Carysil Limited (524091) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Acrysil Limited Q4 and FY '20 Earnings Conference Call. This conference call may contain forward-looking statements about the company, future base and belief, opinions and expectations of the company as on the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Chirag Parekh, Chairman and Managing Director of Acrysil Limited. Thank you. And over to you, sir.

Thank you. Good afternoon, everyone. A very warm welcome to the FY '20 earnings call of Acrysil Limited. Along with me on this call, I have Mr. Anand Sharma, our CFO and [ SGA ], our Investor Relations adviser. I hope that all of you and your loved ones are safe. These are extraordinary and unprecedented times where the most important thing of all is to ensure that we are safe and so is our family. Moving to the company's performance. The results on the investor presentation are uploaded on the stock exchange and on the website. I hope everybody has had a chance to gather. The Board of Directors of the company has recommended a dividend of INR 1.2, 60% for equity share of face value INR 2 each for the financial year ending March 31, 2020, subject to approval of shareholders. Recently, we have incorporated a wholly owned subsidiary, ACRYSIL USA INC. as on April 30, 2020. Expanding our presence in U.S.A. through the subsidiary to penetrate deeper in the markets of building a network across America. The company will be dealing in kitchen products, bath products and tiles. We also appointed a sale representative, [ Mr. Kenya Brackham ] of the U.S. market. He will be looking after existing customers and develop new customers for larger market penetration since America is approximately 30% of our global market share. Recently, we have incorporated -- sorry, also the wholly owned subsidiary based in U.K. Homestyle Products Limited has been changed to Acrysil Products Limited, integrated to the company brand. Coming into the performance. Company reported good performance for the financial year '19, '20. We registered a top line growth of 10% approximately, despite a challenging economy. Company reported highest-ever profit for tax, INR 23 crores for the financial year '19, '20. The growth is driven by contributions from all products under the basket in our core product, quartz sink. Export revenue grew by 15.5% for FY '20. Domestic revenue remained more or less stable in marginal dip of 1.5%. The domestic revenue witnessed slowdown in the entire financial year, which was further impacted due to COVID-19 in the last quarter of financial year 2020. However, we expect demand to improve when the situation normalize. Demand of our product in the export market is adequate and encouraging. During the year, we introduced new products, taken initiative to further strengthen Carysil and Sternhagen brands. With this COVID-19 pandemic outbreak, which I said, almost all the countries and industries across the world has resulted in disruptions in the term of labor issues concerning their safety management on the short line of the supply chain instruction, et cetera. But the world will have to adjust to the new normal working and so do we. During these challenging and unprecedented times, besides the measures have been implemented by the company to protect the health and safety all our stakeholders, including employees, their families, suppliers and the dealers. So company is following all the guidelines issued by the local regulatory authority to comply with a large number of factors. In the presentation, we have some pictures, video clips on company’s preparedness on the manufacturing plant for smooth function. Just to give you a quick update on the business operation in the COVID-19 period. Our plant was shut from 24 March 2020 to 13 April 2020. On 14 April 2020, we partially started manufacturing operations with the exports order backlog. Currently, we're operating in 3 shifts with a capacity utilization of approximately 80%. We are taking all necessary preventive measures like social distancing, temperature testing, providing masks, sanitation facility to all workers, et cetera. Due to lockdown, many laborers have migrated and many companies are facing this labor challenge but fortunately, most of our laborers are from local villages, so we are not facing any labor supply issues. Coming to the industry. Industry is facing unprecedented time to adjust its operations and function to the new normal. Social distancing, employee safety has taken precedence over productivity and work efficiency. Customers are more focused on health and safety and postponing the discretionary purchase. However, since we have the home improvement category, not expected to be affected by this change in consumer variable as most of the people during pandemic situation are staying at home and hence, home improvement win over other purchases. Coming to demand. We have sufficient export orders, scale of capacity, utilization; and with the normalization of domestic market in coming quarters, we expect to return a good growth trajectory. We are maintaining sufficient stock, raw materials and other equipment to meet production requirements. We have not observed any major supply chain issue during uncertain time except some small hiccups. We believe the company has enough resources and liquidity to scale in operation and service all debts as and when due. To conclude, the company is focusing on sustained business growth and manage the capital with recurring and current volatility calls for getting all the necessary budgets in order to keep our business running without interruption, while still protecting the health and safety of all our stakeholders. We as a company contributed INR 20 lakhs towards PM CARE Fund (sic) [ PM CARES Fund ] to fight against COVID-19. This is a small gesture for all the COVID warriors out and fighting the situation to protect us. Now I would like to hand over the line to Mr. Anand Sharma, our CFO of the company, to update you on the financial performance of the company. Mr. Anand Sharma?

Thank you, sir. Good afternoon, everyone. Let me take you through the financial performance of the company. Quarter 4 FY '20 performance. The consolidated revenue stand at...

Sorry to interrupt, Mr. Sharma, we can't hear you clearly. Your voice is breaking up.

Okay. Q4 FY '20 performance. The consolidated revenue stand at INR 64 crores for quarter 4 FY '19 -- FY '20 as it is...

Sorry to interrupt, sir, the audio is still breaking up. There's a lot of...

Yes, I am able to hear very clearly. So...

Okay. I'll try just -- Q4 FY '20 performance, the consolidated...

Loudly, say it loudly.

Okay. Quarter 4 FY '20 performance -- now is better? Hello?

Yes, sir.

Hello, operator. Is it better now?

Yes, sir.

Okay. Q4 FY '20 performance. The consolidated revenues stood at INR 64 crores for Q4 FY '20 as against INR 65 crore in Q4 FY '19. Minor dip was on the back of COVID-19 pandemic, which impacted the domestic revenue in the month of March 2020. EBITDA of the company stood at INR 9.6 crore in quarter 4 '20 as against INR 9.1 crore of Q4 FY '19, recording a growth of 6%. EBITDA margin grew by 110 basis points margin for the quarter stood at 15%, as against 13.9% in quarter 4 FY '19. Profit after tax stood at INR 4.5 crore in quarter 4 FY '20 as against INR 4.2 crore of Q4 FY '19. Cash profit after tax for quarter 4 FY '20 stood at INR 8 crore as against INR 6.5 crores of Q4 FY '19, a growth of 23%. Now FY '20 performance. The consolidated revenue stood at INR 276 crore for FY '20 as against INR 252 crore in FY '19, recording a growth of 9.8% year-on-year. We have achieved EBITDA of INR 46.4 crore for FY '20 as against INR 40.4 crore for FY '19, a growth of 15%. The EBITDA margin increased to 16.8% from 16.1%, an improvement of 17 basis points. Profit after tax and minority interest for FY '20 stood at INR 22.1 crore as against INR 17.2 crore for FY '19, recording a growth of 28%. As profit after tax stood at INR 34 crores, as against INR 25.9 crore, recording a growth of 31%. Our effective debt-to-equity stands at 0.58x. Our return on capital employed stood at 16.2% as of 31 March 31 2020. Our return on equity stands at 13.8% as of 31 March 2020. Now we will open the call for questions. Operator?

[Operator Instructions] The first question is from the line of Ashish Kacholia from Lucky Investment.

My question is basically, if you can talk a little bit about your strategy in each of your major markets. And what kind of growth we are looking for in each of our major markets?

Yes. Okay. Should I answer?

Yes.

Okay. Thank you for the -- thank you, Mr. Kacholia, for your questions. As we've seen that the -- India will probably take some more time for the coming of the pandemic, our company's strategy is to focus more on export market. In the export market, I think one indication we have already done that U.S. market is going to be one of our major focus and then it's going to be U.K. and EU. U.S. is -- we have set up our office there, and we have set up a sales rep so that we want to penetrate the market better. We are already into a process of ending some good deals in the U.S. market. Second, we feel that the U.K. and Europe will be coming out of the pandemic very soon. France and U.K. has already opened. Germany is quite strong, and we already see a good flow of orders. So the company plans to focus on the U.S. and for the U.K. and the EU markets, at least in the next coming quarters. Thank you.

What was our sales in each of these markets? And what is the kind of growth that you are looking for? If you can give any indication on that.

So I mean, U.S. is 30% of our market. U.K. is 20%, Europe is 30%. Very, very, must say, it's really hard to say that what growth we will achieve. Our company is talking all the efforts and initiatives to try to have a good growth in each of these countries. And as far as the strategy is concerned, we see an opportunity right now for India, since there's a lot of -- in the -- some of the countries in demand. So I think it's a good time for Acrysil to claim some opportunities. And I think there is a potential for the company to show some good growth even with the pandemic going on at this point.

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

A couple of questions. Firstly, can you just mention how much was the contribution from GROHE this year? And how do you see it going forward?

That's your question? Can you just say all the questions? I'll just write it down.

Okay, okay, okay. Sure. Second question was on -- if I see your Slide #32, where you mentioned the breakup of the sales from Acrysil Products Limited, our U.K. subsidiary. So if I see -- so you have given GBP 7 million, which is around INR 65 crore of sales and out of which quartz is 31%. But in the graph you have mentioned, quartz sinks is 73% of sales. So I'm just trying to understand that thing.

Okay. So I think coming as far GROHE is concerned, I think the good thing is that GROHE has surpassed the first expectation of the company. And GROHE has already launched in more than 25 countries with our products. And as soon as the GROHE was about to take off even further, the pandemic came into picture. But we do feel that GROHE is going to play an important part for the company, not for last year, this year, but also for the coming years. As part of the Slide #32 is concerned, the Homestyle quartz sinks must be -- consist of 73% of the sales. Anand, would you want to just quickly check what was it? What is that?

Yes, yes. So yes, this slide is for the company. This slide is not for the Homestyle. This came at a wrong place. This came actually -- actual the quartz sinks percentage is 46%.

Okay. Okay. So -- okay. So that graph is for the entire company?

Entire company. It's actually placed at a wrong place.

The next question is from the line of Viraj Mehta from Equirus PMS.

My questions have been answered.

The next question is from the line of Ravi Naredi from Naredi Investment.

Can you tell what is the turnover of quartz and net profit in total turnover?

Anand, do you want to?

Yes. So we don't give segment-wise profitability, but we can give you the turnover of the quartz, which is INR 180 crores.

INR 180 crore in quartz, Anand?

Quartz, yes.

And remaining is different -- other business for profit-wise, you are not giving, right?

No, we don't give segment-wise.

Sir, asking for [ MD ]. I am shareholder of this company since last many years and reading about this round, but not able to grow. So any long-term plan will you share with us for entire year? What is the planning of our company? Where we can lead likely?

Okay. So I think our vision is very clear for India. Carysil could be one of the most home prominent brands inside a home. That's why we have a one-in-all category. We got sales and built-in appliances. So it's that a one-stop solution we would like to have. Unfortunately, this last year, our sales have been stagnant in India, but we see a very good market, both for the granite sink and for the built-in appliances segment, which is a new segment for us to report in the future. The company will be focusing on to build the brand and to build the distribution channels across India. Our plan in the next 3 years, if we want to, model our reach across India. Number two, on the export side, the -- we plan to -- we are exporting to more than 50 countries around the world. We plan to cross about 75 countries, 70 or 80 countries in the next 5 years. Our focus in the next 5 years will be on the emerging markets, not economics, but where we see the market for our products. We would be focusing on that, and we would be focusing -- as I said, our prime focus for the next 5 years will be for the U.S., U.K. and the European market. Our strategy to boost sales in the global market is to tie up with the large retail stores across the world to ramp up our group. Thank you.

[Operator Instructions] The next question is from the line of Poonam Sanghavi from Progressive Shares.

Pardon me if I'm repetitive actually because of the call drop in between. Basically, what I have understood from one of the initial questions is the 75% of the revenue that is coming from the quartz. And you are of the view that we've got enough of export orders in hand with this capability and sufficient stocking that you have indicated. But giving a little longer view, do you think the 15% Y-o-Y growth that is blocked for FY '20 looks doable going forward as well? That would be my first question. And the second would be on the other smaller components, which is your domestic part, which obviously has been hit by the pandemic, which is indicated to the 15-odd percent drop that you've seen in the numbers for Q4. How do you see this going forward? Like, do you think that people are -- I mean I'm talking from a layman's perspective. Do you think people are going to let any and every one come into their house and get kind of mentoring or developing changes in this chaotic environment?

So I just want to answer your first question. I think as the export -- I think the export growth for the current year, it is possible is we can if -- like I said, that we are focusing -- we are tied with some large utility retailers across the world. Few of them, we already tied last week, few of them in the process. One thing that's changed in the previous sales balance we observed that almost 40% of our distributor sales in Europe and U.S., it's converting to online sales and whatever orders we are seeing is actual orders the customer ordering. It's not for everybody trying to stop the products. So we are definitely seeing and we have shared in our statement, in the home improvement sector, in America, especially the Europe numbers will come now. But approximately 7% to 8% of the home improvement stores have shown growth in America and expecting the same to be in Europe too. We call it a vehicle bounce-back. So we think the bounce-back in U.S. and Europe will come. And hence, we see an opportunity for the company because of our good prices and quality and our aggressive marketing efforts, we -- there is a chance that we would -- there is a chance that we can post a growth in export, too. I mean obviously, at the same time with the virus, we don't know what would happen and second wave is going to come, what's going to happen. But we just keep our fingers crossed and just try to company -- just try to focus on these efforts now right now. So number 2, in India, I think the quarter 4 is because already the market sentiments started being low in quarter 4. So I think that's why we had a dip where people are getting more cautious. And I think it's more outcome having this gone across all the categories inside the company. So what we -- the company meanwhile can see is that if kitchen sink is a product which a person cannot do without it. Chimney is a product, a person cannot do without it. It's a product sitting at home where most of the entertaining, and most of the time they're going to stand at home. There is a survey done in the western side that people are going to spend more money inside their homes because they're going to spend more time and which could be appliances to electronic gadgets. So that's why we feel that this phenomena which is happening outside India, this should happen in India, too. We have already seen some good orders from India, even the markets in south have all cleaned up. People are buying -- started buying products for home, especially at kitchen sink, which they -- because that's where the hygiene is required. You could call the food and wash all the food. With all this pandemic and sentiments of hygiene going on, kitchen sink is the first thing you would like to change. Chimney is something you'd like to put it in your kitchen and keep your air clean inside it. So yes, so I think a story, not just investing because also in India, I believe it should come. The only problem we see in India is whether a second lockdown may come, the cases are on a rise. What the government is trying to do today, we got the Home Minister had a meeting with the Chief Minister. So we don't know that whether the market will be closed again. So I think that's the only very gray area, whether the markets would be open normal.

Okay, okay, okay. Fair enough. And I would just have one housekeeping question from the financials of the quarter 4. If the other income, which is actually if you see in your process, which if I'm just trying to get that other income out, I'm going to be at a loss. I'm going to be recording a drop of about 32-odd percent. So can I get a clarity on what exactly is this other income component as this seems to be a little repetitive? This was in December '19 quarter as well and now seen in March as well. If I could just get a little bit of clarity on that.

Yes. So Anand, I think it's a...

Yes. No, no. See, other income, is the exchange in what we got. See the exchanging because of the accounting standard that is showing other income. It's a lot, actually there is -- it's part of sales.

It should be a part of the sales, right? Yes, that's what I wanted to check.

Yes, yes. So there is only that.

The next question from the line of Parimal Mithani from Credential Investments.

Yes. I have 2 questions. I'd like to know what's the -- how are the receivables to the lockdown from your global supplier to the global clients of yours? And second thing, what's the net debt on the balance sheet?

Yes. So we do not have any problems with receivables from the -- from our global customer side. We have all the -- receivables are intact, and so we don't have to worry about it. Question #2, Anand, if you can help me on this.

Sorry, I could not be able to hear your second question.

What's the net debt on the company's balance sheet for...

Net worth?

Net debt.

Net debt.

Net debt, INR 86 crores.

The next question is from the line of Riddhima Chandak from Roha Asset Managers.

Sir, my question is regarding the branded and non-branded sales. So out of the total portfolio, how much is branded and the nonbranded?

Okay. So branded is approximately 8 -- sorry, for the India, it is completely 100% branded. For the export and the group sales, it's about 80% nonbranded and 80% -- and 20% branded.

Okay. 20% is branded, correct?

Yes. Yes.

Okay. Okay. And so -- are some material that is for and the more chemical. So how much we see the raw material pricing in the past 3 months and going forward?

So on the quartz, we have 2 major raw materials: this quartz and the acrylic. So the -- all these supplies will go stable. We don't see any rise in inflation in the prices, neither we do see a decrease. But on the main, main, side, in the acrylic side, the prices have approximately dropped by 10% to 15% due to lower market demand, and which would probably help the company's profitability in the coming quarters.

Okay. So that means our margin will marginally increase in the coming quarters?

Yes. Yes. Yes. So I would say on the gross margin side, 100%, there would be some improvement in the gross margins.

Okay. And in the domestic market, how much are product going to the renovation sites? And how much is in the new premium project that is directly to the dealers, overall, in the domestic market?

So there are unfortunately no market data for whatever the information we have in India, approximately 60% to 70% goes for new homes and about 30% go for renovation. And now we see this change could go to 50% or even 60/40 with this pandemic. So people are going to be doing more renovation than buying new homes. So this can change like in export in the global market, will be 80% innovation versus 20% in new homes. This phenomenon could change in India.

Okay. Okay. So I mean 20% from new homes and 80% is from renovation side, right?

Yes. No, that's for the exports market because people are doing the renovation. Whatever -- India is obviously new home and buildings projects and all going on, that's why your sales are up, right? I see that changing now to 50-50 or 60-40. People are -- the real estate market, we all know is in a bad shape. People would like to consult us at this time. So they will not buy new homes, but try to renovate their existing homes.

[Operator Instructions] The next question is from the line of [ Devish Meda from Demero West ].

Sir, actually, I'm tracking this company in the last 6, 7 years now. And I have seen that this company has always done a steady CapEx in terms of capacity since last 6 years. So our capacity was at around 3 lakh, 75,000, 2 lakh, 50,000 as well. And we reached at around 5 lakh units. So I'm saying in terms of quartz. So I just wanted to understand one thing that going forward, since we are looking for a medium-term target of around INR 300 crores in top line, INR 500 crores in the long term. So how do we see a road map for the sinks? So are we looking for any acquisitions in the global market like what we did with Sternhagen since we have INR 20 crore cash in our books? Do we have any road map by increasing the capacity next 3 years again?

So I think as a -- why the company is quite, I would say, observing and focusing on the export market, try to maximize the market share at the same time, company is quite watchful about the situation is going to turn out with the pandemic in India and abroad. So I think fighting at this moment of time, we would like to keep our eyes and ears open and try to see what opportunities do we have without taking any major risk inside the company. This -- because what we have out there. And I think we're going to increase gross by end of this calendar year, too. We -- like I said, we are seeing opportunities in the export market, even companies we'll keep on continuing to focus and try to maximize our market share. At the same time, we keep our eyes and ears open if this pandemic -- I'm sure there could be many opportunities for us to which could -- any opportunities on acquiring business could possibly there post pandemic. So we are very watchful in keeping our ears and eyes open, and we'll see what opportunity is coming. And if we feel that it is aligning with our thought process and our growth strategy, we would possibly have a look at it.

But sir, with the existing plant capacity, what we have at down level, do we have any space to increase the capacity for more than 5 lakh units over there?

So we have a good land bank in hand. We have -- I think we have enough land bank given if we have to increase to another 100,000 sinks. So I think we have the land bank and the resources. Capital, if we have to increase -- I mean scale of our growth even 700,000 sinks.

Sorry to interrupt, but Mr. Parekh, there's a lot of disturbance from your line.

From my line?

Yes, sir.

Okay. I will try to fix it. Is it better?

Sir, can you move the handset more away with you?

Okay. I'll do this. Yes.

Sure. We'll move on to the next question that is from the line of Rajat Chandak from ICICI Prudential AMC.

So I wanted to understand what kind of CapEx we are looking at this year and next year. It looks like it's consistently been going INR 18 crores to INR 20 crores in that range, from the CapEx from last 1 and 2, 3 years maybe. So any guidance on the CapEx front?

Yes. So we are -- we will be doing approximately if we are -- like I said, we've been watchful on things. But if the things don't go as per plan, we'll be doing about INR 10 crore CapEx for the current year. And for the next year, we will see by end of this calendar year, how the situation turns out to be. And I think we would be able to make a call by end of -- for the next year.

So are you saying that CapEx this year will have like from INR 19-odd crores to INR 10-odd crores?

No, about INR 10 crores, about -- yes, approximately INR 10 crores.

Okay. And sir, the other thing is in terms of free cash generation. I was just seeing our cash flow. This year, we have INR 2-odd crores of free cash, net cash from operating minus CapEx and minority interest, at these 3 parts. But last 3 or 4 years put together in fiscal '19, '18 and '17, we have not been generating free cash. So any thoughts on the scene? How are you thinking about that?

So I think working is -- no, you I think you are right. But if you see the improvement with EBITDA in the last -- in last 2 to 3 quarters, only we have a quite a bit of free cash generation, it was not very good. Previously, you are right. The company has taken a lot of initiatives on new programs or products. We have some stock in hand, we had -- we had some new export clients, which has a larger credit period. We expanded our geographies across India, which we had to do some more credit period. So I think this is -- these are the few easy reasons. And plus, our operating margins has now improved. Our EBITDA is about 42%. So I think our cash is as you will see in the coming quarters, it will improve from some last year. We have our stock liquidations, quite a bit of stock liquidations. We would have our operating margins, we expect to improve. So yes, so I think we would have -- Anand, can you brief last quarter? We have observed in terms of previous quarters.

Yes, yes. What has happened in last 3 years and what has happened in last financial year? See, basically, we were in expansion mode. So we are -- we did a lot of CapEx. Even in the U.K. subsidiary, there was a leak event going on. So this year, last 2, 3 year were our consolidation year for us unlike the -- whatever CapEx we are doing with the revenue and dilution of the cash. So this is a cycle which we completed last 2, 3 years, and now we are at a stage where we can scale up the production without having much CapEx. So we reached to that capacity. And going forward, you see much cash generation in the company, precalculation in the company because we completed our first cycle of the observation and the enhancement of our acquisition.

Yes. And so we are now at consolidation phase.

Just to understand, we share our capacities, how they have expanded and then earlier determined also asked about it how we have grown. So we are now at 500,000 kind of capacity on the quartz side, right? What volumes you would have sold in fiscal '19? And I just [ condition when ] year ended?

252.

Not in volumes, quantity.

Quantity. I'll do. So total quantity last financial year, 438 -- 431,000.

431,000. Yes.

And current year, 487,000. So there's a growth in our volume, 13%.

Sorry, 487,000 is for fiscal year '20?

Fiscal year '19, 431,000 -- [ 436,000 ]. FY '19, '20, 487,000 overall growth in the volume. If you want only for the quarter, then last year, it was 345,000. Currently, it is 378,000. So 9% growth in the volumes.

Sort of 500,000 and a bit [ 80,000 ] and we did in the last few months on the other, it was earlier 420,000 sinks.

Okay. And just to understand in terms of capacity utilization, right? When you say presently, we have 500,000 tonnes of capacity for quartz sinks. That is actually achievable? Or it's like achievable is only probably 90% of the time? So utilization also will probably sort of the first [ 2,000 ].

Right now, we're going at 80% activity, 80% of our export market. So 500,000 sinks is also, we will be completing that sale in the next few 3 months' time, 0.5 million. So right now, we are -- current capacity decline is about currently since we are in a phase of expansion right now. We are at, right now, about 440,000, 450,000 sinks capacity at this point, out of which we are 80% utilizing.

Yes. But when you say this 440,000, that is actually producible, right? It's not that that's the rate of capacity and production will be lower than that. It's not that -- that's not the case, and we are...

No. No. That's net capacity. Yes.

The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.

Sir, I missed -- I mean I joined a bit late. Just once more, your thoughts on domestic business. And within domestic business, which segments are now lower than company average months? For example, is appliances still below company level margins? And how do you see the path to profitability or increased profitability for your domestic piece of -- domestic side of the business?

I think the domestic side of the business volume, I think volume is the -- and so I think our granites sink business is doing quite well. On the appliance side and the gross margin side, also, we are quite good. Demand is the only thing now which we would turn around the domestic profitability.

Okay. Okay. And sir, what is the differential of margins between, say, your sinks versus appliances versus bath fitting, if I'm able to understand? I'm assuming sinks would be the most profitable for you. How much is the difference between appliances and bath fittings today?

See, on the -- see, strictly on the gross margin side, our bathroom business crossed one another. I guess, later on, my CFO can state the details. So bathroom business, gross margins that followed by appliance and then by sinks. Because of the sinks, because the appliance are more lifestyle products, and they are lower in sales, so we need to have our gross margins higher than sinks. Unfortunately, in those sinks, we have good gross margin but not as high as the appliance and bathroom product. But there, the volume is 80% of our sales.

Sure. Sure. So I understand. So basically now...

The moment -- so the -- so far, we, obviously, in our 5-year plan, which we have said INR 500 bathroom, the bathroom products and the appliances, not just for India but in exports. So we are looking good, a large one. I think it's all volume gain, which we are expecting to come this year, next year or now this pandemic has just spoiled the party. But now we'll have to a little bit be patient and see.

But in terms of capability, sir, like you said in the earlier question, and you talked about you were in the building phase wherein you were building all the building blocks. Have now that been -- has that been built up? And now it is all about scaling up? Or do you need to build more capability...

Only now scaling up. So I think we are -- whatever we have consolidated, all the -- our initiative -- product initiative, growth initiatives started, everything is in place. We just need to scale up now. That's it. Yes.

So in terms of dealer addition as well as human capital or capabilities, all that is in place. All you are waiting for is now demand to come back and then grow.

Correct. Correct. So now what we're waiting is also another big question. [ How many days or months can anybody wait? ] India is going to maybe in a bad phase. So India's growth story, what is it. So what we are doing as company is company has taken some very, very immediate steps is trying to develop products in the stainless steel. Stainless steel is our sinks and the chimneys. We are planning to quickly develop products in chimneys and in the stainless steel sinks for the export market. So that's one. Number two is, as far as bathroom products Sternhagen is concerned, company plans to launch the Sternhagen brand in America in quarter 2 to scale up. Because we as a company believes in growth, and we just cannot sit and wait for the India market to be -- to do something. So the other initiatives company has taken to export both in the export market. So there are some manufacturing capabilities, which we have to improve, we are doing, will take about 30 days' time, 30, 40 days' time to improve to match the product demand for the export market. But we have to do. We don't have a choice.

And sir, your margin guidance from a medium-term perspective, would it be higher than what we have reported today? Because as you build scale and these are higher -- and I mean I'm assuming incremental growth further comes from sinks and -- sorry, appliances and bath fittings, which have a higher gross margin. Would it be fair to say that the EBITDA margins would move directionally upwards only?

I think there is one -- there is no doubt. If we want to have incremental growth, then margins will improve. There is no doubt on that. The question for the current year and next year is that, how much is that growth going to come? From where it's going to come? That is the question. But if the incremental growth comes in as what we've been planning, if things normal, yes, there's the increase in -- I mean improvement in the margins.

Sure. Sure. And sir, as you said, your CapEx next year is INR 10 crores and going incrementally going forward, I'm assuming the intensity would be lower. Fair to say that you would deleverage your balance sheet now, you would start repaying debt?

I would not say that moving forward, we will reduce our CapEx. But I think the company will have good cash flows. So to not to -- try to not just maintain but try to even lower its current debt mix level, yes.

The next question is from the line of [ Manish Nariwal from FDC Capital Advisor ].

Yes, I would like to take a light on the working categories...

Sorry to interrupt, [ Mr. Nariwal ], we are not able to hear you.

Yes, just a minute.

Hello, [ Mr. Nariwal ]?

Yes. Am I audible now?

Yes.

I would like to read first on the working capital position of the company. Given the pandemic and given the scene, what are the impacts that you are facing on the inventory and on the receivables side?

Okay. So one second. So as I think on the receivable side is that, this only challenge what the company has is that we are trying to maintain our current credit period with our customers. More scenario in that the customers asking for more credit period. But fortunately, we have been able to sustain the same credit period, and we're able to do it moving forward, too. On the inventory side, we see a reduction in inventory, like we said in the previous year, the year in terms of company was in a growth trail. We invested a lot of CapEx. We've done a lot of initiatives. We have stock. So looking at what the current level is, we see a good improvement as far as the inventory and we see no issue with the receivables this time.

Okay. Do I also then do assume that the inventory levels, which were at like INR 60-odd crores in March '20, are they -- would they be coming down?

Yes, would be going down. Would be, I think, definitely going down. The only thing is inventory as far as the Indian market is concerned, now that is what the situation is, so on the export side, we definitely see the inventory moving down because we also cut down on the number of SKUs, too. Let us see now how India turns out. So we'll have to go what we quarter-on-quarter in currency, what happens on it. Because we -- because most of the built-in appliances are mostly for the Indian market, which we have stopped some of the models in which we have are specifically for a regular market. So it's very hard to sell those products into other countries. Nevertheless, the company has [ requisite ] 10% to 15% of the Indian stock level for the export market. But rest, we'll have to now wait and see what happens in interim.

Okay. But you don't have any issues of [ solutions ]? Like -- or they need the stock they need to go back. It might take time, but then it doesn't kind of get on...

Yes. Sure, sure. No, we don't have any debt to stock or something like that.

The next question is from the line of Keshav Garg from Counter Cyclical Investments.

Sir, I wanted to understand that, as things stand today, in FY '21, will you be able to achieve the same top line and bottom line that we did in FY '20?

Well, it's the -- things continue to be -- as what we wish to continue, I think there will be. But unfortunately, things don't do as to what you wish, right? So I think we are now in a very easy situation as is -- especially for the company, the company CEOs to answer what growth I think we are looking in this year and in the future years. I think it's very tough to say. I think what the job in hand for us is right now to try to focus on export market entry and try to see opportunities that the growth comes from. I think that's what we want to see. I think that's what we want to do.

Okay, sir. And also, sir, like your presentation says that there are 4 global quartz sink manufacturers, and you are one of them. So are the rest of the 3, are they present in India?

So we are the only one in Asia. The other 3 are in Europe.

No, sir, I'm trying to understand, do they sell in India? Or are you a monopoly seller of quartz sinks in India?

They sell very few, but we think we -- I think we have a 99% market share.

Okay. So that's great. And also, sir, like American operations. Sir, I hope in the near term, they don't -- I mean we don't see a hit from there, I mean in terms of losses.

So U.S. is already contributing 30% of the company's revenue. So the only thing we are putting up is -- we are not invested like heavily into this. We just have a person and some small office or rep office there because the -- we would see that there are some growth opportunities over there. So I think the sales will improve there. So these expenses will be readily below compared to what the growth we expect in the U.S.

And sir, lastly, in the first quarter, sir, are you breaking even at the operating and net profit level?

Let's see. Let's see.

The next question is from the line of [ Karthik Mat ], an individual investor.

You mentioned that exports will be a major focus area this year. And I think, alluding to the previous question, there are 3 other companies globally who are in too quartz sink base. So I just wanted to understand how big are these other 3 players? And where are they based? In U.K.? In U.S.? And how big are they in terms of capacity?

Yes. So each one is -- so approximately shop technology is about 2.5 million sinks. So we do about approximately 0.5 million. That 3 are doing well -- million plus on whatever information and on data what we have. So indeed now we are doing approximately 1 million sinks plus/minus whatever each points coming here.

Okay. Sure. And the other small question I had is, I see a slow increase in the employee expense in Q4. Anything of significance over there or what?

Sorry, what is it? There is...

I see a small increase in employee expense in Q4 as impact on a Y-o-Y basis. Anything of significance there? Or...

No, no, there's nothing significant. There is nothing significant.

The next question is from the line of Ravi Naredi from Naredi Investment.

You told in previous, some question about export and import -- in export, 80% is nonbranded. And we are not interested to promote the brand in a foreign country?

So the company is doing all its efforts to do the brand. And that's why the American operation has been done is to launch our Sternhagen brand in the U.S. market. Unfortunately, our -- we are not $1 billion, $10 billion company that our brand is big like Samsung or something. So we have to bridge partnerships with the brand business in all the different countries, and we do increase our -- maximize our market share.

Okay. Okay. And then...

We need to build strategic alliances with the big companies over there because their brand is already very popular in those markets. If you want to build a brand, you will have a negative profit in the company. But the company's endeavor is to -- year-by-year increase their branded business.

Right. And sir, how much advertisement expenses in our annual basis?

So our total sales in advertising is less than 10% of our revenue.

10% of the revenue.

Less than 10%. I'm talking advertising sales, so including sales promotion traveling, about 10%. Yes.

The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.

Sir, just -- sorry, just coming back to this question on free cash flow and debt. Look, if you think about your capacity utilization is not at 100% of age and versus last 3, 4 years, your cash generation capabilities from the company has gone up substantially, in my view, around 2x, 3x because of the way PAT has grown, right? So today, you would have a very big scale versus earlier in terms of CapEx. So what I'm trying to get to is, if you have 3x asset turn, and if you were to spend INR 30 crores of CapEx every year, or say, INR 20 crores of CapEx, that would give you INR 60 crores of top line in the period of 2, 3 years. So then, sir, somewhere you would need to consolidate, right?

So we will see -- I think it is all about demand in the market and demand the company it has. What is very important is our asset turnaround ratio. I think what we need to see that the return on capital employed needs to increase and maximized so that we can still continue with our expansion, but we reduce our debt levels. Yes.

Okay. Okay. No, no, no, obviously, you will not sacrifice growth for the -- I mean for that focus. But you would look at...

We see -- I'm saying we see ample internal cash accruals of the company improving year-on-year. So we definitely see a debt consolidation. That's what I'm trying to say.

Just to add to this, see, we have set our goals short term, midterm and long term. For the short term goal of INR 300 crore, we build the capacity to be consolidated and made it possible, and we are very close to INR 300 crores. So first phase of the consolidation value date on the CapEx and whatever capacity building and of course EBITDA. Now going for the scale-up of another by INR 500 crores, whatever required to be done, we'll do for the sake of growth.

Sure. So question was, the last time you had raised some money via QIP. Will you again dilute your equity? Do you believe you need to dilute your equity for the incremental...

No, no.

So that self-sufficiency scale has been reached now?

Yes. I think we have reached to self-sufficient.

Great, sir. And just one last question. Would you believe there could be some pent-up demand in second half of this year? Or this year would be slightly on the lower side when it comes to revenue? Any small -- I mean how are you seeing in May and June? I don't know if that question was asked. But any impacts on...

Western countries, Australia and New Zealand has already shown a V curve at this point of time. Hence, we have a bunch of export orders. Otherwise, the company would no way -- I think very few companies right now would be working at 80% capacity. No company would work at 80% capacity with some demand. And so there would be a bounce-back happening in the U.S., U.K., we're seeing opening, France, Germany, Australia, New Zealand, China, we have more than 25 countries have shown some V curve. So as of now, the company has orders for the next 2 months. And we see, at least from the export, it is going great. It is going great in segment. I think coming from few pockets from the world. It's not every pocket of the world is going to show a growth. But we do see that the company will come out of the pandemic and opening out and now. So I -- so we have seen the demand coming from there. India, the industry we have here, I think, now begin the call. We are fired to reach on the top and fired to still [ pattern out ]. So India, good thing is that whichever markets are open, south has opened up a few market, center, east. We have seen growth also coming from orders and flowing in from there.

Okay. Okay. But in terms of recovery, fair to say, the exports will recover faster than domestic?

Yes. That's what we assume. And I think that what indicators are showing us.

The next question is from the line of Keshav Garg from Counter Cyclical Investments.

Sir, I wanted to understand, sir, your export margins are higher or domestic margins?

So in terms of the net margin, export margins are higher. But in terms of the gross margins, both are same.

So sir, you said that in domestic, we are 100% branded, and in export, we are basically B2B. So still, you are saying that export margins are higher, so that will be a bit changed...

No, because you see, ForEx is playing a big role for us.

Okay, sir. And also sir, wanted to understand that what has been the realization growth in quartz sink for last year as well as for last 5 year approximately?

Last...

Sir, last year and last 5 years.

For the last 5 years, we have already put it, no?

Sir, I'm saying realization growth, so price per piece, let's say, roughly.

Price per piece, the realization per piece is approximately 4,800 to 5,000 for export market, and for domestic, it would be about 3,800.

Sir, and 5 years back or last year, this was how much, approximately?

I think it was 5% to 7% lower than this, yes.

Okay. Okay, sir. And also, sir, are we planning to -- so sir, is there -- since you said that we are monopoly quartz sink seller in India. So is there any room for us to increase our prices or because it's a premium product and since we are a monopoly player. So is there any scope for increasing pricing?

So we will -- we have -- so that's based on opportunity and demand. So we'll see how India's shape comes -- turns out to be. And I think we'll make and put a call then. Right now, it's too early to say with this pandemic going on and markets still not opening. And I don't think it's a good time to think about a price increase at this time.

So, sir. And also, sir, are we planning to become a contract manufacturer in the domestic market also, let's say, for Jaguar and for other branded bathroom and kitchen players?

As of now, it's not into the company's philosophy to be for others, but we'll see in future if something comes up.

Ladies and gentlemen, that is the last question. I'll now hand the conference over to Mr. Chirag Parekh for his closing comments.

Thank you. We are happy with our performance led by greater emphasis on the team Acrysil driven by this testing time and achieve highest operational efficiencies. We are continuously focusing on growth drivers and expecting improvements in macroeconomic factors to entail and add momentum in the business. We are committed to create value for all stakeholders. We thank you -- we are thankful to all the investor, participants for joining on this con call. Goodbye, and stay safe, please. Have a good day. Thank you.

Thank you. Ladies and gentlemen, on behalf of Acrysil Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.