Carborundum Universal Limited (CARBORUNIV) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Carborundum Universal Limited Q1 FY '24 Earnings Conference Call hosted by Kotak Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Mongia from Kotak Securities Limited. Thank you and over to you, sir.

Thank you, [indiscernible] and good afternoon and welcome, everyone, for the 1Q FY '24 Earnings Con Call of Carborundum Universal Limited. From the management side, we have Mr. Sridharan Rangarajan, the Managing Director; Mr. P. Padmanabhan, the CFO; Mr. G. Chandramouli, Advisor, Investor Relations; and Mr. Dinesh Kumar, Senior Manager, Strategic Planning. Without any further ado, I would request the management to share their opening remarks post the results. Over to you, sir.

Good morning to all of you and a warm welcome to our first quarter call. I would request my colleague, Chandramouli, to read out the general disclaimer and then we will start 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 forward-looking statements. These statements are based on the management's current expectations and are associated with uncertainties and risks, are more fully detailed in our annual report, which may cause the actual result to differ. Hence, these statements must be reviewed in conjunction with the risk that the company faces. Thank you.

Thank you, Mouli. So let's begin the call. I trust all of you are safe, your family are also safe and well. Today, I'm joined in this call Mr. Padmanabhan, our CFO; Chandramouli, our Investor Relationship person President; Dinesh, our Strategic Planning Head. We will begin this call by providing a broad outlook and summary. Then we will take your questions. Before I start, I would like to place on record the company's appreciation and thanks to Mr. Ananthaseshan who has retired as Managing Director of the company after reaching 60 years of age. Mr. Ananth served the company over 37 years in various capacities. We wish him well in his retirement. The company has begun this financial year with a solid start. We are glad to report another yet quarter of robust performance and a solid start to FY '24. For the quarter, our revenues have grown by 6% quarter-over-quarter to INR 1,191 crores at consolidated level and by 10% to INR 659 crores at stand-alone level. The growth was majorly driven by ceramics and the growth from base is, electro minerals has been steady. All major overseas subsidiaries have performed well. Profit after tax and noncontrolling interest grew by 44% to INR 113 crores against INR 79 crores at consolidated level. You would note that we delivered INR 137 crores in Q4 FY '23 and this included an exceptional income of INR 25 crores. In the current quarter, we delivered similar PAT without onetime exceptional income. PAT margins improved from 7% to 9.5% quarter-over-quarter at consolidated level. At the stand-alone level, the PAT increased by 28% to INR 993 crores from INR 73 crores. During the last year, same quarter, this was mainly on account of margins coming back to normal in abrasive stand-alone and improvements in margins of ceramic business. PAT margins improved from 12.1% to 14.1%. Coming to the subsidiaries' performance, among the overseas subsidiaries, CUMI America performed significantly well in terms of top line and the bottom line. CUMI Australia grew well and profits were better. Volzhsky Abrasive Works, Russia and Foskor Zirconia in South Africa was almost flat on top line. CUMI Middle East and CUMI China, the company has cut down its operation, as you all know. On the other hand, domestic subsidiaries have grown in double digits over the last year, whereas our energy generation business SEDCO, had some challenge in terms of the bottom line due to a steep rise in gas price. And we are working in terms of how to recover. In terms of the CapEx at consolidated level, we spent INR 55 crores in the first quarter. I will now cover the segmental performance. Abrasives, abrasives' consolidated revenue for the quarter was almost flat at INR 519 crores compared to INR 513 crores in Q1 of the last year. Stand-alone grew by 5% to INR 282 crores. Sterling, American subsidiary, VAW and AWUKO delivered INR 24 crores of incremental sales. Closure of China, lower volumes in RHODIUS reduced to INR 14 crores of sales. On sequential basis, sales degrew by INR 6 crores. Stand-alone Abrasives, Sterling, CUMI America and VAW combined together gave an increment of INR 12 crores, whereas RHODIUS dropped by INR 15 crores. Abrasives India has grown 5% compared to Q1 of the last year, that is almost flat sequentially. Coated retail segment is facing challenges after increase in supplies from China and new entrants in the segment. All other segments and abrasives are doing well. We expect to hit overall 8% at 10% growth at the full year level. The focus has been on improving the margins, which have come down significantly in the last few quarters. We focus on product mix optimization, increasing sales in value-added products and improving internal efficiencies, which helped us to bounce back to the previous margins in the range of 15% to 16% compared to 12.1% in Q1 of the last year. RHODIUS in Q1 achieved a net sales of EUR 15.5 million compared to EUR 17.4 million in Q4 of FY '23 and EUR 18 million in Q1 of the last year. We communicated in the last call that RHODIUS is planning an 8% to 9% growth in FY '24. We also said that the energy cost increase would be in the range of EUR 2.2 million to EUR 2.5 million and our team will try their best to offset these. The price increase put up to offset the cost push resulted in lower order intake, which impacted the overall sales. We are also seeing softening of demand in parts of Europe. Our revised outlook is a flattish top line. Last year, we delivered a loss of EUR 4.7 million, which included one-off costs of EUR 2 million and a PPA write-off of EUR 2.8 million. We expect that this year with higher top line, we could deliver a small profit but with softening in demand and increase in energy costs, we can expect a similar loss in line with that of the last year. This is our current outlook. We have 8 more months and we are looking into all possible options to minimize this loss and improve the performance. Coming to AWUKO's performance. This quarter, they achieved EUR 2.5 million sales against EUR 2.6 million in Q1 as well as Q4 of the last year, past financial year. Losses in Q1 was EUR 0.7 million against a loss of EUR 1.2 million in Q4. The cost control efforts as well as drop in input costs helped to minimize the losses. We communicated in the last call, the losses in FY '24 will be around EUR 2.5 million. We expect AWUKO to break even in the FY '25. We maintain the same outlook. Coming to the bottom line performance for the quarter, profit and loss before finance costs and tax at consolidated level of INR 31 crores against INR 18 crores in Q1. The increase predominantly coming from stand-alone margin moving from 12.1% to 15.3%, better performance of Sterling and closure of China. Sequentially, PBIT margin dropped from INR 32 crores to INR 31 crores. This is due to lower profits in India, in America, Middle East and China. Margins at consolidated level dropped from 7.3% to 6% sequentially but improved from 3.5% in Q1 of the last year. Electro Minerals. Electro Minerals consolidated revenue for the quarter was INR 418 crores versus INR 406 crores in Q1 of the last year, resulting in an increase of 3% and stand-alone Electro Minerals grew at 10% quarter-over-quarter to INR 197 crores from INR 179 crores in Q1 FY '23 and grew by 11% sequentially. Volzhsky Abrasive Works, Russia and Foskor Zirconia, South Africa was almost flat quarter-on-quarter and marginally lower when compared to sequentially. For the quarter, profit before finance costs and tax at consolidated level was INR 74 crores against INR 59 crores in Q1, predominantly contributed by a better performance of VAW. PBIT at stand-alone level improved by 59% to INR 23 crores. And sequentially -- INR 23 crores sequentially and degrew 25% quarter-over-quarter, after easing in commodity price impacting the realization of our products and higher input costs. Coming to performance of VAW despite challenges due to ongoing Russia-Ukraine conflict, the team at VAW is continuing to manage the risks well and taking suitable actions every time. The operations are running well and the installed capacity is being utilized well. VAW delivered its higher ever quarterly sales of RUB 2.4 billion in this quarter compared to RUB 2.12 billion prior quarter and RUB 2.11 billion in Q1 last year. This was mainly on account of higher realization across all 3 segments, as well as weaker ruble against U.S. dollar and euro. They delivered a profit of RUB 417 million, which is again highest in any quarter. Rubles were converted on an average of RUB 1, which is equivalent to INR 1.01 for this quarter compared to INR 1.16 in Q1 in FY '23. You would note that the average for FY '23 was INR 1.23. Capacity utilization is normal and they are able to sell more in Russia. The mix towards Russia, sales domestically has increased to 60% in the first quarter. VAW is able to collect all this receivable, they continue to be debt free and outlook remains stable and positive. As for as Ceramics business is concerned, Ceramics consolidated revenue for the quarter were higher by 18% at INR 287 crores as against INR 243 crores in Q1 of the last year and sequentially, it was INR 265 crores. Stand-alone Ceramic grew by 19% to INR 231 crores on a quarter-on-quarter basis on account of strong demand across end-use services and geographies and grew 9% sequentially. Subsidiaries in Australia and America registered significant growth as well. Profit before finance costs and tax at consolidated level grew by 39% to INR 81 crores from INR 58 crores on a quarter-on-quarter basis and grew 31% sequentially at stand-alone level. It grew by 38% to INR 62 crores quarter-on-quarter. This was majorly on account of growth in volume, realization and product mix. There was INR 58 crores of debt at stand-alone books and total debt at consolidated basis was at INR 178 crores compared to INR 232 crores as of March '23. The debt-to-equity ratio was at 0.06 at consolidated level. Cash and cash equivalents, including deposits with maturity exceeding 3 months at net of borrowing was INR 190 crores. I would like to end the opening remarks with a small summary. Performance of the company in Q1 is good. Electro Minerals, Ceramics and nonretail portion of Abrasives are performing well. Russia and South Africa are doing fine. AWUKO progress is in line. There's a softening of demand in Europe and RHODIUS is working on an effective response plan. Company remains debt-free. We feel stable, stand-alone growth could be in the range of 15% and consolidated could be in the range of 10%. And stand-alone and consolidated PBIT margins compared to FY '23 should improve. With that, I think we will complete the opening remarks. We'll be happy to take your questions. Thank you.

[Operator Instructions] The first question is from the line of Bhoomika Nair from DAM Capital, erstwhile IDFC Securities.

Sir, my question -- first question is on the Abrasives segment on a stand-alone basis around -- the demand still continues to remain fairly muted because the revenues are still at around sub 5% kind of a growth, just about that. So what is the outlook in the domestic market? And how is the competition from the Chinese, which had kind of picked up in the last 6 months, does that still continue? And that's my first question.

Yes. So I think, as I said, except the retail segment, we are doing fine in rest of the segment and the growth rates are in double digit. We feel the challenge is largely in the retail segment, where there could be some dumping happening from China. And of course, there's going to be a response, which will take some time. And as I said that we could be looking at a broad 10% growth, which is what I indicated at the full year level. This is, we feel that retail could be flat or slightly lower. This is our current thinking. And our team is putting together a response plan for that. Other than that, I think the standard industrial side -- position aside and international exports are all doing fine.

So sir, 10% would be the Abrasives stand-alone entity growth?

Yes.

Okay. Sir, your view of, obviously RHODIUS still is a challenge, as you mentioned. But there was also a plan to kind of bring the technologies and the practices that they have on [indiscernible]. What is the progress on that aspect for improving the abrasives' cost competitiveness in the local market?

So the -- bringing technology of RHODIUS is not to address the cost competitiveness in India but it will address the cost competitiveness in Europe. By having product manufactured here, we will be able to supply to the Europe well, which are all like the baseline products, which is -- I think we are progressing, I think we will take 18 months by the time we will have these work. But whatever we are doing currently, we will do that, which requires like, for example, we are currently working on overall certification, which is a base level requirement and the audits are currently going on. Once that is there, then we will have the next step which is basically creating a environment of manufacturing at their quality level. And so will start supplying to that. So that program is very much on.

Sir, my second question is on the [ A&D ] segment and [indiscernible] initiatives out there. What is your progress of the high priority, SIC that we were looking at? We were already in final stages out there, in Russia, this sector was much ahead than India. So what is the progress out there? And also, if I may just squeeze in on the project of the SOFC within the ceramic segment?

So the -- as far as -- in terms of the high-purity silicon carbide, we are doing it at both in Koratty as well as in Russia. And these are at the, I would say, lab scale where we are testing these products and creating confirmatory results for various parameters, which requires, like are we able to achieve the [ 4Ns and 5N ]capability. And that is what we have done and we have reasonably achieved the 4N capability. And we are progressing towards -- work towards on the 5N side of it. And we are also, in the meantime, setting up a plant in India. And that will be -- that we will convert it from a lab scale player, a small mini plant at this point in time. That's what we will get into that. As far as SOFC is concerned, I think the progress is quite decent. We have been fully utilizing our capacity. One of our major customer is doing well. And that progress is really well as far as CUMI is concerned. And the progress in terms of further parts that we can supply in the SOFC field is also very much in line with the time scale that they are working with the customer.

Sure. Sir just 1 follow-up on the high quality of requirement, when do we see them progressing from lab scale stores revenue and within the SOFC, what is the kind of revenue run rate that you are operating at? And what kind of possibility, therefore, over the next 2 to 3 years?

See, high-purity silicon carbide setting up could take a year and then we will start supplying these products. So I would say it might take a year to set up and then establish ourselves, another year. SOFC, I think we don't share an individual component wise details as far as industrial ceramic piece is concerned. But it's a very sizable portion of our business and we are progressing well there.

The next question is from line of Bhavin Vithlani from SBI Mutual Fund.

Sir, question is on [indiscernible] it's little disappointing to -- for your expectations. Sir, could you talk about the cost takeout initiatives given that passing on price increase and increased cost is difficult. So how do you scale up in the revenue, which is very critical for you to turn around? And is the eventual plan of 11% still in there?

Sir, I missed your first sentence. Could you repeat -- are you talking about RHODIUS?

Yes. Sir, the question is on the RHODIUS where the performance has been below your expectations and -- so how do you takeout costs as you're not able to pass on the price hikes. And your guidance of 11% margins.

Yes, yes, yes. No, no, very fair question. I think -- so first of all, the biggest portion of it is the energy cost. So these costs are contracted much in advance and that is, okay. We had a benefit of that in our favor last year but that is impacting us in the current year. So -- as we see the cost of gas prices have come down. And I think our contract once it's over in the current year, we expect that will taper down and that is, we are currently seeing that. And the second is, we are also working in terms of improving the product output, which is basically some rework in terms of material preparation investment that we have done as well as in terms of land balancing that the work that RHODIUS is doing, we feel that would also help us to bring the cost down. To your question of, will we get to the 12% that we indicated to you in terms of the PBIT margin. We are still confident of getting that. I don't think we have any doubts on that. It's a temporary phase, I would say that the softening what we are currently seeing. Products are in demand. But at the same time, we have to recognize the fact, Europe is going through a demand challenge. So hence, I think it is important to bring this up and that's how we are sharing the current outlook. As I said that we still have 8 months to work on in terms of any other possibility of bringing these. And see some of these contracts are with private label partners, happens much in advance. So hence, we need to work with each one of them and win these orders, which we are definitely working on. How can we load the business in such a way that we get the benefit of the volume and that's what we are currently working on as well.

Actually second question is on the industrial ceramic piece of the business. And within that, where we're seeing that refractory is a piece where you're running full now despite the strong growth. Could you just give us this outlook on new expansion initiatives in the refractory space and also the other expansions in the ceramics segment?

So Ceramic segment, I think, has got 2 components, the refractories and industrial ceramics. Both the components are doing well. And in fact, the refractory side of it is definitely, definitely hedging higher than industrial ceramics at this point in time. And all our programs in terms of the capacity expansions, investments in latest process, all that is fully on steam, nothing is held back. We don't see capacity coming in way as a constraint.

Okay. So just to follow-up here. What is the outlay towards the expansions in industrial and the refractories and what will be the volumetric expansion, will it like double, also so the current capacities?

I think -- see, if you really see this year, I think they have, Q1, they have grown at about 19%. And we should expect, a 20-plus percentage growth is very much possible.

We have the next question from the line of Harshit Patel from Equirus Securities.

Sir my first question is on the stand-alone Electro Minerals margin. We have done 11.6% in the third quarter, which is very much below our guided range of 14% to 15%. While I understand that we had done some structural improvements in the past couple of years, such as producing the synthetic version of brown fused alumina, modernization of furnaces to increase the process yield and so on and so forth. So any specific reasons you would want to call out here?

Absolutely. Great observation. And I think largely coming out of the softening of the market, coming basically, import from China that is coming in this way. That's the biggest reason for the drop. But we still feel that at a full year level, 13% to 14%, we will be looking at as a EBIT margin, that's still our gain. And I think we will -- the outlook for the next few quarters when we went through that, we feel confident about that.

Sir, just a follow-up to that. In the VAW Russia, we are already operating at flat-out capacity. How we are planning to grow over there? Because as I understand, the realizations are coming down and if we are not able to grow the volumes because of the capacity constraint, then how will we achieve any kind of revenue growth over there?

Sir, so I think -- I would look at it in 2 parts. I'm not sure where you're getting the idea that the realizations are coming down. Average realization in ruble terms is higher. They are able to flex the mix more towards the domestic one. But your observation of the volume growth is a fair observation. But given the market condition, which is largely a geopolitical issue, we are waiting and watching. We did 1 cell expansion last year and I think that is on stream and that will help us a bit. But I think we would have to wait for things to stabilize before we take the next call. Understood.

Understood. Sir, my second question is on the stand-alone abrasives. So the revenues have been fragment around INR 280 crores since last 7 quarters now. So as you have already mentioned about the heightened competition from Chinese products, especially in the retail [indiscernible]. So just wanted to check if you have deliberately scaled down a particular product group or a customer side? Or is this softness entirely due to the normalcy coming back to the Chinese imports?

So I would like to split this into 2 parts. One, the part that is on the retail side of the abrasive business, and the part which is on the industrial side of the abrasive business, both on precision and standard industrial product side. We feel that on the retail side, we see this challenge coming. And -- but on the rest of the side, we are able to see the growth. And as I said that the growth on those sides will be double digit. With the retail at flat or slightly lower than last year, we are expecting about 9% to 10% growth. But I think this is our current outlook. Our people are working in terms of how should we work on a response plan in terms of addressing this. It is a fact that we have been flat for a couple of years. We are conscious and we will get back, I think, give us about 6 quarters in terms of how do we respond to that. We are working on multiple strategies to address this.

Understood. Just a small follow-up to that. Have we reduced the prices of our products as improved costs have started coming down or the pricing remains at the same level as before?

So prices are responded based on the market condition, which is, as the input cost is coming down, definitely, people expect this and we are also responding based on the market situation. But at the same time, we are able to improve the margin. If you look at -- our margin has gone up and we are in the range of [ 15.3% or 2.4% ].

The next question is from the line of Amit Anwani from Prabhudas Lilladher Private Limited.

My first question is on the industrial ceramics side where we are witnessing a strong growth as you just highlighted, at least 20% growth. I just wanted to understand, sir, we have been talking about our product advancements here and largely this business being global in nature. I would like to understand, are we increasing our addressable market with new products in pipeline, if you would highlight like we did for [indiscernible]? And at the same time, if we would like to highlight the contribution from [indiscernible] and industrial ceramics and how the growth has been there?

Yes. I think we are definitely trying to improve our product range and service the customer. And as the customer also expects us to move along with their own growth as well, like lot of our customers are asking us, can we supply a part which probably they are sourcing elsewhere at this point in time. So definitely, these programs are there and some of them are very interesting areas that we are working on, which I think will start playing out in future. Similarly, even in the refractory, also we see that quite an interesting demand, overseas exports is really picking up and that is also helping us in terms of the growth. So I would say that both these engines are currently firing well and we are doing the right steps in terms of addressing that.

Right. My next question is on abrasive, you did highlight it on retail side, we are facing headwinds. So how much is the retail portion in abrasives? And second question on the RHODIUS Abrasives. You did highlight it that the major advantage would be taking cost advantage and then selling cost there. So what is the utilization there? And how we are actually thinking to increase utilization in RHODIUS Abrasives in coming quarters?

So as far as the retail is concerned, we are in the range of about 30% to 35% is our share of our business is the retail. And as far as the RHODIUS Abrasives, they are operating pretty much on a very high capacity utilization. So that is not a challenge. And what we are really looking at is the challenge of price drop or expectation of the price drop from the customer vis-a-vis our situation of passing on the cost, there by the price increase. So that is where this current struggle is and we are working towards that.

All right. My last question sir, on Electro Minerals. VAW, as you did highlighted in the last quarter were only like 85%, and your [indiscernible] recent growth there. So any thoughts on CapEx there? Any outlook you would like to give n the capacities in VAW?

No. As I said in the previous question, we are operating at probably to the brim there and we just added a cell last year and we will not hesitate adding capacities. We will wait for some stability in the geopolitical situation before we start adding capacities. Normal CapEx programs that we do besides the silicon carbide in terms of the refractories and abrasives are all very much on and that we have made an on-ground investment there.

Sir, how much is the capacity sir in VAW right now?

How much is the...

Capacity in VAW.

Capacity is about 90,000 tonnes of silicon carbide.

The next question is from the line of Karan Gupta from Varanium Capital.

Hello? Sir, I am audible?

Audible, just lot of disturbance is there.

Yes, okay. So I think right now it's okay. So my question is more related to the industry side. Am I audible?

Sir, if you are on a speaker, I would request you to come off on the speaker.

No, I am using a handset. Yes. So basically, my question is related to the industrial side, where you are working on abrasives or [indiscernible]. Right. So how do you see the B2B products standing out in the immunization story where the B2C products which is there for you, all the consumer products [indiscernible]. So where do you see in the next 5 years or maybe in your B2B products segment, which you own in the manufacturing side. So the first, really is my point, why not in India around the manufacturing [indiscernible] industrialization question. So how do you see this thing?

Yes, I think it's a great observation. I think India is witnessing a lot of investment in high-tech manufacturing as well as some of the new tech industries coming into India. So definitely, the B2B, what you call as industrial products, definitely will be in demand and products that we have, practically, we don't have any business to consumer type of a product. We have all B2B and probably a channel could be a different but I think, by and large, it's that type of application. And we see I think a great opportunity for a company like us in terms of the -- what India would present to us and the -- as it goes from the current to, say, that position, as the government wants to, by 2030, definitely a far more greater opportunity for companies like us will be there.

Okay. So I think the translation in the product will be on the basis of [indiscernible]

Sorry to interrupt but the line is not very clear. We are losing your audio in between. May I request you to please use the handset while you're speaking.

Yes, yes, I am using the handset. Maybe there is an environment issue, not allow the connection better. But I'm trying to ask the question, being competitive advancements [indiscernible] in B2B segment, is it more than [indiscernible] cost effectiveness, right, on the basis of cost advantage, we can make competitive advantage or anything we can introduce in the B2B segment? Overall industry which is not abrasive, maybe you're acquiring maybe minerals or anything, which is related to the manufacturing side. So I'm trying to get a broader view on this thing.

Yes. I think look, in some of the businesses that we are all in, actually, it requires a lot of processing and technology skills that are required. It's just not the cost which acts as a competitive advantage. Perhaps you start with cost as an advantage but predominantly, it's the value that we would create, both out of the technology as well as out of the processing capability, plus the integrated value chain that we possess in terms of the minerals that we will have and which is manufactured by us, helps us to get integrated into both abrasives, ceramics and refractory products. So these are the value opportunities that we will be able to create and bring the differentiation.

Okay. And just the last 1 is, how does [indiscernible] China or the other electrical manufacturing countries that are dumping the product. So how do you tackle in the long term? So that's something related to my previous question on cost advantage.

I think actually, give a very generic response because we are in a very wide sector that we are looking at. In the long run, you have to compete on the values and that's the only way you can compete, any country for that matter. And that is what we are working on.

Sir, productivity also beneficial, the governments are implementing about the dumping part. So that will be helpful kind of thing [indiscernible] manufacturing.

All right. The government should work on taking a active look at the antidumping support systems, which is, I think, a very good observation.

Okay. And just in the long term, just let's review as a company, dumping your product in another country, right. Let's say you have 2 to 3 segments. You're dumping your products in another country. So in the long run, is it going to be beneficial in terms of financials or [indiscernible] just a [indiscernible] question.

Yes. I think I'm not getting your question right but I think if you're asking us whether we will be going and dumping in some other country, the answer is no. That's not our interest and probably we are not playing in those type of field. And our scales are not that high for us to start looking at dumping as a way to survive.

[Operator Instructions] The next question is from the line of Aditya Mongia from Kotak Securities Limited.

The first question was more focused on Russia. You talked about the constraint on the supply side but assuming there is no constraint from a supplier perspective, given where globally people are going into China [indiscernible], what kind of growth it'll be on a 5-year you're locked and you see out of Russia?

Aditya, I wish we have -- able to do such kind of a forecast in a country like Russia. You would appreciate that it is amongst many things that's going on at this point in time. But what I can tell is that what is going in favor for -- Russia as a country has got lot of minerals. This is not going to change overnight. And the demand for those minerals will continue to be there irrespective of the political situation that it is facing. And the cost positions that they have are really attractive. So these are core, I would say, values that -- or the advantage that Russia processes at this point in time. And hence, I would like to look at it that way. And it is difficult for me to give a forecast, let's say, 5 years from now, what would be the growth. If things are normal, I think we can definitely look at all possible ways to expand there. And this is a good place to work on.

Understood. The second question that I had was again related. You talked about [indiscernible] realization from Russia going up. What are the kind of drivers -- kind of driving that thing up? Just want to get a sense of because there's a mix change that has happened. How much more realization growth can actually happen from hereon if capacity is not constrained?

So I think the way I would like you to look at it is that -- so there is a demand inside Russia, right? And those demands were met by us as well as by imports. Now the Russian government is also looking at similar to Atmanirbhar programs in terms of supporting the Russian industries as well as supporting the consumption that should happen in a domestic manufactured industry. So hence, they are also looking at how can they support their ecosystem. And they are also facing in terms of sourcing products from outside of Russia. So obviously, these things help at this point in time. So I would say that that's the reason we are also having a capability to change the mix and improve the mix in what we sell in Russia. And thereby, we are able to continue to progress well.

Understood. The final question from my side. As we -- first of all congratulations for the new role at the company. From the perspective of how you see through the growth happening from here on, how much importance would you be giving to acquisitions from here on? And I understand the integrated supply chain and how it kind of feeds inside. Does that make you more open to be doing acquisitions? And if you can give us some sense across segments, might be help us out?

Yes. I think, you see, CUMI has been doing acquisitions based on the need it had and how that acquisition brought value to its existing positions. So I think -- if you ask me, I think we will continue that program and we will continue the program in terms of our core areas that would be the area that we will look at it. Largely in terms of where we can add value in terms of the technology, to support growth in, let's say, industrial ceramics in particular. And similarly, some of the growth areas that we would look at it in terms of high-performing materials. These are areas where definitely we would look at it. And similarly, we are also looking at how should we revitalize the -- our research setup and improve our capability and bring in, let's say, not short-term objective but really on a long term, how we can add value in terms of bringing products, a differentiated product through the research. This is something will be our focus going forward.

The next question is from the line of Harshit Patel from Equirus Securities.

Sir, my question is on [indiscernible] advanced technology. I think in the last annual report, you have mentioned quite a lot about what are the new products that you are developing over there, including those [ electrical ] insulation box and 1 order that you have received from a power utility company as well. Sir could you give us some outline about what would be the growth drivers over there? What kind of growth that we are looking at? Would that be in excess of now by 20%, 25%or not over the next 3 to 4 years? And what are the actions we are taking to become profitable over there? I think last time you had mentioned that for the full year FY '24, that segment will become profitable. So are we on track with respect to that or not?

So I think as far as Flex is concerned, they are working on multiple segments. The key focus segment is, Building is 1 key focus area, which is basically how do you reduce the energy intensity of a building. Then the second area is the cold chain, which is largely how do you supply products from -- what is produced is efficiently supplied to the market. And there are current methods of serving them in terms of [ reefer trucks ] type of model and how do you make use of PCM as an alternate. And similarly, the other area is transportation of vaccines, transportation of medicines, all these areas augur well in terms of the PCM product applications. They also have polymer as a third vertical that is also their key focus area. What currently we are doing is bringing out newer and newer applications and demonstrating to the customers in terms of the use of it and convincing them to shift. And this is actually the -- is the process that takes time because there's going to be an initial first cost, which is going to be higher but a lifetime cost is going to be lower. But also, you are having a very, very green conscious [indiscernible] that you would have. But it takes time. In India, it's not going to be easy for converting from a traditional solution to a solution like this but that's what our team is working on. From a small base, their growth rate can be higher and as I said I still feel that we should give them a couple of more years before we start presenting and reviewing them in terms of focus lens, people like you can start looking at that. So I would say it's something that we nurture at this point in time, let's allow them that space and then we will wait for their growth.

The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

Sir, just in regarding to previous answer, a little confusion. You mentioned the SIC prices in Russia has been going up, I think. In the domestic EMD, you mentioned about drop in the realization. So if you could answer on from this. One is, the quantum of price increases in Russia and quantum of the drop in India over the last quarter in the Y-o-Y terms? And if you could just help us understand this better.

Yes, I think it's a good observation. I think what we talk in India is largely alumina-based material. And what we are talking in Russia is the silicon carbide. And material coming from Russia into India is pretty expensive and that's not to be compared. So here, we are talking about materials coming from China into the Indian market and bringing the prices down. Basically, it's -- I would say, not on a fair basis but let's say, it's a dumping that would happen. But I don't believe that they can continue, keep on doing this. So we feel that we are able to match sometimes the prices based on the volume and we are able to continue to keep the utilizations and capacities on stream. And that's why you are seeing that the growth there, margin improvement is there and we feel that there will be also a continued such programs. But at the same time, we are also moving a lot of value-added products that get supplied, which helps us to, not based on a commodity-based discussion but actually the value adds that we can bring down. So that's what we are currently working on.

Could you give us the price realization gain Y-o-Y in this quarter, both in domestic and in Russia?

I'm sorry, sir, at this point, I will not be able to discuss that.

Okay. No worries, sir. And just last question is, what is the capital expenditure plan for the current and the next financial year? And how would that be across the 3 divisions?

So last year, we spent about close to INR 300 crores, is the consolidated CapEx spend. And we would -- generally, we should be ballpark in that range this year as well.

And how will that be different across the 3 segments?

I would say, for ease, I think, you can take 1/3, 1/3 but it could be somewhere 25%, somewhere will be 35% but ballpark, it's 1/3.

The next question is from the line of Jason Soans from IDBI Capital.

What I just wanted to know, well, I really do understand that you have well backward integrated your Electro Minerals section for manufacturing abrasive as well as certain ceramics as well. But I just wanted to know like, in terms of proportion, how much do you source in-house and how much is taken externally or bought externally as a percentage?

So, typically, let me call it about 25% to 30% would be sourced, our abrasive division would source from our Electro Mineral and the rest is all sourced outside.

Okay. So 25%, 30% is sourced internally in the abrasive segment and the rest, I think is sourced from outside?

Right.

And sir my next question is and then you did speak about the increase in Chinese competition in your Abrasive segment as well as Electro Minerals segment as well, especially towards the alumina side. Well, I just wanted to know for the ceramics business also, I think, around 50% to 60% is exports. And China is basically stepping up intensity there in terms of competitive intensity. So just wanted to know from your -- how is the Chinese competition playing out in terms of the ceramics business there, in terms of global -- the global scenario, how are you see the Chinese competition play out in your ceramics business?

So as far as the ceramic business is concerned, look, I think we have [ vase ] ceramics, and we have the other one is the industrial ceramics side of it. There could be competition coming in the vase ceramic side of it, which is like base level ceramic that will be coming for protecting against the vase. But on the other side, we don't see competition. Obviously, on the vase side, we are definitely getting into the value-added solutions like engineering solution plus supplying the entire rubber bag ceramics or lined ceramic. So all those are value-added products. So there, you really work in terms of what the customer finally gets as a product rather than looking at per kilogram of ceramic supply there. So that's how we work.

Sure, sir. And just a follow-up to that. I mean you do also supply to emerging areas such as electric vehicle, SOFC and renewable energy. So there also, would you say the competition from China -- the Chinese competition is minimal?

So on the SOFC field, definitely, we don't see that and definitely it's very, very minimum. And people actually work with you, the customers work with you for quite long time to be part of their design itself. So it's not going to be just a quick buying decision but it takes time, first of all, to bring you on board. And then it's also going to take time for them to make any change. So hence, I would say these are areas where people really compete on values.

[Operator Instructions] The next question is from the line of Amit Anwani from Prabhudas Lilladher Private Limited.

Just wanted to understand 1 thing. You did mention about [indiscernible] ceramics and technical. Any proportional take up, if you can provide within the industrial ceramics?

Normally, we don't share this, Amit, I think -- yes the proportion of technical ceramics on the higher side.

That was our last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

So thank you for being part of this call and actively participating in our business. Your questions and comments really help us in lot of times. I would like to summarize here is that I think the performance of Q1 is really good and electro minerals, ceramics, nonretail portion of abrasives are performing well. Russia and South Africa is doing fine. AWUKO is progressing well. Softening of demand in Europe needs to be addressed as far as RHODIUS is concerned. The company is debt-free and I think the margins are improving. We will have a reasonable growth for this year. And I think with that, I would like to complete the call and looking forward to seeing you in the next call. Thank you.

Thank you. On behalf of Kotak Securities, that concludes this conference. Thank you for joining us. You may now disconnect your line.

Thank you.