Carysil Limited (524091) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Carysil Limited Q2 and H1 FY '24 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 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 this conference is being recorded. I now hand the conference over to Mr. Chirag Parekh, Chairman and Managing Director of Carysil Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on the Carysil Limited Quarter 2 and H1 FY '24 Earnings Conference Call. I hope everybody had a chance to view our financial results and investor presentation, which were posted on the company's website and stock exchanges. I'm accompanied by our CFO/COO, Mr. Anand Sharma, and SGA, our Investor Relations Advisor, on this call today. Allow me to begin by providing you some key economic updates. In the first half of the fiscal year, the global economy began to recover, showing a stable performance in both the Indian and global economic sectors without any major surprises. Notably, factors like rising inflation and energy price increases influenced the path of economic growth. However, some sectors of the global economy have demonstrated impressive resilience, particularly those not closely tied to direct consumer demand. As a result, the consequences of economic slowdown have been milder than usually anticipated. The market for home improvements have been expanding rapidly in recent years, changing preferences, customers predisposition towards improved esthetics and desire for comfort are important factors of influence. As a result, consumers are placing a greater emphasis on designing kitchens, bathrooms in their homes and lifestyles. We have carefully aligned our strategy to make India the world's premier manufacturing hub and top alternative destination. Demand for luxury and premium goods have been propelled by shifting consumer preferences, accelerating urbanization and emerging new lifestyle products. Despite the unstable geopolitical circumstances, we continue to witness an improved inflow of new orders and potential prospects that we expect to tap in the near future. Similarly, the cost of raw materials have been stable, and we anticipate this trend should continue. As discussed during the last quarter, we have started the assembly line of the faucets. We showcased our capabilities in our trade show in Mumbai ACETECH Exhibition, received an overwhelming response from the audience. Additionally, we intend to create a global impact by boosting exports in the coming year via our distribution channels. We see potential branding prospects in countries like United Arab Emirates, South Africa, Australia, and new markets, such as Oman, Saudi Arabia and Turkey. To develop the brand identity, we will participate in a number of exhibitions in UAE and United States, where we shall showcase Carysil's credibility, dedication and reliability through our new products. The industry risks are considered inevitable and cannot be overlooked. Risks are unavoidable and must be taken seriously in every field. However, the impact can be controlled or mitigated. Our company's adaptability, the resilience of our staff, our team's willingness to embrace change enables us to readily accommodate new circumstances. We, at Carysil, are well positioned to take advantage of the multiple existing market opportunities using both organic and inorganic growth strategies. Organic growth is accelerating as we strengthen the existing capacities to meet the demand of more domestic and international markets. Furthermore, we are actively exploring adjacent segments, exploring new opportunities for future expansion and making strategic acquisitions in order to strategically expand into untapped markets, where our presence was previously limited. This combination approach allow us to leverage our manufacturing capabilities and wide product basket, unlock growth potential and serves as a stronger market presence. Following three successful acquisitions in the U.K., we made our fourth acquisition in the United States called United Granite LLC. This acquisition will be complement to our existing product range and first-of-its-type organized fabrication business with seamlessly integrated kitchen tops with workstation, kitchen faucets and accessories. This will simulate the growth of wide-range of products. Architects and consumers will be pleased to choose prefabricated kitchen tops from a variety of brands, each of which includes a complete integrated, full complement of accessories. Post acquisition of United Granite, we have retained the entire team, except the promoter. The current senior management would lead the business in the future. At present, the company's capacity utilization is 60%, but we are confident that we can increase utilization to 90% level in coming quarters with improved efficiency. Our goal is to expand our business network across the United States. Currently, we operate in three regions: Washington, D.C., Virginia and Maryland. The United Granite EBITDA has always ranged between 7% and 11% over the past 3 years. We estimate this to increase to more than 15% in the coming quarters, with increased capacity and better material sourcing and operating leverage. We always look for acquisitions with strong cash flow and profitability. And through the acquisition, debt can be serviced, straight from the acquired entity's cash flow. United Granite has sufficient cash flow to pay the interest for the debt raised for the acquisition without putting any strain on its parent company. United States market is huge, and we believe we offer complete -- includes quartz sinks, steel sinks, appliances, faucets and countertops, fabs business, we can expand our market base, and strengthen our presence in the market in the United States. Furthermore, we'll be introducing technology of India post acquisition, allowing us to backward integrate our production processes, ultimately lowering the cost of production. Carysil believes that the technology is critical for growth, and we are committed to showcasing modern design to successfully combine form and function and cutting-edge technology. We have designed new chimney, which will be in the best of the class. We are committed to improving our research and development efforts to achieve this excellence. Our dedication not only ensures long-term success of our company, but creates more value of our stakeholders. Now I would like to hand over our call to our CFO, Mr. Anand Sharma, to update you on the company's financial performance. Thank you.

Thank you, sir. Good afternoon, everyone. Let me take you through the consolidated financial performance of the company. Quarter 2 FY '24 performance. Consolidated total income stood at INR 164.5 crores. For quarter 2 FY '24, it grew by 18.1% year-on-year and 15.2% on a quarter-on-quarter basis. EBITDA for quarter 2 FY '24 stood at INR 33.9 crores, grew by 48.7% Y-o-Y and 23.9% quarter-on-quarter basis. EBITDA margin for quarter 2 FY '24 stood at 20.6%, increased from 19.2% quarter-on-quarter and 16.3% on Y-on-Y basis. Profit after tax and the minority interest stood at INR 15.4 crores in Q2 FY '24, grew by 67.1% on Y-o-Y and 33.4% on quarter-to-quarter basis. Coming to H1 FY '24 performance, sales volume for quartz sinks stood at 253,000 units. Stainless steel sinks stood at 54,000 units. Kitchen appliances and others stood at 28,000 units in H1 FY '24. Consolidated total income stood at INR 307.3 crores for H1 FY '24 as compared to INR 310.6 crores in H1 FY '23. EBITDA of the company for H1 FY '24 stood at INR 61.3 crores as compared to INR 57.2 crores in H1 FY '23, growth of 7.2% Y-o-Y. EBITDA [ margin ] for H1 '24 stood at 20%. Profit after tax and minority interest stood at INR 27 crores in H1 FY '24 as compared to INR 27.9 crores in H1 FY '23. Gross debt stood at INR 216 crores as on December 30, 2023. Debt to equity stands at 0.66 as on September 30, 2023. Cash and bank balance stood at INR 12.5 crores. Thank you. Now I open the floor for question and answer. Over to the operator.

[Operator Instructions] Our first question comes from the line of [ Garvit Goel ] from [ Invest Analytics ].

Congrats for a good set of numbers. My first question is on the domestic operations. So despite a substantial expansion in our distribution network, there appears to be a disparity in the growth of domestic revenues, like current outlook for domestic revenues in H1 FY '24 stands out at INR 66 cr. That is falling short of our projected yearly guidance of 160 to 170 cr for FY '24. So can you please provide the insights into the factor impeding the growth? And how the outlook is going to be in H2?

Yes, sure. All right. So let me answer this. I think the first 6 months, we've been -- honestly, we've been trying to expand our dealer network. We're trying to -- so we kind of consolidate toward efforts in domestic. And I think the realization you seek starts coming from quarter 3. Secondly, we also are reorganizing our distribution network. Our pricing strategy inside the domestic, I think, so that kind of took us about 45 to 60 days time. I think we are all set. We already closed a good October. And I think the domestic sales, you'll see a sharp increase starting from quarter 3.

So are we still intact to the guidance of 13% to 14% growth in domestic revenues over FY '23?

Yes. So our -- we will have no efforts left to try to achieve this. Yes.

Okay. And on the topic of EBITDA margin and PAT margin side. So do you anticipate that EBITDA and PAT margins, which are currently at 20% and 10%, respectively, for the quarter, will be sustained in the upcoming quarters as revenue increases? Alternatively, are there any expectations of a decline possibly influenced by the ongoing consolidation of the U.S. acquisition in Q3 and potential rise in marketing expenses, as you highlighted in the presentation?

So I believe there is a potential of margin expansion. If the revenues grow, which we expect it to be. Second thing, I think the raw material prices are stable. Rest of the other input costs are stable. So this -- so I think the company is doing their best to try to maintain at least 20%. Yes, the U.S. consolidation will come into play. And -- but at also the same time with the revenue growth, the -- we are still quite confident that we're able to maintain and sustain our EBITDA margins around 20%. I think we've always given a range of 18% to 20%, but our efforts will be always then how can we sustain at 20%.

[Operator Instructions] Our next question is from the line of Chandrakant Dhanuka from CD Equisearch.

Sir, how have you been able to grow exports despite the stress in the Western markets?

Yes. So I think it's a good question, and I told this last time that there would be more opportunities for us because the manufacturing -- where most of our competition -- 90% competition comes from the West. So we have been able to grab a lot of market share from our competition. We've been doing -- as far as our company is concerned, we had explained last time, we are doing everything. We try to be very cost-efficient. For us, I think, that's coming into play. And we've been able to grab a lot of new customers. We've been able to increase our market share. And I think we are very confident that, moving forward, the momentum is going to be on. I think we are probably in the worst of the home improvement scenario. And still, I think, our company is doing quite well. And I think we still have more opportunities in the coming quarters.

Okay. So sir, the -- if we see like in Q2 fiscal year '24, we have around INR 129 crores export revenue. And in Q2 fiscal year '23, we had INR 106 crores. So the increase of INR 23 crores is mostly from which part, like the market share increase or new customers or something like that?

So both. We have increased our market share and we have increased our new customer base.

Okay, sir. So sir, my second question is how much is the gestation period for quartz sinks orders in the new export market?

For the new export market so I think the gestation period takes about 90 to 120 days.

Next question is from the line of Vaidik from Monarch Networth Capital Limited.

Congratulations on the...

Sir, may I request you to use your handset, please?

Am I audible now?

Yes. Please go ahead.

Congratulations on a good set of numbers. Sir, my question over here is that despite of gross margin improvement of 369 bps on a Y-o-Y basis and EBITDA margin improvement of 400 bps on a Y-o-Y basis? And also, we can see that the volume numbers for quartz sinks has also increased by 17%, 17.5% this quarter. But the realization in quartz sinks have not shown such an improvement. Like on a quarter-on-quarter basis, it has decreased by around 7%. So any comments on that?

So I think nothing is alarming. I think just -- this is product mix, so it depends upon which country to -- it depends on that. I think it's just a result of a product mix. So it may also happen in the next quarter, it may -- it may change and can go up, yes.

But sir, I still can't understand why there is such a sharp dip on Q-o-Q basis because we are seeing an improvement in the gross margin and EBITDA margin. So is there -- so have we taken any price cut or something? Or are there any discounts going on to increase our sales in quartz sinks?

No, I don't think.

Sorry, I think on the realization side, the numbers what we have, we have not seen any decline if I go with an average rate also. So our average rate is INR [ 5,630 ] what happened when there is FOB pricing and CIF pricing. That depends on which customers we are servicing. So there may be some variation quarter-to-quarter. But if we compare Y-o-Y, already -- there's an increase.

There is an increase [ 5,527 to 5,630 ].

Yes, I agree to that, that on a Y-o-Y basis, there is an improvement. But on a Q-o-Q basis, there is a sharp decline of 7% on realization.

On -- that is what I'm explaining. It depends on the customer. If there's a CIF pricing, then the average realization will go up. If the FOB -- normally in U.S., what we are doing is FOB. So when there is a more sale in the U.S., you'll say that -- you'll see the price rates are lower. When it goes more to the European country, their contract will go up. But it has nothing to do with the profitability, EBITDA or...

So sir, you mean to say that our exports in the U.S. have increased? And over there, the realization is less whereas in -- whereas our sales in Europe, over there, our realizations were higher? So that is the reason behind it?

Yes...

There is a higher cost...

[indiscernible] contract. Because once we have FOBs sales, usually, the prices will be lower. Whereas with CIF, insurance and freight is added to the price, it will go up. So otherwise, it has no impact on anything, EBITDA or profitability.

Our next question is from the line of Pritesh Chheda from Lucky Investment Managers.

So for the past 4, 5 quarters, you were talking about inventory overhang in the system, which was curtailing your sales growth. But what we see this quarter, you are virtually back to your peak number. So should we assume further built on now -- on these numbers as we go ahead? And that inventory overhang, as it got resolved and we had added a lot of customers. So can we expect growth momentum to pick up from these numbers?

Yes, absolutely, Pritesh Bhai. I think that overhang of the customer stock is over. We also have a lot of new customers over the horizon with large -- so we are in advanced stock for a very large quantity for coming -- for quarter 4 and coming year. So we should be -- we have a good tailwind. And I think looking at the current position, I think, we are looking at a good growth in the coming quarters.

Okay. What is the quartz volume that we recorded for quarter 2? Was it about the 1.5 lakh, closer to that number?

Yes, it was -- granite sink was close to 1.5 lakh. Yes.

So basically, quarter 1 was 1 lakh, quarter 2 was 1.5 lakh, and we see numbers building up over this 1.5 lakh, right? That's how we should look at it?

Yes, yes, yes.

Okay. Then on the progress -- on the India side of the business, what kind of growth do you see in the India side of the business for FY '24?

So I think the internal plan within us as a company is definitely next year we want to cross -- we want to cross INR 200 crores next year. We had started the first initiative by launching a lot of new products in the ACETECH Exhibition. That is basically for the FY '24. It takes about -- gestation period takes about a couple of months. So we got an overwhelming respond to the ACETECH. And I think we are all -- distributors are excited, architects, projects. We also, as last time announced, we have a new B2B team, which is focusing only on architects and projects. We are also able to grab a lot of new project orders. So I think we are quite confident next year that our aim will be to cross INR 200 crores in domestic next year.

Okay. So between now and, let's say, in the next 2, 3 quarters, we will actually see the costing utilization of your capacity going up toward 11 lakh type of capacity. We will also see the faucets export building up and you have the stainless steel capacity. I don't know whether it is up and running. If you could just comment there and on the comments on [indiscernible].

Yes, I think yes. So you're right on of course, 1 and 2 points. On the faucets also, we have started assembling for India. There's also a lot of export opportunities, which have got inquiries as you plan to pack it like in a sink, kind of faucet in a box. So as far as the -- your question was on for the appliances, right? The stainless steel sinks. So the stainless steel sinks side, the IKEA business will commence in Quarter 4. We also have this new customer, which we have been awarded with large volumes in stainless steel sinks. Also should start from quarter 4. So I think we are also looking at a good business coming FY '24 win for the stainless steel sinks.

[Operator Instructions] Next question is from the line of [ Bala Muralikrishna Chunalgarh ] from [ Oman Investment Advisors ].

Regarding the CapEx, what are the built-in kitchen appliance CapEx plans. Can you please update on status of that, sir...

Sorry to interrupt sir, may we request...

Regarding the CapEx of homebuilding appliance -- kitchen appliances. So could you please update on the status of that, sir? I think it was earlier a little bit delayed by 3 quarters. So what could be the status now?

No. So the built-in appliances factory, I think you're talking about. We already started assembling in quarter 3. We already started our project. We already started manufacturing and assembling the built-in appliances. So the project has already started.

A follow up on that. So can we expect some contribution to the top line in Q4?

Yes, yes, we will. Both our faucet built-in appliances, you will be able to see some contribution coming from quarter 3.

Got it. And by Q4, if we can achieve this utilization level of 80% to 90% in quartz sinks. So we can expect around 200,000 quartz sinks from Q4 onwards? And then maybe we might need to go for some other CapEx in expansion -- quartz sinks expansion. Do you have any plans on that? [indiscernible].

So I would not comment on the 200,000 sinks. What I can only comment is that we have some -- we are in advance negotiations further. We already have good order booking. But for Q4 FY '24, we are already in advanced talk with some large customers for bulk quantities, very large quantities. Then I think that should come into play. So we are just doing -- hoping our best. Obviously, our aim is to utilize our capacity as much as we can in FY '24.

[Operator Instructions] Our next question is from the line of Udit Gajiwala from Yes Securities.

Congratulations on great set of numbers. So firstly, sir, can you explain, I mean, of the U.S. acquisition that you have made? So when do you expect it to get consolidated into our financials?

So it will start from quarter 3.

Okay. So this basically puts you on the road map to achieve your INR 1,000 crores revenue for '25, correct?

Yes.

With this acquisition, so on a blended basis, I mean, you are there in your near term. So are you planning that 2 lakh sinks capacity that we had deferred last year? So once -- you just mentioned that the order book is until Q4. So are you planning to make that live again, the 2 lakhs sinks that we had deferred?

See, I'm like, again, I think I want to say I cannot confirm this. I think our endeavor is to use the increase in capacity utilization for the granite sink and the stainless steel sink in FY '24. Company is putting tremendous efforts. Also [ repeating ], we are in advanced talks with some large quantities -- with some very prominent customers next year. I think everything gets realized. I think, it will be to maximize the capacity utilization in FY '24. As far as the U.S. business is concerned, we actually started [ indicating that ] from quarter 3, and we are very confident. We have some more potential opportunity coming forward -- I mean, coming in, in the coming quarters. And we feel that we are all on track [indiscernible] next year, which will start seeing coming from quarter 3.

That's great, sir. And on stand-alone basis, sir, we have seen the margins going up to 23%. So just on the stand-alone front, are these margins sustainable? Or there also, you just want to keep your guidance of 20% for consolidation?

You see, I think our -- you see our guidance of 20%, it was always there. I think the company has done a great job. Our team has done a great job to be able to control our cost. And so I think potential, yes, I think 20%. Yes, I think is a good, safe thing to do, always margin 18%, 20% because we need to understand we are still in a very, very uncertain environment. But if the volumes grow further to this, yes, there is a potential that our margins will expand.

We move to the next question from [ Darshan ] from [ Crown Capital ].

Sir, just wanted to know what guidance do we give for FY '25 And for FY '24 with the consolidation of new subsidiary coming in? So what kind of revenue guidance...

Can you come again, you are audible, but you are not clear.

Yes. So just wanted to know with the U.S. subsidiary consolidation happening, what kind of guidance do we give for H2 FY '24? And will our margins take a bit of a hit in FY '25 because U.S. business is a bit lower margin? So how do we see FY '25 and the remaining FY '24 panning out in terms of revenue and margins?

So I think as far as the U.S. business, which we -- consolidating business, I think that's not a very large at present. It's less than 10% of our business revenue. So even if you consolidate that, it would not have much impact on the margin. That's number one. And your second question on the U.S. margin, I don't think so. That's a correct statement. What I think the previous gentlemen was answered, it was on the price realization value because Europe is CIF. On an apple-to-apple basis, on the FOB prices, the U.S. business is the most profitable business. So the more U.S. business increases, the more possibilities of margin expansion.

Sir, I just wanted to confirm FY '25, we are on track for INR 1,000 crores revenue with 20%-plus margins?

Yes. I think so. Based on what I commented on earlier statements I had made, that company is putting every effort to be on the track of INR 1,000 crores next year.

Okay. Any sort of risk that we see for that like any speed bump that we need to be aware of that can -- causing for that? So any speed bump or risk that we see for that target.

The world is a very uncertain place, isn't it? So it's nothing that what you and we can do. But there are -- this geopolitical situation is, the cloud is on our head at this point of time. So we don't know. The U.S. elections are coming up. There's a lot of uncertainty around the world. So those are the geopolitical risks. Second is, I think, on the other side, the inflation is very high. The interest costs are very high, but also I think the -- what we see on the -- sunshine on the horizon is that -- also that it seems that the interest rate should soften by coming 2024. And if that softens, then the housing market can boom again, at least show signs of recovery. So what we are showing you the growth is probably the most adverse times in home improvement business ever. So yes, I cross my fingers. If next year interest rates go down, I think, you may see a better demand coming in India and globally.

Next question is from the line of Moksha Shah from YellowJersey.

Sir, my question is, if you can please help me understand how is the demand panning out, especially in the export markets? Like is it improving? What are we further -- what are the further growth levers which we are seeing in export markets?

So like I said, that we've been maximizing our market share by taking more -- adding more customers. We are expanding our product range. So I think overall, globally, we are maximizing our market share since most of our competition was -- 90% comes from Europe, which we are quite -- it's quite -- we're having challenging times in terms of production costs. So yes, there are more opportunities. Second, we have -- we are in advanced talks with some with large export customers. So that can come to realization in quarter 4. So I think we -- if that all comes into play, yes, you will see a lots of upside on the export sales coming from quarter 4.

Okay. And my second question was, in which markets are we seeing a slowdown in the demand for quartz sinks, whether it is domestic or exports? And when you think can we get back to historical growth rates in this segment?

So I think one thing is we are very clear. We want to stick to the fundamentals of our business that the granite sinks are on the rise globally. So not a single market is right now on a decline. It may happen because of geopolitical situation, like Israel and Jordan and some of the Gulf countries. But across -- I think there's a demand and the demand is only increasing. It's not going down. Second question was on the historic -- what was that?

Historical revenue -- numbers.

Historical growth rates in the segment.

Historical growth in '22, '23, can we share that?

Yes. So that one thing that, like I said, that I think our -- we are on track on our 1,000 growth for next year. We have large opportunities coming in our way, and I think we are on track. I think we would be doing our best to reach historical numbers, yes.

Our next question is from the line of Nikhil Gada from Abakkus AMC.

Congrats on a great set of numbers. Sir, my first question is on United Granite. So you mentioned that we are running this business currently at 60% -- as in the business was running at 60% utilization. So is it fair to assume that at peak utilization, this business can deliver somewhere between INR 150 crores to INR 170 crores of revenue?

So I think on the peak, you can go about $15 million to $16 million of [ business ]. So I think that $15 million, $16 million could be INR 120 crores, INR 130 crores yes.

Understood. And sir, this business, basically, is it just the technology of doing the entire fabrication together? Or is there some assets as well, which are being used to make this product -- entire product in-house?

The entire product?

What is the technology we are using to make this?

So these are all completely [ CMC ] machines. So you get a drawing and then you customize. I mean it's all based on bespoke. So every kitchen gives us designs and we do the [ CMC ] and then we [ consolidate ].

Understood. Sir, so what kind of...

So this is with [indiscernible] technology and the steel sinks what [ United Granite has ] and they can make the fully integrated seamless integrated tops with accessories and faucets and the sinks.

Sir, what I wanted to understand, so I got that. So what is basically the asset and this is the gross block in this, if you can give.

This is an asset-light model, gross block is around INR 20 crores.

Understood. Got it. Sir, my second question then is on -- this INR 200 crores of a plan that we want to achieve in domestic business. What kind of margins range are we targeting to achieve this INR 200 crores? Are we trying to work around 15%, 20%? Or do you think that it can be much lower than the export market margins?

No, no. So I think we have always said the domestic business with the -- with our growth expansion, the margin also ranges between 17% to 18%. So I think we are -- because the new product launches is a good high validation-- high diluted products. And so with the growth in the revenue, the margin expansion will also happen in the domestic market.

So we believe 17%, 18% is possible with this INR 200 crores revenue?

Yes.

Okay, sir. Just one last question, sir. This faucets and appliances, now that you have commenced in the INR 1,000 crores of estimates that we have for FY '25, how much was this to sort of categories point of view in our assumption?

Yes. So right now, I think, what we have, the current breakup is 50% Granite, out of the total, I am talking consolidated basis 50% Granite. And I think, 20% is Surfaces, 20%, 21% Surfaces and then you have 15% of stainless steel and 12% of our built-in appliances. So that's the breakup. I -- we assume that this year I think, the granite sink share should slightly improve on this coming year and in the next financial year.

So basically, the 60% includes faucets as well in the granite sink. So -- or the faucets will be remaining 2%, 3%?

Those are on -- so the faucets right now 2%, 3%, which is a very insignificant number we added in the sinks.

Next question is from the line of Nitya Shah from KamayaKya.

Congrats on a good set of numbers. So I just wanted to understand, I saw a big spike in the receivables of H1 of this year versus H1 of last year. So could you throw some light on that, please?

So receivables -- we have improved on the receivable number of days, if you look at. We have improved on the numbers.

No, I'm saying, as a percentage of sales. So you've done say around about INR 300 crores of top line in H1 of this year. The receivables against that are quite high. It's close to 40% of sales. So I just wanted to understand that.

So it's only something -- it depends on the country to country export market. Like if we sell in France, number of days are high. If we sell on the U.S. side the number of days are more. But it's -- overall, it's on the declining trend because we have -- on the domestic side, we have reduced our credit number of days. So it's only a rightly -- and it is nothing, I mean number of days have not increased.

Okay. And second I wanted to ask that now your...

This is just the effect of, sorry, it is just the effect of the consolidation because the new consolidation of the company, Tap Factory also came here, which was not there earlier.

Okay. Fair enough, sir. And my second question was on the dealer network expansion. So now your dealer network has reached around about 3,200 dealers. So how has been the response of this entire network? And how is the competitive scenario in India? Just to understand the consumer preferences in India. What has been your experience so far with the expansion?

So I think whichever -- whatever the galleries, we need to upgrade our current galleries, these last 2 years we've been talking about. So we are going to upgrade. We increased galleries from 10 galleries to more than 60 galleries now. And now from quarter 3, we have, again, started expansion of the dealer network, which I -- one of the gentlemen asked. So first on quarter 3, you will see that there'll be a sharp increase in the domestic sales. And second thing, I think, on the consumer preference, more and more inquiries we are getting to open up franchisees, all the displays, as the sink and kind of build-in appliances. So we can see that our Carysil brand is emerging to be a very prominent brand, not only sinks, but also built-in appliances in India. And I think this was the same feedback we got on the ACETECH Exhibition in Bombay also. Third thing on the preferences, I think, we see a great shift that people are moving from stainless steel sinks to the granite sinks. So I think that platform is coming into play. The more sellers are coming into play now. And this idea of a one-stop solution on one service by a click of a button on a WhatsApp, we can service your Carysil kitchen sinks and the built-in appliances. I think it's going to ease the customer pain. I think they absolutely like it. So I -- so we believe that Carysil is strongly emerging as a very prominent brand in India.

The next question is from the line of [ Ankur Kumar ] from [ Alpha Capital ].

Congrats for a good set of numbers. Sir, my question in, for next year, you have given a guidance of INR 1,000 crores. So any guidance you would like to give for this year also?

In my last call, I said that we are going to be in the annual rates -- we will start hitting the annual rate from this quarter around INR 727, INR 750 crores. I think we are quite in line with that. Yes.

So from the Q3, we expect that INR 727 crores?

Yes, yes, yes.

Got it, sir. And sir, on the demand side, how are we seeing -- because it's like a mixed signal. We are seeing a lot of issues in export side and -- but our company has done well. So can you comment on that, please?

So number one, fundamentals of the business. Again, I'm saying that granite sinks are the fastest-moving category in the home improvement section at this point of time. Second is that India, especially Carysil, has a massive opportunity in terms of maximizing their market share as well. We have lots of inquiries -- global inquiries. People want to come and source sinks from India. Because our 90%, which is about 4 million to 5 million sinks, our competition comes from the Western countries, which they are finding very challenging times with the increase in costs. So we absolutely believe in coming years, we cannot only emerge to be as strong, but there is a large potential for us to become one of the strongest player in the world in terms of granite sinks manufactured from India. So that's what the flavor is right now.

Got it, sir. And sir, in this quarter, we have seen a reduction in the COGS. So gross margins have expanded this quarter. So can we expect these kind of numbers to continue?

So the material prices for this quarter was still down and currency is stable. So I think we believe that this material cost will remain in same territory for quarter 3. So let's see -- and the margins should sustain. Because if the material prices are remaining stable, I think, we should have the same kind of margin.

We move to the next question, from the line of Sampath Nayak from Tiger Assets.

Congratulation on good set of numbers. So my question is mainly on like United -- U.S. acquisition. So sir, can you give numbers on like FY '23 sales and EBITDA numbers for the U.S. acquisition?

Yes. You're talking about FY '23 project, sir? So I think the -- so all I can is the FY, how much was the FY?

FY '20 is $12 million.

No, then the 6.

6 months, around $4.8 million.

Yes, it was 4 points -- so it was about 5 -- $4.8 million to $5 million. Based on that rate, I think you're looking at about close to $9.5 million to $10 million sales this year. We obviously got it consolidated from end of October only. So I think we will get the benefit to that extent in quarter 3.

Yes. And it's also like will be like improving EBITDA margin from 7% to 8% to 15%. Can you throw some light on how exactly you are planning to do that?

So I think this company had issues with a lot of working capital and that is why they've been able to sourcing the materials locally only. While we've been able to strategize that to buy bulk quantities at a lower rate, so I think that's going to start soon. So moving forward, you will see improvement in the EBITDA margin.

We move to our next question, which is from the line of Adityapal from Motilal Oswal.

Congratulation on a good set of numbers. Just have a couple of questions. So when we look at exports, so exports have really grown well. So just wanted to understand the geographies that the growth pockets coming from?

Opportunities....

From where the growth is coming?

Yes. So the opportunities right now, I think across -- mostly, it is coming from the United States, but it has also -- the countries around the world are also showing signs of improvement. So there will be -- the more momentum should come more from the U.S. In Europe, there are some large bulk opportunities, which we are looking for, coming in the horizon in quarter 4. But overall, I think, the trend is improvement across globally.

Okay. But if you were to pinpoint a particular geography or a bunch of geographies where the growth is coming from and to where the growth -- where the management is seeing the opportunity is coming from?

I see that the #1 large growth coming from the U.S. That's one. Number two, all the more opportunities in the emerging countries, like I mentioned in my speech, that our new territory is UAE, Australia, Turkey, all are doing -- they are doing quite well, including Australia, South Africa. And also I think that's where we're going to see a very strong growth. That's two. Three is that the acquisition in the U.K., which we have done with the Tap Factory and the Sylmar's, Surfaces. So that distribution is coming into play. So if you would have seen the U.K. sales, they are almost at par with -- during the COVID time we had done sales. So sales are at about -- Carysil Products Limited is at about GBP 4.8 million, which has grown about 30%, if I'm not wrong. So that's where basically we would expand the customer base by as more as 30% in U.K. So yes, so I think the next will be the Germany and the U.K. Germany, U.K., Denmark, Sweden, IKEA is now bouncing back with some new orders, with some new models. They started in India. So I think that would be the growth we are looking coming from those countries and those customers.

Ladies and gentlemen, that was the last question of our question-and-answer session. I would now like to hand the conference over to Mr. Chirag Parekh for closing comments.

Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. However, if you need any further clarifications or want to know more about the company, please contact SGA team, our Investor Relations advisers. On behalf of my colleagues in Carysil Limited, I wish you all a very happy Diwali. I hope the year -- and the new year brings a lot of happiness to you and your dear ones. Please be safe. Thank you.

Thank you. On behalf of Carysil Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.