Carysil Limited (524091) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Carysil Limited Q3 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 date of this call. These statements are not the 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, for his opening remarks. Thank you, and over to you, sir.

Thank you. Good evening, ladies and gentlemen. Thank you for joining us for the Carysil Limited Quarter 3 and 9-Month FY '24 Earnings Conference Call. I trust you had an opportunity to review our financial results and investor presentation, both available on the company's website and on stock exchanges. Joining me on this call is Mr. Anand Sharma, our Executive Director and Group CFO; and SGA, Investor Relation Advisors. The success of any organization is measured by the value it creates and the growth it achieves. Each product we craft and manufacture is a step towards enhancing lifestyles and consumer experiences, elevating industry standards over time. Carysil's journey involves exploring new opportunities through market expansion and product innovation, steering towards sustained growth and value creation. We are also strengthening our leadership team as first and second level to have sufficient management bandwidth to meet the fast-paced sustainable growth of the company. Our focus on brand domination is evident through global partnerships with reputed home improvement retailers. The home improvement market has witnessed substantial growth driven by evolving consumer preferences for aesthetics and comfort. Buyers now place higher emphasis on creating kitchen and bathroom spaces that completing their living environments. We continue to pursue our multi-prolonged and holistic growth strategy with the focus on upgrading our state-of-the-art technology, investing in R&D, making the right CapEx, investing in the brand visibility, expanding reach via dealer and distributor network across India, expanding newer geographies around the world. Carysil is progressively pacing towards establishing the brand entity in the kitchen and bath segment, both domestically and internationally. We are steadily moving up the value chain, capturing the minds of niche customer segments across categories such as quartz sinks, stainless steel sinks, kitchen top fabrication, built-in appliances and faucets. Our focus on increasing capacity utilization in the quartz sinks category has been steady progress reaching 70% by end of 9 month FY '24 and expect it to further on quarter-on-quarter basis. The profit margins of our quartz sinks remain steady and our commitment to sustain the stability in the foreseeable future. In the stainless steel segment, we expand our capacity by adding 90,000 units in the last quarter, bringing total to 180,000 units. The demand in this segment remains strong with the capacity utilization of 67% of quarter ended 31 December 2023. Our performance in the U.S. and the U.K. market continues to be strong. The destocking process is concluded, inventory returned to normal level. European markets for product remained at a stable level compared to last year. While the overall global scenario is a path of improvement, the Red Sea scenario emerged towards the end of Q3 FY '24 poses a little risk. We are closely monitoring the situation as the ocean freights have been risen considerably. It has also increasing the sailing time by approximately 2 weeks more. However, it is pertinent to note that 90% of our exports are on FOB basis and therefore, it will not have any impact margins, it will be very marginal on our margin. Domestically, our business is thriving marked by a significant expansion of our dealership network from 1,500 to 2,200 in 9 month FY '24. There has been an enhanced significant expansion. I'm just focusing it back on the dealer expansion in the Indian market and the brand will be across India through diligent efforts by our sales and marketing teams. On the 20th of October, we successfully made an acquisition of United Granite LLC. The steady acquisition has now been fully integrated into operations. Contributing to our total income, the acquired entity, United Granite LLC, financials consolidated to results in the quarter exhibits lower margins, which has impacted overall margin of our company on a consolidated basis. However, we are expecting better operating margins in the coming quarters due to various steps, actions taken by improvement, material sourcing and business expansion. We anticipate the effort to translate to improve financial results in the coming quarter, underlining our commitment optimizing the potential of this acquisition. Our U.K. operations Carysil Surfaces is progressing well. We have been successfully integrating synergies between U.K. companies across selling our current product lines between the common customers base and market for further business expansion. With consumers shifting their focus on more aesthetically pleasing and high quality, we anticipate the fabrication market for kitchen top will improve probably in near future. I would also like to give a good news about our new tie-up with Howdens U.K. Howdens U.K. is the #1 kitchen manufacturer in the U.K. It has 750 depots and it makes about more than 1 billion. It has 27 granite models. They sell 10,000 kitchen sinks per week. That's 500,000 kitchens per annum. Their gross revenue is GBP 3.3 billion with approximately 20% EBITDA margin. That's been a great feather on the cap for our U.K. team. And we also have got -- received the first order from them. Now coming to the Appliances division. Exciting to inform you that we have initiated the sale of appliances from our new manufacturing setup. Looking ahead by March 2024, our state-of-the-art facility capable of producing 1 lakh units annually will be fully operational. This plant aligns with our commitment to the growing demand for the sustain success in this sector. Our operation in Dubai has commenced and are witnessing positive response from the market. The encouraging feedback affirmed the visibility of strategy in international markets. On another front, we have taken a significant step in Turkey by establishing our subsidiary company, setting the foundation of operation in this region. Our operation in Turkey are yet to commence and we are optimistic about the opportunity that market holds for us. To just inform the members that we have already started our sales from our United Arab Emirates entity. In the last quarter itself, we have started sales of our sinks and of the appliances under the Carysil brand. These developments underscore our dedicated to strategic expansion and diversification. We are actively pursuing opportunities for growth, both domestically and internationally. I remain confident that the positive impact this initiative will have on overall performance and financial outlook. I will now hand over the call to Mr. Anand Sharma, Executive Director and Group CFO, to update you on the company's financial performance. Thank you.

Thank you, sir. Good evening, everyone. Let me take you through the consolidated financial performance of the company. Quarter 3 FY '24 performance. Consolidated total income stood at INR 188.8 crore for quarter 3 FY '24. It grew by 37% year-on-year and 14.7% quarter-on-quarter basis. EBITDA for quarter 3 FY '24 stood at INR 36.1 crores, grew by 42.8% Y-on-Y and 6.2% for quarter-on-quarter basis. Profit after tax and minority interest stood at INR 15.3 crores in quarter 3 FY '24, grew by 27.2% on year-on-year basis. Coming to the 9 month FY '24 performance. Sales volume for quartz sinks stood at 4.1 lakh units, stainless-steel sink stood at 84,300 units. Kitchen appliances, faucets, FWD, bath and other products stood at 14.9 units in 9 months FY '24. Consolidated total income stood at INR 496.1 crore for 9 months FY '24 as compared to INR 448.3 crore in 9 months FY '23. It grew by 10.7% Y-on-Y basis. EBITDA of the company for 9 months FY '24 stood at INR 97.4 crores as compared to INR 82.4 crore of last year 9 months FY '23. It grew by 18.3%. EBITDA margin for 9 months FY '24 stood at 19.6% compared to 18.4% of last year 9 months. Profit after tax and minority interest stood at INR 42.4 crores in 9 months FY '24 as compared to INR 40 crore of last year 9 months FY '23. Growth is 5.9%. Thank you. Now I open the floor for question-and-answers. Over to the operator.

[Operator Instructions] We'll take our first question from the line of Pritesh Chheda from Lucky Investments.

Sir, these acquisitions that we do in the fabrication side, first of all, if you could share a little bit logic were in terms of these acquisitions? And do we add any substantial fixed cost in these acquisitions? Because if, let's say, there's any downturn, do we see any significant operating deleverage on account of these acquisitions that you do?

Are you talking about mainly U.S. or also our U.K. business or both?

Both, sir. Generally, the fabrications business in general.

Okay. So generally, fabrication businesses, I think we have proven in the last 2 years since our U.K. acquisition that we wanted to strengthen our brand presence and our product presence in that particular region. That's one. Number two is we wanted to have the cross-selling opportunity, but sometimes not just that technology but it also helps us to do a lot of new customers which you can take a whole lifetime, but you cannot enter. Everything takes a lot of time. Third thing, it's a strategic diversification because everything has been installed on the worktop, so we need this fabrication. Fourth thing, I also mentioned, this fabrication business technology has to come back to our country, has to come to India because India does not have an organized fabrication business. So these are opportunities that you can have it with having a sink and a fabrication business. The new trend has also started across the world that most of the things are now entering -- after we entered, they all have started looking for entering the fabrication business, everybody wants to value add -- just add value to their portfolio. As far as fixed costs are concerned, I think you have seen in the U.K. that our margins since we acquired has improved. We'll also add from our side when we do the due diligence, we already find those pockets where these guys are not taking actions. So I think what we do is first, we try to scale up. Second thing, we try to get a better sourcing margins in it. And third, we have -- we do a lot of brand and marketing activities, which normally the owners of that company do not do it. So I think U.K. has done quite well. The figures are in front of you. The U.K. -- the U.S. business we have just acquired. So yes, there is a fixed cost, but there is already a downturn. So whatever you are seeing right now is with the downturn. So we already got the hint that the economy, both in the -- essentially the U.S. is now going up. And whatever the current or the last quarter, which Anand can later on and we will share with you this -- it's been with the down downturn. And anyway, the quarter 3 is always a seasonal quarter, so yes.

Do you need to do any more acquisitions in the fabrication side or this is enough in these 2 countries?

Right now, till we get a fully hang of it, we are not planning to do. Right now, I think our focus is back on the granite sink. We have a lot of opportunities here. The U.S. business is going to scale up on its own. And once the fabrication business, we get a complete hang on it, we will then try to see that fab company is able to generate that much liquidity and cash flows to acquire another U.S. business from that fab business.

Okay. My second question, sir, you mentioned about a retailer which does about 10,000 kitchens per week, and that's the client which we got. Do you now feel that the 200,000 unit capacity of quartz, which you had postponed earlier in terms of expansion, that is now more closer than you think -- than you earlier thought?

I think you kind of answered my question. All I can say is that. So I think we are quite close to starting our plant #4, but we will know by next quarter. But yes, that gap is getting narrow, yes.

We have our next question from the line of Adityapal from Motilal Oswal Financial Services.

Sir, just wanted an update. Last quarter, we had discussed that there will be a new order from IKEA for stainless-steel sinks. Can you update on that?

Sorry, can you speak a little bit louder and slow please? I'm not able to hear you.

Am I audible now?

Yes, sir.

Perfect. So just wanted to know, last quarter, we had spoken that we were supposed to receive an order from IKEA for our stainless steel products. So is there any update on that?

Yes. So the stainless steel sales are IKEA again it's commence is going to start from next quarter.

All right. And if you can just highlight or quantify the order book or the orders that we will receive then?

Yes. So I think as of now, I will not be in a position to tell you because the agreement put in place, but it's a good and a reasonable quantity.

All right. And sir, our stand-alone gross margins have reduced on a quarter-on-quarter basis and our consol gross margins have also reduced. So anything to highlight over there?

I don't think our margins have reduced. The margins have improved.

So stand-alone, I can just quickly tell you the numbers. Stand-alone, we are at 55% and last quarter, we were at 61%. Whereas, consolidated last quarter, we were 53% and right now, we are 52.6%. So my major question I wanted to understand that why such a big drop has come on a Q-on-Q basis on stand-alone?

So actually, if you want to see the gross margin, you have to see on the 9 months basis because quarter-on-quarter basis, there are some inventories lying because of some shipment is not going in the last quarter or the week before that, that is valued at the inventory price. So to that extent, our RMC cost may increase. So that's why it's quarter-to-quarter variances. If you look at the 9-month basis, the margins has improved.

Understood. So this can be attributed to the 2-week delay that we are facing because of the Red Sea, right?

Adityapal, I'm sorry, may I request you to join back the queue, please? We have our next question from the line of Dhavan Shah from AlfAccurate Advisors.

Sir, my question is on the quartz side. So given that most of the retailers had destocked the inventories in the export market in the last few quarters and now there is a concern of the increase in the transit time because of the Red Sea. So have you witnessed the larger inquiries for restocking? Because the -- you already mentioned that the demand itself is very good in the U.S. and U.K. market. So is there any more inquiries coming in to restock the larger inventories?

Yes. So I believe that the next order is flowing in because people are just opening after Christmas, and I'm sure that this is -- we are already seeing the flows, but this more issues have started now. So I think now the customers will note in the next 2 months for stocking, what is their plan. And I think I'm -- I think looking at the situation and almost doubling the lead time stock, there will be some inventory stocking because the new customers are very important customers. And I think they would like to see that they do not this -- satisfy them, yes.

Okay. And in the last quarter, I think you mentioned that for the cost side, we can do roughly 20 percentage volume growth in this year. That means that we can do roughly 6,10,000 sinks. So are we on the track? Because I think in the first 9 months, we did roughly 4,11,000 sinks. So in last quarter, can we do roughly 2 lakh, 2.1 lakh kind of the volumes?

So I think all I can say that we are on track, we are on track. I think our last quarter as I think we have shown which I had kind of. I think my -- both my -- the top line guidance and the bottom line guidance was there. I think we are on track based on that.

We have our next question from the line of Vaidik from Monarch Networth Capital.

Congratulations on good set of numbers. I have 2 questions. Firstly, I want to know how much would United Granite contribute for this quarter in our revenues?

So you're talking about the sales?

Sorry?

Sales, yes.

Sir, I'm talking about the recent acquisition in terms of revenue, how much would this contribute in this quarter?

So in this quarter, around INR 15 crores.

INR 15 crores?

1-5, INR 15 crores.

Okay. And sir, the next question would be on the stainless sink side. We can see that the -- sir, we can see that there is volume growth. But on the realization side, there is a huge dip on the stainless sink side. So any particular reason for that?

There is not a huge difference on the realization. I have the numbers, which say that we are about 5,700 per sink and we are close to 5,630. That is only because there was mainly CIF earlier, which we converted into FOB. So overall value realization is not an issue. Price is [ sustained ]. There are few changes because of the geography mix depending on whether we have more CIF and the FOB depends on that. Otherwise, all model mix.

Also model mix. The big change is I think of 5% or 10% quarter-on-quarter depending upon the market and model mix.

But first change. Actually, it is in the same line.

Yes, yes. More or less.

We have our next question from the line of Abhilasha Satale from Quantum AMC.

Yes. So my question is regarding this quarter, we have seen some margin decline, margin moderation because of the integration of United Granite, this subsidiary. So going forward, what is our road path towards improving margin? Because we are seeing -- we are guiding that even for these subsidiaries, we expect margin to improve. And for the overall company, how it is likely to be on a sustainable basis? That is my first question.

So this quarter, we have indication of United Granite and there are some onetime costs. And this quarter in not even the full quarter. We acquired the company on 20th October. And normally, quarter 3 is a lower volume because of the Christmas and the New Year. So the margin, what you see is not a representation of the margin. I think from the quarter 4 onwards, you see the better margin, and it will improve quarter-on-quarter basis.

Okay. Any range you would like to give. I'm not asking for this near term, but over a medium term where you want to reach in terms of margins?

So I think the margin guidance is already given by us. I think we are always in the range of 18% to 21% range. So I think that's where the guidance that will be around that.

Okay. And my second question is like this year, we would be crossing sales of around 6 lakh tonnes in our quartz business. So going forward, how are we expecting seeing the order what we have in our hand and the visibility what we are getting from our customers, how do we the sales numbers panning out over a period of time. And by when you will get visibility in terms of new capacity, the announcement of new capacity?

I think one of the gentleman had asked this question. So I think based on the new customer tie-ups and our dealer expansion in India and our new market expansion and what the demand coming on from overall global and India markets, I think on quarter on -- I think in the next quarter, I think we expect that the order booking for the granite sinks -- I mean we already see the trend improving. And I think that's going to slowly take us to our 1 million mark capacity.

Yes. So sir, like...

I request you to join back the queue, please, as we have other participants waiting. We have our next question from the line of Resha Mehta from GreenEdge Wealth.

So my first question is on your domestic business. If you could highlight how is the progress being here, both on the B2B side as well as on the B2C side. Also, you did mention about the softness in demand in India. So is that impacting our plans of achieving INR 200 crore revenue by FY '26? And also, if you could mention that how has been the gallery addition and what gallery count are we at?

Okay. What was your question 2. I was not able to get that. The first one I got it on the B2B, B2C. What was the question 2, please?

Yes. So the progress on both on B2B and B2C in the domestic market. And also, you did mention about India demand being soft in your presentation. So does that deter us from reaching our INR 200 crore guidance in terms of top line by FY '26 and the gallery count?

So there's a new B2B vertical now and a new team dedicated towards that. We have in the last 4 months cracked a lot of new projects, including [indiscernible] DLF. So I think that has helped a lot. Approximately our 20% institutional project sales have been moving forward for both this Sternhagen and the Carysil, the B2B business, it looks quite encouraging. And to fuel momentum to this, we are expanding our team of B2B by approximately about 3x than what we have right now. Currently, we have about 5 people across India, we are planning to expand this to 15 people by the first quarter because it's -- we see that we have a lot yet to tap, and we need to educate people to do this. I think that's a good sign. Two is, as far as our INR 200 crore of the India side, yes, I think we are quite confident to achieve that INR 200 crore in the next 2 years' time. We are expanding our product range, quite considerably. That's one. Two, we are adding new brand ambassadors in the quarter 1. We are adding a lot of new models in quarter 1. Fourth, we are inducting -- we have inducted, they're all joining from next month, a full-fledged marketing team to promote and brand our products, which is -- we have not been very active in India. So I think we are quite confident that I think we would like to achieve a INR 200 crore mark in domestic within the next 2 years' time.

And the gallery count here?

Gallery, we have around 75 galleries, including shop-in-shops.

Shop-in-shops, yes. So all these new galleries, we are kind of upscaled it. Now if you see the Gurgaon gallery, we opened about 4,000 square feet in Delhi, that is kind of fostered a lot of interest across the North India market, because from South also are traveling all the way to Gurugram gallery, one Sector 29. It's the best gallery in our class you would ever see. So I think we would kind of like to upscale our old standard, branding, display. We would like to be the best in the category. So all the new galleries now we are tying up with, we have a lot of traction in improving new galleries which we are opening. So I think there's going to be a lot of galleries. I think my VP has told me he has signed about 40, 50 galleries for the next year, which should be coming up within the next 6 months.

Right. And on the second question, so this is specifically for the U.K. market. So we've made 3 acquisitions there so far, Carysil products, surfaces and tap factory. So you spoke about the synergies there. So can you just highlight like what are the synergies on the back end, the manufacturing side, on the distribution side, how successful have we been in terms of cross-selling to our customers across these 3 companies. And of course, now since the scale has become large. So do you have a common head for your U.K. business or organizationally, how is the people management for the U.K. business?

Yes. So I think our U.K. business is quite well integrated right now. If you see the U.K. economy by itself, when we had posted good results for our U.K., people could not believe that the U.K. is so bad. I had a lot of questions by investors last few quarters, [Foreign Language] I think that worked out really well. We have shown growth in U.K. So while the downturn is about 20%, 30% in the home market, we have gone up by 30% in the home market. So that's one. Number two is as far as the organization is concerned, we have a group CEO right now over there, and we have 3 Managing Directors in the U.K. who's handling each independent company. Number three, now finally, now we have taken a call to integrate all the companies at 1 base. We had planned to open a big base with all logistics, warehouse, retail, showroom. Also, we have my daughter who's inducted newly to the marketing activities is right now in U.K. and trying to launch or try to integrate the Carysil brand in U.K. So it's a lot of integration happening in U.K. this time because end of the day you want to bring all this together and try and do -- yes, we would like to centralize all this at 1 base.

We have our next question from the line of Nikhil Gada from Abakkus AMC.

Sir, the first question is specifically just on the subsidiary numbers. Now when I look at the breakup for the other expenses as well as the employee expenses, there has been a sharp increase, close to INR 10 crore increase in other expenses and a INR 4 crore, INR 5 crore increase in employee expenses. Is it purely because of the integration of United LLC?

So Nikhil, this is not because of only United Granite, this is because quarter-on-quarter, we have increased our capacity utilization. So there, we have added people, number one. Number two, we are also building a team for the further expansion to cater our new customers who are under pipeline. So there will be training requirements, some skilled manpower requirements. So we are adding that. And there also the increment round which has happened in the quarter, so that has come as a onetime effect in the quarter 3. So these are the 3 factors. But as I said, this will not come every quarter. It is on the -- quarter-on-quarter, it will stabilize and as a percentage, it will go down.

Yes. Okay, sir. But then in other expenses also, we are seeing this INR 10 crore jump from INR 12 crores to INR 21 crores.

So it is only in relation to the sales. If you see the sales growth, it has grown by 37%. So in terms of that, you are going by the absolute numbers. If you go by the percentage, it is not increase, it's all variable.

Okay, sir. Because percentage-wise as well, it's gone from 17% to 25%, so...

That is onetime of United Granite also. You have to understand that United Granite came for less than 70 days, and we have to integrate that. And if you need any further detail, I'm available. We can provide you.

Sure, sure. Sir, my second question is specifically on this acquisition of a bigger client in U.K. So how much incremental volumes, I know it's still early days, but what kind of business can you see from this client? Is it something which can become very big in future?

So I think, Nikhil, I had mentioned to you that these guys make about more than 0.5 million kitchens here. And out of that, we know that about 25% to 30%, they use granite sinks. If I take that ratio, it comes to about 125,000 to 150,000 granite sinks. So I think it could be a sizable volume as per what the discussion. We already got the first order. It's quite a big order in size. I think based on the discussion we had, I think they want 100% get converted to us. So I think the opportunity moving forward likes quite huge.

Got it, sir. And just one last question on the overall impact from this Red Sea issue. Do you think -- while you mentioned there could be some lumpy orders possible but do you think that this could also further our market share in the overall scheme of things, which we are already seeing?

Yes, good question. I think this Red Sea thing, if I would try to look at more from an entrepreneur point of view, I think this Red Sea is going to be a blessing for us because most of the -- especially in the stainless steel sink side and all. Because a lot of the Chinese import costs have doubled because of this and they're not able to supply. So we have -- just in the last few weeks, we had a lot of inquiries for our granite sinks for the Europe and for the U.S. market. So while we understand on short term that we may face some larger voyage, transit time, we have to do the larger lead times. But I think overall, I think on the business side, we can have more opportunities here.

We have our next question from the line of [ Akshay Shah from Kriis PMS ].

Sir, you have mentioned in the presentation that quartz sinks market is growing annually at the rate of 25% CAGR, while we are not able to do the same. Now we have a strong distribution network in U.S. and U.K. So can we expect that we will grow at the rate of 25% in future?

So I don't know where this guidance have come from this granite sink growth but overall I can say...

Overall, it is mentioned that granite sink is growing by around 25% year-on-year.

Yes, that is all -- overall. Market share is growing. So where the market share is growing very fast and where we have exactly told you that, there's a lot of opportunities for us for the granite sinks. And with these new tie-ups, we are very confident that with the new inquiries and customers on quarter-on-quarter, we are able to see growth in terms of quartz sinks.

We have our next question from the line of [ Rohit Singh from Nvest Analytics Advisory LLP ].

Congrats on a good set of numbers. Sir, my first question is on Kaelo. So Kaelo has entered into a new partnership with Carysil. So could you provide more details on the partnership and the ongoing developments in this regard?

Sorry, I'm not able to understand the question. You said there is a tie-up with Carysil?

Kaelo. Yes, sir.

Who's Kaelo? Sorry.

I came across an article where the Kaelo company just you mentioned regarding the partnership entered with the Carysil.

Not that we have heard of honestly.

Okay. I will take that offline. My second question is on basically the outlook, like you mentioned the new partnership with Howdens. Further, IKEA is also getting expanded in India and the Red Sea crisis, as you mentioned, are expected to be blessing for you. So are we still on for INR 750 crores kind of revenue for FY '24 and INR 1,000 crores for FY '25?

I think we are quite on a good growth trajectory at this point of time. I think we kind of close to the INR 800 crore run rate, and we expect to improve quarter-on-quarter.

So the guidance that you earlier had given is not intact, that's what you're saying, right?

What is intact? In order to the guidance of INR 1,000 crores? We said that we'll update on the quarter-on-quarter basis.

So I would like to clarify. We are with the current almost INR 800 crores run rate. We are improving. We are on track of INR 1,000 crores. You will see that happening in incremental growth quarter-on-quarter. And for that we already have last quarter of INR 165 crores, ended at INR 180 crores, INR 188 crores. So you will see this quarter-on-quarter improvement, and that's how we are able to attain the INR 1,000 crores, unless some unseen foreseen circumstances happens which is not under our control.

Understood, sir. And you mentioned Red Sea crisis in the near term may create the hindrance for us. So is it a correct understanding that the Q4 is likely to be getting impacted because of it?

Because you are saying Red Sea, our sales get affected, that's what you said?

Yes. Because in near term, like you mentioned, there may be some problems because of Red Sea like order delays and voyage time increasing. So do you see any short-term impact in Q4 on our sales because of it?

You see the problems are bound to come. You're in an industry and all these logistics, all these kind of problems will keep on coming. And I think it's my job to tell that these problems are there. But none of the problems are inevitable. I mean everything you will be able to -- there is a solution to every problem. So as of now, we do not see -- our company does not hold any kind of major risk as far as this is concerned. Yes, the lead times have increased. The freights have increased. So that we have to speak to the customers and we need to align ourselves with them based on their requirements. So we're having issue, but this can be solved amicably by talking to customers, which we're already doing.

We have our next question from the line of [ Madhav from DMS Wealth LLP ].

I had a question from my side about the contract that we have entered with Howdens. So is it a pass-through contract? And in what terms like are we passing the cost in dollar terms or in percentage terms?

Yes. So the Howdens contract is a perpetual contract. It's, I would say, a long-term contract. And the prices what we are billing in Howdens are in U.K. sterling pounds.

Okay. Sir, actually, my question was like if there is an increase in the cost in future, so how are we passing those costs? Are we passing them in percentage terms?

Yes, we'll be passing on the cost. So all our -- for example, on the freight, example, so all our terms are on FOB basis. So now whatever the freight increase is on that.

We have our next question from the line of [ Bala Murali Krishna ] from Oman Investment Advisors.

I would like to see an update on the built-in home appliance CapEx plan, sir, what could be revenue potential...

Sorry, your voice is very low.

Could you please update on the built-in home Appliance CapEx, sir?

Built-in home Appliances CapEx. We have already announced last -- how much did we announce, INR 10 crores? We announced about INR 10 crores CapEx on the built-in appliances and it's going to start commencing from quarter 4.

Got it. What could be the asset turn we can expect from that?

Asset turn would be about 5x.

Okay. And secondly, on the technology development like we have some green sinks and some high strength sinks we had developed earlier, is there any progress on the orders in those sinks, sir?

I'm very sorry, we just did not get you the last question. Can you please say it again, slowly, please, and loudly?

Yes. We had developed some new technology sinks like green sinks and some high strength sinks we had developed last year. So is there any progress on the orders in those sinks? Are we expecting some good orders from those sinks because they are better performance as compared to the normal conventional sinks?

I think we need to try to understand that the green sinks are not just for sale, green sinks are there to try to show the values of the company. Are you a sustainable company? Are you going on a green global footprint? And is kind of it adds image to a corporate? And for example, Howdens what we have -- what we started, the green sinks was one of the major part because of that, we got this order. So sustainability in all is very, very important for them. We also have increased in, for example, IKEA orders with us has also improved because we started looking at more as a green company. So I think it's helping a lot. And indirectly or directly, the green sinks has 100% helped the company. And what was your second thing? It was about green sinks, right?

High-strength sinks that we had developed last time, regarding high-strength, any orders?

So now, mostly 20% of our exports happens in this high-strength sinks because the value is a bit high. So I think whatever you see the momentum in the order booking is because of high-strength sinks.

We have our next question from the line of [ CA Garvit Goyal from Nvest Analytics ].

Sir, just to get some clarification, like I was reading an article or commentary from Marcus Smyth, who is the CEO of Carysil U.K. Group. So he mentioned that the Carysil U.K. has entered into a partnership with the company named K-A-E-L-O. It is a bottle cooling technology company.

Kaelo. Yes. Yes. Kaelo. Okay. Okay. Yes. So you're talking Kaelo, it's called -- the brand, it's called Sommelier, so Sommelier is the new wine chiller, it's a new startup for wine chiller buckets.

Yes. So what are the developments -- ongoing developments in this regard? And what kind of opportunities do you see in this area?

So they have just started the distribution of it. I think in the next quarter, I'll be able to give you the more light. But all I can tell you is that it's been very encouraging. The results have been very encouraging because every time you cannot invest in a wine chiller at your home, right? So what happens is that if you ask -- because most of -- in the U.K. and Europe, most of the people, if you call smaller -- I mean, smaller groups, they all hang around during kitchen side. They have a bar, they have stools and they all hang around on kitchen site. So that's where a wine bottle or a champagne bottle is put. And this Sommelier, which is a new technology wine chiller for a single bottle, it can adjust to any temperature what you want. So the results have been very, very encouraging. We are also planning to bring this to India next quarter.

So the announcement in this regard will be in next quarter. That's what you are saying, right?

Yes.

We have our next question from the line of Nikhil Shetty from Nuvama Wealth.

My question is on United Granite. So it's contributed around INR 15 crore and I believe the margin profile is almost half of what currently we are making in overall business. So if we assume a normalized quarter, Q4, then we can expect around INR 20 crores, INR 25 crores kind of a number from that particular piece. So can we expect the margin profile to be lower than 20% this year and next year as well?

So I think it's too early to say. I think that the acquisition costs which we did for the United Granite was approximately at 10% EBITDA level. Now the quarter 3 is always a very low quarter for the worktops. And then we had obviously a one-off cost for acquisition and all. Quarter 4 is where the things start going because a lot of snow and all that. So that's where it's slowly now the snow will -- the spring time comes in Feb, March, we'll get more orders with too much snow. So I think when it starts getting on quarter-on-quarter, you'll see the margin improvement. And I think we -- by the quarter 1, it should go back at 10%.

And my second question is on the overall volume. So currently, if you look at the costing volume, your target is around 6 lakh total units for FY '24. But when we look at the first 9 months, it seems pretty difficult to achieve those numbers?

So I can just tell you from quarter 3. The quarter 3, how much was the granite sink number? So 1,58,000 in the quarter. If you analyze it, it would be above 6 lakhs, right? So this is already the rate, we already picked up this rate. And as I told you, it's going to be further improved in the coming quarters.

So I'm talking about, sir, FY '24, so...

We'll be quite close to it. We'll be quite close to it.

We have our next question from the line of Manan Madlani from KamayaKya Wealth Management.

Sir, my question was that we are seeing a slowdown in Germany. So are we trying to capture a market gain due to that adverse situation going on?

So while you see a slowdown in Germany, we have good demand coming from Germany for the granite sinks, so which is good. I think in this coming -- in the last 1 month and what we see in the coming months, the order booking is going to be quite strong. We also see a sales increase up in Germany, so which is, I think, a very good sign.

Okay. Sure. And are we planning to bring our tap business in India?

So tap business is 100% we're bringing in India. We already launched at the ACETECH Exhibition. We got an overwhelming response in it. And so in this, we all are in. Right now, the marketing plan is getting set to launch the hot water taps in the quarter 1, '24-'25. So people are very, very excited. All the top dealers of India are put advanced orders to us for this new hot water taps. So I think we are quite excited. Overall, the faucet business, the tap business looks very, very encouraging for us. And I think this is going to add cherry on the cake.

Sure. And my last question will be, so as you said that you are trying to achieve INR 1,000 crore. So let's say, conservatively, you will achieve in FY '26. But the question is, do we need any further CapEx or acquire any further subsidiary to achieve that INR 1,000 crore or our internal capacity or internal enough capacity to achieve the INR 1,000 crore mark?

So I think we have -- we are right now all putting heads together. We have a budget meeting coming up in March and where we are going to carefully strategize our next year and the 3 years coming forward, and we'll be able to answer that after that.

We have our next question from the line of Ronald Siyoni from Sharekhan.

I have just one question on the steel sink realization, which you talked about CIF and FOB basis. So generally, previously, what had happened that 2 of the quarters would have higher realization because of that geographic mix. So now everything has been normalized over the last 3 quarters, we are seeing normalization of realization. So now this realization this quarter should be the benchmark or there's still a geography mix and that realization could be higher going forward?

Okay. So steel sink realization depends on our product mix. One is the pressed sink and the Quadro sink, depending on the sales volume it may change, number one. Number two, we are focusing now on the project sales because there are more projects sales we have done in quarter 3. And due to that, there is some small realization difference because in projects mostly pressed sink only goes. But it is not a benchmark. You have to -- if you have to benchmark, you have to take 9-month numbers and then you'll get the better price realization, which is -- which will give you more clarity on the price.

Okay. And second question, just on that if you are doing projects business and then domestic would be your focus area. So should not be that the case that this realization would be lower going forward because you would be also going for more project sales going ahead also?

So going forward, there is an export opportunity and domestic both. We have always started export to our U.K. company. There are export going to GROHE and there are further companies we are doing. So it's all depend on the product mix, geography mix, and then we'll see, but we don't feel that relation will go down or...

Even -- can I take this? You are asking more on B2B activities than the rate realization comes down, right?

Right, right.

So I'll answer the question. See, the B2B project sales are always on the [indiscernible] side, it's not on the cheap side. So for stainless steel sinks, I think that's on side. While the granite sinks are concerned and our Quadro stainless steel, we do only the high-end projects where the dilution of the price is not very high. And to compensate that, we always have an 80-20 principle. So while we dilute 20% of the lower-end sink, we also launch another 20% of the high-value sink to compensate that. Hence, you were able to see on quarter-on-quarter, year-on-year, we've been able to improve our margins.

We have our next question from the line of Harsh Shah from Dalal & Broacha.

Just one question. Can I get the gross and net debt as on date?

Okay. So gross debt is around INR 270 crore on the company as a whole. And net debt will be about INR 260 crore.

Ladies and gentlemen, due to time constraints, we'll take that as a last question for today. I would now like to hand the conference over to Mr. Chirag Parekh for closing comments. Over to you, sir.

Thank you, everyone. I hope we've 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 our SGA team, our Investor Relations advisors. On behalf of my colleagues in Carysil Limited, I wish you all the best. Thank you.

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