Carysil Limited (524091) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Acrysil Limited Q4 and FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on 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 this 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, Mr. Parekh.

Yes. Good evening, everyone. A very warm welcome to the FY '21 earnings call of Acrysil Limited. Along with me on this call, I have Mr. Anand Sharma, CFO; and our SGA, Investor Relations Advisor. I hope everyone got an opportunity to go through our financial results and investor presentation, which has been uploaded on the stock exchange as well as on our company's website. I hope that all of you and your loved ones are safe. These are really difficult times and perhaps the most important thing for all of us to ensure that we are safe and so as your family. It has been a challenging year for the first quarter of financial year 2021 being made by COVID-related lockdown restrictions. Despite the challenges posed, we are able to achieve growth on all fronts and have, therefore, achieved our short-term guidance of INR 300 crores revenue. Also, the Board of Directors recommended a final dividend of INR 1.20 per equity share in addition to interim dividend of INR 0.80 per equity share declared in February 2021. During the FY '21, the company received approval of listing of equity share of the company on a National Stock Exchange. The equity share of the company was listed admitted to bidding of National Stock Exchange to be set from January 14, 2021. The current -- the country is currently facing a second wave of COVID-19 infections. The new strain of COVID virus is infecting certain key states across the country. We are seeing localized lockdowns, micro lockdowns and restricted imports other than a nationwide lockdown compared to last year. Despite this scenario, we are able to run our manufacturing operations are largely running fully while following all the health and safety protocols. Our priority is the safety of our employees and the company is doing no stone unturned to insurance. Coming to the company's performance. Our company in FY '21 has embarked by robust total income growth of 13% Y-o-Y. A sustained trust on growing our top line while keeping check on costs resulted into strong EBITDA margins of 22.7%. Quartz continues to be dominant product category. Export revenue grew by 20% to INR 244.7 crores for FY '21. Domestic revenue were impacted due to nationwide lockdown in the start of the year due to lockdown restrictions, however, post-relaxation of lockdown measures, domestic revenues witnessed a strong -- significant pickup and stood at INR 65 crores FY '21. We witnessed spurt in demand from international markets during the year, where domestic demand picked up for July 2021. We expect the sales momentum to sustain going forward. We have witnessed change in the spending pattern in terms of discretionary income spend towards home renovation and decor, the limitation on travel and legal expenses. We have sufficient export order booking. Also, we have sufficient stock of raw materials to meet production requirements. We have not observed any major supply chain issue during these unprecedented times. Coming to our capacity expansion. I'm pleased to inform our company has successfully completed the expansion of 100,000 units of Quartz Kitchen Sinks announced in August 2020 within a very a short span of time. The commercial production from this additional capacity commenced from the end of February 2021. The manufacturing capacity of the Quartz Kitchen Sinks has increased from 5 lakh to 6 lakh units per annum. This was due to the commitment of our employees and they are preparing us to work under the difficult situation. We have recently announced additional capacity expansion of Quartz Kitchen Sinks by another 100,000 units. It is progressing well, and the project is expected to be commissioned by June 2021, date to be confirmed. This should be approximately -- I think we feel that we should be able to complete because we are in a bit of stall in our state and then [indiscernible] is a little bit affected. So this has been a little bit postponed to July, the next 100,000 capacity. Due to expansion our manufacturing capacity with [indiscernible] lakh units per annum. Let me update you on our strategic partnership with IKEA. We entered into a strategic partnership with IKEA Supply AG Switzerland in August 2020 for manufacturing and supply of composite quartz kitchen sinks for their global requirement. IKEA has an expertise in distribution and supply of home improvement products. Our company commenced the dispatches the quartz kitchen sinks of IKEA in March 2021. It should enable IKEA to offer its customers the best-of-its-class quartz kitchen sinks manufactured by Acrysil. Innovation is the core of the company. Company possesses ability to take new and maximize the opportunity. With our technical proficiency within the current product line, commonly launched new [ warehouse ] to meet the customers' expectations. Our company's focus on creativity and in-depth research in every step of the way. During the year, we have introduced new products with anti-bacteria sinks of many other variants in the kitchen appliances segment. And Acrysil aims towards worldwide spent on the company touch go live, increase our value proposition. We are also working towards increasing our global footprint, developing a strong network to capitalize on opportunities. We have taken steps to expand the American European markets and grow across the group as a valuable trustworthy brand. Our company is focused to build brand and distribution channels across India. Our products have a global appeal and have impressed both influencers and coming all across the world. We also have a special announcement here that the company has tied up with Grohe, the leading German sanitary brand for supplier of stainless steel kitchen sinks. We also have news, since I'm in America. We have -- our distributors are able to tie up with Menard, which is a $10 billion retail store with 850 stores. We have tied up for distributing our all Acrysil granite sink in all the Menard stores across the United States. Our company has been paying special focus on asserting brand dominance, which is highlighted in our global partnership with equity retailers for home improvement products. Our company always embrace challenges come out of the top of the back of the greater determination. We established ourselves a long-term plan industry. We are headed towards a future of consensus success increase validation. Now I would like to hand over the line to Mr. Anand Sharma, our CFO, to update you on the financial performance of the company. Mr. Anand Sharma?

Thank you, sir. Good evening, everyone. Let me take you through the financial performance of the company. Quarter 4 FY '21 performance. The consolidated total income, including foreign exchange gain stood at INR 104.3 crore for quarter 4 FY '21 as compared to INR 65.8 crore in quarter 4 FY '20, recording a growth of 59%. EBITDA of the company stood at INR 24 crore as compared to INR 11.1 crore in quarter 4 FY '20, recording a growth of 117%. EBITDA margin for quarter 4 FY '21 stood at 23% as compared to 16.8% in quarter 4 FY '20, recording an improvement of 620 basis points. Profit after tax and minority interest stood at INR 13 crore in quarter 4 FY '21 as compared to INR 3.9 crore in quarter 4 FY '20, recording a growth of 235%. Coming to FY '21 performance. The consolidated total income, including foreign exchange gain stood at INR 315.5 crore for FY '21 as compared to INR 280.3 crore in FY '20, recording a growth of 13% year-on-year. We have achieved EBITDA of INR 71.6 crore for FY '21 as against INR 50.5 crore FY '20, a growth of 42%. The EBITDA margin increased to 22.7% from 18%, an overall improvement of 470 basis points. Profit after tax and minority interest for FY '21 stood at INR 39.1 crore as compared to INR 22.1 crore as FY '20, recording a growth of 77%. Our net debt-to-equity stands at 0.52x as of 31st March 2021. Our return on capital employed stands at 20.7% as on 31st March 2021. Our return on equity stands at 20.2% as of 31st March 2021. Now we will open the call for the questions. Over to operator.

[Operator Instructions] The first question is from the line of Pritesh Chheda from Lucky Investments.

Yes, sir, thank you for the opportunity and congratulations on a good set of numbers. Sir, in the quarter 4, in the other expenses line, is there any -- something to highlight because the Q-o-Q margin looks a little bit different?

Sir, can I reply?

No, so -- okay, yes.

Yes. So Pritesh bhai, this quarter 4, the increase in other expenses is pro rata to the production in sale, except export spread increased by 45% quarter-on-quarter basis. So there's a significant increase in the cost of rate, which we are passing on to the customer and we expect that it will stabilize in this quarter.

Okay. My second question is, we have a medium-term target of about INR 500 crores, and we have exited the number at about INR 100 crore. And we are constrained by capacity, which we are adding up, which also signify that there is a fair amount of demand in the system. So this INR 500 crore medium-term target in your opinion is how far into the future now? Is it a year or a couple of years or more than that?

Yes. So Pritesh bhai, I think what we have rightly said that I think this is the first benchmark we achieved on the quarter 4 that we achieved a INR 100 crore sales, which -- I mean, if you take annual rate is already INR 400 crores in the same moment. Plus, we are already seeing some tie-ups which we are making. We're also seeing some continued pent-up demand coming up. So we definitely feel that our goal of achieving INR 500 crores would be -- which was earlier, would probably about -- we were thinking about 4 to 5 years, it will be now probably shorten for sure. So even if you take annual rate of INR 400 crores, plus we will have some stainless steel sinks and built-in appliances. So I think the company is planning to achieve this target as soon as possible.

Is it probable that INR 500 crore revenue can be achieved in FY '22 itself? Considering that you're adding 20% capacity in -- more than 20% capacity in sinks itself. So is there a high probability that you can achieve INR 500 crore in '22 itself?

So I think -- at this point of time, we are really focusing on expanding the capacity to -- we are up to 700,000 sinks, and which will be probably taking quarter 2. So I mean, we don't have all revenues coming in the -- we won't get the benefit of the full year. But I think a company is exercising focus on not the how, I mean numbers, obviously, are an outcome. But we are trying to see that even if there could be a chance that further, we have spurt that the new tie-ups are being made by the company. So there is a likely possibility we may have to go for another expansion soon. So I think the numbers will follow the expansion.

Okay. And my last question is, there's an opportunity in domestic market in kitchen sink. Considering one of the brand has spit up in 2 ways, the Nirali brand. How do you see that opportunity for us? And is there an opportunity whereby we can really accelerate our growth in sinks? And it was quite surprising that a lot of the categories in the building space in India in FY '21 did grow. But for us, when you look at our domestic business, it's declined by about 15% to 17%. So some comments there as to why is there was any challenge for us? And how do you see the build-up on the domestic business within that, the kitchen sinks for us?

So I think it's a good question. Let me just answer this. The overall demand of the granite sinks that's in our last investors call has been is there has been a huge demand and the market share of quartz sink increasing in the stainless steel sinks. I think that's not just across America, Europe or across the whole that includes India also. Unfortunately, what has happened is because of this production capacity restraint, we were unable to supply approximately 30% of our orders in India on a month per month basis. So I think we have and also in exports, too. So I think that has kind of -- that has not been able to improve the domestic performance. If we had big production capacity, we would have been able to have a better number. So that's one. Number two of the stainless steel sink side. I would not comment on what is going with our competitors. But yes, we have seen the demand of the stainless steel sinks in India going up. We have been working quite aggressively. We have been getting a good response. And thirdly, on the stainless steel sinks, we have tied up with Grohe. We had tied up with some other export customers. So there will be an expansion of the stainless steel plant also. So I think all-in-all, including the export domestic granite and the stainless steel sink, I think we are looking at a good momentum in sales for the year.

The next question is from the Varun Arora from Great Eastern Shipping Single Family Office.

Congratulations on good numbers. My first question is related to the COVID situation. If you can talk about the COVID situation in Bhavnagar, how has that impacted the local labor in any manner? And also there was a cyclone. If you can talk about like any challenges that we might be facing right now?

Yes. So there are some short-term challenges, which we are facing currently. And we have been experiencing absenteeism with all the COVID situation. Fortunately, the COVID situation in Bhavnagar has improved dramatically for what I heard from my operations team. The people are coming back to work. Early absenteeism used to be about 20%. Now it dropped to 10%. So we assume by next month, everything should be online. That's one. And number two is on the cyclone. Yes, fortunately, we are safe, but there was not much damage which has happened to the company. There are some shed, which has been done apart and some small damages here and there, but nothing major, and which is going to disrupt our expansion of our production. So we should be on -- we should be absolutely in line with our capacities.

Sure, sir. Second question is related to the international geographic mix, if you can give an idea as to how that is shaping up. And also some color as to -- because, I mean, there was lockdown in some of the countries like U.K., there was lockdown. So last year was kind of a slowdown in the U.K. market, but since has been opening up, so if you can give some color as to how your key markets are opening up, maybe some idea about the March exit, that will be helpful.

See, the 1 thing is, nothing has changed. But the western countries are more matured in terms of the granite kitchen sink side. So about 16% of revenue comes from America and Europe and comes from Asia and other countries. But overall, there has been -- there has not been the localized demand we have experienced just from United States, Europe, U.K. There has been overall demand even from India, Asia and Europe for the granite sink. That's one. Number 2 is a pandemic situation, yes, there has been lockdown for us, but fortunately, lockdown has worked good for our company. Like I'm in right now in America, and I've been visiting all my clients here because we have just got our deal with Menard. So I went to see the Menard stores across America. We are putting display. You can see unbelievable line of people, there have been crowd to buy home improvement products. So home improvement has taken -- it has taken a big lead in sales here. The dynamics of the working, I'd say, the more hybrid working culture has stepped in, I think not in America, I think also in India. People are working more from home, the work-from-home culture as it's considerably high. I went to my clients office with 200 people in the office, but at this time, there are 4 people in the office and he had revenue increased by 50%. So there's been a big change. And because of that, there has been more of ordering of the home improvement products, especially our kitchens sinks. And second, in order to overcome this challenge of the lockdown, there will be more online ordering system like U.K. experience, coming back to a U.K. question. Approximately 30% of our revenue of the kitchen sinks came by ordering online of our kitchen sinks.

[Operator Instructions] The next question is from the line of Sanjay Shah from KSA Securities.

And congratulations on good set of numbers and even congratulating on the new tie-ups with Grohe and U.S. stores. Chirag bhai, my question was regarding when we see your presentation, and then we understand that we have been pushing our sales domestically. But -- and even we have grown from 95% export to today 79% export. So domestic market is growing as we see the pie of products, where we see that even steel sink is not growing, and our quartz business is growing. So is there any change in the customer demand in India, which is shifting from steel to quartz? Or do you see that growth coming in the future? And even in export market, how do you see the trend in quartz sinks and steel sinks?

Very good question on this regard. So answering your first question, yes, there is no doubt that the granite sinks are the future, which is not even consisting. It is approximately less than 10% of the global kitchn sink business. So we have a long way -- a long load, a long highway yet to come. Good times. I'm sure it's going to come from granite kitchen sink because there are only about 4 to 5 companies in the world who produces granite kitchen sinks. We got 2 situation here. One is the pandemic, which has helped the -- I don't want to repeat again, but the work-from-home culture; and second is the share the granite sink consistently increasing. We have seen that in our kitchen worktops, all that people are using granite or quartz. Nobody uses stainless steel. It's the same there the granite sink, the quartz sink has come also in the kitchen sink. Nobody wants to use a stainless steel sinks. Preferably, no, I would not say nobody use. You are preferably now the quartz sinks that are coming into play. So I think that's one. The -- on the domestic side, especially on the stainless steel sink the -- yes, there is -- like I said, the quartz sinks are coming up. So there's -- the focus on sales is not there. But due to some circumstances in India, which is favoring us on competition side, there has been a big demand coming for us on the stainless steel kitchen sink side. The company is investing to double the capacity in stainless steel sink both on account of export and for the Indian market. The company is also expanding in terms of our R&D, which we are producing more high-end stainless steel kitchen sink kitchen sink to add better value addition gross margins to the company. So we are actually working in a space where nobody else -- nobody has manufactured products like us. And then the designers who want to manufacture, there is probably Acrysil, I think 'I am', but I think it's probably Acrysil is only company which is manufacturing this. So yes, there have been favorable demand than on second side on stainless steel that the new tie up with export also is going to give a boost to the stainless steel sink. So I think, overall, we are looking at also the stainless steel side to perform well with the current year and future years. Again, also, we forget to mention, we also put the PVD plant, physical vapor deposition plant for manufacturing innovative rose gold, yellow gold sinks for high-end markets.

Sir, my second question was regarding our -- it's while we have been launching this and promote plus Sternhagen brand. Can you highlight upon it how it is doing and what are the future strategy on that side?

Yes. So Sternhagen brand is -- I think as a brand we have achieved probably the top 5 brands in India as for the luxury brand is concerned. Unfortunately, the pandemic, which are the top highest selling points of our Bangalore, Delhi, Mumbai is in a severe lockdown. So we are struggling there with the sales, but our momentum is not going to stop. We are right now currently focusing on our granite sink and on the stainless steel kitchen sink side. Knowingly, we've not been able to do much focus on the -- but our program escalate the Sternhagen ceramic sales is already -- the program is running. We are adding a lot of new quartz models invested in the Sternhagen side. We have tied up with export customers also at the Sternhagen side. We have tied up with Sussanne Khan, which will be -- the famous designer, the ex-wife of Hrithik Roshan. She is agreeing to partner with us on launching a new line, which is not a very luxury line, but a premium line between INR 10,000 to INR 14,000. So we plan to launch this at the pre-Diwali this year. And I believe that, that time the COVID situation will be much eased in India. So we are soft-pedaling, but does not mean we are taking on Sternhagen as category, and we are quite optimistic as far as Sternhagen is concerned for the future.

[Operator Instructions] The next question is from the line of Ayush Agarwal from Mittal Analytics.

Congrats on a great set of numbers. Sir, my first question is, can you please elaborate more on the American partnership that we have. What kind of products will we be supplying to them? And when can we expect this starting?

Yes. So I think it -- I think 1 -- I think it's good that we need to answer these questions. The U.S. market is good when you are in America. So I think it's actually clouding around [indiscernible] see clients what's happening. But I think America is here one of the most potential markets moving forward. And I think everybody would agree on the potential what Americas as a country for the exports. It's always the large wallet. Menard is third largest retail chain after Home Depot and and Lowe's in America, approximately $10 billion revenue. It is 850 stores, mostly in Midwest of the United States. We have about 4 SKUs right now. They're planning to increase it to 18 SKUs within a very short period of time. It will be one of the top-selling granite sink inside the stores. So we -- on -- so what are the information, what we have. I think this should pick up at least 50,000 sinks to start with for the year, which would be a quarterly revenue of about INR 25 crores a year just from a single customer. We have another 2 customers, which are major customers, [ Karan and Kraus ] and we have MSI, which is the largest quartz slab importer in United States, run by a Gujarati company, I think they import about 20 -- I think 30,000 container quarter of quartz slabs into United States. So even we have started supplying to them. So overall, the situation in America, I think we are expanding quite well. As you know, we have opened up American office, too, and we soon will be able to expand our office in the U.S. to have a much more closer -- I mean, much more to have to gain ground in the American market.

All right. That's good to know. And I mean, we can already see data on U.S. home building and homebuilders consumption that has high operate in the U.S. So it is a good time for us to be there.

Yes.

And my second question is, as far as you can remember from our last con call, I had asked this question that how much I think can we house in the current infrastructure that we have, and you had mentioned somewhere around 8 to 10 lakh sinks. But you also had mentioned that this year in the CapEx that we see, it is pretty high in number, and the reason for that is because we had bought some land. So what are our plans after this June expansion is over in the granite sink area. Because if we have already bought land, then I'm sure we would not be able to build an infrastructure as easy as we did for the last 2 lakh capacity. So what are our plans going ahead for the expansion of capacity in the granite sink?

Yes. So yes, I think you're right. I did say we have a land -- we had acquired land, good capacity 2 millions sink. So as we are talking, I mean, stocks with my team with -- especially my marketing sales team moving forward. And also looking at the closely the pandemic situation. But in all likelihood, it seems that the company is looking at the different tie-ups. We may have to likely go for another round of each times. So we don't know what level. I think at the appropriate time, we will let you know. But once it's quite likely that company will go to -- will have to go for another round of expansion to ramp up capacity to cater demand for both domestic and in the international market.

[Operator Instructions] The next question is from the line of Aditya Jadhav from SIDBI Venture Capital.

And congratulations for the great set of numbers. My first question is regarding our domestic sales. I could see that our dealer network and distributor network for the last 2, 3 years, has been stagnant at 1,500 dealers and 82 distributors. Is it the stagnation reason for our almost flat revenue in domestic market?

So there are 2 sides of the story here. One is that the company does not have like I've been saying again and again, we do not have capacity.

I heard that. I heard that. I'm just asking apart from...

No, that's what I'm saying. So because of that, we are kind of soft peddling to penetrate our sinks in the domestic market. That's one. There is no point of market expansion where you cannot supply the granite sink all time to the customers. So it is quite sad. And the second side of the story is if you remember in my last call that company is building, doing all of activities on brand building and expanding the showroom size. So any of the category or the C category dealers, we are improving to category B and B category improving into category A. Now what does it mean? It means that the C category of a dealer is more of a prototype display where you have 1 sink or a couple of sinks. Then the B category has about at least 10 models of sinks, both granite and steel and they have a few building appliances. Category A, which is approximately 500 to 1,000 square feet of display showroom, which is a stand-alone showroom of Carysil as a franchisee model. So we're actually working more on a branding display, then trying to -- then try to create more numbers in India. That's what we were. So we are upgrading our dealer.

Okay. Sir, my second question is regarding your IKEA partnership. Can you help us understand, okay, any kind of fillers that you're getting from IKEA about kind of growth that you see -- foresee from IKEA and what kind of capacity that you will have to add to cater to that demand?

So we have -- I think we have started the supplies. We have started the second model to it, got approval. Second model is going to start. So they're just waiting for a few months because right now, our capacity is full. We are -- IKEA is very happy with our quality. That's a very good sign. The sinks have been supplied. So they need a little bit time to assess our quality of delivery on time, situations and all. And then based on that, like I said earlier, there is a large option line with IKEA moving forward. Now how large that can be? I think we definitely think it's going to be larger, how large even I'm not aware. But it's going to be -- I think it's going to be quite large.

[Operator Instructions] The next question is from the line of Rohan Gupta from Edelweiss.

Sir, couple of questions. Sir, first is on the EBITDA margin, which is mainly led by almost 400 basis point gross margin expansion and now we have had roughly 23% EBITDA margin. Sir, can you explain a little bit? Is it driven by better product mix of higher realization of this sink? Or is it basically just some raw material cost advantage, which we had in the current year, sir?

No, it's a -- it was the last time question had come. I had explained that this is a reasonable good product mix and a better price realization.

Okay. Sir, if I look at your revenue and the kind of numbers which you have, it seems that your average realization for the sink business is roughly only INR 5,000 per unit that may convert roughly as low as $70 to $80 per unit. So we have a huge scope in terms of change in the product mix? I mean, on the premium line or a large part of the business, which we do export is a low end of the product or a low-value product, sir?

So the company comes -- continue to focusing on coming for more innovative products. So if you remember, I mean, I remember, if you take Acrysil 10 years back or 20 years back. 20 years back, I do remember the average price of the kitchen sink was INR 3,000. 10 years back, it was INR 4,000. Currently, we are at approximately INR 5,000 to INR 5,500. Just 5 years back, it was INR 4,500. So I think we've been consistently able to increase the -- I mean, increase the posting price realization, which is, I think, a very good sign. And we have a consistent efforts to improve that.

Okay. Okay. Sir, just a second question, if I'm allowed to ask. Otherwise, I can get back in queue. Sir, you have just added a capacity of last 10 lakh unit in a month of [ April ] and going to add 1 lakh further by June. The participants also asked that additional 2 lakh units available for FY '20 and the rest of the year. Can you have a higher volume growth? I mean and we have a 30%, 40% kind of volume growth because we have additional capacities available. So just wanted to know on that front that is there a scope for us to do strong volume growth in the current environment?

So we don't have additional capacities we have in terms of land, we don't have in terms of the infrastructure. So the plant, we don't have another 2 lakh in capacity available. So the company will have to put up additional capacity.

Sir, I think he's asking the additional -- this volume from 5 lakh to 7 lakhs and how we're going to additional 40%, whether we're able to dispatch and produce.

Exactly, which we have already added, sir.

Added, yes. Yes. So I think about 5 lakhs, I think, last year, we did 400,000 sinks, I think the 400,000 sinks and if you're able to do 700,000 sinks, I think there is already a 30%, 40% growth.

So is that kind of growth 1 can expect from this kind of this year revenue growth because last year, your revenue growth [indiscernible]

So last year, let's talk about how was the quarter 4 compared to last year. So yes, comparing...

Rohan to answer your question, the capacity is getting added in the quarter 2. And we have 100,000 additional capacity available from March and other capacity is coming from June or July. So yes, there is a capacity addition we are doing, and we are seeing good demand. So we will definitely catch up the demand with the capacity available. That's how we see it.

The next question is from the line of Resha Mehta from GreenEdge Wealth Services.

And congrats for a very good set of numbers in the tough environment. My first question, again, is going back to our bath fitting portfolio, which is a Sternhagen brand. Sir, this brand has essentially been struggling even before the pandemic, you're right. So what really has been the pain point here? Is it the high price point, the positioning of it being a luxury product? Is it our sales and marketing? Or is it that we've not really channelized an energy towards leveraging this brand? And also, last year, despite it being a pandemic year in India, the home improvement space had gained a lot of momentum. So in that context, in the last 1 year, has the brand done better than the previous year? And what are our revenues from this particular brand in FY '21? That's my first question.

No. So your -- so I think the first -- in my last call, also I said first Sternhagen is concerned, that our focus has always been on building the brand not on the revenue side. So we've been able to manage to get -- because of the high price points, high innovative products, which one, one-of-a-kind product that nobody has in the world and the price points are really very high for the Indian market. So looking at that, yes, it also took a lot of time for us to get the displays down to get the showroom attention, consumer attention. So lot has taken that time about a few years. Finally, we have about 65 dealers across India doing it. And just when I was about to begin to pick up at that time, the pandemic happened. Point number two, yes, we have not actually put our energy to channelizing operations across India. We've not done much marketing focus to trying to promote this brand to do various circumstances. But it is on our radar. And I think moving forward, the home improvement, I think, is going to bounce back very fast once this pandemic situation over. And we see once this gets over, Sussanne Khan line coming in and she is promoting with the builders, architects, I think this will take the brand to the next level very soon.

Okay. And the second question is on the working capital. So is there any scope to reduce our inventory and debtor going forward? And if yes, then what probably could be the quantum of that reduction?

So -- yes, yes. So I'd ask Anand to do. And Anand has the numbers ratios, too. And I think we have already made a significant [indiscernible] improve. But I will leave it up to him to say.

Yes. So to answer your question, we have already taken steps to reduce our working capital cycle. And if you can see from our results, which is that we have given, there's a balance sheet also, we have reduced on the inventory side. So inventory, which was around 32 days, that's come down to below 60 days. So there's already a debt short in the inventory side. Now coming to the debtors, yes, we wanted to focus on the election of debtors, but there is -- we have customers who are long-standing with us. We don't want to put too much pressure because then it will affect the volume. And in the Indian market, you can see the pandemic is playing all the havoc. So we want you to take the action, but we want to have a calibrated action, we should not affect our business growth.

[Operator Instructions] The next question is from the line of Anand Jain, an individual investor.

Thanks for the great set of numbers, congratulations on that. My first question is that we added 1 lakh capacity in the month of March. Are we fully utilized there?

Yes. We have started fully utilizing that. Yes.

Great. Now my second question is on future expansions. We are coming up with another 100,000 in June. Now do you think that future expansion should be of much larger quantities because we will be at 7 lakhs and then with deep kind of tie up that we are having and like, for example, which we have announced like Menard and then the other -- the Gujurati MSI, I think that's what you mentioned. So do you think that we should be coming up with much larger capacity expansions after June?

So I actually honestly believe that, I think the next expansion could be of a larger magnitude because just looking at the pent-up demand, we cannot go on 100,000, 100,000, I think [indiscernible] a lot of time. And so we need to have a little bit more aggressive in increasing the capacity. So yes, you are right. I think that is what something we are currently thinking of.

Great. Last question, there was a question on Sternhagen. I just want to understand how much money are we losing in Sternhagen? And when do we expect it to breakeven?

So Anand has a number, I think that would be about 50 lakh to 60 lakh last year, Anand? How much on Sternhagen?

Yes. So 80 lakhs we are losing. It's not much amount because once this turnover, what we are expecting coming in, we should be able to breakeven smoothly.

So okay. So this is 80 lakh a quarter, right?

No, no, yearly.

And the final question is we have kind of gotten into Menards. What about Home Depot and Lowe's?

Well, I'll talk into that. I think we are quite -- no. So I think 1 thing good, we already started Home Depot and Lowe's on the online sales program with them. We have not gone into a stocking program with them because we cannot lock only doors, looking at the current constraint in their capacity. So the appropriate plan will definitely be back.

So we're online, we're online as of now on that side?

Yes. Yes, yes, we are online with...

And with our brand, Acrysil brand, I mean with our brand or with their brand?

No with our -- their brand and our partners brand.

The next question is from the line of Suraj Deora from Paladin Capital.

Just a continuation on U.S. subject. If I remember correctly, you only formed the U.S. subsidiary in FY '20. Is that right? And can I assume that your U.S. sales only started in FY '20?

So, U.S. has been there for last 10 years. I just opened up the office because we wanted some more focused on the U.S. market.

Okay. And what percentage of your overall sales is coming from the U.S. today?

I mean, I think approximately about 30% to 35% right now, which I think we expect it to go to 40% maybe so future.

Okay. Got it. And MSI, you said you're working with them for sinks or for quartz slabs?

Sinks.

Perfect. Okay. And last question is that when you're planning a next round of CapEx, sounds like it will require to do a larger program. Any thoughts on how you plan to fund that and [indiscernible] value?

Sorry, sorry, I could not hear your last sentence very well.

I just repeat, you're planning a larger round of capital expenditure going forward, your expansion is going to be larger than your 1 more lakh units? Do you need to raise equity for that?

I don't think so at the point. So we still -- we are still contemplating as we are talking on what sort of capacity we need to build. So once we get that sorted out, we'll have exact number on capital expenditure.

Next question is from the line of Rajul Shah from Mahalaxmi Securities.

I just have 1 question. Basically, so how is the fixed and variable expenditure in our other expenses booking? And because given that the scale would be improving, what kind of operating margins can we expect going forward? Because I mean, the -- so the operating leverage, can we see like blended margins of, say, 24% to 25% on a yearly basis? And the other question is slightly on the continuation of the U.S. partnership. So you said that around 50,000 units will be -- we will be supplying to the client going ahead. And is there scope for further capacity expansion to promote that specific client or like the whole export and the domestic clientele as well?

So I'll just answer the second question and Anand will answer the first. But like I already said, that we are already looking at the -- we would be likely -- I think, very lastly, we have to do [indiscernible] currently. So at an appropriate time, we'll let you know, how much we did. And coming to the margin side, Anand will answer, but before Anand prepare to your question. One thing is to understand the supply chain across the world has -- it's been quite challenging for any company at this point of time. So [ subsequently ] , I think we are fortunate that we are able to pass on a lot of pricing to customers, and we have more higher price value addition products. But I think in future, the cost will always supply like the freight has increased by 40%. But fortunately, we're able to -- so yes, Anand I would like to you to this. Okay. So a comment follow-up on this, but these are my take on this.

Yes, yes. So on the other expenditure side, it's around 85% is the variable cost, which includes manufacturing costs and selling overheads. Only 15% are the fixed costs, which includes our office expenses or rent and repairs to building, machinery, et cetera, et cetera. So maximum, 85% is the variable cost, which is vary with the sales and production level. The question, which is coming because of the increase in the other expenses in the quarter 4 vis-à-vis to quarter 3, as I said earlier, this is mainly because of the export freight cost increased substantially in quarter 4, which is 40%, 45% higher than the quarter 3. Otherwise, all the costs are within the parameter reset.

The next question is from the line of Ronak Vora from AUM Advisors.

Congratulations on good set of numbers. It's a fantastic job that is being done. I have 2 questions. First one, I mean, can you share the volume details for quartz and stainless steel sink for the year?

Yes. So I would provide you. In the current financial year, we have sold quartz sink, which is our 413,476 to be precise against last year, 386,751. The volume growth is 7%. Value growth is 19%. On the steel sink side, we have sold 68,852 sinks against last year, 66,331 sinks. Volume growth is 4%, and the value growth is 10%.

Okay, sir. Sir, and just 1 clarification. You said Menard, right, for U.S., the new tie-up?

Menard, yes.

Okay. Sir, and in the near term, say, next year, any kind of margin guidance that you can give? Hello.

Ladies and gentlemen, the line from Mr. Chirag Parekh has got disconnected. Please hold the line while we reconnect him.

Can I answer this question?

Sure, sir, please go ahead.

So on the margin side, as I said, we have stabilized margin around 20%, 23%. And looking at the volumes and the growth perspective, and we have a very tight cost control, we think we should be able to maintain our current trajectory of 22% kind of margins.

Say by -- in FY '22, we can do a minimum of 6 lakh sinks for quartz?

See, looking at the current pandemic scenario, it is difficult for us to predict for the whole financial area. But yes, we are there up with the facility. We face a lot of a capacity issue in the last financial year, which we are solving, and we hope that sinks will in same line.

[Operator Instructions]

Please connect to Mr. Parekh.

ladies and gentlemen, please hold the line while we reconnect to Mr. Chirag Parekh. The line of Mr. Chirag Parekh has got reconnected. Thank you, and over to you, sir.

Thank you.

We'll take the next question from the line of [ Keval Ashar ], an individual investor.

Congratulations, Chirag sir and the team for [indiscernible] FY '21. Two questions from my side. So the first is regarding the domestic presence. So what are the initiatives that we are taking to increase our domestic presence as well as the brand awareness of Acrysil?

So I -- like I said, we are upgrading our showroom and our branding activities. Like I said, that all our -- we have the whole dealer network category into 3, A, B and C category, which actually, in our term, we have given different names. But in the A, B, C Category, try to upgrade all the C into B and B into A. What happens is by doing this, you have a larger portfolio, the products on the display. And wherever we are able to do this, this is able to increase its volume and a better price realization because we have seen a customer coming to buy a sink will also buy the appliance along with the sink. So I think that's one. Number two, we have also seen the branding activities of our company outside the showrooms, which is -- which has all been aggressive from our side. So by this year, you'll see a lot of branding of Carysil happening outside the showrooms. This is actually a -- it's a free advertising. It is probably the best and efficient way to do it. So there, we have started focusing into that. Third, we are going to step up our digital marketing spending on more making YouTube videos for the built-in appliances, how to use, how it is user-friendly. We're also going to do a lot of videos for our kitchen sink products. We have launched the new workstation in our sink where the sink is just not for washing, but you can actually do a lot with the kitchen sink. So a lot of new initiatives stepping up from our side for the domestic market. Also, we are in talks with one of the celebrities in India, which is upcoming and a very prominent celebrity, which we are talking to. And I think mostly the most it should be contracts should be done the post pandemic and so that will also give a lot of boost to the branding and sales activities in India.

Ladies and gentlemen, due to time constraint, we will take that as a last question. I would now like to hand the conference over to Mr. Mr. Chirag Parekh for closing comments.

Just a second. Thank you all. I would like to take the opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with our Strategic Growth Advisors, our Investor Relation Advisers, our SGA. Once again, thank you all once again for joining this call, and we wish you all the best for your health and your safety of your family. God bless. Thank you.

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