, we should cross -- normally in nonasbestos in the whole country, the market size one used to heard was about 12,000 metric tons. We'll already supply 15,000 metric tons this year, and we pull ourselves towards doubling that and tripling that in the coming months, and you would hear that. So it's showing good potential.

Perfect. And secondly, my question is related to the roofing segment. As you already mentioned in last quarter itself that the order book was pretty high, almost all-time high. And currently, also, the order book is very high. And as far as raw material is concerned, availability is already sorted out. So my question was slightly near term as to whether we will see a significant increase in capacity utilization in Q4?

I think your question is on flooring. Am I right?

Right.

Okay. So I mentioned that to you. We will go all out on production in Parador in both the factories. And there are certain limitations [indiscernible] on the number of towers they can put in, but we have started the new shift in [indiscernible] and let me confirm to you that while COVID looks bad in Germany and in India, none of your factories are at all, tough because of COVID or any implication on COVID. Our teams have kept it absolutely clean and safe for the purpose of working. And Parador will go all out in Q4, you will see movement on that. But I caution you that the profitability of Parador will take its time to come back because the material costs are high, but we are trying to get maximum offline. And with that will come the profitability.

The next question is from the line of Shantanu Basu from SMIFS Limited.

So my first question is with respect to the strike that happened in the Balasore plant. So I want to know what was the main issue. And I missed in this -- in the earlier part of this call, you mentioned that they may have seen some price cuts in the pipe segment, and there's also been some price reduction in the routing segment. So want to know the quantum of all those? And lastly, I mean, do you see that -- I mean, what was the percentage of Charminar Fortune sales as a percentage of total roofing if you can get that figure right?

Thank you, Shantanu. And let me answer one by one, if I forget something, please remind me. But on the strike side, Shantanu, this zone is quite prone to it and nothing wrong. They have their demand, but it's going on -- it was going on for a long time. I now completed 5 years in HIL. We don't have a strike in any of the factories till now. But this was a time when our demand were low. This is also a time when roofing demand normally remains low, and this was the time we therefore decided to implement some automation in the plant. It came up with a bit of a backlash, but we have sorted it absolutely amicably. They are wonderful people, and we take care of them and they understand that we will take care of them in long term. The local government also supported us. So absolutely no problem, no loss in revenue, no loss in profitability, except a little bit of maybe freight charges that got increased because we have to ship the material from other godown, but we didn't miss sales at all. Coming to your next question on price cuts, sorry, I didn't get it, but we haven't done a price cut in roofing in quarter 4 at all, and we don't intend to -- we will increase the pricing in quarter 4. Quarter 3 also if you see realizations have been better than quarter 3 last year by about 2%. So we are doing well on price. On the pipe side, the selling price follows the material product and the market, therefore, expect a reduction once PVC prices go down. And in India, that's something which is extremely volatile and it's at the moment going down. So we are managing that. There's a lot of improvement back at home that we have done on the efficiencies of machines as we have already moved ahead of 50% utilization. And we attended the team, we have bought from R&D on pipe and everything is working fine for us. So we are hopeful the margins of pipes have also gone up over the last year. And while the growth has been quite good, 60-odd percent in pipes, the margins have also gone up. So I don't see a problem. There was one more question you had, sir.

Yes, I just wanted to know the percentage of Charminar Fortune with respect to the total roofing sales.

I answered that, it is absolutely no. Charminar Fortune is only going to be 15,000 metric tons in this year against a total sale of 800 metric tons that we'll do in roofing.

Okay. So I mean around 1% to 2% of -- or maybe less than that of total revenue.

You're absolutely right.

The next question is from the line of Bharat Sheth from Quest Investment Advisors.

Congratulation on a good number and challenging time. Sir, on this Parador, we have been successfully able to diversify from Germany, and that has started showing. Going beyond, if you can give some color about China as well as the US market that we were looking to -- from that perspective? And second, of course, now we were also looking for expansion in this plant. But since now this availability of raw material is challenging. So how do we see this business again from say 3 years' perspective?

I tried to answer that earlier, but you have asked some very pertinent questions, so let me try and revisit them. Bharat Ji, this -- the fabric of Parador is absolutely safe. And if you trust me, you will trust what I'm saying. We have gone through some difficult times, and this is not Parador alone. All the flooring companies in Europe have laminated against the material availability and trial. As we speak now, availability started out because we are getting materials from all around and many more suppliers have been added and very extruded negotiations have been conducted by them, and we have been able to get that. Sadly, even the shipping costs are very high, but it's definitely going to be subdued in the coming months. So we now have the material, let me say that way, and we want to now ramp up production. Parador will move up to $350 million in the next 3 to 4 years and we will achieve that by expanding Parador to many more countries. Germany was almost – Germany, Austria contributes 50% of their revenue, but that's changing now. The balance of the countries in Europe fancies about 25% of the revenue, and that's changing and going up. And the rest of the world was 25%, and that will change. There was some hiccup in the dispatches outside the different countries because of COVID and seafreight, but we are finding a means to ramp up production in Europe system. There's a huge demand of flooring in Europe, and that has only gone up after COVID. So we are maximizing that. Our US product there, which is modular 1, which is a resilient flooring. These are fantastic products and that has shown us so much of potential for growth, and it's selling like literally like hot case. And we are very proud of the team that they are doing with their design and development in Parador to meet up to the expectations of influencers in Spain, France, Italy, Nordic country, Switzerland, United Kingdom. They are all different. They are also setting up logistics centers or soon would be setting up logistics centers in different parts of Europe and UK. In UK the Brexit that's needed that we have local logistics there. So that's something that we are already working on. United States, the JV has taken up because of time. We haven't been able to conclude yet. But I think in a month or 2, we will conclude that, and that will just be beginning in the United States. China has grown 14% over last year, but there is huge potential. So let this cohort be slightly more dampened and then further visits to China and strengthening that team and all those things -- you would see a lot of vibrancy in Parador in the coming financial year. And I think the [ pedestrial ] is all set for that.

You stated about doubling and tripling of this Charminar Fortune in coming time. But when do we really see a meaningfully contributing our top line and EBITDA? And second thing, we -- since the technology on which we are working that reduced the price gap between currently asbestos, cement sheet and this roofing system. So what level we have been really successful in achieving that?

So yes, the ramp-up has taken time primarily because earlier we went with the autoclave histology and later, we found that was becoming extremely expensive because of power consumption and capacity because autoclave always defined the capacity of manufacturing. So now we have gone with a new technology, again, homegrown. IPs have been all announced, and the journals have announced it, and it's been registered. So that is our now IP. And that product is showing extremely good quality, strength from all angles, customers are liking and the colored part of those, we have 6 variants of colors. They are fantastic. So I think now nothing can stop us from growing. Yes, it's going to take time because this is all in institutional segment that we sell and they have, for many years, shifted to steel and to convert them back to a cement base roofing, takes time but it will happen. Meaningful if it is INR 100 crores, it will happen in the next 2.5 years' time. If it is INR 500 crores, it will happen in 5 years' time.

And last question on the polymer business. So where we wanted to grow exponentially and grow around INR 1,000 crores or INR 1,005 crores because the opportunity is large, and we also want to expand the capacity. So what stage we are now and after this INR 500 crores catching in this year, how do we see this business and further CapEx for new plant?

So you see this is a very interesting segment. There were lots of questions all of us had, including you and I. On whether we have done the right investment strategy in getting into polymers because there are very, very big players there. And I don't want to name that all. But we tell you, we have made a good meaningful beginning in this, and our brand is stabilizing. The influences our plumbers are showing a lot of faith and at B2B segment is growing in the price, which is now almost 25% of the sales. And we have ramped up from INR 8 crore per month sales to now crossing -- edging towards INR 40 crores per month in pipes and putty has also shown a good ramp-up. I think pipe this year is already growing at 65%. Ajay, you can correct me there. And these are very, very good numbers, which we are proud of. This segment will grow, sir. And I have committed to everyone, and it's a commitment to me myself first, and then to all of you. This segment will be INR 1,000 crores in the next year 2 to 4 years, if not earlier. And reaching INR 500 crore makes it meaningful from a contract negotiation with material supply because material becomes a very important part of this business. And therefore, that milestone is going to all go well for our future growth.

Last question, if I can add. If you can give some color on geographic spread and how do we want to become a pan-India player in what time frame.

On the polymer business yes. So at the moment, we have become good consistent player in north in polymers. I think pipes very difficult to mark the market share, we may be 1% or 2% but we are almost touching 5%, which is a good bit in North at least. We mapped the total of one of our -- 2 of our biggest competitors there, and we mark against them, and we are doing very well actually. So the next was South. So we build up a plant in Hyderabad, incidentally, we'll be coming very soon to the board again for an approval of a short CapEx to augment that capacity and add on HDP and foam pipes into our profile. And the south has picked up very well on pipe. And the next bit that we are trying is in East. There are significant capabilities that needs to be grown in these because we are very far from -- for all our plants and the fright element becomes very, very high. So we'll have to look at alternatives in East obviously will soon come to you guys as we are discussing on the whiteboard and to grow in East. So we don't want to leave any part of India. We want to be a pan-India player, and we want to be amongst the big players.

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

One is Dhirup, a bit more on the flooring side. And just in last quarter call that you were discussing. And you had mentioned that there were some players who had in-house MDF manufacturing and who are also into flooring. And those guys were relatively better placed than us in terms of the material supply and also on the pricing. Just wanted to understand now and if I attach to what you said just now that in Q4, Parador is seeing a very strong order book -- so just want to understand, is it the market growth, which is helping all the players or we have maintained a price differential versus the second or the third player in each of the markets, and that is helping us to maintain our market share. Where I'm coming from is to understand better on the competitive landscape? And how are we able to compete? And we not serving an MDF plant, is it becoming -- does it become a handicap in any way for us to scale up the business?

Extremely good question, Nikhil, and I'm sure it will be validated in many of our thoughts and to everyone on this call. First of all, let me start backwards. If HDF/MDF something that we want to have in our manufacturing scale up. I had mentioned this last quarter also, and I'll repeat that these manufacturers are lamenting for good 5, 6 years if you leave out the last current 12 months, their profitabilities were low in Europe and especially talking about Europe. They have closed down their manufacturing plants. You talk about [indiscernible] you talk about some of the big names there. It all slowdown there, HDF/MDF plant because it was nonprofitable. The investments are very high. And if we are to ever dip into this, it will be, a, a very high investment, bond EUR250 million, EUR300 million for a plant. And we would only use about 20%, 30% of the capacity, and then we'll become a B2B player trying to supply this product to other manufacturers, which is not what we want to do because the margins won't be above. And it's only the market, you wait and watch. I mean these sides are going to come down. And again, the profitability will become a question of concern and realization on the capital they have invested, all of that. That's my count on that. Only about 20% to 22% of our competitors have their own down the line HDF/MDF capacity. All the rest buy from outside. Therefore, there is a good competitive landscape where we compete. Our brand is #1. So Nick is just correcting, we are #1 in Germany, in brand. And therefore, we have continued to maintain that. Our issue was can we grow outside Germany as well and spread our wings because I always meant to scatter the product and reduce our overdependence on Germany. And I think this has given us a good window to do so. And I mentioned about some of the countries where we are moving in. So the competition in each country is different, Nikhil. So we are not tapping against the same guys and it's not important that each country has HDF/MDF manufacturers or local manufacturing capabilities. So it's quite a different landscape in different countries, the levers that the consumer uses are different, the preferentials are different, what they are looking for. And we are trying to compete by local teams there. So we are setting up local teams in each of these countries to really align to what it means to gain markets there and pricing. So we are not cheap. We are not cheap. So we are not taking the price and leaving behind some cookies and thereby gaining market share. The market share gain is like customer acquisition for hardware where you're converting the customers. And there is a residential segment and there's a commercial segment. So in residential segment, mostly people buy from either the DIY or they have the workmen who buy the contractors who buy for them and do the renovation. Roughly about 60% of the market in Europe is renovation and 40% is new or even 30% is new and 70% renovation. So they've done a lot of renovation during this time after the COVID because they were sitting at home or the cocooning effect where they were sitting at home, they are not spending on their travel, so they are doing. So all of that has helped in the market to grow. We have tried to capitalize wherever possible. We could have been -- let me tell you very honestly, we could have been $200 million already had we not faced the problem of materials this year. And -- but with the good order backlog that we have, I think, presently, Ajay again, correct me, it's about $18 million or $19 million already. And that's a good order backlog to have for normally $12 million to $13 million is a comfortable lot of backlog that we carry because most of it is order book and bill in the same month. So we're seeing a good order backlog not because we are at all leaving anything on the table and getting a low price, but because of our connect.

Okay. Just one follow-up here, Dhirup. Thanks for the detailed explanation. Why I'm trying to understand the competitive landscape is? Because if I understand, and I think over the call, the way you understood Parador is like Parador is the leader in terms of the new designs and the design people, which Parador tie-ups has, Parador is able to get the best product and the best time and the fastest way in the market. But in the environment where we are in, like where prices are so high, like 15% price increase ourselves have taken. Is the influencer decision moving away from the design to the price or they are still sticking with the design, which means that the competitive landscape or the advantage with the mode which we talk of Parador has created sustain. So just trying to understand, has there been any change in the influencer decision-making because of so high price increases which are happening.

Again, a very, very good question, Nikhil. Thank you for asking this. It gives me an opportunity to explain. Let me again segregate the business of Parador in Q2. One is residential, one is commercial. Commercial businesses are all done by influencers, interior designers, their own consulting groups, external consulting groups for big projects in malls and hotels and other things. They are completely done on design. They want new designs. They in fact sometimes come and jointly works with us for design. So design becomes a very, very imperative part and then comes to quality and price and quality is mostly given, so it's design and price. When it comes to the residential device on DIY. So there this is A, design; B, price; but mostly it is the technology. That means if there is a bathroom, they can't get wood there. So they will need a wine and the water pulling is there and things like that. So it's more about where to get what type of product. What is changing as we see part is also the e-business. So a lot of this e-business is coming in there, they are ordering from the net but those offerings are with cheaper products from China. And that's something we don't operate anyway. So we also have our business. So we have our own business store at the internet, we have started that about 1 year back and that's doing well, this actually did very well during the COVID. We were doing shipments from our factory to the customers directly. I don't see a big change there. Design and brand will still play a good role and Parador has a way to go through that.

Sure. Just one last question I have. On the AAC blocks, and I was taking a call of a few listed companies and even talking, and there is a significant market shift which has happened from the red bricks to the AAC blocks and there has been some price increases as well -- are you witnessing a similar kind of a scenario for our AAC block? Or do you see that the market shift is still not happening? Or how do you see that scenario evolving? Because 3 to 4 years back.

Very strong market share that we will tell you. And more so, if you are agile, and you have been able to move from the A class cities to the Tier 2, Tier 3, cities which we have done. There's a lot of construction work that is happening there. And therefore, we are trying to get that benefit. We have raised our price a good bit in December, and it has sustained and that's going to help us in the quarter 4 as well. So yes, we see a good benefit. Our plants are 95%, 96% full. Actually, if we have more products to sell, we can sell it. We are getting good traction on that.

The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors.

At the onset, let me say that listening to you, I think, is one of the best experience that I personally get each quarter. And I made the point that I attend your call and the conversation that you come back. So thank you very much for that.

Let me tell you from the point I come from I work for you and I worked for the company to want to invest or you are already invested. And therefore, I have to do my job by being transparent, and I also [indiscernible].

That's wonderful, and that actually adds to the whole thing. Now see, we've been like very, very expressive on the fact that we are on the way to becoming $1 billion enterprise and basically concentrate on the building solution side. Now -- so that's like you're chasing sale growth. We also had a leadership on the profitability and thereby the return ratios, which I now see is getting impacted because the new businesses that we are kind of getting into are obviously, like lower margin relatively compared to the original business of asbestos sheets. So basically, over a period of time, what's going to happen is that our operating ratios are going to begin at a consolidated level, and thereby, the return ratios are going to be impacted. That's one. The second thought that I had was that the new products that we're getting into, like pipes, like water tanks, like some sort of chemicals and the some blocks, et cetera. Other than Parador, which obviously, I would say, certainly not commoditized because there is a strong design element there, and there is a price point that you basically work at, that is the #1 brand. But then the pipe and the water tanks, et cetera, meaning they are more on the commodity side. So -- which obviously will basically lead the organization to pressure on pricing on the volatility of the raw material movement, et cetera. So if you could kind of share with us some perspective on how you are seeing the organization over a period of time on the subject of profitability and thereby the return ratios?

Thank you, Manish. Manish, I will be very honest with you again, okay? And let me give you my mind, if you like it, excellent if you don't, please call me back later and we can have another set of call. Look, if I had to grow HI. What I found HIL to be was a great company when I joined it 5 years back, but INR 1,000 crores with INR 100 crores EBITDA. And for 70 years that it had already settled in, this is the 75th year of the company. 70 years when I say in, I didn't think it has done it to us. The question was, should I continue on roofing as we had because we had 86% dominant from effective routing during that time. We will still be leading as number one, we would have an excellent profitability go or take 20%, 18% EBITDA. That was one aspect. The second was how do I grow this company. Now we decided to take the building solutions route, and so we want to be out made. We want to be a one-stop solution. We want to be so-called the leader in this segment in times to come. And a vision of 1 billion was not mine. It came from the team where we did a celebration together. We were $140 million there, INR 1,000 crores or $150 million. So from there, we've now come to -- I don't know, this year, we should close INR 3,400 crores plus. So INR 1,000 crores to INR 3,400 crores. That's the ramp-up that we have done. Now we have to ramp up the new product. Pipes is a vast business cycle. You look at it as a commodity. I don't look at this as commodity, pardon me for not a dream because look at all the declines there, commodity is there, you will have a constant single-digit profitability unless you are a monopoly. And the market cap will be designed only by what you have as you know buyers from you because you are monopoly there. Freight is not that, look at the valuation that Astral has, the Prince has. I mean the market is booming with valuation. What I decided for you and for HIL was we have to have a profitable model at a steady state version. So we will always start with a single digit, but we'll ramp it up to a double digit. That was the idea and also see the benefit of the market accessing it. And freight definitely will be a good segment that you should look at growth versus profitability versus evaluation. Similarly, now the other part of it, you think we will leave out -- sorry, flooring, we will leave out because you left it all. So let's talk of chemicals and other things. What are the adjacencies? Where do I go? Should I get into sanitaryware? Should I get into tie? Should I get into Rex? All of this has been worked out and we found that possibly the huge network that we have around the country of retail footfall, each of these sell chemicals in some fashion or the other. So can we get into that and we look at how the market use there some of the big companies, which are doing wonderfully well at 13% to 15% EBITDA. We said that really looks good, and that's something that we want to do because it is also a brand play for us. There is no chemicals that Birla brand [indiscernible] into that. All of that has been sent in order to provide for this. Look, whenever you get into any new business, the profitability will be lower. But when you really ramp up the business and come to a steady state, we will come to, and my activation is not very high. So it will be about 12% to 14% EBITDA. I think I'd be very happy with all the business we're seeing there [indiscernible].

I was saying that thank you so much sure to share your perspective with us. And yes, I understand the challenges and obviously the thing. So I wonder yes, I get the perspective.

Manish, you may not agree with me and you have all right to do it and as an investor, please call us back and give us your input and if there's any other verticals that you want to try a meaning, we will do that.

The next question is from the line of [ Sathish Kumar ], an individual investor.

My first question, crude oil prices are increasing nowadays. Will it impact our raw material price. That is my first question. And the second one, so there is an extension of PMAY scheme, central government scheme will it benefit our company, especially in our roofing segment.

So yes, crude oil will have an impact on raw material, and I don't think any company will tell you otherwise. This will have an impact on the shipping prices. We are almost double at the shipping costs, depending on the end to which we're talking about -- it will have impact on the local trade in the country. So we can't avoid that. It will have an impact on polymer business, which is linked to oil, Chemical. So all of that is there, but we have to find a way. So business is all about looking at the stringers, having a very clear charter of the challenges and working out a dimension, how you will be still successful. And I think that's what the team is paying for and we have a fantastic team on the ground for rest assured we will take all actions that is needed to take our company first. Your second question was on the government policy and I was saying, it is definitely good for us and we are taking all actions that are needed at state levels in implementing it and ramping up our product businesses.

Last one, I think our promoter holding is not that much great. It's around the 40% basis. Can we consider buyback in future?

I would very honestly say I'm not the promoter. I'm working for this company. So that decision I can't make, but the Board will do it. Thank you. I will put up your point to our management.

Thank you. Ladies and gentlemen, we take the last question from the line of [ Chirag Shah ], an investor.

Sir, I had a few questions on the Building Solutions segment. Is it possible to give a breakup in the revenue of the AAC block both and annual separately as well as segment?

I could, but I don't have the numbers here, number one. And number 2, it is not fair because we take this as one business now. So plants are also from them, and therefore, the costs are all divided. Therefore, we normally take it as one block. But you can say that about 20-odd percent would be 20% to 25% will be a analysts or both. So there'll be any coal division more of that.

Who would be the market leaders in these 3 segments?

So in block, we are -- we have about 50% of the market, which is unorganized, which are small players, mostly supplying AAC bricks, not blocks, which means it doesn't go to the autoclave. And the other 50%, we are #1. So we have about a market share of about 19% overall and 38% if you leave out the unorganized sector. That's in the blocks, so we are #1. In panel, we are, again, #1, the total market for cement-based panels about INR 120 crores or something, and we have a market -- our business is roughly about INR 50 crores to INR 60 crores in that. So we have -- we are again massive leaders in panels. Boards we are not market leaders. There are others who are doing a good job, but we are very clear for our strategy on this.

Okay. And sir, what would be the approximate numbers, if you could share, what would be the market size of each of these segments?

It's a different question. But yes, so if we are, let's say, how much in blocks we would be on an annualized basis roughly. Are they just pay me? INR 200 crores. So INR 200 divided by, let's say, 0.19, [indiscernible] So INR 1,000 crores or a little lesser than that INR 800 crores.

And for boards and panels, if you could also share the number?

I told you about the panel. About INR 120 crores. Board would be what, about INR 500 crores or INR 600 crores in the country.

Okay. And sir, these 3 segments have grown in the next couple of years, at what rate would you think it will grow?

Chirag, we will take this business, which is presently around what, INR 300 crore levels to about INR 750 crores in the next 2 years to 2.5 years’ time.

And again, you would say that will there be an equal contribution from all 3 segments or that might change?

We would aim to keep it there because it's doing well this year.

All right. Sir, last question, sir. So sorry, one more question. Sir, is there any goals for exports in the board and panel segment?

Definitely, there is. Our quality is par excellence. So we are looking at that as well.

Okay, okay. And that would be again to the neighboring countries or beyond that also to the deadlock country?

If the manufacturing is from India it will be enabling countries if we have an opportunity of setting up manufacturing elsewhere, then naturally, we can go anywhere.

Okay. Sir, last question, sir. Sir, you mentioned that when you're facing some raw material headwinds in this segment also. So what specifically would it be beside, say, transport and fuel costs? Sir, if I heard correctly, you said you're facing some raw material headwinds in the Building Solutions segment. So besides fuel and transport, which would be the areas.

Cement continues to be a problem for every one of us, I guess, because they have their own way to be in the market. I actually had a problem with a couple of our factories because due to COVID and some of power plants that were getting shut down. And as you know, earlier, Fly ash was coming through from the power plants, but now they have started digging there, because cement guys are -- there is much more demand than supply from the power front. So that's another issue. So power continues, but we are going for solar power in some of our plants to augment that.

Okay. Sir, in the board and panel segment, do you also use fiber, which is imported from Russia, or Siberia or it's locally procured.

There is a small sector of it, which is fiber.

Okay. Sir, is it possible to procure the same locally or the supply is not available at all in India?

No, fiber is international. We are talking about effective fiber. It's always procured from outside. So we buy from Brazil.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Thank you very much. Stanford. You've done a great job. It has been a pleasure interacting with all of you on this call. We thank you for taking time out and engaging with us today. I hope I could do justice to this call and to all your questions. We value your continued interest and support in your company. If you have further questions or would like to give us a suggestion. Please don't hesitate to reach us out at our Investor Relations section. Thank you, and stay safe.

Thank you very much, sir. Ladies and gentlemen, on behalf of HIL Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.