Cera Sanitaryware Limited (532443) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '21 Earnings Conference Call of Cera Sanitaryware Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devrishi Singh of CDR India. Thank you, and over to you, sir.

Thank you, Steve. Good morning, everyone, and thank you for joining us on the earnings conference call for Cera Sanitaryware Limited for Q4 and FY '21 earnings, which were announced yesterday. We have with us today the management team comprising: Mr. Ayush Bagla, Executive Director; Mr. Rajesh B. Shah, CFO and COO of the company; and Mr. [ Mahesh Taparia ], the Deputy CFO for Cera Sanitaryware. We will start with brief opening remarks from the management, following which we will open the call for Q&A. A quick disclaimer before we begin. Some of the statements made in today's conference call may be forward-looking in nature, and a detailed note in this regard is contained in the results documents that have been shared with all of you earlier. I would now turn the call over to Mr. Ayush Bagla for his opening remarks. Thank you, and over to you, sir.

Good morning, everyone, and thank you for taking time to join our call. The earnings for the fourth quarter and 12 months for the period ended 31st March 2021 were adopted by the Board of Directors yesterday, 10th June 2021. The earnings documents have been released to the stock exchanges. As we indicated during the last quarter, the demand from both retail and projects in Q4 was robust, and we witnessed strong traction across all markets and products. The home improvement theme has been resonating well with consumers. Project sites, which was gradually opening up during Q2 or in most cases, fully operational in Q3 and in Q4. The impact of reduced interest rates for home loans at 6.5% to 6.75% was the single most important factor for the surge in interest for acquisition of new homes. We truly experienced the elasticity of demand in relation to cost of capital in real estate. stand Stamp duty reduction in a few geographies for a limited period make consumers bring forward their new home buying decisions. This resulted in demand exceeding all estimates in Q3 and Q4. As the challenges posed by COVID-19 [indiscernible] in Q4, we started witnessing a notable improvement in our performance. The positive rebound in demand we witnessed starting Q2 FY '21 and continuing in Q3 from our most profitable verticals that is Sanitaryware and Faucetware businesses continued to sustain into the fourth quarter as well. The Sanitaryware business and the Faucetware business both continued their positive trajectory of growth during Q4. These present trends are expected to remain strong in FY '21, '22 as well. The temporary blip of the second wave has halted offtake of products as some markets remain closed in April and May. We, and Cera, do not see this as a worry going forward. Demand is expected to exceed supply, and since Cera's manufacturing operations remain fully operational in Q1 of '21, '22, there will be an increased product availability going forward. The media campaign on staycation at home, which was unfold by the company from September '19, directly connected with consumers post lockdown. Recently, the public TV recognized Kuch Pal Ghar Ke Naam as an innovative campaign, embedded with a social message relevant to the current times. In Q4 FY '21 the company initially took some more days than anticipated to restore the overall normalcy in production post the labor disruption of Q3. sanitaryware operations required a plant maintenance cycle and fresh mold making process, which took almost 45 days in Q4 to complete. So the onetime impact of plant disruption in Q3 also had a spillover effect in Q4. For the first 45 days, the Sanitaryware plant operated at a capacity utilization of 75%, and for the balance half of Q4, capacity utilization was 95%. Overall, on a 90-day basis, Sanitaryware plant operated at a capacity utilization of 85%, whereas our Faucetware capacity utilization continued to remain high throughout the quarter at 92%. There has been a strategy to develop agile infrastructure by leveraging a mix of in-house and outsourced facilities to enable us to rapidly respond to evolving circumstances. This proved highly beneficial in the backdrop of the partial disruption as we were able to increase volumes from our vendors to cater to the improved demand. Normal percentage of outsourcing in Sanitaryware, which is around 50% to 55%, rose to 65% during this quarter. In Faucetware, the normal percentage of outsourcing, which is also 50% to 55%, rose to 59%. Coming to our numbers. Revenues in Q4 FY '21 were INR 431 crores, higher by 39% on a sequential basis. EBITDA, including other income, was INR 65.62 crores in Q4 from INR 48.21 crores reported in Q3 this year. The EBITDA margin has been 15.2% versus 15.6% in Q3 FY '21. PAT was INR 43.02 crores in Q4 FY '21 versus INR 29.09 crores in Q3 FY '21. Due to a rebound in performance, Q4 this year, has nearly reached parity with Q4 last year despite the challenging backdrop due to the partial disruption at the manufacturing facility. For Q4 FY '21, the revenue for the quarter stood at INR 431.37 crores versus INR 293.24 crores in Q4 FY '20, which is up by 47% on a Y-o-Y basis. On a Y-o-Y basis, EBITDA, excluding other income for Q4 FY '21 was at INR 63.15 crores versus INR 42.4 crores in Q4 FY '20, an increase of 48.9%. The EBITDA margin for Q4 FY '21 stood at 14.64%, higher by 18 basis points. Profit after tax for Q4 FY '21 has been INR 43.02 crores against the Y-o-Y number of INR 38.47 crores, an increase of 11.83%. EPS for Q4 was INR 33.07 versus INR 29.58 in Q4 FY '19/'20. For Q4 FY '21, 48% of the top line was from Sanitaryware, 30% from Faucetware, and Tiles represented 20% of top line. Wellness was 2% of top line. On a Y-o-Y basis, Sanitaryware revenues registered an increase of 46.8%. Faucetware represented -- revenues increased by 62.3%. Tiles revenues increased by 39.2%. And Wellness declined by 10%. The Sanitaryware and Faucetware verticals remain the bedrock of the business with contribution of 78% to our overall revenues. Cera continues to witness encouraging demand for its newly launched products. During Q4 FY '21, and during FY '21, our new products contributed close to 20% of revenues. The company has been receiving positive responses towards new packaging design, which we introduced with the aim to create more brand awareness and for retail customer visibility. The quarter also witnessed an increase in raw material prices of ABS, of stainless steel, brass, ring and a few others. There was an increase in overall logistics costs due to rising fuel prices. These factors led the company to undertake a price hike of around 5% to 7% in Sanitaryware, 8% to 10% in Faucetware from the month of February '21. Inventory days in Q4 FY '21 were 51.66 days compared to 62.01 days in Q4 FY '20. Receivable days in Q4 FY '21 were 53.24 days versus 56.78 days. Payable days in Q4 were 52 days against 44.36 days in Q4 FY '20. Therefore, net working capital days in Q4 FY '21 were 52.9 days versus 74.43 days in Q4 of FY '20. As most of you who closely track our company are aware that this has been a strong focus area for Cera. Considerable effort to compress working capital has been made over the last few years. Some of the initiatives such as digitalization, establishing local warehousing has enabled us to offer just-in-time inventory management solutions for finished goods to trade partners and large customers. These efforts have gone a long way, enabling declogging at their respective locations and sites, leading to faster and smaller billing cycles for Cera, resulting in better receivable management. FY '21 has largely been regarded as a period of disruptions by COVID-19. The company has adapted well to these disruptions, and through its judicious capital management was able to increase its already high liquidity position. So as on 31st March 2021, our cash and cash equivalents increased to INR 479 crores compared to INR 230 crores on 31st March 2020. Cash position has increased and become a significant portion of capital employed. ROC, including cash of INR 459 crores was at 18%, and without cash, at 32%. Our CapEx spent for FY '21 stood at INR 10 crores as against our initial plan to spend close to INR 22 crores. CapEx for FY '21/'22 is estimated at INR 26 crores. Though significant liquidity has been released as working capital has contracted, we do endeavor to monetize all of consumer demand going forward. During FY '21, '22, we may use a small portion of liquidity to increase inventory levels and stock up on products from vendors. The Board of Directors have recommended a final dividend of 260% on a face value share of INR 5 and works out to INR 13 per share, subject to shareholder approval. To conclude, overall, the sector fundamentals are strong, and the domestic demand continues to grow at a steady pace. As we look at it, we continue to see an immense potential for our products. Healthy demand, coupled with our strong positioning in the industry, should further enable us to gain traction and build momentum going forward. On the whole, we are confident of the future growth potential and opportunities across our markets over the medium to longer term. On that note, I would now like the moderator to open up the line for Q&A. Thank you very much.

[Operator Instructions] The first question is from the line of Arun Baid from BOB Capital Markets.

Ayush, just a few questions on the number front. In this quarter, we did see our gross margins declining significantly, both -- if I look at the Y-o-Y numbers. Any particular reason for that?

There are 3 contributory factors, Mr. Baid. First of all, COGS increased due to 2 factors. In Faucetware sharp increase in the critical raw material of brass, and that sharp increase was consistent in every quarter from Q2. So the dramatic price decrease that in brass that we saw in Q1 of last year was beneficial to the company. We did reduce our prices. And as brass prices went up from Q2, Q3, Q4, we increased one price hike last year and one this year. That was one reason. The second impact was COGS was the mold. So post resumption of the factory on 22nd December, it took another 45 days for -- to run a maintenance cycle and to build fresh molds for Sanitaryware. So that's one reason why the COGS is impacted.

So going ahead, they should normalize, right? This is one-off in that?

So COGS, if you look at the last 6, 7 quarters, it's been between 49% and 51%, and that's where we feel it should normalize. So the raw materials in Sanitaryware are widely available. There is very little impact on pricing. So clay, feldspar, all of that have very little pricing, and availability continues to be plenty. The only moving item in brass. So zinc is less than 1% of raw materials whether prices have gone up. So brass is the largely contributory factor. And the mold making process completed on 15th February, since then, there's been no extraordinary maintenance cycle that the company has had to spend on.

So sir, incrementally, for this year, and going ahead, should we look at this quarter margins as the normalized margin -- EBITDA margins at least for the coming?

See, we always look at between 14% to 15%. We are at 15.2%. So anything between 14.5% to 15.5% is a good indicator. It's not really a guidance. It's a good indicator because we see the full effect of the February price hike kick in, in Q1 of this year.

Okay. And sir, today morning, in your interview, you have basically indicated that INR 1,450-odd crores, it wasn't a guidance, but actually indicated in that call with CNBC. So you have mentioned 17% CAGR after that. So basically, you are trying to say that this growth of 17%, 20%, is sustainable beyond FY '22? Am I correct to understand that?

If you -- even if you look at the year that has gone by, 2021, we would have ended with INR 1,350 crores. So the lost sales in Q3, we had given in our last call was INR 65 crores. The lost sales in Q4 have been INR 31 crores. So the INR 100 crore deficit to -- would have been made up from there. So we would have hit INR 1,325 crores in any case. So the plant disruption cost us lost sales of INR 100 crores, and the demand is way ahead of supply. And that is the phenomenon we are seeing from August. There's been no change. The second wave may have closed down a few metro markets, project markets continue to function. Wherever dispatches could be made, they were made. And as markets are opening up, there's again going to be a surge in demand. So demand is not the issue right now. It is just the factory's ability and vendor's ability to supply. And there's one more interesting factor. We have continuously spoken about us being a atmanirbhar company and relying on domestic vendors, and that's why we've given out our China numbers consistently. It's always less than 5% of top line. So our imports from China have consistently been less than 5% of top line. During the year, there was an 11% appreciation of the Chinese currency against the U.S. dollar. So those companies, which was China-dependent, which had not built capabilities in their factories, not only were they constrained to import, but they were unable to price their product to pass on those increases to the consumer. So these are a lot of moving parts, and each of the new parts is working in favor of the company right now.

Sir, in this quarter, current quarter, that -- our production is normalized right for the plant, Q1?

Correct.

So whatever sales you have lost technically because of COVID in the first quarter, we'll be able to catch up with that because we have the production already in the interment quarter, right?

That's right.

[Operator Instructions] The next question is from the line of Pritesh Chheda from Lucky Investment Managers.

Sir, it would be helpful if you could give the mix for FY '21? And what was the growth or decline in your 4 categories for FY '21? That's the first question. And second, so what is the total price hike that you would have taken in FY '21, which flows through FY '22? And did we somewhere mentioned that there is a possibility of INR 1,400-plus crores of sales in FY '22 in second quarter?

So I'll answer the first question first. For the quarter, Sanitaryware was...

I want them for full year, sir.

I'll give you both.

No, quarter 4. I have written. For full year, if you could.

Okay. So for the full year, Sanitaryware was 48.51% of top line. Faucetware was 28.28%. Tiles was 20.80%. And Wellness was 2.41%.

And the corresponding growth rates or decline in Sanitaryware, Faucetware?

Sanitaryware was a decline of 0.62%. Faucetware grew by 10.49%. Tiles was minus 6.62%. And Wellness was minus 34.54%. And then coming to price increase. In August, we took a price hike of 3% to 5% across all products. And in February 2021, we took, in Sanitaryware, between 5% to 7%, and in Faucetware, 8% to 10%. And...

Okay. Basically if -- yes. Please, go ahead, sir.

So the way the brass prices have behaved, there is a good case to have an intermediate price hike between now and August. So that is under discussion. It may or may not take place. That's under discussion right now. And the third question was your -- the run rate on revenues, right?

Yes. You mentioned something on lost sale of '21 of INR 100 crores, so you think a certain scale of [indiscernible] is possible. What would be that number?

Because the factory had a 82-day disruption in Q3 and it had 45-day lower than normal capacity utilization in Q4, complicated products, which were made at the factory could not be sourced from anywhere else because vendors aren't make those products. So lost sales of INR 100 crores took place if you combine Q3 and Q4. So that's why if you look at our INR 1,201 crore top line, it's closer to INR 1,310 in any case.

Okay. That's all you're putting?

Yes. So 16%, 17% growth is a normal run rate. I'm not even looking at this 46% run rate that we had in Q4 versus Q4.

So you're saying that 15% to 17% growth rate is possible next year is how you're putting on a normalized -- on that INR 1,200 crore revenue because you're assuming it's not INR 1,200 crore, but actually it's INR 1,300 crores. That's how you're putting that?

Right. That's right.

Okay. And lastly, sir, on the margin side, aren't there any levers on higher scale, which can flow through on the margin profile?

There are 2, 3 levers. First, we had a burst in advertising and publicity spends from September '19 to March '20. And that's the reason advertising and publicity during this lockdown year could be curtailed because that was a very successful campaign. That is one. Then INR 10 crores of contracts for renters and godown rents, et cetera, were renegotiated. So that was another reduction in fixed costs. And finally if you look at the issue of variable cost to fixed cost in the company is 80-20. So that will be a very important operating lever for the company. And fourth and most importantly, the margin profile for products taken in Sanitaryware especially from vendors is as close to own manufactured products. So share of outsourcing will increase with increase in revenue. And the margin profile will be maintained. So these are the 4 levers.

Okay. So because the A&P spend was curtailed this year, right, in '21, is it a case where it rises and hence, you are still pegging the margin at about 14.5% to 15.5%?

See, normally, our advertising, publicity is 4% of top line. But now, that is no more a rigid rule because the marketing professionals choose to have these spend in smaller bursts. And then they evaluate the impact and then they go for many bursts during the year. So if the burst remains effective for 6 months or 9 months and they postpone the next burst. That's how we calculate the numbers.

Can you quantify what is the A&P spend for '21 as a percentage of sales?

It will be around 1.5%.

Okay. So that is 1.5% versus 4% in '20?

Yes. Correct. 3.5% in '20.

Okay. Should this go back to the normal?

No, it's not known right now. These are going to be small burst, and then post evaluation call will be taken. In any case, there's a shortage of product.

The next question is from the line of Archana Gude from IDBI Capital.

Congratulations on a very good set of numbers. Sir, 2 questions. Sir, if you see most of the organized players have gained the market share in the last 2, 3 quarters may be -- or pipes or may be or paints. So how are we placed in terms of market share?

See, currently, there is no external data available or industry-wide data available for us to be able to conclude any market share. So we consider ourselves to be market leaders and others will tell you the same thing. Our Sanitaryware numbers are well known. So it is HSIL, Cera and Jaquar are neck and neck. And Parry is one step behind in sanitaryware numbers. We are #2 to the market leader in faucetware. So we know our faucetware numbers and the other players faucetware numbers. So I mean, the industry data is not really available or validated by third parties. So for me, to compare on us on an industry-wide basis, it's very difficult. In any case, all the MNCs are unlisted. Couple of domestic players, which are held by MNCs are also unlisted. So it's very difficult to get authenticated data.

No sir, what I was trying to understand is, is that the competitive intensity from the small unorganized players has reduced in the last couple of quarters is what I want to understand.

In sanitaryware that theme of unorganized to organized has fully played out because sanitaryware players provide a 10-year warranty on the ceramic product, there is after sales service. Similarly, for faucet also, we are the only company provider 10-year warranty versus a 5-year warranty by the rest of industry. So after sales service, availability of spares, those have become very critical factors. The price gap for a product that's going to last to between 10 and 20 years sometimes is miniscule at the lower end. So that theme of sanitaryware moving from unorganized to organized has always played out 80% plus of the market in any case, would be organized.

Okay. And faucetware?

Faucetware anything between 60% and 70% is organized.

Okay. Sure. And sir, the second wave of COVID has been like very badly affecting the ruler, which was supporting the Q3 and Q4 sales. So like how has been April and May for us? Is there any improvements from June like -- June in demand?

See, demand continues to be very strong, and the problem for us was supply. So the most important factor during the second wave in April and June was the factory will continue to operate at 95% capacity. So whatever little inventory has been built up will easily get absorbed in June and July. Last year, we were grappling with supply issues throughout the year. This year, that is the single-minded focus of the company. So demand is not an issue. Project sites remained open during the second wave in most places, and only retail and dealers suffered with that demand will come back very strongly in June, July.

Sure, sir. And sir, lastly, sir, do we have any dividend policy at place?

Yes. Yesterday, a revised dividend policy, which takes into account a lot of external economic and internal factors such as availability of positive cash flow, CapEx requirements, business risks, all that has been captured in a document. In any case, there is a dividend policy on our website for many years, and that has been revised with a little bit of more focus with numerical clarity. And that will be immediately placed on the website. It was adopted by the Board of Directors yesterday. So the past dividend guidance of between 14% to 18% of PAT being declared as dividend, that is pretty much the guidance going forward.

[Operator Instructions] The next question is from the line of Prakash Kapadia from Anived Portfolio Managers.

Yes. I had 2 questions. So on the real estate sector, we are seeing larger, cities demand for households being much better this time as compared to Tier 3, Tier 4 cities. Historically, what trends have you seen in metro cities and Tier 1 cities see higher demand? Is it easier to sell more value-added products or high value-added products? Are we also witnessing that trend? And if that hypothesis is true, then the value growth should be much higher than what we are looking at in the near term?

The metro towna, especially Delhi, Bombay and Bangalore, they look very appealing to all sanitaryware and faucetware companies. So maximum efforts by any new entrant in the business especially MNCs are made in these 3 markets. So not only is there intense price competition, but companies spend a huge amount on display, rentals and renovation of the interiors. Dealers also are very demanding. They want to get a lot of freebies from the company. So we believe that the competitive intensity in Tier 1 towns is much higher. And that's why historically, our numbers have been always tilted towards Tier 3 towns. So if you like, I can give you the breakup, there's not much change in the percentage, but our focus has always been Tier 2 and Tier 3 towns, where 65% to 70% of our sales take place. Tier 1 towns, of course, we have a significant presence in these 3 markets, but the competitive intensity and the focus of all MNCs is in these 3 places.

Okay. So even now, we are witnessing that trend. You think there is no major change in terms of metro or Tier 2, Tier 3 even now?

No, I'll give you some data that will give you -- throw further light. So for -- in Q4, Tier 1 was 31% of top line for us. And for the year, it was about 27% of top line. Tier 2 was 14% for the year, also 14%. Tier 3 was 54% of top line in Q4. And for the year, it was 58%.

Okay. Understood. And on the Tier 2, Tier 3 side, in the gone by quarter, most of the lockdown was more broad-based this time as compared to the lockdown last year. So how does that demand shape up. Is there a huge pent-up demand because most of the retailers who are shut or semi-shut practically, say, for 35, 40 days during the quarter. So does that incremental demand also lead to pent-up demand once things open up? And how do you pop up in that scenario where you are paying, obviously, the plant and capacity ramp-up seems to be the focus. So how are we managing the scenario between the possible higher demand and capacity?

See, second wave happened in April and May. So til 31st March, there was virtually no impact on any market shutting down. During the second wave, most of our project customers continue to function. Now the dealers that shut down, they have nearly staggered their demand. So I would not call it pent-up demand. I'll call it, a chain of sustainable demand, which has got staggered by 60 or 90 days. So since August, I've been saying that this is not any pent-up demand. This is not a must-have consumer durable. It's completely discretionary, but there has been sequence of events where a lot of projects have now near completion. Because the end consumer is buying, projects find it easier to complete and sell their inventory. And that's where we come in. So Sanitaryware, as company has come in the last 3 to 4 months of project completion. That's been a real awakening that's been positive surprise, and that is fully sustainable. So I don't see this trend as pent up at all. Even retail customers and dealers are simply staggering their purchases due to the second wave. The important thing was to keep sourcing from vendors and keep the factory operational. So last May and last April 2020, there were negligible sales. This May and April were decent sales. So we definitely crossed 3 digits combined in these 2 months. So if you compare it to last year, it was much higher. If you compare it to any other normalized year, it was lower, but it will easily be made up in June, July.

The next question is from the line of Saurabh Shroff from QRC Investment Advisors.

Ayush, congratulations on a great set of numbers. As -- my one question is you've mentioned multiple times that demand is much stronger than supply. And I'm guessing this is in your case as well as the industry. Can you help us understand what is our capacity addition plan? And do we see any issues in meeting this demand? Or what are you going to do about it?

See because we have been very careful with CapEx all these years, we didn't ramp up capacity in our manufacturing operations. We chose to build up capabilities. And that worked out well for us because we were neither China-dependent, and in any case, Indian vendors were not in a position to manufacture many of the complicated pieces in sanitaryware and faucetware. So each year, a new list is made on basic items to be outsourced to third-party vendors, and that continues. So as the top line grows, the bulk of the contribution of incremental sales will continue to come from vendors. And our factory will be used to make more and more high-end pieces. So if you ask me volumes of the factory, that may not be a good benchmark, but value being made in the factory will continue to increase both Sanitaryware and Faucetware. So I can give you a flavor on the CapEx that we have planned. So for the year 2021, the total CapEx budget was INR 21.82 crores, of which only INR 9.84 crores was spent. And for financial year '21, '22, the total budget is INR 25.59 crores, of which the slate is Sanitaryware automation at INR 6.69 crores, Faucetware automation INR 4.97 crores, INR 8.4 crores in customer touch points. And logistics and IT is INR 5.53 crores. So there's no major capacity addition planned in the current plant right now.

So between this whole outsourcing mix, you think that we should not be at a disadvantage in terms of meeting the strong demand that is there, clearly?

See, that's why we are all looking at all options. First, a lot of cash was released by compressing the net working capital days from 74 to 52. So maybe that 52 needs to go up a little bit, the inventory days and needs to go up a little bit from current level of 51 days. So that -- those are under discussion. There are plans being made to increase inventory days so that we don't have to turn away any customer like we had to last year. So that's the single most important factor for the company this year.

Okay. Got it. And I saw on your website, you also have started some Italian kitchen line as well. I'm getting it's still very small, but can you talk us through how you are thinking about adjacencies and new lines of business?

See, we entered into arrangement with an Italian company where we would not have to incur neither any CapEx nor any OpEx. So this is a brand called Senator Cucine. We take the full advance from our customers, and we designed a bespoke kitchen for his home. And the designs are then implemented in the Italian partner's factory in Italy and then shipped to India, where it's installed. So this is a 0 working capital or OpEx business. And it's still very small. Top line is less than INR 5 crores. So as and when it scales up beyond INR 10 crores, then, of course, the Board will take a call on what it wants to do with that business.

Okay. And any other sort of products that you all have added? I mean there was a whole plethora of Wellness products and now this kitchen line. So I just want to understand how the Board and the management is thinking in terms of new lines of businesses? And what do you think is the potential scale on this kitchen business? Because obviously, this is very high end, I guess, competing with the big brands -- and correct me if I'm wrong, so is this a competition with Poggenpohl and Häcker and things like that? Or is it more Indian pricing to Italian product?

See, it's right at the bottom of the pyramid starting at INR 2.5 lakh for the entire kitchen. So it competes with even a carpenter's version of a kitchen. And it can go up to INR 15 lakhs. And we figured that between INR 15 lakhs and INR 30 lakhs and beyond, there's a lot of competition. We don't want to be there. We want to be at the bottom of the pyramid to get certain volumes, and we got a very good deal from my Italian partner. So...

That INR 2.5 lakhs -- I'm sorry, that INR 2.5 lakh, this is still all imported landed into India?

Yes, yes.

With margin for us and them?

Plus gadgets plus electronic white goods.

Of course, yes. Okay. Got it. Okay. This is interesting.

Then the second question you asked about new SKUs. So I'll just tell you why our SKU focus remains in Sanitaryware and Faucetware. There are plenty of opportunities in Sanitaryware and Faucetware. In -- even during these COVID times, in Sanitaryware, in Q4, we launched 22 products, and during the year, we launched 75 products. In Faucets, during the year, we launched 11 products. So there are plenty of opportunities in these 2 businesses. And we had, as a pilot project, started 3 years ago, a water heater business, which became a INR 8.5 crores to INR 10 crores business. So the Board is not very keen to have any of these INR 8.5 crores to INR 10 crores kind of businesses, which are too small for the company. So gradually, the water heater business will be phased out. So that's what you mentioned on the Wellness side.

The next question is from the line of Achal Lohade from JM Financial.

Yes. My first question is how do we look at the Tiles business? I mean, it's been a few quarters that we are kind of struggling with the numbers. I mean on a Y-o-Y, it is a strong growth of 40%. But if I look at on a 2-year figure, it is still a drop. So how do we look at this business in terms of the scale-up? Or Where are we in terms of the growth aspiration?

See, the Tiles business has worked out well for us for 2, 3 reasons. First, now soluble salt is only 7% of sales. It's the first time that soluble salt is single digits. That's low end and lowest margin. And the GVT, plus double charge is now almost 55% of sales, which is the highest end, high margin. So though Cera doesn't have any market leadership or brand premium in Tiles like it has in Sanitaryware and Faucetware. The Tile business is operating on 50% cash and carry. So again, inventory days are reduced -- inventory days in Tiles is close to 0 because there is direct dispatch from vendors to the marketplace. So 1/3 of our total Tiles sales is from our joint venture, alliance companies, and 2/3 is from completely third-party vendors. So inventory days are close to zero. And finally, receivable days -- the tiles industry as a whole has always had a problem of high receivable days. So 50% is cash and carry, and all incremental dealers running added only on 100% cash and carry. And we do not conduct any Tile sales below a certain threshold margin. So though the Tile sales has -- may not be a very large number, but every sale is profitable. And we have incurred no CapEx. See, if we had put up a plant, then we're dealing with a lot of issues in our plant, and how do you respond to changing design changes and all of those factors. So the decision taken in 2015, '16 was the most important decision not to invest in any capacity.

Right. So how do we look at it in terms of going forward. Is it going to be a big growth driver, or not really? It will be in line with the aggregate growth, you're saying?

It all depends on the tight market growth. You see, the market leaders are also exporting a lot of tiles. We have not been in a position to export tiles. So the top line that the market leaders are saying is also a result of tiles export. So that is not happening. But overall, profitability in Tiles is increasing. We are getting some pricing power, and 55% to 60% high-end sales. So that's the most important factor.

Right, right. Understood. And just one more question with respect to Sanitaryware. Now if I look at our top line for Sanitaryware, in FY '19 was close to INR 700 crores. For FY '21, we have closed at INR 582 crores, and you said that we lost about INR 100 crores of revenue largely in the Sanitaryware piece, Right?

Correct.

So that means 2-year, we were kind of flat, even if I gross it up. So how do we see the growth? I mean when you say 15%, 17% growth, is it going to be largely driven by the Faucets, or even Sanitaryware can grow at that pace given the competitive intensity?

See, Sanitaryware, we achieved INR 581 crores this year in 6 months of effective working. And our highest number was INR 603 crores of '19, '20. So we are almost there. On the best 12-year numbers have been achieved in effective 6 months. In Faucetware, again, we have beaten all previous numbers, even the best year number, that is beaten. So Faucetware, INR 339 crores. And we are a market #2 in Faucetware. And we are only an 11-year-old player in Faucetware. So 16%, 17% was the growth being offered by the market even during this year, which we couldn't monetize.

You're talking about -- sorry, sorry, I'm interrupting, Ayush. You're talking market growth for Faucets or Sanitary plus Faucets put together?

I'm saying in Sanitaryware, we achieved INR 581 crores in 6 months of effective working. Our all-time highest number of Sanitaryware was INR 603 crores. So then you can understand the company's achievements. So achieving another 16%, 17% growth, adding another INR 100 crores to Sanitaryware during 2021 is not difficult because we won't allow that. Secondly, Faucetware. We achieved INR 339 crores, which is higher than even the best year of '19, '20. We got about 9 months of effective working in Faucetware. So adding another INR 50 crores in this year is not difficult. Whether Tiles adds top line or not, these 2 businesses together can easily add INR 150 crores is what I'm saying.

The next question is from the line of Rajesh Ravi from HDFC Securities.

Sir, you share the quarterly breakup -- revenue break up...

[Operator Instructions]

Hello? Am I audible now?

Yes, sir.

Yes. Sir, can you give the revenue breakup for the quarter and last year's same quarter, please? I missed out.

Yes. So Sanitaryware is 48.67% of sales this quarter. For the year, it's 48.51%. Faucetware is 29.81% for the quarter and 28.28% for the year. Tiles is 19.70% for the quarter and 20.80% for the year. And Wellness is 1.82% for the quarter and 2.41% for the year.

Okay. And sir, in terms of our balance sheet, we have significant cash balance, and your CapEx outlook also is -- you're not expected to incur major CapEx -- large CapEx. So what's the plan for this cash pile up which will continue?

So we had INR 230 crores of cash balance when we started the year, 1st April 2020. And working capital days was 74. So working capital days, which came down by 1/3 to 52 was one of the reasons while cash in hand increased consistently every quarter, and now we've ended up with INR 459 crores plus unrealized gains of INR 20 crores, making it INR 479 crores. Some part of that will be used this year to increase our inventory days. And that's going to be very important. CapEx is planned only at INR 22 crores. And each year, we have cash surplus due to profits of between INR 118 crores to about INR 150 crores. So this year, if you add the PAT and depreciation is about INR 135 crores and you take away CapEx of INR 9 crores and dividend of INR 20 crores, that leaves to you again, with a cash surplus of INR 105 crores, even for the year. So if your question is, is there a major CapEx plan currently, we have toyed with a few plans, but no decision has been taken. And if there's a special dividend or a buyback plan, that also has not been -- that's a decision that has not yet come in front of the Board. So no decision has been taken.

Okay. Because what we understand is that even incrementally for '22, given the top line that you're looking at with a healthy margin of around 14%, 15%, our cash accrual will be strong even in FY '22. Even if you factor in the working capital increase, then also you may not have to dig into your FY '21 balance cash. Is the understanding right?

That's correct.

Okay. Okay, sir. And on the segment-wise growth outlook, as you mentioned that in Sanitaryware, you're looking to add at least INR 100 crores growth -- top line growth this year, and INR 50 crores in the Faucetware. But when I have to look at 2- to 3-year view, what is your outlook? Will they continue to -- both these businesses will continue to grow at 15%, 17%? Or do you see different growth trajectory for these 2 business segments?

See, the best way to look at that is to look at the past. So even during the downturn in real estate, the company's top line doubled itself every 5 years. And that happened twice between 2010 to 2015, and from 2015 to 2020. So going forward, on a higher base, we always estimated that the company will now double itself every 7 years. But given the surge in demand, we expect again the company to double itself every 5 years. So if you look at that 15% to 17% top line increase is definitely possible, both in the short term and in the medium term, consistently every year.

Okay. And almost 50% of this...

[Operator Instructions] The next question is from the line of Rahul Agarwal from InCred Capital.

Congratulations for a good result. Just 2 questions, Ayush. Firstly, on the CapEx side, when you say INR 9 crores to be spent on customer touch points, which is basically part of sales and marketing. Could you explain a bit as an exactly how -- where is this money spent? And how does it help in incremental sales? That's the first question.

So we have company owned 10 large-format customer touch points in the major metros. And because of the surge in demand in states like AP, Telangana and Karnataka, we put a very large format of between 8,000 to 12,000 square feet customer touch points, which are owned by the company in Hyderabad and Bangalore, where there are tremendous amount of walk-in customers. And these are experiential customer touch points. So there are no sales taking place from these. And the customer is then directed to a dealer in his projects area or a dealer contacts them, et cetera. So we found a direct correlation between surge in sales and spending on these customer touch points. These are all either in large-format office buildings, or malls, or retail outlets, or shopping areas. So the Hyderabad one is just opposite the IKEA in Gachibowli. In Bangalore, we have it on 100 Feet Road. So the best 2 locations possible. And these are visited by plumbing contractors, civil contractors, architects, homeowners and developers. Now we are also toying with a hybrid model where we go to a dealer and try and create some uniformity in their retail outlet's design with the customers -- with the company-owned experience center. So by spending INR 1 crores, INR 1.5 crores on our dealer's outlet, we can achieve what we would by spending INR 3.5 crores on a company-owned outlet. So the hybrid model is under discussion, and the company might open a fewer of its large format customer touch points. The real estate is never owned. It is always rented. So this is largely the interiors and the fit-outs.

Got it. Got it. And secondly, you mentioned on the market share bit, obviously, there are no numbers sanctity, but still just to discuss. HSIL, Cera and Jaquar , you said are neck-to-neck on Sanitaryware. Parryware, a notch below. And on Faucetware, we are the #2 player. Is this correct?

That's right.

And on the market size, basically, if -- the way I understand, Sanitaryware is about INR 4,500 crores to INR 5,000 crores, and Faucets is about INR 8,500 crores to INR 10,000 crores. Is that correct? That's the range to work with?

So Sanitaryware though we really don't have a authentic number, it's a little lower than the number that you mentioned.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Ayush Bagla for closing comments. Over to you, sir.

Thank you, Steve. I would like to thank everyone for attending this call and for showing interest in Cera Sanitaryware. Cera remains positive at its strong positioning in the industry and improving macros would help it deliver steady and consistent growth going forward. With this, I hope, I've been able to answer your questions satisfactorily. Should any of you need any clarification, or would like to know more about the company, please feel free to reach out to me or CDR India. Thank you once again for taking time to join the call and see you all next quarter. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Cera Sanitaryware Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.