Cera Sanitaryware Limited (532443) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the 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.

Thank you, Yashashri. Good morning, everyone, and thank you for joining us on the earnings conference call for Cera Sanitaryware Limited for Q4 and FY '25 earnings, which were announced yesterday. We have with us today the management team comprising Mr. Vikas Kothari, CFO; and Mr. Deepak Chaudhary, VP, Finance and Investor Relations of 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 will now turn the call over to the management for their opening remarks. Thank you, and over to you, Deepak.

Thank you, Devrishi. Good morning, everyone. On behalf of the management team of Cera Sanitaryware Limited, I would like to welcome you all to our earnings conference call. I will begin by sharing some updates on the operations and strategy, following which our CFO, Mr. Vikas Kothari, will run you through the key financial highlights. I'm delighted to share that we concluded the financial year 2025 on a positive note, supported by stable margins and steady performance across key segments. Our focus on operational efficiency and disciplined cost management has been instrumental in sustaining profitability and supporting our performance. The operating environment in Q4 remained subdued with continued softness in consumer demand across end markets. Despite this, the company managed to deliver a satisfactory performance for the quarter, largely driven by our strong business fundamentals, sustained focus on cost and efficiencies and consistent execution across key verticals. Revenue from operations in Q4 FY '25 stood at INR 578 crores, registering a year-on-year growth of 5.7%. EBITDA stood at INR 121 crores with improved margins at 20.4%. Our Faucetware segment reported a year-on-year growth of 9.6%, supported by resilient demand and good acceptance of our wider range of SKUs. In the Sanitaryware segment, while demand remains subdued, we remain optimistic that structural drivers such as urbanization, rising disposable income, desire for improved living standards as well as home renovation and upgradation cycles will support the recovery over time. In Q4 FY '25, the Sanitaryware and Faucetware business contributed to 48% and 40% of the total revenues, respectively. During the quarter, capacity utilization stood at 95% for Faucetware and 90% for Sanitaryware. At the same time, the B2B segment continues to gain traction, contributing 40% of revenues during the quarter, up from 35% in Q4 FY '24. We are witnessing strong preorder momentum from the real estate sector, supported by rising construction activity and higher disposable incomes. Cera's long-standing brand equity and track record of quality and reliability has enabled us to consistently win project orders, further strengthening our B2B growth trajectory. FY '25 demonstrated our ability to execute across multiple strategic fronts despite a challenging demand environment. We enhanced our product portfolio with the launch of approximately 431 new SKUs across the CERA and Senator brands. And undertook a comprehensive portfolio reinvention through the establishment of a dedicated design center at our factory. This has helped drive innovation in categories such as designer basins, slim profile water closets and PVD coated faucets. During the year, we also significantly expanded our retail footprint, launching over 342 new stores and expanding our company-owned Cera Experience Centers at Mohali, Jaipur, Pune and Lucknow, bringing the total to 13 across India. Our retailer loyalty program continued to scale effectively, now engaging over 24,400 retailers. Additionally, we strengthened market presence through participation in leading industry forums across cities such as Kochi, Vijayawada, Lucknow and Siliguri. We continue to take progressive steps in evolving our brand architecture and sharpening our premium and luxury positioning. Our flagship brand, CERA, continues to perform well, while our premium brands, CERA Luxe and Senator are poised to gain momentum in an evolving market landscape. Backed by a clearly defined product road map and supported by in-house design, manufacturing and R&D capabilities, we are prepared for a focused scale-up in FY '26 and beyond. There has been substantial progress on the Senator brand. The complete product range has now been finalized, covering faucets, sanitaryware and wellness products to offer a full spectrum of bathroom solutions. In a significant strategic move, we are setting up a dedicated team under the leadership of Mr. Ramesh Baliga, Chief Business Officer, to exclusively drive the Senator brand. This move demonstrates our increased commitment to developing Senator as an independent premium retail brand. As part of efforts to deepen engagement with the architect and design community, we have partnered with the Festival of Architecture and Interior Designing as a powered by sponsor. This platform will enable us to showcase Senator's full range across curated events in metro cities. This association includes exclusive branding, product demonstrations and direct connects with key industry stakeholders. We believe this will significantly boost Senator's visibility in the premium design ecosystem. Our flagship Senator stores have already begun operations with 17 stores functional as of March 2025, and we plan to open approximately 40 to 45 Senator stores during FY '26. Separately, CERA Luxe products are also being prominently showcased in over 50 stores -- also set to be prominently showcased in over 50 stores by the end of FY '26. While this scaleup will take place over time, the initiatives underway today lay a strong foundation to capture long-term growth opportunities in the premium and luxury segments. Our advertising and marketing spend for FY '25 stood at INR 54 crores. Our brand ambassador, Kiara Advani, continues to play a vital role in reinforcing brand identity and driving consumer engagement. We executed high-impact campaigns during the Lok Sabha and Delhi elections across 40-plus national and regional news channels, significantly enhancing the brand visibility. This was further amplified through strategic media placements on platforms such as Big Boss OTT and Big Boss Tamil, helping us deepen our connect with younger and regional audiences. We are seeing strong traction from digital campaigns across popular social media platforms with strategic influencer collaborations further enhancing visibility and engagement with our aspirational consumers. We are increasingly adopting AI-driven automation and hyper-local marketing to improve campaign efficiency and to personalize communication. Our Unboxing Smiles initiative with live showroom displays with biannual product launches has also helped energize the channel partners and consumer excitement around the new collections. Also launched our e-commerce platform during the year, a significant step in our digital strategy, allowing consumers to browse and order products online while enabling fulfillment through 200-plus onboarded channel partners. This initiative strengthens our omnichannel capabilities and opens new demand and revenue opportunities across touch points. During the quarter, Cera began implementing a robust dealer management system to enhance billing transparency and operational accountability. The system automates invoicing and integrates directly with our internal software platform. We have already onboarded our top 50 dealers and plan to expand this to 150 to 200 dealers over the next 6 months. This will greatly enhance the data and analytics available within the company, providing further insights on trends across products, designs, regions, micro markets, et cetera. During FY '25, we incurred a total CapEx of INR 22.84 crores with investments directed towards enhancing manufacturing infrastructure, upgrading retail experience centers and strengthening our IT and digital backbone. We also allocated capital towards display enhancements and strategic brand building initiatives to support our premiumization agenda. Building on these efforts, we have earmarked a CapEx of INR 24 crores for FY '26, comprising largely of routine investments along with targeted spending on brand development initiatives. To summarize, FY '25 was a year of steady execution amid a soft demand environment. While overall market recovery was slower than expected, we maintained healthy margins, expanded our premium product portfolio and deepened our presence across both retail and project channels. As we move into FY '26, our focus remains on building our brand, strengthening distribution and advancing digital and customer experience capabilities. With a strong legacy, trusted brand, financial discipline and fully integrated manufacturing operations, Cera is well positioned to drive long-term growth and create sustained value for all stakeholders. With this, I would like to hand over to Mr. Vikas Kothari, our CFO, who will present the operational and financial highlights for the quarter ended 31st March 2025. Thank you, and over to you, Mr. Vikas Kothari.

Thank you, Deepak. A very good morning to everyone. I will now provide a brief overview of the company's financial performance for the quarter and year ended 31st March '25. In Q4 FY '25, revenue from operations stood at INR 578 crores, registering an increase of 5.7% from INR 547 crores in Q4 FY '24. EBITDA, excluding other income, stood at INR 106 crores as against INR 92 crores in Q4 FY '24. EBITDA margins, excluding other income for the current quarter stood at 18.3% as against 16.8% in Q4 FY '24, registering a healthy increase of 150 basis points. The rise in the margins was primarily driven by effective cost management, enhanced operational efficiency and favorable operating leverage resulting from increased revenues. Gas prices increased during the quarter. The average gas price from GAIL was INR 28.68 per cubic meter in Q4 FY '25 as opposed to INR 28.35 per cubic meter in Q4 FY '24. Similarly, the average gas price from Sabarmati rose from INR 55.62 per cubic meter in Q4 FY '25 from INR 50.12 per cubic meter in Q4 FY '24. Drawal of gas from GAIL was at 73% and from Sabarmati at 27% in Q4 FY '25. The weighted average cost of gas in Q4 FY '25 was INR 36.03 per cubic meter, which is notably below the industry average. Gas constitutes 3.5% of our total revenue. For the quarter under review, revenue contributions were as follows: Sanitaryware at 48%, Faucetware at 40%, Tiles at 9% and Wellness at 3%. On a Y-o-Y basis, faucetware revenues increased by 9.6%, Tiles by 4.7%, Wellness increased by 46.7%, while Sanitaryware revenues marginally decreased by 1.6%. Our core segments, Sanitaryware and Faucetware contributed 88% of the total revenue. In Q4 FY '25, 42% of our sales were in premium category, 35% in mid-category and 23% at entry-level category. Profit after tax for the quarter stood at INR 86 crores, registering an increase of 14.1% from INR 75 crores in Q4 FY '24. EPS for the quarter stood at INR 66.36 versus INR 57.9 in Q4 FY '24. In terms of the working capital management, inventory days increased from 70 days to 79 days, receivable days from 34 to 44 days and payable days decreased from 44 days to 43 days. Consequently, the net working capital increased from 60 days to 80 days in quarter 4 FY '25. Regarding the sales distribution, Tier 1 cities accounted for 35% of our total sales; Tier 2 cities, 21% and Tier 3 cities led with 44% of the total sales. For FY '25, the company reported net revenue of INR 1,915 crores, registering an increase of 2.4% from INR 1,871 crores in FY '24. EBITDA, excluding other income was at INR 291 crores, a slight decrease from INR 294 crores in FY '24. Profit after tax stood at INR 247 crores as against INR 239 crores in FY '24. Overall, the company maintained stable revenues and profit on a Y-o-Y basis. As on March 31, 2025, our cash and cash equivalents stood at INR 719 crores. In conclusion, we remained confident in Cera's financial resilience and long-term growth potential. With a strong foundation in place, we are well positioned to benefit from improving market conditions as demand gradually recovers. Our focus will continue to be on prudent financial management, efficient capital utilization and sustained margin discipline to drive value creation in the quarters ahead. Going ahead -- going forward, Cera remains focused on consistently improving its financial performance and is well poised to create greater value for all its shareholders. With this, I would now request the moderator to open the line for Q&A. Thank you very much.

We'll take our first question from the line of Praveen Sahay from PL Capital.

Good margin improvement in the quarter. So the first question is related to the margin improvement only, sir. So there is -- as you had already mentioned, that's operational efficiency and some cost management that led to the margin improvement. Can you give us some -- the way forward the margin to be -- how sustainable this kind of a margin? And what kind of a specific cost management you had done? One, I can understand related to the advertisement, which has down on Y-o-Y side, but apart from that what else you had done? And way forward, is that sustainable or not?

Thank you, Praveen, for asking the question. So as you have rightly told, the margins have improved in the quarter -- in the fourth quarter. And overall, if we see, the margins what we generally say is in between the range of 15% to 16%, and that has been proven through our past performances also. So way forward is also very clear that margins will be within these ranges. Now coming to the part of what has played a role in terms of the improvement. So this 1.5% improvement which is there, this is contributed by the improvement by 0.10% improvement of gross margin, then we have the publicity savings, which has contributed 0.5% and the cost-effective measures, mainly in production overhead and sales and marketing expenses that has contributed 0.9% overall leading to 1.5% in terms of improvement in the [indiscernible] margin.

Okay. And the next question -- second question is related to the working capital, which has increased and especially the receivable. So is it because your institutional business is increasing, that is the main reason or something else to read on and where you will see the way forward to be?

As Vikasji mentioned in the con call script, like the inventory days has increased from 70 to 79, the receivables from 34 to 44. The payable days reduced from 45 to 43. So that the net working capital days have gone up from 60 to 80 days. Now your question was specifically related to your receivable days. The receivables have not gone up on account of the project business. Project business last year constituted 35% of our total sales. If you look at the previous quarter, Q3, it was in the region of 37%. In this quarter, it has gone up to something like 40%. So we are in the same range, 35%, 37%, 40% -- 35% to 40% on a year-on-year basis and 37% to 40% on a sequential quarter basis. So this increase that we are seeing is not on account of the project business. This is mainly on account of a change in the credit policy. The cash credit policy that we used to have earlier that has undergone a change in the recent past. This has resulted in -- we're talking about the cash discounts that we offer in respect of for somebody who's paying before time. In this context, like earlier, our total -- the discounted sales, CD sales constituted something like 74%. In Q4, it has gone down to 67%. So this is the primary reason why the receivable days have gone up. If you look at a slightly higher aging for more than 3 months, we are at the same levels which were there in Q3 as well as what we were there in financial year '24. So as of May, this has already come down from 44 days to 38 days at the end of April. So going forward, we don't anticipate this to be a challenge. It's more of a kind of an adjustment which has happened due to a change in the CD policy. Going forward, we can expect the same level of debtors which were there earlier.

We'll take our next question from the line of Lakshminarayanan K. G. from Tunga Investments.

Sir, when I just look back, the last 4 quarter calls, you have been alluding to slowness in demand. So when we started last financial year till now. Now why there has been a slowness in the demand? Is it -- can you just elaborate as to what led to this? What has been your read? And how it is different now than earlier?

The slowness in demand is mostly in the retail sector. In the project sector we have mentioned earlier that it has been going up. If I look at the proportion of project sales vis-a-vis the total sales, it has consistently gone up from -- if you, let's say, go back 2 years, it would have been 30%, 70% in retail sales, went up to 35% in FY '24. And by end of FY '25, quarter 4, we are looking at something like 40% being coming from projects. So there has been a slowness in demand in the retail sector. Now the factors have been many over a period of time, like when the real sluggishness started by, say, Q3 of FY '24. And since then, that trend has continued due to various factors, seasonal factors as well as the elections, et cetera, which had happened in the last year, and it has continued to subside. Now exact cause for that slowness in demand is very difficult to pinpoint. But we are hoping that once that slowness in the retail demand improves, we can expect greater momentum in our total revenues also.

Got it. Now is it more prevalent in the Sanitary segment for retail? Or is it prevalent in the Faucetware segment in retail?

The slowness in demand is across both segments, but we have been experiencing that slowness more in the Sanitaryware segment. In Faucets, we have typically grown by 10% in FY '24 as well as in FY '25. But that is essentially because of the fact that we are a much smaller player in case of faucets as opposed to the largest player in the industry. So which even in a slow condition, it enables us to gain market share from others. In Sanitaryware, us being one of the larger players over there, that becomes a little more difficult to sustain the improvement in growth in the demand -- growth in the revenues once the demand is sluggish.

Sir, on the Sanitaryware segment....

[Operator Instructions] We'll take our next question from the line of Moksh Ranka from Aurum Capital.

I wanted to understand our scale up of the Tiles business. Are we -- could you just help me understand that currently freight rates are down. So the oversupply, which was there for the Tiles segment should not be an issue. Is my understanding correct?

So regarding the Tiles business, if you see the composition of the CERA, in CERA, we -- the Sanitaryware and Faucetware contributes almost 88% of our total revenues and Tiles contribute 10% of our total revenue. And in case of our business model, Tiles business is fully outsourced and where we operate at a 0 inventory level model. Our larger focus is in terms of including this as part of our portfolio is to provide a full solution to the consumer. So whenever there are consumer requests in terms of the sanitary, faucet along with that, this offering -- the Tile offerings are also given. So largely, we have different ranges starting, vitrified tiles, GVT, DG wall tiles. So GVTs almost constitutes 50% of our total tile sales. So ideally, our focus is largely on sanitary and faucets. And in case of Tile business, this is offered in terms of the complete package solution to the consumer.

Okay. And our margins in the Tiles business would be lower than our Sanitaryware and Faucetware, right?

Correct.

Okay. And are you -- could you give me some color on exactly what the margin range would be for the Tiles?

Can you repeat?

What exactly would be our margins, like how low would be compared to our average 15% to 16% EBITDA margin for the Tiles business?

So we provide the complete financial performance. In terms of the individual segmentation, we do not disclose the margins. But the margins are lower as you rightly told in the Sanitaryware and Faucetware.

It will be in single digits. You find that the margins in Tiles is in single digits.

And just one last question...

[Operator Instructions] We'll take our next question from the line of Rudraksh Gupta from Navneet Family Office.

I have 2 questions. I would request you if you can throw some light on export opportunity referred to in the earlier call of quarter 4 FY '24. Is this arising out of the tariff situation and supply chain realignment? Or does the company see it as a strategic focus area in exports?

As of now, export constitutes a small portion of our total revenues. With the tariff situation, which is prevailing right now, we do feel that there is an opportunity for us to kind of grow a little. But it is not something that we anticipate will grow by leaps and bounds. Like, we are currently, I think it is at 3.5% of our total revenues. We don't anticipate it to grow to double digits or something like that. But this actually presents an opportunity. Let's see how it goes forward. So more time will enable us to gauge the real impact of the tariffs and what kind of opportunities are actually present.

Okay. And my second question is that the company has guided for a revenue -- for a potential revenue of INR [ 2,900 ] crores by FY '27. Given the aspirate, are you still comfortable and confident to able to achieve the same?

So the guidance what we have given, that guidance was given in the scenarios where the market will perform or the market conditions will be positive. So as we have seen, market conditions have remained subdued for almost 6 consecutive quarters, primarily due to the weak retail demand. So the projections what we have made, those projections were made with the anticipation that the market growth of what we expected was 7% to 8% in case of Sanitaryware segment and 12% to 13% in case of Faucetware segment. And we had expected to outperform the market by 6% to 7%. However, in the actual scenarios, the market growth has consistently fallen short of our expectations. But to be on the positive side, in spite of this challenging environment, which is there, our project pipeline remains very good. We are confident to meet our growth targets as the retail momentum improves. So the idea here is that -- it is dependent on the market conditions. Market conditions once they improve, basis that we will outperform the market by 6% to 7% through our strong execution and focused strategic initiatives.

We'll take our next question from the line of Sonali Salgaonkar from Jefferies India.

Sir, my questions are on the industry basis. So real estate cycle generally has been steady over the past 4 to 6 quarters, a bit weakening probably over the last 1 or 2 quarters. So overall, in the industry, and I'm talking about your competitors as well, could you please probably shed some light as to why the volume growth is coming slower? Because if we were to look at the real estate launches, which happened about 2 to 3 years back, then intuitively, that demand should come in the system right now, probably in FY '25. So that has not really happened over the industry. Any particular reasons why you feel that is? And also, any pricing pressure you have seen either in Sanitary or Tiles in FY '25?

I'll take your second question first, the pricing pressure. There has been some pricing pressure in FY '25. With the slowness in the demand, which has been prevailing in the current year, the industry has been [ over flooded ] with oversupply and overcapacity. With the result that most of them are offering higher [indiscernible] . So in account of that fact that you find that even our discounts have gone up slightly in the last 1 year and which has not enabled us to take price increases over a period of time. So we have kind of tried to balance that by way of better efficiency and cost management so that our profitability and margins, they remain intact. So going forward also, like we don't anticipate as of now in the immediate near future, we don't intend to increase our prices. That is based on, again, the sluggishness, which is continuing in the current quarters also -- in the current Q1 also. In respect of your first part of your question, where you're talking about the industry and real estate, your typical cycle, as you mentioned, for real estate would be -- nearing completion should be in the range of 3 to 4 years. So ideally, projects which have started in FY '21, '22 should have been started and nearing their completion cycle by '25 and '26. So we have started seeing that upswing in our project business in the last 1 financial -- in the last 1 year. And we anticipate that FY '26, the number should be translating even in higher numbers.

Sir, what is the quantum of price cuts that you have taken or rather discounting that you could have taken in FY '25? And my last question is about the Tiles. I understand you outsource your -- majority of your Tiles business. But what are your views on the Morbi exports? And also going forward in FY '25, do you expect the exports to resume?

I'll talk about the price cuts first, which you asked on the -- in your first part. We don't have price cuts in our business. What we do is the amount of quantum of discounts which are being offered. They typically go up. So over the last 1 year in the retail sector, the discounts would have gone up by something like 0.5% to 0.75%, that is on the retail side. In the project business, it is a little more complex because it depends upon the size of the business. But on an average, the same level would have gone up in the project business as well. So that was in respect of price cuts. In Tiles exports, we don't have too much of exports, as Mr. Vikas mentioned, we are mostly in the business of procuring and doing trading business within the domestic market. So we will not be the right people to comment on the exports position, which is on an industry-wide basis.

We'll take our next question from the line of Pranav Mehta from Equirus Securities.

Congratulations on good profitability improvement. Sir, my first question is related to the breakup of -- absolute breakup, if you can share for Sanitaryware, Faucet and Tiles and other categories for 4Q '25 and -- versus 4Q '24? That was my first question. And sir, my second question was related to the INR 34 crores credit write-back that we are seeing in the cash flow [Technical Difficulty].

Pranav, your voice is sounding a little muffled.

Yes. So what I was saying, the second question was related to the INR 35 crores of credit balance write-back in the operating cash flow. So I wanted to understand where exactly in the P&L this effect has been taken?

So thank you, Pranav. So regarding the first question, the breakup of the revenue. So largely, if you see the quarter 4, in quarter 4, Sanitaryware was 48%, the Faucetware was 40%, Wellness was 3% and tiles was 9%. And...

Sir, if -- absolute breakup, if you can give, that would be helpful.

So Sanitaryware, it is INR 269 crores; Faucetware, it is INR 222 crores; Wellness, it is INR 16 crores and Tiles, it is INR 53 crores.

And similar in 4Q '24.

For the full year?

Sir, for 4Q '24, if you can share for full year, it would be...

For the previous year's quarter, the Sanitaryware figure was INR 273 crores, Faucetware was INR 202 crores, Wellness was INR 10.96 crores and Tiles was INR 50.7 crores. Is that okay?

Yes, sir. Yes.

Okay. And regarding your question with respect to the write-backs what you have said. So there is what we have seen that there are some excess provision, which was provided earlier. They have been taken back -- they have been written back. So the amount what you are saying is reflecting in the balance sheet.

Sir, no impact on the P&L is that of the INR 34 crores?

Yes.

[Operator Instructions] We'll take our next question from the line of Udit Gajiwala from Yes Securities.

Sir, in terms of the real estate demand that you mentioned in your opening remarks, so I mean, what is the kind of traction you are seeing there? And is it an order book kind of a business for you?

As I mentioned earlier, like you were earlier doing that as a part of a total -- proportion of our total sales, project constituted 30%, which has gone up to 35% and then 40% in Q4. The way it functions is that depending upon the number of bathrooms, which are being offered, it's classified as a project business. If it is classified as a project business, the kind of discounts which are typically offered is higher. Normally, what you're saying is right, depending upon the size of the project, the degree could be varying over a period of time. Like for larger projects in different states, you'll find that it is different. But let's say, we talk about Gujarat, you find that in the larger projects, the builder would typically have a sample home constructed just at the time when he has started the project and you would take an order at that point of time. So that deliveries would happen maybe after some time. It will not happen to start immediately, and it will only happen over a period of time. And typically, the deliveries are spread over a period of 2 to 3 years, normally 2 years. And for the smaller projects, you would typically find that once we get the order within a very short time frame, the deliveries start and get completed also. So it depends upon the kind of builder and the size of the project. Typically, you can say that 50-50, 50% of the deliveries happen in the first year and 50% in the next year for larger projects.

Understood. Understood, sir. And sir, the CapEx that we had deferred for the Sanitaryware, so there are no plans on it as yet or you are still considering any time line?

So as of now, it is on hold, like we have purchased the land which we have communicated earlier also. The land acquisition is complete. But the construction activity will keep on being on a quarterly basis depending upon the demand scenario. As of the end of the year, we are not intending to start with the construction.

We'll take our next question from the line of Samyak Jain from Marcellus.

My first question is, sir, while you gave us some color on the discounting aspects. So just wanted to understand whether you see the discounts have peaked out or going forward, you expect them to increase on account of the slowdown in demand. So just your thoughts on that.

The discounts have kind of now flattened, like, if you look at the -- as I've mentioned earlier also, the slowness started in Q3 of FY '24. So in the first few quarters, it was an increasing trend of discounts. But in the last couple of quarters, the discounts have stabilized and are remaining constant at the levels, which had already reached by, let's say, Q2 of FY '25. So now they are stable. We are not seeing an increasing trend. In fact, we expect them to improve, like the discounts to again become lower going forward.

Got it. Got it. And my second question is on the faucets. So like in quarter 2 of F '25, there was some channel restocking due to the price increase. And that led to some liquidation in last quarter. So has the liquidation of the restocking been done or completed in quarter 4? Or you think some reduction in stock is still pending?

So as you have rightly told, means the price rise was taken, I think from October onwards, there was an impact what we have seen in the quarter 2, where the growth has come higher because of the price rise taken. Now if you see the quarter 4 figures. So the growth is now 10%. And if we need to characterize this growth of the increase what is there, the volume has increased by 2.8%. The product mix has improved by 3.5%. The price impact, which is now stabilized in terms of liquidation being completed, that has given the impact of 1.7%.

We'll take our next question from the line of Jenish Karia from Union AMC.

First question is with regards to the premiumization that we are planning. So considering we are planning to ramp up the sanitary and list brand, which will largely be in-house manufactured. And considering we are still guiding for INR 2,900 crores of revenue in next 2 years, hoping that retail demand will revive. So why do not we go ahead with the CapEx and rather than delay it? I understand we still have capacity and we can outsource it, but considering the premiumization, hope of demand revival and the CapEx, if we announce next quarter also, it will take 2 years to commercialize. So just your thoughts on whether we'll be missing out on upcycle in demand because of short of capacity or not be able to properly capture the premiumization that we are trying to do because of shortfall in capacity? Just your thoughts on that front.

Jenish, you are right that we are taking a premiumization drive. As Mr. Vikas mentioned in his questions -- in his answers earlier, like Senator and Luxe, we have mentioned in our previous calls also that we intend that over the next 3 years, we would be constituting something like 10% of our revenues. The product which comprise in Senator and Luxe are a mix of in-house manufacturing as well as outsourcing. Some products are always outsourced. like if you see the faucet range, you find that most of the showers, spas, et cetera, which are being offered over there, will always be on an outsourced model only. It will never be in-house. So the premiumization drive, which you see is not something which will be kind of driving the manufacturing capacity. The manufacturing capacity is primarily driven by our -- the main core segment of CERA. So over there till the time that we don't start seeing an improvement in demand, it is not really making sense for us to start with the expansion project. We are closely monitoring the situation. As you mentioned, it will take roughly 18 months from the start of the project to get completed to be operational. So once we start seeing the kind of demand improvement, we can start and complete it within 18 months. In the meanwhile, we have adequate inventories and outsourcing arrangements, which can take care of any incremental demand or upsurge in demand which happens in the interim period. So we don't see it as a challenge within that 18-month period that will be resulting in any lost sales.

Jenish, does that answer your question?

Yes, that answers my question. Second question is on the marketing spend. So although your premium products will be 10%, 12% of the revenue over the next 3 years, can we see an aggressive marketing expense going forward, maybe 2.5% to 3% is the range, but additional 50, 60 basis points for the premium products that we are driving?

No. So as far as our marketing spends are concerned, so we are strategically reviewing the scenarios in terms of the current market position also, and we are focusing on those particular spend where we think that in the current scenario, the ROI is in terms of reaching out the share of [ voice ] Is higher. So like we have told now Senator and CERA Luxe, these are the new added -- new brands which are added in our family, CERA. So definitely, there is an allocation of the budget will be there in FY '26 also. And the spend will be done considering the market and how we want to target each of these brands.

We'll take our next question from the line of Akshay Chheda from Canara Robeco Mutual Fund.

Sir, two questions from my side. First is on this B2B side, you said that it was 40% in fourth quarter. Sir, can you give the contribution for the full year, that is FY '25? What was the B2B share? That was one. And related to that is, sir, what is the ratio the company is okay with? Would it be -- company be okay to take it to 50%, 60% or what it is? That is one. Sir, secondly, on this retail piece, sir, is retail actually remaining flat for us or it is degrowing for us? And thirdly, sir, what is the reason for sequential decline in the gross margin because that is steep at around 250 basis. Of course, it remains in the guided range, but still if you can talk a bit on this.

Akshay, too many questions at one time, but I'll try to remember and answer them one by one. First, you asked B2B was 40% at the Q4, what was there for the full financial year. For the full financial year, the project composition was 38% of our revenues. This was for B2B FY '25. If you can repeat the balance part of your question, the retail, why is it degrowing?

Sir, on the retail side, sir, is it actually remaining flat for us? Or is it degrowing?

If you see our total revenues, we have been kind of growing at 5%, 6%. And if you look at the proportion of the project business, they have been growing as a proportion of our total revenue. So retail has been kind of -- if you do the mathematics, you'll find that it is more or less remaining constant. I think you also asked whether we anticipate the project business to go further in the coming years. That will totally depend upon how the retail business picks up because we are seeing that traction in the project business. And as I've mentioned in my earlier calls also that we do not have too high a difference between the margins in the project and the retail business. The gap would be something like you can say, 5% to 6%. So the difference in the margins, even if the proportion increases, as you are mentioning if it increases from, let's say, 40% to 50% it could impact the margins by, you can say, 10% of 5% of the differential, which is there between project and the retail business. On an overall basis, it will impact us by 0.5%. So we are not too worried about that because we are hopeful that the retail business could be picking up in the future, and this proportion should ideally remain at 40% to 45%. But even if it increases, the impact on our EBITDA margins could not be too great.

Okay. And sir, the third question on the gross margin, I mean, sequential decline. So any specific reason you would like to call out?

No. As such, if you see the gross margins for the quarter or if you see in terms of the -- you are talking about quarterly means quarterly it was -- first quarter, it was 55% and now it is 50%. Your question is why it is declining, correct?

Yes, sir.

No. So in terms of the gross margins if you see -- the full year basis, if you see for the financial year '25, our gross margin is 52.51%. And the previous year, if you see financial year '24, it is 52.86%. So there is a slight decrease, you can say, in terms of the overall gross margin on the overall full year basis.

We'll take our next question from the line of Shubham Padhiar from Tamohara Investment Managers.

So my question is on the strategy side. So how are we going to strategize ourselves in the market being an entry-level brand and positioning ourselves as a premium brand going forward?

Your voice was not too clear. If you can just repeat the question?

So I'm asking about the strategy aspect. So as of now, we are positioned as an entry-level brand. So how are we going to differentiate ourselves and compete in the market as a premium brand going forward?

I think your understanding in terms of positioning Cera is not correct. So we are a mass premium brand with the portfolio or with the products we are focusing. So as we have seen over a period of past few years, we have seen there is a steady increase in demand for the premium products also. So now we are strategically introducing our 2 new brands, CERA Luxe and Senator, which will show our premium face, and that is going to be the -- that we have already told that these 2 will be contributing around 10% of our total turnover in the coming next 2 to 3 years.

Okay. And how are we going to compete with the existing players in that segment? Like any table glass...

For the Luxe and Senator, we are now completely having -- focusing on how we can compete with the competitors. So as step-wise things, what we have did is there is a separate team, which is going to focus on this Senator part, which will be under the leadership of Mr. Ramesh Baliga as told in our con call. Then we are separately focusing on the separate flagship stores. So as on March -- as on -- by 31st March, we were -- we are already having 17 stores for the Senator. And this year, we have targeted roughly 40 to 45 more stores to add on to this. Apart from that, the complete portfolio, which is premium in nature, is almost now finalized, and it is going to be displayed across all these flagship stores. We are also connecting with our architects, the Architect Connect and the other influencers, which will lead in terms of showcasing the product and the -- its technical strength, which is going to be there to compete with the competition.

We'll take our last question from the line of Aasim from DAM Capital.

Just one question. I couldn't quite pick up the reason for sequential gross margin decline, 53% -- 51%. Is it due to higher discounting of another nature to push sales because the reduction in cash discount sales on debt should ideally have improved gross margin sequentially?

So the discounts reduction has not happened. We are anticipating it will happen in the future. As of now, the discounts in the current financial year had improved -- sorry, it increased vis-a-vis the previous year. So what happens is the gross margin is a composition of both the kind of discounts which are being offered as well as the efficiencies which are going into the composition of the cost of the products, both on the procurement side as well as the manufacturing side. So the discounts have increased over the last 1 year. The decrease in the gross margin is only to the extent of 0.4%. The discounts maybe would have increased by higher margins than 0.4%, but the cost efficiencies have also kind of made good the increase in discounts. So what Mr. Vikas was saying was that on an overall basis from F4 to -- FY '24 to FY '25, the decrease in gross margin is only there to the extent of 0.4%.

Is it also a mix-led thing there? Faucetware might have done better Q-o-Q? Could that also be a reason?

It could be because the gross margin is a composite of so many factors. So such small deviation will keep on happening on a year-on-year and a quarter-on-quarter basis. It is very difficult to give you a pinpoint as to what reasons have gone into for the quarter 1 to quarter 2, quarter 2 to quarter 3 kind of a variation which has happened of 1% and 2%. But on an overall yearly basis, it is more or less remaining constant from 52.86% to 52.59%.

I now hand over the call to the management team for closing comments. Over to you, sir.

Thank you, everyone, for attending this call and for showing interest in Cera Sanitaryware Limited. Should you need any further clarification or would like to know more about the company, please feel to reach out to me or to CDR India. Thank you once again for taking time to join the call. Thanks and bye.

Thank you, sir. On behalf of Cera Sanitaryware Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.