Carysil Limited (524091) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Carysil Limited Q3 and 9 Months FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Chirag Parekh, Promoter and Managing Director. Thank you, and over to you, sir.

Good evening, ladies and gentlemen. Thank you for joining the Carysil Limited Quarter 3 and 9 Monthly FY '25 Earnings Conference Call. I trust you have an opportunity to review our financial results and investor presentation, both available in the company's website and on stock exchanges. Joining me on this call are Mr. Anand Sharma, Executive Director and Group CFO; and SGA, Investor Relations Advisors. With over 30 years of learning at Carysil, we focused on rapidly translating those learnings into action, which has helped us grow over the years. We have also stayed a step ahead and emerge as a bigger, stronger force in the market. We have continued with our multi-pronged holistic strategy for growth and continuous innovation, investment in capacity expansion, brand visibility and expanding our reach across new geographies worldwide. Our commitment to brand development, both in India and internationally has been instrumental in strengthening our position as a trusted name in the kitchen industry. We are working to become the most trusted one-stop kitchen solution company by forming partnerships with global marquee customers, leveraging technology, strategic marketing, building a robust ecosystem, keen understanding on evolving consumer preferences. Innovation, as you know, is a key driving force of Carysil and continuously, we strive to introduce cutting-edge products and technology resonate with the lifestyle, keeping the customer engaged and inspired on a continuous basis. Additionally, our strategic diversification of products allows us a comprehensive and integrated range of kitchen solutions, making Carysil a one-stop destination. We have successfully expanded our footprint in global markets with over more than 50 countries worldwide. Besides of global expansion to increase production capacity, we have committed to provide best quality to our global customers, investing in the state-of-the-art manufacturing and adopting best-in-class process ensure our products meet the highest international benchmark. While we are focused on business expansion, we are committed to the environment and people is reflected in our ESG certification and Great Place to Work certification. We recognize the strength, expertise of our people, fundamentally our growth, therefore, talent acquisition with our products business remains a key priority as we focus on building a young, energetic, motivated, high-skilled team to support our expansion plan in domestic market. We are also focusing on the women empowerment very, very strongly. Attracting, developing, retaining top industry talent, we aim to foster country innovation, enhance operational efficiency and deliver exceptional customer experience. At Carysil -- no, sorry. Furthermore, in the 9-month FY '25, we took significant steps in product innovation and portfolio optimization. We have successfully designed high-margin models for quartz sink for the international and the Indian market, along with the stainless steel sinks and a large variety of high-margin kitchen faucets to cater the domestic industry. To support the development, we invested INR 35 crores in new molds, machineries, utilities and new products, reinforcing commitment to deliver high-quality cutting-edge kitchen solutions. Simultaneously, as part of our continuous performance improvement strategy, efficient working capital manner optimized use of resources, we have undertaken a rationalization of our product portfolio by discontinuing slow-moving SKUs and focusing more on high value-added products to streamline and enhance our offerings, improve overall inventory management efficiency. During quarter 3 FY '25, we have enhanced marketing efforts and run strategic marketing campaign, including participation in ACETECH exhibitions, Big 5 in Dubai, advertisement on the TV ads and in the theaters and a bunch of distributors and customers meet. Also, we run social media campaigns and investment in the ads of about INR 3 crore plus last quarter over our regular marketing spending. Our participation in the ACETECH exhibition allowed us to showcase our cutting-edge kitchen solutions to a diverse audience, including industry architects and potential customers. Our Big 5 exhibition in Dubai has helped us reinforcing our brand in the international market and tap into new business opportunities. The overwhelming response from the attendees combined meaningfully with key stakeholders usually enhance our brand credibility and market positioning. We have shown strong growth in our U.A.E. subsidiary in the last quarter. As part of our brand -- sorry, as we move forward, our focus will be on creating awareness with consumers, industry professionals and businesses our unique benefits of quartz sink through well-structured and strategic marketing campaign. We believe that well-planned strategic marketing campaign, we can significantly expand the quartz sink to a global scale. Our vision is to obviously position Carysil as a global pioneer in the industry. In the upcoming quarters, our key objectives going to be achieve higher value growth, streamlining working capital and boosting margins to drive long-term success. We aim to accelerate value creation, enhance working capital efficiency, improving profitability in the coming quarters, positioning our business for sustained growth. Quartz business. Coming back to the business for the coming quarters. We will start with the good news. Finally, we are pleased to inform you that our major customer, Karran U.S.A. has been awarded a huge order by one of the biggest U.S. home retail chain, and we are expecting large flow of orders from them by this quarter. This will also require a fresh investments in new molds with the addition of the molds, machinery infrastructure. This achievement is a testament to our continuous efforts to expand and diversify our customer portfolio. As of December 31, 2024, our planned capacity utilization stood at 65%. We are also happy to inform a second breakthrough by the new SKU has been approved with IKEA for their global requirement and which will overall improve our capacity utilization to 80% in the coming quarters of FY '25, '26. Stainless steel sink business. Quarter 3 FY '25, our steel sink business experienced a softer performance due to spill of some major orders. However, the momentum still remains strong and healthy pipeline, encouraging mainly with the existing quartz customers express their interest in expanding their portfolio, including our steel sinks. We'll provide updates once these contract -- new contracts are signed. Meanwhile, operational efficiency remains robust. Capacity utilization remains around 80% in 9-month FY '25. We would also like to let you know that China Plus -- with the China Plus strategy, we've been receiving a large number of inquiries for the steel sinks for the U.S. and other markets. One more feather in the cap for the stainless steel division, we have able to secure a good size order with -- as a starting point with Kohler India for the stainless steel sinks for our long-term journey with Kohler. Subsidiaries performance. The December quarter is typically a softer period for overall international overseas subsidiary due to ending of their calendar year. Domestic business. Our domestic business remained relatively flat quarter 3 FY '25 due to softer market conditions, however, we expect a more value-driven growth in coming quarters. The implementation of the BIS standards has provided a unique opportunity to assemble and manufacture built-in appliances, products like kitchen hoods, hobs, ovens, dishwasher et cetera, to capture significant market share. We are also building capacity to meet the demand of the current sales forecast to seize any OEM opportunities. Additionally, our faucet division is progressing well with introduction of new technology of like powder coating and chrome plating, which is going to gain momentum, not only for kitchen faucets but also for the bathroom faucets. We anticipate a strong domestic growth in the faucet industry. Strategic priorities, following key initiatives: Product innovation, infrastructure expansion. New factory will be constructed on the land opposite to suffice the above expansion plans in the built-in-appliances. If required, we may have to -- we may use this land for further Quartz expansion business. Cost optimization and improvement of profitability in the U.S. subsidiary. We do understand that the last quarters in the U.S. subsidiary have not been great. It is -- we feel it's a initial period of time. We are also learning the business. But now we have a plan. We are implementing a structured cost optimization plan, U.S. subsidiary with a clear road map to achieve profitability in the coming quarters. Customer expansion, we are broadening our customer base across the diverse product portfolios to penetrate the market. Leadership strengthening, we are enhancing our leadership team to drive operational excellence and effectively execute our strategic vision. With this, I hand over the call to Mr. Anand Sharma, our Executive Director and Group CFO, to brief you on our financial performance. Thank you.

Thank you, sir. Good evening, everyone. Let me take you through the company's consolidated financial performance, quarter 3 FY '25 performance. Consolidated total income stood at INR 205.5 crores for Q3 FY '25. This grew by 8.9% on Y-on-Y basis but marginally lower than the previous quarter, primarily due to holiday season in overseas subsidiary and lower sales in steel sinks segment. EBITDA for quarter 3 FY '25 stood at INR 31.2 crores as compared to INR 36.1 crores in Q3 FY '24. EBITDA margin for quarter 3 FY '25 was impacted mainly due to reasons like the export freight cost increased from 6.5% in March '24 to 9.3% in December '24 due to Red Sea issues. This has resulted in impact of margin by INR 2.1 crore on Q-on-Q basis. However, with the current ceasefire with Israel and Hamas, freight rate has came down sharply and current freight cost will be at pre-March '24 level. We have incurred strategic additional marketing spend of INR 3 crores in Q3 FY '25, which will drive the growth for future. There was adverse impact of GBP INR translation difference due to consolidation of the U.K. balance sheet in Indian rupee as on 31st March '24, where the rupee is appreciated from INR 112 in September '24 to INR 107 in December '24. This has resulted in notional loss of around INR 2.8 crores in quarter 3 FY '25. However, GBP INR now strengthened to INR 108 plus. This will benefit us in coming quarters. Increase in price for key raw material MMA from $1.79 per kg in April '24 to $2.33 in September '24 to now $2.52 in December '24. However, this current trend shows that this will come down to around $2.02 per kg in March '25 onwards. So this is going to have benefit. However, this has resulted around INR 70 lakhs cost increase in quarter-to-quarter basis. We also have some retention and training of additional skilled manpower to meet the upcoming demand and to enhance capacity utilization. Profit after tax and after minority interest stood at INR 12.5 crore as compared to INR 15.3 crore in Q3 FY '24 due to reasons stated earlier. Coming to 9-month FY '25 performance, sales volume for quartz sink stood at 4,72,193 as compared to 4,10,728. This is recording growth of 15% on Y-o-Y basis. Standalone sink stood at 1,09,346 units as compared to 85,998 in 9-month FY '25, recording impressive growth of 27%. Kitchen appliances and other products stood at 41,759 units in 9 months FY '25 as compared to 43,418 in last year 9-month period. There is a marginal degrowth mainly due to BIS issue and the import. Consolidated total income stood at INR 614.9 crore in 9 month FY '25 as compared to INR 496.1 crore in 9 month FY '24, recording a growth of 24% Y-on-Y. Total income increased mainly due to 2 reasons, quartz sink business has improved and there is a better efficiency in the plant and performance of U.S. subsidiary has also improved. EBITDA for 9 months FY '25 stood at INR 105.9 crore as compared to INR 97.4 crore in 9 months FY '24. Profit after tax and minority interest stood at INR 45.2 crores in 9 months FY '25 as compared to INR 42.4 crores in 9 months FY '24. Now coming to utilization of QIP proceeds. We have raised INR 125 crores through QIP for CapEx, working capital and general corporate purposes. The working capital allocation of INR 31.25 crore is deployed in the business, which has resulted in reduction in bank borrowings and cost management. We have CapEx allocation of INR 62.5 crore, which includes investment in molds, machinery, new facilities. Till now we have utilized around INR 5 crore in major -- because the major CapEx plan is underway, which will be utilized in FY '25, '26. Out of general corporate purpose fund allocated of INR 27.9 crores, INR 5 crore is utilized for marketing, branding and promotional activities. The remaining fund will be utilized in the coming period and the same the balance we maintained in the FD with the banks. Now coming to debt position. As on 31st December 2024, our consolidated borrowings stand at INR 255 crore as compared to INR 300 crore as on 31st March 2024. The debt utilization on 31st December '24 are mainly in the areas like we have INR 95 crore debt, which is for the acquisition of Carysil Surfaces Limited and United Granite LLC. INR 35 crore of the CapEx is used in the term loan for India operation and INR 125 crore is used as a working capital. So we have efficiently used our working capital and try to reduce our debt, which can be seen from the March to the 31st December level. Thank you. Now I ask operator to open the floor for question and answer. Over to you, operator.

[Operator Instructions] The first question is from the line of Harsh Shah from Dalal & Broacha.

A few questions from my side. So firstly, on the gross margin front, so if you could kind of help us understand the dip in the gross margin, especially on a sequential basis. So even if I adjust the increase in the raw material cost, the dip in the margins at the gross margin front is almost by around 250 to 300 basis points. So one question is that -- so when I do consolidated minus standalone to find out the subsidiary gross margin, it seems that there has been some one-off or maybe I don't know the reason for the drop in gross margin at the subsidiary level. So if you could kind of help us understand?

So the gross margin, mainly because of the U.S. subsidiary where we have an operating loss. Second, since we are doing consolidation in Indian rupee, as I explained in my speech, when we did our consolidation on 30th of September, the INR equivalent is INR 112, which came down to INR 107. So when we do again the consolidation on 31st December, the difference in the consolidation is all got into quarter 3 because we cannot change the first 6-month period number. So the consolidation difference came in quarter 3 itself. So that has bring down the gross margin side.

But how would -- I mean, I'm not understanding how is my gross margin kind of getting impacted at the subsidiary level?

Yes, I'll tell you. So like you have opening stock, which is valued at, say, INR 112 -- closing stock, sorry, closing stock valued at INR 112. When you do the other consultation, you valued at INR 107. So INR 5 getting lost just in that translation. So there is a notional translation difference of around INR 3 crore at the subsidiary level.

Got it. Got it. That was clear. Secondly, going forward, in terms of the employee cost, so we have seen for the last 4 quarters, it's been on a continuous rise and you even alluded in the investor PPT saying that a lot of training programs kind of have been done. But -- so how should one look in terms of at where this number would stabilize as a percentage of sales?

Yes. Chirag Parekh here, CMD. There is, I think, a great point on the employees. So I think as far as on the workforce we were expecting this increase in the sales in the quartz sink business. We've been carrying quite a bit of workforce with us, and that's why we see this ERE cost rising since the last few quarters. Finally, anyway, we announced this new business, which will be coming through we'll be optimizing this. As far as the new salesforce what we have recruited, they're going -- undergoing a training. And we are now, as I said, focusing on more high value-added products. So we are introducing -- we just introduced this product. Some of them went out of stock. So in the quarter 1 '25, '26, we'll have a complete range of new high-margin products, which this team has been assigned to introduce in the Indian market.

And sir, if I may, I mean, what would be the percentage to sales that you're looking at? So meaning in terms of absolute, say right now, on a consol basis, it's somewhere around INR 20-odd crores for Q3. Then should we consider this run rate to continue?

What INR 20 crores? I'm not understanding, the INR 20 crores of what?

Employee cost.

So basically -- I'll tell you, we have cost benchmark like 10% of the sales. If anything in that range, it's all acceptable because number one, we are growing. We have to have a more talented manpower. And second, we have built something for our future capacity expansion. So that's why...

Skilled workforce.

Skilled workforce.

Which is not easy to get.

Yes, yes.

So we carried on this skilled workforce because...

But 10% of the sales is our benchmark. So just for your benchmarking, 10% of sales.

Got it. Okay. Now you also mentioned that the large flow of order you're expecting from Karran. So now you would kind of be doing some sort of capacity expansion. Any number in mind in terms of what would be the incremental capacity that would come in?

So there is no capacity expansion because we already have a 1 million sink capacity in place. We are doing production expansion. So the plant utilization is expected to improve from 65% to 80%.

Okay. So this would be in the Quartz business, 65% to 80%?

Yes, 65% to 80% will be the Quartz sink business. What it requires fresh investment is only on some molds and machinery, which is required to dedicate to this new customer.

Sorry to interrupt, may I request to Mr. Harsh Shah to pleas rejoin the queue, we have participants waiting for their number. [Operator Instructions] The next question is from the line of Ayush C. from Shravas Capital.

I just wanted to know if you could give me an exact number for this quarter on how much we have sold in value terms in each segment, that is quartz, steel sink and appliances. Could you just help me with that number?

So I'll give you the number for the quarter. Granite -- so in quartz sink, we have valued of INR 92.95 crore. Steel sinks, we have INR 12.76 crore. Appliances, we have INR 7.62 crore. Faucets and FWD INR 3.4 crore and others INR 1.56 crore. So total INR 118.3 crores for India business.

Okay. So this is India alone, you're saying?

Yes, India business. So that includes Carysil Limited India and Carysil Steel India.

Okay. Understood. And also, could you just shed some light on the faucets part? Is there any kind of demand? I mean I would have missed it in the initial comments, I wasn't present. But could you just like shed some color on what is going on in the faucet side? And are we expecting any incremental orders going forward? And also, on the quantum of Kohler, if possible? If you could just give us some idea.

Yes. The momentum in the quartz sinks orders will expect it to flow in this quarter itself. We are gearing up as far as our internal team and our plant is concerned for these orders. Some indication has already been given to us. So we are already gearing up for that. And the second question was on the Kohler?

Kohler.

So the Kohler is a good starting point. The deal value could be about $1 million a year to start with but it's a good starting point with such a global company. It can only take you to places from here. Yes.

Also on the first question, you said it's on the quartz sink. I just want to understand on the faucets. Could you just like emphasize on that, like, alone?

Faucets, did you use the word faucets?

Yes.

Okay. So faucets, if you see -- if I have to see the faucets, the last number, which Mr. Anand Sharma has said was -- yes. So the faucets, if you talk about, it's been sold about -- or close to INR 3.5 crore in the last quarter. If I had to remember maybe some 6, 7 years back, it would be about INR 30 lakhs, INR 35 lakhs something. I'm not trying to -- maybe I'm wrong somewhere. But it has been a huge step forward on the faucet side. Every sink needs a faucet. So I think it's wise for a company to introduce faucets where if you've seen the growth is muted across all the economies in the world. So where you could get growth is by introducing new products, especially faucets, which every sink requires a faucet. And we've seen -- that's why we are ramping up our faucet capacity.

So we have received orders already from an existing player, is it?

We have been -- we expect a good increase because we just launched it and it's been accepted very well in the market and orders have started flowing in.

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

So one question is on the -- so our exports to the U.S., so it's almost a 20% revenue contributor for us. So any thoughts that you can share in terms of are we expecting any kind of tariffs to be imposed on the kitchen sinks that we export? Because while we hear you that instead, you were rather talking about the China Plus One opportunity that we have. But do we see that tariffs as a risk to our exports -- to our kitchen sink exports to the U.S., the quartz and stainless steel sink?

So all I can say is that nothing has been heard in quartz side as of now. Metal is something, which was in announced the duty for the -- any imports of the stainless steel or metal sinks, it's still not clear. But if the duties -- I had to talk with a few of my customers last night, but if they are still clarifying with their internal trade. If the duties on the steel sinks and steel is not at all. We don't export to U.S., I think maybe 1%, maybe -- so it's not -- it's a very, very small. But if it is applicable, then we see only the rise in demand of the quartz sinks in the U.S. So it may work in our favor.

But you're not hearing anything on the quartz sink side, right? As of now, no...

Quartz no, no. There's nothing on quartz, and I think we should not kind of speculate things. I think as of now, we hear it on the stainless steel sinks and aluminum metal products. So I think the -- as far as the quartz sink business, probably we will see -- probably we can -- if this holds true, then we may see a demand or a surge in the business of the quartz sinks in the U.S.

And why would we talk about China Plus One? This is for which particular product? Because as I understand, the main competition for us in quartz sinks are the European players and not the Chinese imports, right, the Chinese exports to U.S. for sinks. So for which products exactly are we talking about this China Plus One opportunity?

No. So the Europe is -- Europe -- so less U.S., but Europe is still -- some part of the Europe is still like we penetrate Croatia, right? So Croatia, we were buying from China, now it's moved to us. But more of the stainless steel sink side, it is that the stainless steel sink, like I said, that we did some deals. We're having a strong traction in the stainless steel sink demand, and we are expanding in the stainless steel side. So mostly, it has to do with more of the stainless steel and faucets. And India will be now for the built-in appliances.

Understood. And the second question is basically, we've been encountering weak demand, right? And you've mentioned reasons for that, right? But however, how do you see this going forward? Because we have also seen volume degrowth in quartz, stainless steel sink and appliances, we have seen a pretty sharp decline, right? So how do you see this going forward considering U.S., it's an uncertain probably market. U.K., again, which is a bulk of our revenues, almost 40% revenues comes from there. So how do you see your subsidiaries there in the U.K. doing? So any outlook on demand on each of these markets and these product segments would kind of help from an FY '26 perspective?

Yes. So no, nothing is that we don't know. The global economy, the demand is muted that also includes India now. And we have seen results of other companies also. So I think nothing. But one silver lining for us is that kitchen sink, it becomes a very functional product and it becomes a very necessity product. And we have not seen a major decline in the kitchen sinks. Moving forward, as where the demand is muted, the economies are -- we see that the growth -- a strong growth can come by getting -- by doing some great deals with some new customers. So this new deal, which our customer did with one of the U.S. major. A large deals like this will help us to grab a larger market share and in result, we will increase our growth in the quartz. Appliances on the other side, while the value has gone down. And the quantity, we have almost stay in the same quantity is that because the Delhi was the North India market, especially Delhi in the -- and we do appliances everything 100% in India only. So the whole quarter -- and I probably would have heard it that quarter 3 was completely they had shut down because of the pollution control. So there was the high value-added products, which we could sell in the North India market did not happen in quarter 3. Hence, the quantity has remained same but we have a decline in the value growth. U.K. now. The last one, the U.K. So U.K., yes, the economy is bad. The people are struggling, and we have -- but somewhere we've been able to maintain even if it's not grown very steady growth -- healthy growth in U.K. The reason is that more and more customers are preferring products from us. And I had also said it last time also because the biggest competition for us is Germany. And all our competition in Germany, the inflation cost is rising, the production cost is rising. So there has been a massive now price difference cost difference between us and that. So we have been able to grab more and more customer. So expansion of the customer base in U.K. is right now helping us to drive our sales in U.K. I hope I answered all your questions. Yes.

The next question is from the line of Nikhil Gada from Abakkus Asset Management.

Sir, my first question is you sort of mentioned that we can see the expanded capacity as in the capacity utilization to go to 80% in the coming quarters. When can we sort of achieve this?

I would like to -- I would obviously like to have it soon as possible but I think you'll be able to see it coming gradually from this quarter, slowly, slowly. So I would say 80%, if I'm trying to be optimistic, it will be from quarter 1.

And we are currently working on the entire 1 million line, right? We are currently operating on 800,000, 900,000.

Capacity is 1 million. As we said that current last quarter 3 capacity utilization was 65 -- around 65%.

And sir, just also you mentioned about IKEA as well that the second set of SKUs have been approved by them.

Yes.

So can you highlight what kind of order flows and from when can we see this coming into the numbers?

Yes. So IKEA, I think we have -- IKEA, we have already got the order flow. We are expecting a 10% to 15% rise in the sales with the IKEA business.

And sir, if you don't mind, can you share how much IKEA contributes right now?

That's why -- so as last time, IKEA is always that because of our contract with IKEA, we are not able to disclose the number but the whole IKEA business is a substantial business for us.

Got it, sir. One last question, sir. The value-added product mix, which you sort of highlighted in the early statements, is this largely for the -- I missed a statement, whether it's for the Indian markets or whether it is for this new customer that you have just onboarded?

So the high-margin products are the -- I would say the high-margins, there are 2 kinds. So one is like quite high-margin and one is mediocre. So the very high-margin products are for India. The U.S. business, particularly will obviously draw a higher margin because of the U.S. dollar currently, which is in our favor right now. Also, I would like to take an opportunity is also that we have -- the freight rates have crashed in the U.S. the acrylic prices, which is one of our key components in the sinks is also declining. So overall, I think -- and last time also I said, there's nothing that we are talking, which we are not -- that you have not heard before. I always said, and I say it again, when the U.S. business increases, when the U.S. market increases, the margins will grow. When we had experienced this during the COVID time where our margins had -- they were gone to 20%, 22% -- around, I think, 22%, 23% guidance, right? And so I think the time is back for us now. U.S. is back. Forex rates are favoring us. The input goods are going low. So we definitely see a margin expansion happening from -- gradually from quarter 4. And I think probably a good impact you can see from quarter 1.

The next question is from the line of Yug Patel from Anand Rathi.

So my first question is on to the capacity expansion. So as you know, when we reach to the capacity utilization of 80% to 85%, we tend to increase our capacity. So what will be the planned capacity expansion for quartz sinks, steel sinks and faucets?

So I think it's a very good question. I think the quarter where we receive 80% expansion, I think the company should start planning about how do we increase the capacity because like I said, any large, major customer wants at least 10% to 15% idle capacity in the plant before they do. So if we -- the quarter, which we touch 80%, the company will start looking at expanding the capacity of more than 1 million sinks, and that's why exactly the QIP was raised for this reason.

Okay. And my second question is on to the margin side. So if you look at our operating margin, so it has gone below to 14%, which is the lowest in the last 2 to 3 years. And if I see that our freight cost has spiked up in FY 2022, which has been the highest. But then we will be able to maintain our margin to 18%. So what has changed now? And when we can expect this number to normalize?

U.S. have definitely -- the decline in the U.S. sales have spoiled the game. The increase in the freight cost has changed the game for us. So this would soon start changing in the coming quarters. Yes. And we need to understand that with all this happening at the same time, we have increase in our key material costs in the quarter 3 is accruing. So everything, we call it a perfect storm, like we had all these increases. We had low value-added product sales. And then on top of that, we had a increase in the input cost and the freight cost, which kind of spoiled the party and the margin guidance, it went below the margin guidance.

The next question is from the line of Gautam Vandra from Shubhalakshmi Family Office.

Sir, my first question is in previous con call, you mentioned that there is 1 lakh capacity you have added to the kitchen appliances. Could you please clarify, which specific product in the kitchen appliances category has this capacity increased?

Yes, it is for the kitchen hoods and cooktops.

Okay. Okay. And my another question is, are we generating any sales from countertops in the Indian market?

Not yet. No.

And my final question before I jump to the queue, like what are our plans to grow our domestic segment, like our plan to improve and grow our Indian market -- our business segment overall in the Indian market?

Yes. So we have -- we are kind of drawing up a great plan. I think the first plan we got into play for introducing high-margin products, sinks with better utility. Now what is that? That is a sink you saw it in the 8 stack, they called the workstation sink. The workstation sinks are complete functional sinks where you can wash and clean and even have the glass windsor. Typically, a sink like that sells for a retail INR 25,000 to INR 40,000 against a normal sink of INR 10,000. Now that's in vogue right now, right? So I think that's the first thing. Second thing, we have come out with new quartz sinks with better designed for catering the high-end segment of the market. Example, let's say, a sink 24/18. 24/18 is the largest selling model in India. We had only one quartz sink model, which was catering to all the segments of the market, which is not right. Somebody has more money to pay. He wants to pay money but does Carysil has an option? No, we didn't have an option. So the same big bowl, we call it, 24/18 used to cater to the mid-end to the high-end of the market. Now we have a complete different category of the model, the high-end market, which is now compromising. Already, we expect in the quarter 4 about 10% of our sales will be of high-end margin products. Secondly, we introduced the new built-in appliances, which are of great value. For example, we introduced 300 -- we tried a 300 quantity of built-in refrigerator, not [ stand ], built-in refrigerators. We -- everything got stocked out and now we are without stock. So now we are bringing in with a double-door refrigeration. Average price of this could be more than INR 2 lakh to INR 3 lakh one piece. Then we introduced the AI-driven smart appliances with a digital screen of where you don't have to use -- even if a guy like me goes at night, I want to cook some food, If I put something in, I just have to press rice button, I have to press a popcorn button. So automatically, it generates the time and the heat what is required to do it. Third category of oven we introduced all the ovens are with built-in air fryer. Air fryers becoming very, very popular. We had completely did not have this segment. So these kind of new products are in demand and they're going to add to the -- not to the value but also the margin. Very important point is a faucet. So all the faucets what we have launched are with an average retail price of INR 20,000 to INR 25,000. And to my mind, a faucet is an ornament to a kitchen. A kitchen becomes a necessary item, but faucet becomes an ornament to a kitchen. Why would somebody not pay a kitchen INR 40,000 and would pay over a faucet. It's got a PVD, looks good and stands out. It comes under aesthetic A. I am very, very surprised, honestly, to see this demand in the surge in the faucets where people are able to pay a higher price than the sinks also. So I think we are going to keep that momentum. I'm very, very happy, satisfied with my team that we are able to adapt new technologies very, very fast. Diversification is the answer but we are all playing with the box. We are using the same distribution system. What can we sell with the things at the same time, which gives you better margins. So hence, we are very confident with the strategy moving forward. And this should -- this will -- not should, will result in better growth and better margins.

The next question is from the line of Udit from Yes Securities.

Thank you also for explaining the growth prospect going ahead. Just wanted to check on the numbers that given all the orders and the growth that you are talking about, so the quarterly run rate, which will take us to INR 1,000 crore number on an annualized basis, when do you expect from which quarter should it translate?

Good question. You see, this INR 1,000 crore, I think it's also hitting me also as a CMD of the company. Why do we are reading? We are talking about INR 1,000 crore. What has happened is suddenly -- and last quarter also, I mentioned this or I think probably you were in our factory, I don't know, I remember maybe I've seen you or met you, but the -- and I had mentioned this, and this is not a try -- I'm trying to duck with the question. But global scenario, who knew this is such a -- we are in a period where there's so much of uncertainty and now the trumpet blows everyday morning, you don't know what's happening. So we are in a very uncertainty period, geopolitical situation, inflation situation. Hence, I think organically, with these large deals, we will grow, and I think we will reach to INR 1,000 crore marks. What is important for right now, our focus is how do we improve back our margins? How do we improve on our capacity? How do we become more innovative and seize the opportunities in the world? I think we are on the right track. This deal was very, very important for my customer, Karran. It's very, very important deal because I've been talking about this for a long time. This happens once a lifetime. If you have 2 deals like this, my friend, I think the INR 1,000 crore will not look very far from us.

That's great to hear. And also, I respect, sir, that you have been maintaining that best at least to reach there, and I understand the uncertainties but yes. And sir, just one more question, if I may squeeze in specifically to the Sternhagen brand. And how much of it will be the focus and how much will Carysil? Because a few quarters back, we were saying that Sternhagen we will a bit -- could be on a sideline maybe. So what is the status now? And how are you looking at that side of the business?

So I think Sternhagen is a -- isn't a burning question every quarter? And also, I think the, Khush, is not come. I think the Sternhagen, we have just kept it as it is. Organically, whatever we can grow. One thing, which was just missing is, for example, we had a review meeting on Sternhagen is we need to indigenize the Sternhagen products. Can you believe it? Every Sternhagen product with a retail price type of INR 50,000 to INR 1 lakh. Compared to my competition, it's about 5x to 10x more. This is ridiculous. Luxury is there, customer can pay up on how long -- I mean, how much a customer can pay. So we have started indigenizing the products. In the next quarter, we're going to slash the price of Sternhagen at least by 30% to 40% for some key products. That's strategy one. Strategy 2 is we did not have a project series, which can give us volumes. So we are focusing on the -- we are launching the pro series we call in April 2025, which we are specifying for some large products in India. People love the brand Sternhagen. Projects want to use it. Why we are not able to get a penetration. We have the B2B in place because we are atrociously priced as far as our pricing is concerned. We need to recheck our prices. And I think that's the answer to Sternhagen. I do understand the Sternhagen sales is less than $1 million a year. How much time we are giving to, I think we are not giving even more than 5% of our time to it. We just want to see whatever we want to put it in the market, what are the gaps. We want to fill those gaps up, and we just want to let that brand move in the market. If it gives us $2 million, I'm fine. It gives $1.5 million, $2 million is fine. But when the right time comes, I think we are going to push it. So I think we are still in the -- we're still trying to learn the pricing game. If you are able to hit the right pricing game in the quarter 1, I will be able to answer your question in your quarter 2 conference call.

The next question is from the line of Tushar Raghatate from KamayaKya Wealth Management.

Sir, just wanted to know like in the domestic market, you've been increasing your dealers, distributors but in tandem, the sales are not growing. Firstly, the reason for that? And secondly, sir, what are your marketing efforts which you are planning going forward in order to create a brand in India? Yes, sir, that would be my questions.

Yes. See, there is -- it is not our company, the whole demand in India market is muted. There is a low demand. Last quarter, Delhi was suffering from pollution. All the construction was stopped. Everything was stopped come to a halt. Not our company, other companies also suffered that. So we have seen growth in other states of India but minus North. We -- when the North comes back in, you will see the growth in the domain. That's point number one. The point number 2 is when the market is flat or muted, we try to see what opportunities, what can we see in India. And that's what I'm saying. We're not looking at a quantity. We're seeing value-driven growth. So we are focusing on value driven. We launched -- I think I said it in my many replies to other fellow members but I say it again, we have launched new kind of things, workstation things, new faucet, new appliances, and I think that's going to drive us the growth in India. As far as the distribution and the branding is concerned, we are opening now more galleries. I think that's what giving us a very good momentum in the sales. The campaign, the Mira Kapoor campaign, we are going to keep on doing it. We had advertised a lot of advertising, which happened last quarter. We are very excited on television to see the brand is made very -- honestly, we've been able to maintain the sales. I think this kind of marketing actually would have not, we probably would have declined in sales. So I think we are good, we are able to maintain that. We do want to continue our momentum on brand building and marketing, but for the right terms.

Sir, in your stainless steel sink business, there's been a competition in India, like Nirali NG is a company. They've been a good competitor to you. So how do you see the competition in the stainless sink? I understand quartz sink you have a moat -- kind of moat in India. But on the stainless steel front and the appliances front, I just wanted to know why any buyer would go for Carysil appliances, why not any Bosch or any other companies, any MNC companies for the appliances business?

You will not be able to own everything, isn't it? Somebody buys Bosch, somebody buys Carysil, right? Somebody buys Kaff and whatever. It's a different priority. We all don't buy the same television, same clothes, the same way everybody cannot buy the same appliance. I think it's very clear. How we are able to sell appliances? I think it's a very good question is when the trust factor comes that this company, Carysil is a trusted brand. When I come to buy a sink, why not I buy appliances, give me a one-stop solution is what the key and that's why they buy it. So I think this one key stop solution is a major -- we launched in 7 -- I don't know, 7 years back, you were asking, so why are you launching appliances? Why launching -- what do we understand? Today, we have almost 20%, 25% of our business is appliances, right? As far as the stainless steel sink is concerned -- as far as stainless steel sinks are concerned, you have a right question. Nirali is not my competition. My competition is not anyone. My competition is we offer unique products, unique stainless steel sinks, which offers a better functionality, value and design end as I took customers. So when you're looking at an average value, our average value must be maybe INR 6,000, INR 5,000, INR 6,000 a sink. Maybe our competition has INR 3,000, maybe half than ours. So I think we are in a very different category of the market, yes.

The next question is from the line of [ Saumil Shah ] from Paras Investments.

Sir, how is the current quarter shaping up? I mean we were expecting to cross INR 850 crores in the current financial year. So are we on track to achieve it?

So I think we are definitely on a track to cross INR 800 crores. Now let's see how this quarter 4 ends, but we are definitely looking -- if the same momentum comes, I think we'll be doing INR 815 crores, INR 820 crores or something like that. Yes, something like that.

Okay. Okay. And sir, in terms of EBITDA, I mean, we were at the lowest in terms of EBITDA, 14% in last many years. So I mean, how is the current quarter shaping up? And by FY '26, where do we see the EBITDA margin settling down?

See, one thing, if we can just split on a standalone and consol basis, right? So I think our CFO and Mr. -- Executive Director, Mr. Sharma clearly stated. So if you see on a standalone, our margins have been -- yes, just one second. I'm just trying to pull out something for you. Standalone margins. Just give me a second. You're talking about on the standalone margin, right? The standalone margin...

So what happens, they do calculate the margin where they not calculate the other income. But the other income includes exchange difference and interest. So exchange difference is actually operational income, which you should include and if you include that...

That happens to [indiscernible] prices. So anyway, taken into that on a standalone basis, and obviously, you can talk to Mr. Sharma separately and give the details or on investor presentation, but the margin has improved from 18% to 19% on a standalone. On a consol basis, it's down to 14%. Is that the reason? There were 2 major reasons. One is the notional value impact, which we have taken on the U.K. companies and second is the U.S. company integrating into this. So this -- as on an operational level, it's not bad. Unfortunately, we had to face this, both these things. But moving forward, the exchange rate looks good. It looks strong. And so I think we should be getting back to our normalized margin guidance of 18%.

And adding to that, if you see what I said in my speech, every factor coming from the export freight to exchange to raw material price, everything in cycle is getting reversed. So whatever the factor was affected in the quarter 3, all the factors getting reversed in the current quarter itself. So it's not something we are talking per page. This is what is there, like freight from 9.3%, it is coming to 6.5%, like pound, which came down to 107, we today say [ 108.5%. ] Like MMA price from 1.79, 1.33 and 2.52, again, it came down to 2.02. So all these things factors, which has impacted quarter 3 is all coming down. So I think this is going to improve our margin.

Okay. So to summarize, from current quarter, we can go back to the 18% EBITDA margin, if I look at consol numbers?

We are going back on our original guidance of 18%. We still do not -- on the operations side, I think nothing is wrong. The margins are there but this notional which we do take for the U.K. And yes, U.S., yes, I think the U.S., we are looking at turning around, which quarter did not happened because it's a year-ending, there was a cash flow issue. So we were also trying to minimize the inventory level, which has also resulted in some decline in sales in the U.S. Yes. Minus that, I think operation, we are still very good. It has not been the best quarter. Yes, we agree. But we are going to 100% get back on our guidance of 18% plus.

Ladies and gentlemen, this will be the last question for today, which is from the line of [ Rupesh Tatiya ] from Intelsense Capital.

I have 3 more questions. So one question, sir, is this Carysil Surfaces, 9 months, we have had INR 6 crore, I think, PBT loss. So how do you see this subsidiary doing in FY '26?

No, no. There is no loss.

There is no loss in Carysil Surfaces. Loss you see in U.S. subsidiary...

United Surfaces.

United. Right, there's a loss in the 9-month period. But if you look at the quarter, it is at the break-even level. And we already stated this quarter will have break-even at the operating level, it will not be a loss. And going forward from quarter 1 onwards, we see that it turn into the profitable.

And is that subsidiary growing, sir? Can we expect like a $10 million kind of sales next year?

No. So I think we were expecting the demand to grow, which has not grown to be honest. We're expecting quarter-on-quarter the fabrication business to grow in the United States. The election is down the line, but which has not grown. So the strategy changes is not trying to be more quantity driven. We are changing our sources of material supply, which is going to yield better margins. Number 2, we are going to cut now the high-end gemstones, which again is going to increase our margins. Third, there are a lot of operating costs we were unnecessary in that, the fabrication. So which we are -- since the business has not grown in terms of revenue, we have to cut down those cost rates. So Mr. Anand Sharma is going to the U.S. next week. There's a strategy form. So all the unnecessary expenses or operating costs, even we have 3 showrooms. One showroom was making losses. So we are shutting down the showroom. So all necessary actions we are trying to see that in the quarter 4 itself of the current year on the operating side, we have a break-even.

That is good to know, sir. Second question, sir, is this steel sink, I think we were looking to expand capacity from 1.8 lakhs to 2.5 lakhs. So can you just maybe update on that?

So we are just waiting for the final clearance on IKEA. I think on the team expansion is going on, so 6 months going on. We are just waiting for some final clearance from our buyers to go ahead. Once that goes through, we'll be getting back to that.

So this capacity expansion will finish, let's say, by Q1, and we will be able to use this capacity next year?

It should finish by quarter 2 -- end of quarter 2.

And another question, sir, is, what is our marketing spend for the 9 months? And what is the strategy? And how do you see that number moving into FY '26?

So I think broadly on the purely branding advertising, we want to -- we definitely want to spend around 8% to 10% coming. So we need to start building our brand. I think we have not been visible as a Carysil brand. It's a great brand. But to order now to -- because we have taken the business of India very seriously. I had also mentioned that we are going to appoint one of the Big 4s to help us to build a strategy in India. So that exercise will be going to start from the 1st of March to build India. And I had mentioned this, we want to do the INR 500 crore India store in the coming years. So we would -- we are trying to do a blueprint for India, how do we build a INR 500 crore store in India within the next 5 to 7 years.

So this 10% number is only on the India sales, right?

Yes, yes.

And do we do any marketing spend in U.K.?

U.K., we do -- we don't do much of marketing in U.K. because it's mostly OEM, what we do for others, yes.

Okay. Okay. And then sir, my final question, sir, is if I look at U.S. business ex of United, it's like 13%, 14% of our business and U.K., which is, I think, a significantly smaller market is 40% of our business. So U.S. business, I think, at least theoretically, logically, if I think about it, should be significantly larger than U.K. business. So can you maybe update on some business development efforts in U.S.?

This deal what we have got through recently will put up, I think, the U.S. business to about around 25%.

Is this FY '26, 25%?

Yes. Yes.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, everyone. I hope we've been able to answer all your questions satisfactorily. However, if you need further clarification to want to know more about the company, please get in touch with SGA team, our Investor Relations Advisors. Thank you. Have a great day.

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