Finolex Industries Limited (FINPIPE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to Finolex Industries Q1 FY '23 Post Results Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Arun Baid from ICICI Securities. Thank you, and over to you sir.

Thank you, Lisa. Good morning, ladies and gentlemen. On behalf of ICICI Securities, I welcome you all to the post-result con call of Q1 FY '23 for Finolex Industries. From the management side, we have Mr. Anil Whabi, Managing Director; and Mr. Niraj Kedia, Finolex' CFO. We'll have the first color from Mr. Whabi, your [indiscernible], sir. And I now hand the floor to you for opening remarks, post which we can have the Q&A.

Thank you, Arun. Good morning, ladies and gentlemen. Welcome to the investor conference call for Q1 FY '23 earnings release. Thank you for your continued interest in Finolex Industries Limited. The company reported a healthy performance for Q1 FY '23 on the back of strong volume growth in Pipes and Fittings segment. Correction in PVC prices during the quarter did have an impact on margins. Let me give you some of the performance indicators for the first quarter of the new financial year 2023. Total income from operations reported a growth of 23% to INR 1,190 crores as against INR 965 crores in Q1 FY '22. EBITDA was at INR 126 crores for Q1 FY '23, down 40% against INR 210 crores for Q1 FY '22. The PAT for the quarter was lower by 32% to INR 100 crores as against INR 147 crores in the corresponding last year's quarter. Now getting into segmental performance. Pipes and Fittings revenue grew 34% from INR 845 crores last year to INR 1,132 crores this year. Volumes in Pipes and Fittings segment grew 29% to 71,960 metric tons in Q1 FY '23 against 55,819 metric tons in Q1 FY '22. EBIT in Pipes and Fittings segment was INR 43 crores in Q1 FY '23 compared to INR 44 crores in Q1 FY '22. Moving to PVC Resin segment. Revenue in the Resin segment grew 25% from INR 627 crores to INR 785 crores this year. Volume in Resin segment grew 25% to 62,746 metric tons this year as against 50,249 metric tons last year. EBIT in the Resin segment was down by 54% on a Y-o-Y basis to INR 73 crores in this year. The company continues to have strong balance sheet with a net cash surplus of roughly about INR 1,300 crores as on 30th June 22. During the quarter, the credit rating for the company was upgraded from AA to AA+ by CRISIL. I now leave the floor open for questions. I and my colleague, Niraj be happy to answer. Thank you.

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Chintan Sheth from Sameeksha Capital.

Sir, I have one question on the other expenses for the quarter. It seems to be slightly -- not slightly higher, but is significantly higher than the historical trend. If you can provide color on what led to such a sharp increase in other OpEx?

So at the company level there were 2 things which actually impacted, you are right. The other expenses were up. One is on the power and fuel, see, we have our captive coal power plant. The coal prices because of this increase in crude prices and the resulting coal prices, they have been very erratic. So that went up pretty high and that had an impact on other expenses. At the same time, we have this buyer's credit on which we have had -- because of the movement of the currency we have had some ForEx losses on that. So these 2 reasons. And also, when you talk about fuel, even naphtha. So overall, in the entire fuel basket as such, the prices are up, which has impacted us.

So can you quantify what will be the normal power and fuel cost versus what we incurred, which impacted our numbers?

See coal prices have gone up from $45 to $55 range to more to $110. That is the range. So it all depends on how coal prices behave. If they come back to $50, $60 levels, we'll go back to the old levels.

Sure. And what was the ForEx impact for the quarter?

Roughly INR 20 crores, INR 25 crores.

And on the demand side on Piping segment, how do you see the -- because of the we are witnessing all across good monsoon this quarter. What is our expectation in terms of pricing volume for the year?

See, for the year, it remains to be seen, but our target is first to reach the pre-COVID levels. Demand for the first quarter is -- has been good, but not to the extent of the pre-COVID levels. And this is especially in the Agri segment. If you see overall, we are 29% up as compared to last year, but when we compare to the pre-COVID period, overall Pipe and Fitting demand -- volume is lower. When you split it into agri and non-agri, actually non-agri is 20% higher than what was in Q1 before COVID. And this drop when we compare it with pre-COVID is primarily because of agri. [indiscernible]

This is driven because of the higher PVC prices, which is impacting demand, what is our assessment?

So Chintan, multiple factors to it. Prices, if you see, they have now, in fact, come down. So this is actually a positive thing for the demand in Agri Pipes because now more or less they are back to the old levels. So whatever pent-up was there because of -- which was not coming because of high prices, the vent should open up. But we're aware Agri demand depends on monsoon. And plus anyway, this quarter, Q2 is a lean period.

The next question is from the line of Praveen Sahay from Edelweiss Wealth.

So the first question is related to the agri, non-agri volume mix, how is that for the quarter?

So for the quarter, the agri non-agri mix is 40:60.

Okay. 40% is non-agri. So [indiscernible].

Sorry to interrupt, Mr. Sahay, your audio is breaking up.

Also, can you give a PVC, EDC and VCM prices for a quarter and the current level?

So PVC prices for the quarter was roughly $14.50, VCM was $11.75 and EDC was $670.

And how is the current outlook.

So today, as we speak, PVC will add roughly $1,050. VCM is at roughly $880 and EDC is $520.

And also if you can give the CPVC numbers, sales and the volumes?

So CPVC sales for the quarter was roughly 3,600 tons.

And the revenue term.

Roughly, INR 150 crores.

The next question is from the line of Sneha Talreja from Edelweiss Securities.

Can you mentioned our agri non-agri mix for current quarter? Could you help us the same number in Q1 FY '22 as well as pre-COVID levels, what it was, as you mentioned that non-agri has actually moved 20%? So I just wanted to understand that mix.

If I talk about just Q1 numbers, in FY '20, non-agri was 25%. In FY '21, it was 21%. Last year it was 32%, and this year to be very precise, it is 36%.

This is your non-agri mix improvement year-on-year?

Yes.

Understood. Understood. And sir, based on demand, I just wanted to understand, so basically, what you're trying to say is the demand lost is all because of the agri and non-agri still continues to move up. Just wanted to get a sense, are you -- because already the season is lost, but where do you thing the demand actually went to? Did it actually go to some other polymers like HDPE and all? And now has the gap again widened with HDPE that demand will again come back to us, what's your sense there?

It is difficult to say whether demand went to somebody else with other polymer or -- because the prices are going down every way. Even HDPE prices are down, our PVC prices are also down. So we'll wait for -- our sense is overall industry demand was weak.

Okay. And now where are the prices, the current PVC prices? And where do you see that moving? Are you still expecting them to move back to INR 170, INR 180 per kg levels.

That will be too aggressive to think. I don't -- my personal view, this is my personal view. I don't think we'll see them going to [ INR 170, INR 180 ] levels very soon. But the prices which are there currently $1,050 levels, they should be range-bound now.

Okay. Like from here, you don't see much of a material downside?

Yes. As of now, we don't see, but this is a volatile market, and we are impacted by things that are not in our control. So we'll see how it pans out. But as I said, we don't see -- we expect this to be in range-bound right now.

Understood. And then last one, if I may. It's regards to CPVC volumes, we have been seeing good amount of CPVC volume gains. I think that was also because of the price gap moving down. How is the CPVC price scenario at this point of time? Or would resin prices stabilize? Or are you still seeing upward movement here? And what's your expectation with regards to prices?

We don't see a major upward trend as of now.

But are they falling? Have they started to fall?

PVC prices, right?

CPVC, CPVC.

Not in the same level as -- or not at the same rate as PVC.

But they have fallen.

Slightly.

The next question is from the line of Utkarsh Nopany from Haitong Securities.

A few questions from my side. First, what is the reason that our price EBITDA per unit has come down to a 5-year low level in this June quarter. Is it primarily because of the impact of recovery in the Agri Pipe or there was an element of interim inventory loss.

So it's a mix of factors. Obviously, Agri demand was lower than expected. And also in a falling PVC regime or a market scenario, you will tend to have some inventory losses somewhere.

Sir, like Agri Pipe demand still has not recovered fully in the June quarter. So can there be a further scope of margin pressure for the Pipe segment from here on during peak-agri season period in future?

We are anyway entering the lean season.

Sir, I'm talking about the peak-agri season period, say, for next June quarter.

It is too early to comment for that right now. I'll be very honest.

Sir, what is our CapEx down for FY '23?

Normal, INR 200 crores, INR 250 crores is the CapEx plan.

Okay. And sir, as all our CapEx plan can be well funded out of internal accrual, what is our plan to utilize the cash which is lying there on the books?

See, if we are not able to deploy this in business, this will be returned to the shareholders in one way or the other. We'll not keep such high levels of cash in the books for a long time.

Sir, it's been a while like we have been mentioning on this point.

But what is happening is, the market has also been acting very, very radically. If you see the PVC prices the way they are going up and down. We are waiting for some stability to come in the market. So our ability to [indiscernible] also kind of improves.

Okay. So can we like understand that once the PVC resin prices will stabilize, then possibly, we can take some decision on this front?

Yes.

Okay. Sir, if you can give some sense like what would be the current ocean freight rate for PVC resin in terms of dollar per ton basis? And what was the peak ocean freight rate seen in the March quarter period? And what was the normal level seen during the pre-pandemic period?

You're talking about the freight rates.

Yes, sir. Freight rates for the PVC resin.

See, PVC resin prices are not function of only freight rate. The major volatility comes from the demand-supply situation. Freight rates were hardened earlier, now they are probably moving towards normal, but that is not the major reason for volatility.

Sir, I understand. Just wanted to understand like what was the normal ocean freight rate earlier? And what is the current rate?

I don't think we have those numbers right now.

Okay. And sir, like with sharp decline in the PVC resin prices, do you see the CPVC pipe demand could get impacted in the coming quarters, at an industry level?

No, no, not really.

Okay. And sir, what is our Fittings revenue in this June quarter?

So Fittings revenue was roughly INR 200 crores.

And how many SKUs do we have at the end of June?

SKUs are 2,000 plus.

The next question is from the line of Ritesh from Investec.

So building on the prior question on capital allocation even we have so much of cash and the perks and working capital as a percentage of sales is honestly not much of a problem. How should we look at incremental capital deployment given I think, again, I'll stress upon the fact that we have been seeing that if not for CapEx there will be a special dividend payout, which will be there. I'm just trying to weigh the time lines and how relative to working capital on overall scheme of things?

We have actually never said that there will be a special dividend. What Niraj has mentioned that we will definitely not keep large cash balances on the balance sheet. We definitely would look for opportunities. But otherwise, if we don't utilize this, then the money goes back to shareholders in whatever way we decide. But right now, there are no fixed time lines for this.

Okay, fair enough. Sir, second question is just wanted to understand the number of inventory days for PVC, CPVC, EDC, [indiscernible] and VCM under normal circumstances that we would have?

Sorry, I didn't get your question.

I'm looking at it from a raw material side, what is the normal quantum of inventory days that we have for PVC, CPVC, EDC, [indiscernible] and VCM.

See, normally, we carry 2 months inventory. But you know that pre-monsoon we -- for EDC and ethylene, we accumulated 4-months' stocks because our jetty doesn't operate during monsoon period. But otherwise, it is normally 2 months, which we always carry whether the prices are high or low.

Okay. And sir, for CPVC resin?

For CPVC resin again, if it is imported, then it is 2 months. If it is procured in the domestic market, obviously, lower period.

Okay. And sir, lastly, on the pricing, I understand we do not call out on the trends, but I do understand that there was an industry representation of potential [indiscernible] duties. Any update over here?

None so far.

Sir, is there any time line that one can look at from a procedural standpoint? Or is it entirely up to the DGTR to take a call?

The representations are still being made -- so we do not know what the result will be and when will it be? Association is still -- association on behalf of all the members is still taking this up with the government.

Sure. Sure. Sir, last bookkeeping, sir, ethylene prices for the quarter and the spot? You did go PVC, [indiscernible] and EDC, I just mentioned ethylene.

Sorry for the quarter?

Ethylene prices for Q1 FY '23 average on the current spot prices.

$12.19 for ethylene for the quarter. And currently, roughly [ INR 1,030. ]

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

Most of my question were answered. I have a few. First of all you mentioned that in the other expenses there are ForEx losses and impact of rising fuel costs. Could you spread in terms of the ForEx loss impact on your -- the 2 segments PVC -- Pipes and Resin?

It is majorly to the PVC segment because, see, ForEx imports are mostly for the PVC segment where we import EDC and VCM and ethylene. But to give an exact number is, right now, not possible. We don't have it handy, but it is majorly towards the PVC segment.

Okay. And on the fuel pricing impact on a quarter-on-quarter basis, could you quantify what was the jump that we have seen?

So you're talking about which quarter, I mean?

March versus June, how has the impact been?

In March, it was about INR 47 crores, it has gone up beyond INR 70 crores.

Okay. Okay, despite volumes coming down?

No, volume, in fact, production volume is up as a [indiscernible] both.

Then if I see production volume for the Pipes and Fittings it is up by 5% quarter-on-quarter and in case of Resin to be down sequential, right?

Sorry.

I'm saying the production volume is up just by 5% in terms of the Pipes and Fittings, whereas your Resin production is down sequentially.

Yes, Resin is slightly down, yes.

Okay. And given that the spreads have further compressed sequentially, the July export number, which you are -- July numbers which you just highlighted, and even domestic market the resin prices have also come down. So how are you looking at September and December quarters? How are you trying to mitigate margin pressure in the Pipes and Fittings?

What we had mentioned, the spread coming down, that is if we were able to procure EDC at today's prices. We are looking at EDC which we procured in Q4. More than higher price but there's nothing that we can do. It always happens. Sometimes we gain. Sometimes we lose. That's part of business.

So what sort of margin impact, particularly in the Pipes you're looking at for next 2 quarters?

Yes. Again, PVC prices, if you look at them, they have gone down by INR 20 for a few weeks of this quarter. Obviously, if there is a sharp movement, it will impact. It's difficult to say how much.

Okay. You mentioned CapEx amount for this year would be around in the range of INR 200 crores, right? So are we not taking any capacity expansion across any of the 2 segments?

Resin, we are not taking any capacity expansion. In Pipes and Fittings, we already have spare capacity. And even if there is a requirement sometimes, so it can be added in a modular fashion. So no major capacity expansion as such in the Pipes and Fittings because here to understand, first, we need to reach the pre-COVID and cross that bar. When we reached 260,000 tons a few years ago, even then we had capacity to go up.

And when you do that, would you have brownfield expansion capabilities at our existing plants?

Yes.

Okay. And last question on the price fall, which has happened, we are aware about the PVC side. In the CPVC side, could you highlight or quantify how has been the June end CPVC resin prices versus March end?

I don't have those numbers.

Any ballpark?

They depend, CPVC volumes are very low. The prices are not published regularly. It depends on negotiation and agreements with the supplier and with very few suppliers. And generally, they tend to follow PVC prices but with a lag.

Okay.

Thank you. [Operator Instructions] The next question is from the line of [ Vipul Kumar Shah from Sumangal Investments. ]

Congratulations for a relatively good set of numbers. So my question is, sir, this ForEx losses will continue in this quarter also since rupee has started -- rupee is continuously depreciating against dollar?

See, if it continues to depreciate, Yes. But I don't think the -- so far, the rate of fall is as high as it was in Q1.

So you don't expect any major ForEx loss this quarter?

If dollar remains where it is, then no.

There's possibly being talked about on rupee going to 82 also. So we never know.

Yes. And since you said current PVC prices are around INR 1,050 per ton, right sir?

Yes.

So this quarter also we'll have certain inventory losses.

Obviously, yes. Because, as I said, INR 20 drop has come in first few weeks of the current quarter.

But has the drop in prices stimulated the demand? Are you seeing any signals from the market?

Actually, no.

Not yet.

Not yet. And sir, you gave the CPVC volume for this quarter. What was the same figure last quarter? And corresponding last year same quarter?

So CPVC volumes for Q1 FY '22 were 2,400 tons and Q4 was 3,600 tons.

So this is -- this quarter also, it is 3,600, right?

Yes.

The next question is from the line of Peter from [ K Fima Wealth Management. ]

My first question is regarding the ForEx exposure you mentioned. In terms of revenue and in terms of cost, what percentage is of the total ForEx exposure?

See, we don't export. So that way, you can say that there is no exposure in revenue. But PVC prices in the country, they are priced at import price parity, which takes into account even your ForEx movements. So that way -- and these prices are actually passed on almost immediately to the customers. So that way, there is a sort of a natural hedge that we have when it comes to sales. And on imports, on the resin side, most of our raw materials are reported. So there, we are open. But again, all this gets translated into PVC prices, which are on import price parity. So we're able to pass on.

Okay. Sir, I'm just a little new, so I'm wondering, but sir, in the PVC prices go high, that is negative for the company?

No, it is not negative for the company.

So only EDC prices going high will be negative?

So it is -- let me put it without specifying anything. If your input prices go up and your output prices don't go up, it is not good for anybody.

Okay, sure. And sir, my final question is that in terms of CapEx, you mentioned INR 250 crores, but how much is maintenance CapEx for you?

It is largely maintenance CapEx.

No, no, no. About INR 250 crores, the maintenance CapEx will not be more than INR 50 crores.

Okay. So annually maintenance CapEx run rate is around INR 50 crores.

The next question is from the line of Chintan Sheth from Sameeksha Capital.

I'm still unable to understand. See, if the data you gave for the quarter on the PVC and EDC and Sameeksha, our sales for PVC, EDC is around $780 versus $728 previous quarter. Similarly, PVC, VCM is $275, that has slightly declined from $350 previous quarter. So the impact should be larger and the power as well as ForEx is related to PVC division, Resin division. The impact should have been seeing more on the PVC resin part. Why our PVC pipe its profitability has kind of contracted sharply? One is you mentioned the inventory losses.

See, one is, of course, power cost has gone up there also. And because of sharp decline in PVC prices, there would be some inventory losses as well.

But the movement is pretty sharp. That's the reason why.

It is, it is.

Okay. And it will actually continue, as you have mentioned because PVC prices are declining, and weaker currency will still have an impact?

To an extent, yes.

And the remaining INR 200 crores will be largely on the molds and the [ extruders ] part, right? No CapEx [indiscernible]?

Yes.

The next question is from the line of Praveen Sahay from Edelweiss Wealth.

Yes. So my question is related to the volume. For a quarter sequential basis, the PVC Pipe and Fittings volumes [indiscernible].

We can't hear you very well.

Sorry, Mr. Sahay. Your audio is breaking. The next question is from the line of Bhavin Shah from Sameeksha Capital Limited. The current participant has placed us on hold. We'll move on to the next question. That is from the line of Vipul Kumar Shah from Sumangal Investments.

Sir, what is the current split for EDC, PVC and VCM?

So current right now, PVC, EDC is [ INR 530 ] and PVC, VCM is [ INR 170 ].

So can you tell what is the lowest spread observed in last, say, 5, 6 years? So are they closer to the lower spread of last few years? Have they come to those levels?

So on a full year basis, we have seen them going -- see, then COVID had just started. At that time, there was a sharp drop -- so that.

Leaving out COVID I say, sir. In a normalized environment.

Normalized, if you see annually, it has been in this range when we look at the lower part of the range.

So more or less, it has reached the bottom range of last few years.

On annual basis, yes.

[Operator Instructions] The next question is from the line of Bhavin Shah from Sameeksha Capital Private Limited.

Yes. I wanted to ask about [indiscernible] demand being, the volumes being lower than pre-COVID. I'm just wondering if that's an industry-wide situation or specific to us. And more importantly, can you talk about what you're doing to the business and how it is working out for you?

Ladies and gentlemen, the line for the management has got disconnected. Please stay connected while we reconnect the management. Ladies and gentlemen, thank you for patiently holding. We now have the line for the management reconnected. Over to you, sir.

Yes, I was just saying that you mentioned that the volumes are not -- haven't crossed pre-COVID levels. So how is this situation for the industry? And what are we, more importantly, broadly doing to grow our business because I think there are peers in the industry which continue to grow quite well. And we being around for much longer time, there is a general perception that aggressiveness seems to be lacking. So can you address that? And also the CapEx is for increasing -- widening the product range or -- I did not understand, the earlier one?

See, the CapEx, while there will be maintenance CapEx that -- for the molds, the extruders and the resin plant also, but mainly the CapEx -- fresh CapEx that we'll be incurring is for fittings. And talking about volumes, we are the only one -- for us the major business has been always the agribusiness. So since agri volumes have been lower in the industry, we are the ones hit most while most of others do more on plumbing and sanitation side. So slowly, we are also trying to grow more there in that segment, we are getting aggressive and slowly, our volumes should grow in that segment.

And as I said in the -- earlier during the call also, in non-agri, our growth has been actually pretty decent. Even on a quarterly basis, while our company level volumes are down compared to pre-COVID, the non-agri are 20% higher.

That's good. So are we targeting any specific geography first? Can you just talk a bit more about the [ sanitation ] how you were trying to grow that business?

See -- so we are mostly present in across the country. I don't think there's any state where our price don't go or things don't go. And we have -- so whatever -- but West and South are our stronger markets. So our focus remains there. At the same time, when we look at newer markets, the way we look at it is not a specific zone or -- so what we do is we see where is the bigger market. And we put ourselves, which are the markets where the size is decent. But probably our reach is slightly lesser, our share of the market is lesser. So the target is to improve our penetration in those markets.

And so in that regard, are you coming up with any specific programs? Like I know that in some regions, there are very strong plumber incentives on the -- basically I'm talking about one brand and things like that. So how is that going for Finolex?

We also engage with truckers on a continued basis. Okay. So -- and so this is something that we lacked in the past. Our engagement with the plumbers and other influences was less. And that is what we have been working on in the last 2, 3 years and that is also reflected in the way our volumes have been growing. And which will continue in the future also.

The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.

My first question is on the channel inventory. Given that the prices were falling, is it fair to say that the channel inventory would have been the leanest in as many quarters, I mean a couple of years?

That is fair to assume.

Okay. And assuming a scenario where the PVC prices do not fall materially from here on, do you expect China inventory to immediately come back to the earlier pre-COVID level?

See, right now, we are in anyway in the lean season, monsoon. So -- and overall, even after June, in the last 20 days, the prices have again fallen sharply. So I think for that inventory level to come at pre-COVID normal levels will take some assurance that the prices will stabilize now. But having said that, generally, the inventory carried by the channel is also not very high.

Okay. So assuming maybe until September, if the prices remain range bound, do you think that by then the channel inventory would have been significantly higher as compared to what it is now?

I don't know how do you quantify significantly, but it should be at a comparable level. But you're right, absolutely right. In a falling price scenario, people tend to de-stock and keep as minimum stock as required. So once the prices stabilize, this mindset should change, which is natural and normal for our business.

Okay. And secondly, on capital allocation, again, sorry to again be repetitive. You mentioned that once the environment stabilizes, you will take a decision on capital allocation. So in your decision-making list, is there a greenfield sort of facility also on the plate? Or as of now, there is no such?

As we said, the capacity expansion when required would be because we have possibility of expanding in the existing plants. We'll do that. But eventually, yes, we will have to consider greenfield a well.

But sir, what better time than now, right? I mean given $13 million of cash, and there will be pressure also to return the cash if you don't invest.

Understood. Understood point taken.

The next question is from the line of Karan Bhatelia from Asian Markets Securities.

Sir, just to continue from Bhargav's question. Sir, do we give some kind of price protection when the PVC prices is so volatile.

See when the market demand or the scenario is such, if required, we do give.

Okay. Okay. And also how does the competitive intensity is from the unbrand [indiscernible] and PVC of [ INR 165 per kg ]. And because I believe the working capital requirement will be far less at this PVC pricing range.

Can you repeat your question, please?

Sir, my question is with respect to the competitive intensity from the unbrand at UPVC of INR 100 per kg and PVC at INR 165 per kg.

So competition is always there in the market. I mean, be it branded or unbranded. This is place for competitive market, we have more than 500 -- 5 manufacturers in the country. So that always remains.

So is it correct to assume at the lower PVC pricing, the competitive intensity will be much higher?

Yes. Even when the price was 75%, those players and the organized players were in existing. But I don't think our brand competes with these unorganized players.

Right. Right. Right. And one last question, if you may allow. Any concrete capacity expansion plans for PVC resin and CPVC resins at the industry levels in India?

Yes, in PVC resins, of course, there are plans, sizable expansion.

So can you quantify any?

If you are seeing in past few decades, there has been no expansion in PVC resin industry. Now we understand some players are expanding their capacities. And new players are also coming in.

The next question is from the line of Abhishek from DSP.

Sir, just one thing in terms of the PVC prices having come off. Has India seen higher PVC price reduction than globally because of the Chinese imports? Or is it in line with the global peers?

See if you look at U.S., the prices relatively have been stable. It is only in the Asian markets that the sharp movement has been there. And you are right, it is because of construction slowdown in China, the lockdowns happening because of COVID that the supply glut situation has come. And at the same time, demand in the local markets, in the domestic Indian market also has been low. So that has triggered this sharp reduction in PVC prices.

Okay. Okay. And so this can partly reverse if the China demand kind of tends to come back?

It is hoped, yes.

Okay. Okay. And sir, just in terms of typically the way you all have seen the inventory losses, probably the inventory losses since you all have strong balance sheet, the ability for these smaller players, how do they react in light of such sharp inventory losses or sharp PVC price reduction? But anything from the last cycle that one can draw conclusion out of in terms of do they get weaker because of such sharp inventory losses and other things? Any thoughts?

Yes, they do. They do. See in case of smaller player it is easy to shut down facilities for a while and then restart. And these things happen. Now we are more affected because we are an integrated player. We are the only one with the backward integration. So the tough price movement is more on us than the only PVC pipe maker and especially ones who are smaller in size, who don't carry large inventory.

Okay. Okay. Okay. And sir, any thoughts on new products not non-related in terms of HDPE or maybe there are a lot of other products which a lot of peers are making. Any thoughts on getting into some of those?

Yes, we have been looking at them. But unless there's some sense that there will be volumes, we have not initiated that process.

The next question is from the line of Vipul Kumar from Sumangal Investments.

Sir, have you lost any market share in Agri Pipes over the last 2, 3 years?

Not that we feel. We don't think because the demand -- overall demand in agri has been lower in the last 2, 3 years.

But generally, the last 2, 3 years have been very good for agriculture. Farmer income has been also good. So why demand has been so low?

More so because of the volatility. In case of farmers, this is one in a lifetime type of investment. So they would rather wait for the prices to come down then take the plunge.

And we also consider that last 2, 3 years, monsoon has been good. So if monsoon is good, the farmer has the ability to defer this decision to buy to the next season. So that has also played a role.

Thank you. The next question is from the line of [ Akshay from CRAMC.]

So just one question.

Sorry to interrupt sir, we are not able to hear you.

Hello, am I audible now?

Sir, slightly.

Audible now?

Yes, sir, please proceed.

Yes, sir, just one question on this. Sir, you did mention that the CPVC -- and now if the gap between the PVC and CPVC is again widening, but you don't see that to impact the CPVC volume. So any specific reasons why you think so because at least in the past, kind of gap had narrowed? So the PVC portfolio the players who were doing well. So now with the gap, again, widening, any specific reasons that you can share?

No, no, we are not saying the gap is widening. And we are -- we feel that the CPVC prices also will come down to an extent.

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

Sir, on the demand side for the Pipes and Fittings, would you have any industry level -- if you could show us on industry level what was the growth in FY '22? And what sort of number you're looking for FY '23 from an industry level, not at the company level, both in the plumbing side as well as in the Agri side?

Unfortunately, there is no association publisher of such figure.

And second, in terms of capacity, you mentioned a few capacities are coming up. Could you quantify in next Q3 FY '23, FY ' 24 what sort of PVC and CPVC capacity are expected to be operational ?

No, no, no. In the next 2 years, I don't think there will be any capacity available because these are [indiscernible] period project. So it will take at least 3 years for these categories to [indiscernible].

Okay. And you were also referring to Abhishek's question that demand is weak. Is it just because of monsoon, you're taking about the lean period and because people held on to their purchases on high prices or there are structural things which you are looking at?

No, there is no structural change in the industry.

Okay. So are we looking at the post-monsoon demand should pick up because there a lot of government initiatives like there are schemes and then also in terms of the plumbing side, real-estate market picking up?

Yes, we feel that it should pick up.

Okay. And just one small observation. Sequential your realization which you give for internal sales and external sales risen, so while I see the realization for your internal sales have come down quarter-on-quarter March versus June, which external sales realizations are marginally higher [indiscernible] in different sequential basis?

The internal transfer happen at the market rates. And external sales mostly happened at open markets. So there will be some difference always.

Okay. So while one is down, the other could also be slightly higher in terms of change quarter-on-quarter?

Sorry, not very clear. I couldn't.

I'm saying that versus last quarter, the realization, your internal sales realization has come down from INR 131 to INR 124 a kg. Your external sales were INR 144, it has gone up to INR 147.

No, I don't think it has gone down per interest transfer per se.

Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Arun Baid for his closing comments.

Yes. On behalf of ICICI Securities, I want to thank the management for giving us a chance to host this call. Sir, do you want to make any closing remarks?

Thank you, all of you. Looking forward to meeting you again.

Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines, thank you.