Carborundum Universal Limited (CARBORUNIV) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Carborundum Universal Q3 FY '21 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital. Thank you, and over to you, ma'am.

Thank you, sir. Good morning, everyone. Welcome to the Q3 FY '21 Earnings Call of Carborundum Universal. We have the management today being represented by Mr. N. Ananthaseshan, Managing Director; Mr. P. Padmanabhan, Chief Financial Officer; and Mr. G. Chandramouli, Senior GM, Strategy. I'll now hand over to Ananth-sir for his initial remarks, post which we'll open up the floor for Q&A. Over to you, sir.

So a very good morning to all of you. Before we begin, as a practice, we will now have Mr. Chandramouli read out our disclaimer, and then I will take the call.

Good morning. During this call, we may make certain statements which reflect our outlook for the future or which could be construed as a forward-looking statement. These statements are based on management's current expectations and are associated with the uncertainties and risks are more fully detailed in our annual report which may cause the actual result to defer. Hence, these statements must be reviewed in conjunction with the risks that company faces. Thank you.

Good morning, once again, and a very, very happy new year to all of you. I do hope that this New Year is quite different from the one which we all passed by. So once again, wishing you and all your families a very healthy and a safe new year. The shadow of the COVID was, I think, still present when we started the quarter in Q3. While all of us were very bullish or were very positive about the way Q2 turned out and with the gradual opening or the unlocking of the lockdowns or opening up of the lockdowns, we saw economic activity come back strongly in Q2. While there was always a shadow of doubt whether this COVID would eat into Q3 post the festivities in the festival season, fortunately, for India, I think the expected surge in the cases did not happen. And today, we are better positioned compared to many other countries. So what we see is that India, I would say, have come out of the COVID, but in many places, the activities are getting back to normal. While that is -- augurs well for us, I don't see any reason why we should let our guard down. And we should have an eye on this resurgence of the COVID till such time the entire country is vaccinated and we can all breathe a sigh of relief. So I'm sure that the last couple of days has also been very exciting for the entire investor community with the Union Budget in focus. So what we also saw that the Union Budget stress on infrastructure is possibly a very welcome move that will have a direct impact on core sectors, such as steel, cement, auto. The growth in capital expenditure we see can possibly flow down to the private investments, and we expect to benefit by way of better demand across all our segments and also by way of, hopefully, high-value, high-margin project orders. So it has -- from the first cut impression, it has been positive for us. And we also hope that the PLI scheme when implemented, and the vehicle scrappage policy will also bode well for us. Add to it the government's focus on renewables and specifically the Hydrogen Energy Mission and on both these PLI schemes and the -- this Hydrogen Energy Mission we would leading into the details more, but we believe it is a very encouraging move by the government. Coming to our business performance over the quarter, Q3 has been kind of a mixed experience for us. While we saw that the stand-alone business has done extremely well, many of our overseas businesses could have done better. We saw that over the October to December period, economies across the world have had very different experiences in terms of their responses to the pandemic and their economic performance. In some ways, this has impacted or reflected on our results, especially in Australia and in Russia and also in Europe. And the stand-alone portion of the business had, what I call, an outstanding quarter and recorded a 20% growth compared to Q3 of last year. Sales was driven by very strong domestic demand across all segments and we recorded an all-time high of INR 488 crores. The stand-alone also saw very significantly higher PAT growth of 63% and a PAT margin of about 13%. The growth has been through both volumes and a little bit of realization in some segments. And the lower fixed costs, I mean, we have been focusing on fixed cost reduction throughout the year, has helped us shore profits substantially. This also marks a sequentially better performance. So stand-alone top line grew by 15% over Q2 and PAT grew by 31%. The -- as I said earlier, the surge in demand over the festive season which was also fueled we believe, by the higher savings of the consumers during the lockdown period was a big driver of growth. However, the performance of overseas entities was a little tepid compared to the domestic business and subsidiaries. The sales of the subsidiaries grew by 5% over Q3 of last year and their profits grew by 31%. However, on a sequential basis, the overseas subsidiaries have seen a muted growth. Their top line declined by 6% and again here, 1 major contributing factor, as I said, was a second wave of the pandemic, I mean, in Australia and Europe, and the outbreak of the new variants of COVID in some of our exporting target countries and consequently, they had subsequent lockdowns and this has impacted the results as well. While the COVID was definitely one reason for our performances being impacted in Australia and in Russia, there were also other geopolitical factors at play. We saw the China, Australia trade tensions and -- which led to the decline in coal exports from Australia which had again a spiraling effect on the coal mining and thus the coal operations itself. On top of it, apart from the geopolitical situation in these countries, we also had, as all of us know, a very acute shortage of containers globally. So inbound and outbound logistics across businesses, both in the stand-alone and in our overseas operations, have been impacted to different levels. Depending on the intensity of exports or the intensity of imports, businesses have been impacted differently. So to sum up, I would say console sales grew by 13%, and PAT grew by 40%. And again, broadly, it's also the reflection of how the pandemic is seen in India and outside India. So the -- we saw the pandemic as something which is being fought and done with, and that is how we have -- the entire country has responded to the situation, while in other countries, this is still being taken much more seriously I believe. Maybe we also have things in better control. So that has been reflecting in the performances as well. So now let me walk you through the segment-wise performance. Abrasives has been a -- it's been a good performance, I would say, a very good performance from Abrasives at a stand-alone level, and we have seen a 16% growth over Q3 of last year and a 20% growth over Q2 of this year. Growth was, I believe, driven by a very strong resurgence in demand from the construction and the auto, auto ancillary industries. So we saw that auto pick up in Q2 and that continued in Q3 as well. Over the festive season, we also saw many construction projects which resumed. And there has also been an increase in home renovations which had given a fillip to our Coated Abrasives segment. Similarly, as I said earlier, the strong growth posted by the auto industry, led by the PV, the 2-wheelers and also the agri equipment, the tractors, drove bond abrasives volumes. We did have increases in input costs, and I think we would see that coming up more in Q4 as well. So across all commodities, we are seeing costs going up. The raw material -- in grains, the fuel cost has gone up, the electrode cost has gone up, the resins have gone up. So across all input costs, there has been an increase. We did cover some of them through price increases, but still not sufficient to cover them completely. Despite that, the stand-alone segment results grew by 44% over Q3 of last year and by 37% sequentially. Abrasives at a consolidated level via what we sell through CUMI America was low, the sales, though we have been able to onboard some big customers and hopefully, we will see the benefit of them over the coming quarters. The sale was low on 2 counts: One is Q3 is always a traditionally low export month, given the weather conditions and compounded now with the nonavailability of containers and shipping delays. In the Middle East, we have kept up the momentum in project orders and recorded a good top line growth. The abrasives business in Russia started the quarter with signs of recovery, but again, with the imposition of lockdowns in some European target markets, it has impacted performance. The Sterling Abrasives in India had what I would call a sterling quarter. So their top line grew by 27%. And because they specialize in agro processing and our grinding needs, so good demand in the agriculture or life solution segments, also in industrial segments like in gear grinding and ball bearing, so that has supported Sterling Abrasives to do exceptionally well in this quarter. So on a consolidated basis, abrasives sales grew by 15% over Q3 last year and 17% sequentially. Consolidated PBIT grew by 59% over Q3 last year and by 35% sequentially. Now coming to the Electro Minerals segment. The domestic Electro Minerals segment saw a growth of 33% over Q3 of last year and by 20% sequentially. Volumes were largely driven by the demand of the white fused alumina, which is an input material for the refractory industry. We saw also the exports doing well here. The segment is also seeing growth in the specialty minerals such as what we call the CUMI blue abrasive, the synthetic alumina abrasives and semi friables. We have also seen here increase in input prices of minerals and for example, the graphite electrodes, which has gone up globally. And here again, some coverage through better realization and favorable product mix has helped. The hydropower generation unit at Maniyar has also seen a steady performance over the year, and generation has been close to last year's level. The rainfall has been kind. And this year, we have seen steady but consistent rainfall pattern in that region. The stand-alone results consequently grew by 86% over Q3 last year and by 11% sequentially. VAW, the silicon carbide production -- producer in Russia, had marginally lower volumes on Q3 last year and also sequentially. This is natural the volumes were impacted by demand from Europe and also the plant closures for the holidays. Again, we did have some increase in realization, but it was not enough to cover the volume decline. The volume decline is not very significant, and it is a normal thing to happen in Q3 when the temperatures dip very significantly. And with temperatures of minus 25 and minus 30 in those regions, it's not so easy to ensure that the operations are run continuously. Our losses in Foskor Zirconia grew sequentially but were lower over Q3 of last year. And our share of our losses for the quarter was roughly about INR 3 crores. So overall, the impact of VAW softened the consolidated segmental sales of the Electro Minerals to 19% over Q3 of last year and to 5% sequentially. And the growth in the results was moderated to 48% over Q3 last year. However, on a sequential basis, profits declined by 26% due to higher losses at FZL. Coming to ceramics, the stand-alone operations grew by 18% over Q3 last year and by 6% sequentially. In Ceramics, the wear segment performed well though we are yet to see the project orders recover strongly. So this has been compensated by the domestic repairs and maintenance segments with a surge in demand and industrial activity over the quarter. So we are clearly seeing a good uptick from the core industries here. The technical ceramics performed exceptionally well. We have been able to ramp up volumes in metallized cylinders and auto components such as spark plugs over this quarter. And we've also been seeing good demand in the components for the clean energy and renewable energy space. The Australian business, as I had indicated earlier, had a very tough quarter. I think while they had issues in terms of the coal mining industry being -- seeing adverse impact because of this political tensions, which we believe are all of a temporary nature, we also have containers being held up at the ports, the coal containers and the country's exports of the coal has seen substantial double-digit declines. But Australia, we are sure and we hear that are preparing themselves to overcome this situation by addressing other markets globally and which will consequently see the revival of the coal mining. However, the team at Australia has started looking at other opportunities available in iron ore or in gold or in other metals, nonferrous metals mining sector, and we are seeing a new opening here as well. So the ceramic segment in America performed pretty well. So they also had, in addition to the core mining there, they also had better breakthroughs in the mining industry in nonferrous iron ore and in nonferrous metal margin. So overall, at a consolidated level, the sales growth softened to 5% on a Q-o-Q basis and also declined by about 6% sequentially. Our profits grew 15% over Q3 of last year but declined by 29% on a sequential basis. Coming to our investments in CapEx, consolidated CapEx for the quarter was INR 77 crores, out of which standalone was about INR 46 crores. And the focus continues to be on vital CapEx and automation projects. So this closes my briefing for the quarter. I'll now request our CFO, Mr. Padmanabhan, to take you through the numbers, following which we can open up the forum for questions. Over to Padmanabhan.

Thank you, Ananth. Good morning, everyone. Wishing you a happy new year and let us hope that the current year be out of COVID. Let me summarize the financial performance for the quarter ended December 31. The consolidated sales for the quarter has increased by 13% from INR 642 crores to INR 727 crores. Of this, the stand-alone has increased by INR 80 crores, significant -- signifying 20% growth over last year. The consolidated segmental PBIT was at INR 117 crores, which was up by INR 33 crores and about 39% growth on quarter-on-quarter basis. At the stand-alone level, the segmental PBIT for the quarter was at INR 88 crores against INR 58 crores of last period, denoting 51% sales growth over the previous year. On a consolidated basis, PAT and noncontrolling -- and after noncontrolling interest for the quarter was at INR 88 crores as compared to INR 63 crores in the corresponding period of last year, signifying a 40% growth. At the stand-alone level, the PAT increased to INR 66 crores from INR 40 crores, indicating 63% growth on quarter-on-quarter basis. At consolidated level, the PAT margin improved from 10% during Q3 of previous year to 12% in the current quarter. At a stand-alone level, it has increased from 10% to 13%, a 300 basis point increase. On the segment Abrasives, on Abrasives, the consolidated sales for the quarter increased from INR 263 crores in the corresponding quarter of last year to INR 303 crores this Q3. Stand-alone sales increased from INR 217 crores to INR 253 crores in Q3, denoting a 16% growth. At the consolidated level, the PBIT was at INR 50 crores, up from INR 31 crores, out of which INR 13 crores increase was from stand-alone and INR 3 crores increase was from our domestic subsidiary, Sterling Abrasives. In the Electro Minerals segment, at the consolidated level, the consolidated sales for the quarter increased to INR 290 crores from INR 244 crores in the corresponding quarter of the last year, denoting a 19% growth. At the stand-alone level, sales increased to INR 130 crores from INR 97 crores in Q3 of previous year. The consolidated Electro Minerals business recorded a PBIT of INR 30 crores against INR 20 crores in the corresponding period of last year, indicating a 48% growth. The stand-alone contributed INR 5 crores to increase in the profitability. In the Ceramics segment, consolidated sales grew by 5% on a quarter-on-quarter basis from INR 152 crores to INR 160 crores. The stand-alone sales grew by 18% on a quarter-on-quarter basis to INR 140 crores. The net sales of the Russian subsidiary, VAW, grew by 52% on quarter-on-quarter basis. Consolidated PBIT of the Ceramics segment for the quarter was at INR 34 crores, higher by INR 5 crores from the same quarter of last year. The stand-alone profitability increased to INR 32 crores, denoting a 50% growth. On the finance side, we continue to be a debt-free company at the stand-alone level as compared to last quarter. On a consolidated basis, the debt equity ratio is at 0.02 as compared to 0.03 in the last quarter. The total consolidated debt was at INR 42 crores, and out of that, we had repaid INR 25 crores during the current quarter. That is a reduction as compared to last quarter. On the ForEx side, CUMI is typically a net importer in dollar terms and net exporter in euro terms. We cover according to our policy, where the net -- after setting off the natural hedging, we will be hedging the balance. And -- so this is from my side. Thank you.

Thank you, Paddu.

Thank you.

So yes. So overall, it has been a very confident building quarter. Going into Q4, we believe that the momentum should -- the current momentum what we saw in Q2 and Q3 will flow into Q4 as well. The some of the -- very strong stand-alone or domestic market is what we see. Some of our businesses, which are located overseas, had a Q3 which is what we believe is more like a one-off situation and would be coming back strongly in Q4 as well. Now as I mentioned earlier, the impetus, which has been provided by the budget, hopefully should flow through in Q4, and that would spur the entire economic growth and movement for the country. So looking forward to better times. Thank you so much again.

Sir, should we now open the floor for questions?

Yes.

[Operator Instructions] We have our first question from the line of Kirthi Jain from Sundaram Mutual Fund.

Congratulations for excellent performance. My first question is like with regard to abrasives, how much like market share you would have gained and what could have been in your view, the market growth, sir, for, say, the current quarter or, say, last 6 months? Either way you can tell.

See, we -- I would -- we keep track of the sales numbers of most of the organized players, right? So from that, what I would see is that the market share gain has definitely happened in the case -- in Q3, definitely. So that is something which we are sure about. This has come across in both the Bonded Abrasives precision segment and also in Coated Abrasives across product groups. We also saw that the imports from China has slowed down possibly because of this delays in shipments and that also would have contributed to a better performance from our side. So though I can't put a number to the market share gain, I believe that overall, there has been a gain in market shares.

You had highlighted there were 2 big disruptions which happened in our business. One is with regard to abrasives, you had highlighted that container availability became an issue and then in Australia, there were disruptions. So both put together, how much of the business we might have lost, just an estimate, how much business we would have lost there?

In Australia?

Australia and the abrasives, the container exports, containers shipment couldn't happen.

Yes, shipments did not happen not only in Abrasives, but also in the IC, Industrial Ceramics part of our business because you all know that the ceramics part is a very export intensive part. So we also had, in some cases, had to airfreight some of these large parts because these are contracted and had very, very strict delivery times. So that also have added to our cost. But having said that, I believe that Australia would have dipped by about INR 15 crores, Paddu?

Yes, INR 15 crores to INR 17 crores is the loss.

Yes, in terms of top line.

And then India, the Abrasive and ICs, sir, which you were trying to highlight?

I would estimate that we could have sold, when I look at the containers which are stocked which could not go out, I believe we should have sold at least another about INR 10 crores.

Then it would have been even more excellent, sir. Very good performance, sir.

Yes. Thank you so much.

We have next question from the line of Ravi Swaminathan from Spark Capital.

Sir, congratulations on a good set of numbers. Sir, just wanted to get an understanding on what would have been the volume growth and price increase mix that we would have taken in Abrasives this quarter?

See Abrasives, the price increases were to the tune of about less than 1.5%. So the entire -- the balance came out of volume growth.

Okay. And what would have been the industry growth in terms of volume? So probably, our growth would have been 12%, 13%. So what would have been the industry growth during this period?

So that's why I've said earlier, so the -- our growth in Abrasives was to the tune of about -- domestic was to the tune of about 20%, Paddu?

Significant.

Yes, so the volume growth has been significant in the domestic side. And since we know that clearly that we did gain market share, I would possibly guesstimate that the industry grew by about 10% at least.

10% kind of growth, okay. And this market share gains would have been from the Chinese imports or from other players also we might have seen resurgence, so any sense?

We believe that we have gained both from the organized players and from the Chinese. Possibly a significant gain from the domestic players.

Got it, sir. And do you feel that there is still further gains that can be done from the Chinese imports? Or do you think that it is transient? I mean, in the sense, just because of the fact that the supplies are getting disrupted that we have won market share? Or is it like so basically customers have kind of shifted to our brand? And generally...

Yes. So I think there are 2 parts to it. One is the, what is happening in China by itself. So the prices in China, the currency is getting stronger, RMB getting stronger, has also kind of pushed the dollar pricing off the Chinese for exports. And that has made them a little less competitive. Second is that the pressure on the Chinese manufacturers to comply with environmental norms is also putting pressure on their cost structure, both from the raw material side and on the finished good side. Fourth, the congestion at the ports, various ports, the shipping delays and the significant increase in freight costs. I mean, the Chinese always used to supply CIF basis. And today, every customer, every supplier is saying only FOB basis because the freight costs have gone now crazy up-not. So while we had situations of containers being available from China at $300 to $400 a container, the same containers are now at between $3,000 to $4,000 a container. So that has really pushed up costs, right? So the landed cost of Chinese imports also have been impacted that way. The other factor, which I also see is that the government has come down hard on GST compliance, right? So the GST collections have significantly improved, and they also went about closing down all these nonoperational or I would, for want of a better word, I would call a fake GST accounts. And that has augured well for the organized players. So I believe it's a combination of all these. And some of these definitely would be sustainable going into the future.

Got it, sir. And with respect to price increases in Abrasives and other segments, any further price increases which are there on the cards?

See, it depends on how the raw material prices will pan out because if the -- if there's going to be a very significant price increases, which can't be covered by any efficiency improvements, then we have to pass on the prices -- costs, so there is no choice. But yes, we will take it quarter-by-quarter. We do not know if the freights are going to be at these levels continuously or will they come down if you include availability of containers.

And any growth guidance for FY '22 for the company level, at an entire company level? That's my last question.

I won't call it -- I won't give a growth guidance for the company, but I can only tell you that India's GDP story, everybody is talking about 11% growth. So definitely, we are looking to better that. So that's what I would call as a guidance.

We have next question from the line of Bhavin Vithlani from SBI Mutual Fund.

Congratulations for great set of numbers. My questions are primarily on the margins. And if you look at the margins for the stand-alone adhesives, which used to hover around 13%, 14%, we have seen a level of 17.5% this quarter. Simultaneously, if I look at the margins for the subsidiaries within the adhesives, we have seen a remarkable improvement in the margins. So 2 questions here. What has driven this? And what is the sustainable level in your view?

So this margins did not happen -- improvement in margins did not happen overnight. And we have been systematically working on a reduction in our material input costs. When I say input costs, not a per unit cost, but more from an efficiency input output cost. So making the operations more efficient in terms of consuming less energy. So that is something which has been now being driven in abrasives and also across the company through what we call this TPA metrology, and that has possibly now borne fruits. We have also systematically looked at a reduction in fixed cost structures. So the COVID definitely has helped speed up that process. So the focus on fixed cost, the focus on variable cost and thus an improvement in our EBITDA margins, that has been what the teams have been working on. So when we have the situation and when we have a situation where the volumes kick in, so obviously, that has really helped the margins overall. So higher-margin volumes, lower fixed costs, better coverage and the EBITDA margins have improved to this level. So while going forward, we do believe that there will be some elements of these costs, which are onetime costs, obviously, like any office, we don't travel, our communication costs are pretty low. So -- exhibition costs, promotion costs has been low this year. And while this may not be staying at the same level the coming quarters, definitely there would be a large element of that, which can be sustainable, and we believe that the margins, what we see, is what we will get going into the future, plus, minus.

I appreciate that. Again, the second question is on the growth of the adhesives as an industry. What we -- if you could break that into domestic and international, what I was seeing is internationally, the subsidiary side, the progress has been actually, on a delta basis, much higher both on the top line and margins. What are the structural changes that we have been doing where we have seen the subsidiary performance has actually come much better? And in your view, what is -- what could be a sustainable level, sir?

The abrasives in subsidiaries, largely in the U.S. and of course, in Russia, we have a big chunk of it, plus the subsidiaries what we see in India itself, you have the Sterling Abrasives, all of them. Sterling Abrasives in domestic market obviously has done pretty well, leveraging what we are seeing in the domestic market. So it's not a surprise that Sterling is doing very well. So their focus on the agro products and on the industrials have really borne fruit. So sterling is a good growth story. In the case of the Americas and the other parts of the world where we have abrasives operations, the last few years have been focusing on gaining customer acquisition or acquiring customers, large customers who would give us stable volumes month-on-month. So that has been the focus. So instead of gaining a large number of customers who have -- we have to go back again and again, so here, we're talking about customers who would possibly give us a schedule for the entire year. So gaining access to them and building a confidence with them has been the theme over these last couple of years. And again, that has borne fruit in the U.S. While they did well, they could have done better without the COVID. But I'm hoping that this momentum will now take them forward.

Sure, and lastly, on the Russia part of the Abrasives, sir, because in last [Audio Gap] you mentioned about [Audio Gap] market as an opportunity.

Yes, yes, the Russian business in Abrasives is largely the domestic focus. And though they do -- what they have done is they have -- in domestic focus, where the customer segments are largely the auto, auto OE and the foundry segments, which had been impacted by the COVID, so there we see fluctuation in performance there. But this quarter has been a little better. But in the Coated Abrasives side, where we send them rolls, jumbo rolls from India and for conversion into coated and distribution in their markets, they have started picking up volumes there.

We have next question from the line of Renjith Sivaram from ICICI Securities.

Congrats on a good set of numbers, especially your stand-alone performance has been [Technical Difficulty].

Sir, I'm sorry to interrupt. Mr. Sivaram, please use the handset. We're not able to hear you properly.

Yes, is it audible now?

Better.

Yes, please go ahead.

Yes, yes, better. Please go ahead.

So in this Australia issue, what is your outlook now that -- is the situation normalized or when do you see this normalizing? Or what are the actions that we are taking so that to reduce the impact of the sale?

See, if you look at our sales into Australia over the last quarter, we have done better than Q3 in the dispatches of shipping containers from India into Australia. It is not that we don't have the order books. So the order books are there. So we have already shipped out from here. Containers are either getting stuck in Singapore, Kuala Lumpur, even in Melbourne and Sydney. So some of those containers would have reached -- normal it takes about 4 to 6 weeks max. And some of them have reached only now. So it has been, in some cases, 12 to 14 weeks. So that has really disrupted their supply chain. And in some cases, they had to take out the containers in Sydney and then ship them all the way to Adelaide by inland routes. So we see that these are possibly a temporary blip. And the team there is now hopefully have got excess materials which they keep shipping out. And so they will have stocks available to them for sale in Q4. One other thing, which has really impacted them is, apart from the geopolitical tensions, is a very strict COVID protocols in Australia. So as you all now know, the travel between states have also been tightened. So you have had -- to go from a Western Australia or to New South Wales or to Brisbane area, so you have to have those quarantine compulsorily done. So that has really restricted movement of men and material. Possibly that would ease with the situation improving and we see that Q4 can get back to normal levels.

Okay, that's good. And what has been the performance in terms of top line EBITDA and PAT if you can share for this quarter?

Pardon?

Russia?

Russia comes under the Minerals business. So they have done pretty well in terms of volumes. Saw a small volume drop but they have been maintaining their profitabilities. So I'm seeing them driving the volumes regularly in this year.

If you can share some numbers on that in terms of revenue, EBITDA, PAT?

We don't share specifically on the different plants but it comes under as a segment.

Okay. But it's largely profitable. There is no issue in that?

Yes, yes, yes. It's profitable. Absolutely. No issues there.

Okay. And sir, just a bookkeeping one. Your consol other income is lesser than the standalone. So anything -- is it because of the dividends or something like that?

Yes, maybe Padmanabhan can answer that better.

Yes, see, it is not because of the dividend because the intercompany dividend will always be knocked off. Therefore, it is not because of the dividend. And it's a normal -- the production scrap sales, et cetera. That is why it has come down. And Moreover, the export benefits at a stand-alone level had come down. When the rates have come down, DEPB rates, et cetera. So that is why the impact is there.

[Operator Instructions] We have next question from the line of Kunal Sheth from B&K Securities.

Congratulations on a very strong set of numbers. I have a set of questions. Sir, I wanted to know in our Abrasives, how large will be auto as a sector for us? And also, if you can talk about which are the other key large sectors that contribute to the Abrasives?