Greenlam Industries Limited (GREENLAM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Greenlam Industries Limited Q4 and FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Saurabh Mittal, Managing Director and Chief Executive Officer, Greenlam Industries Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, ladies and gentlemen, and a very warm welcome to all of you all. I hope you'll all keeping safe and healthy. On the call, I'm joined by Ashok, our CFO; Samarth from the finance team; and SJ, our Investor Relations adviser. The results have been set up on the stock exchanges and the company's website. I assume you have had the chance to look at it. As we reflect on financial year '21, we had several challenges, and I'm sure all of you all know most of them. And we realized that at Greenlam, we could find a way to navigate through these challenges and actually emerged stronger as a company, as a team and with better financial strength post the pandemic or while the pandemic is on. And I feel extremely privileged to lead a team of committed people. And I'm extremely thankful for their continued dedication, hard work despite the challenges we all faced last year. Their resilience was extremely critical in helping the company deliver a record year -- and actually a record quarter, yes. And we believe with this disruption due to COVID, we had a reasonably strong position in both the domestic and the international market as competition faces -- a lot of unorganized competition, seeing a lot of challenges in terms of costs, in terms of raw material availability, availability of people, et cetera. And even in international markets, we believe, in several countries, the local producers are undergoing challenges of raw material availability, higher cost structure, et cetera. So I think from a business position, both domestic and international markets, we seem to be pretty well positioned in the current scenario. And all of this has happened due to the strength of the brand, the product quality we've been shipping out through the years, the deep relationships we've built with our trade partners and our customers, the diversity of the markets we serve with over 100 countries worldwide, and deep presence -- and wide presence in the domestic market. And despite all the COVID challenges, extremely high raw metal costs. In fact, the raw material cost is something we've never seen in our industry. And along with higher raw material costs, we've also had challenges and, again, extreme challenges on the supply chain, both in imports and in exports with availability of materials, availability of containers, shipment schedules even going haywire, both for RM coming and goods getting out. So already, I think despite all of this, I think we've seen a reasonably good financial performance as a company. And Q4 FY '21 saw the highest productions in laminates with over 4.35 million sheets. And sales were also at a record high in quantities at 4.53 million sheets. And even the value was -- value sales was also at INR 415 crores. And with supply chain, this is despite the fact that in exports we still had delays in shipments and availability of containers. So that's on the performance front. On the demand front, in last quarter, both domestic and international markets had reasonably good demand. And we think now post this crisis, we'll have to see how the domestic market gets back -- at what speed does it get back. The international markets even in this quarter is looking pretty decent, and we have a strong order book in the exports market. On the raw material cost front, in the -- for the domestic market, we've largely been able to pass on the entire RM cost increase to the market across our categories. In the exports market, we've been able to pass on partial increase, and we've passed on most of the additional sea freight increase in the international markets, and some of them were passed in Q4, and the rest of the cost increases -- price increases were implemented in the month of April and some in May also. And international business is currently doing reasonably well. And it's -- actually the overall revenues of international market has gone up beyond 50% in the core laminates business. Q4 also saw a decent demand in the vinyl, flooring and door business. With the residential markets picking up and most of these products largely being aimed at the domestic residential market, so we saw a sequential improvement in Q4 versus Q3. And the other important point is on the Greenlam South Limited plant at Andhra Pradesh. So we are in the last stages of getting the approvals from the government. We have got the cabinet approval for the land and investment, et cetera. But due to COVID and certain lockdowns, the paperworks are still moving a bit slow. And we hope in the coming, maybe 2, 3 months, we are able to sort out the last leg of approvals, and then we can begin building the third plant in Naidupeta in Nellore district. The exact time, obviously, we can't predict. We are on top of it and as approvals come in, we'll get running with building that plant. So that's it probably from my side. I will now hand over the call to Ashok. Ashok will take you through the operational and financial highlights, and post which, we'll be happy to address your questions and answers. Ashok, over to you.

Thank you, sir. Good evening, friends. Now I'll take you through the financial performance. For the Q4 FY '21, on a consolidated basis, we saw the highest quarterly revenue of INR 415 crore, a growth of 24% on a quarter-on-quarter basis and a growth of 28% on Y-on-Y basis. Gross profit stood at INR 202 crore, a growth of 16% on a quarter-on-quarter basis and growth of 24.5% on a year-on-year basis. Gross margin stood at 48.7%, a de-growth of 340 basis points on quarter-on-quarter basis and de-growth of 150 basis points on year-on-year basis. The dip in margin was mainly due to increase in raw material costs. EBITDA stood at INR 67.1 crore, a growth of 15.8% on quarter-on-quarter basis and 48.3% on Y-on-Y basis. The increase in EBITDA was on the back of higher operational efficiency and cost [indiscernible] EBITDA margin stood at 16.1%, a de-growth of 120 basis points on quarter-on-quarter basis and growth of 210 basis point on Y-on-Y basis. PBT before exceptional items grew by 86.8% to INR 52.6 crore in this quarter as compared to INR 28.1 crore in the Q4 FY '20. For the quarter, there was an exceptional item of INR 12.4 crore relating to an amount, which is paid for settling outstanding entry tax dispute with Rajasthan & Himachal Pradesh Commercial Tax Department. Net profit after exceptional items stood at INR 30.9 crore, a de-growth of 3.3% on a quarter-on-quarter basis and a growth of 42.3% on an Y-on-Y basis. PAT margin stood at 7.4%, a de-growth of 220 basis points on quarter-on-quarter basis and a growth of 70 basis points on year-on-year basis. Moving on to the full year. On a consolidated basis, net revenue de-grew by 9.2% and stood at INR 1,200 crore as compared to INR 1,320 crore last year. Gross margin improved by 60 basis points to 49.8% in this year from 49.2% last year due to improved product mix and operational efficiency. EBITDA margin grew by 90 basis points to 14.4% in this year from 13.5% last year. PBT before exceptional items remained stable at INR 108 crore despite lower revenue this year. We have reported a net profit of INR 73.7 crore in this year as compared to INR 86.7 crore last year, a de-growth of 15%, mainly due to exceptional items accounted for in this quarter. Moving on to segmental performance. Laminates & Allied products formed around 88% of our Q4 sales and 89% of FY '21 sales. For this quarter, Laminate revenue stood at INR 365 crore, a growth of 23% on quarter-on-quarter basis and a growth of 29% on Y-on-Y basis. Domestic laminate revenue grew by 28% sequentially and 42.7% on year-on-year basis in value term. Volume growth stood at 55% on year-on-year basis. International laminate revenue grew by 20% sequencing and grew by 18.6% on Y-on-Y basis in value terms, and in volume growth stood at 13.9% on year-on-year basis. EBITDA margin stood at 17.9%, a de-growth of 190 basis points on a quarter-on-quarter basis and a growth of 100 basis point on year-on-year basis. Laminate production and sales are highest in this quarter at 4.4 million and sales were 4.5 million sheets with capacity utilization of 112%. Average realization for the quarter stood at INR 780 per sheet. For the full year, laminate revenue de-grew by INR 1,065 crore this year from INR 1,120 crore last year. Domestic laminate revenue de-grew by 12.4% in value term. However, volume grew by 2.7% during this period. International laminate revenue grew by 1.7% in INR and volume grew by 0.8% for the period. During this year, Laminate business stood at [ INR 178 crore ], a growth of 1.2% on Y-on-Y basis. EBITDA margin stood at 16.7%, a growth of 100 basis points on Y-o-Y basis. Laminate production and sales stood at 13.57 million and 13.46 million sheets, respectively. And the average realization for the year stood at INR 765 per sheet. Moving on to Decorative Veneer & Allied segment, which formed around 12% of our quarter sales and 11% of annual sales. This includes Decorative Veneer engineered floors and doors. In the Veneer segment for the quarter, revenue stood at INR 32 crore, a growth of INR 24 crore -- 24% on quarter-on-quarter basis and 33.8% on Y-o-Y basis. Capacity utilization for the quarter stood at 46% as against 32% last quarter. Sales volumes were at 0.47 million square meter as against 0.36 million square meter last quarter. Average realization stood at INR 76 per square meter. For the full year, Veneer business revenue stood at...

Mr. Sharma, can you hear us? Hello?

Yes, I can hear you.

Sir, sorry to interrupt, but your voice is breaking up a lot, sir.

Can you hear me?

Yes, sir.

Veneer business stood -- revenue stood at INR 78.6 crore, a de-growth of 32%, and the volume stood at 1.12 million square meters with average realization of INR 691 per square meter. Moving on to engineered wood flooring. For this quarter, growth of 28.5% on quarter-on-quarter basis and 17% on year-on-year basis. Capacity utilization in this quarter stood at 16%. For the full year, revenue stood at INR 31.7 crore with a capacity utilization of 13%. Moving on to engineered doors. For the quarter, revenue grew by 42% on -- and stood at INR 7 crore. Capacity utilization for the quarter stood at 24%. For the full year [indiscernible] 23%. Gross debt ending March 31 stood at INR 248 crore. Company is also having cash balance and liquid investment to the extent of INR 125 crore, thereby, the net debt stood at INR 123 crore. As compared to FY '20, we could able to reduce our net debt by INR 140 crore in this year. Working capital cycle improvement from INR 306 crore in Q3 FY '21 to INR 291 crore this quarter. Net working capital days improved from 83 days in last quarter to 64 days this quarter. That's all from my side. I would like to open the floor for question and answer. Thank you.

[Operator Instructions] The first question is from the line of Alroy Lobo from Kotak Investment Advisors.

I just wanted to know the size of the laminate market in India as well as for the global market, your addressable market? And what are the drivers for this industry, both in the global market and in India? And could also give us some perspective on for the international market, what is the kind of distribution that you have created for your laminates? That would be helpful.

So it's a big question, so I'll start here. So domestic exports from India is about INR 2,000-odd crores annually in laminates. The global market is about $7 billion, approximately, yes. Domestic market, it depends because lot of local companies throw out quantities, but they don't show values. So probably even the band of INR 5,000 crores to INR 6,000 crores plus/minus for domestic market -- domestic production for domestic market -- for domestic consumption. The drivers for the business is, again -- so laminates has interior application as well as -- some part of the business also has exterior application. So in interior application, growth in interiors, which could be growth in all forms of interiors. So laminates are used in on the surface of making doors, kitchens, wardrobe shutters, paneling products, bathroom partitions, exterior facade, laboratory furniture. So various kind of applications is where the products use. So drivers are, again, largely economy growth, interior growth, growth in residential market, growth in commercial market. So these would be the growth drivers for the product category. And the third question on international network. So internationally, mostly, we have our own distributors who work with our brands. So we have inventory with our channel partners across various parts of the market, who in turn, go and sell products to furniture producers, could be large, small, cabinet makers. Our teams -- in most markets, we have our own teams to working with architects, designers, contractors. So it's a distribution-led model for most part of it. For certain part of the international market, it's a company to large furniture/kitchen OEMs model. So that -- these are the 2 models. We follow the international markets. And majority of our revenues in the international market is with our own brands. So we don't subcontract for any other brand across most markets. Does that answer your question?

Yes, yes. That does answer. Could you just give us some perspective with the margins for laminates in the export market and domestic market? Are they similar? And if you can also comment on the working capital intensity in both these markets?

So we've said that in the past also, the margins in each of these markets at times depends on the currency, raw material costs, structure which happens at various points. But by and large, the model of the business is domestic and exports go parallelly because you're able to leverage your inventory and your plates and your entire churn of the business. So it depends on the brand mix and the product mix. So there are too many variables, which we can -- so sometimes, they are similar, sometimes export margins are slightly higher if the currency depreciates. At times, the domestic margin is higher. Again, within the both markets, it depends on which export market are we addressing. In the domestic market also, there are different categories of products. So on a blended average, if you add consol sales and just domestic sales, it will be very similar.

Okay. And who are your big competitors from India in the export market?

So our nearest competitor in the laminate business is a company called Marino. So we compete with them in the export and the domestic market. So while we remain the largest exporters from India in laminates, Marino is the second largest. So in India, we compete with them. But our model of business is our own branded distribution model in the export market. So at the end customer point, we don't compete with Marino necessarily. So in the OEM market where we ship directly to the end customer, so there we might compete with Marino. But in the distribution market, we end up competing with the international brands or regional brands depending on which market who is positioned. But Marino is the second largest exporter of laminate.

And just finally, on your working capital, that seems to have -- is there any scope for further reduction in that?

So as revenues go up, because -- will -- inventory in number of days will improve because as sales go up, we don't need to stop more SKUs and more quantities per SKU. So it really depends on the top line. As revenues go up, we think there could be some more improvement in the working capital cycle. Our endeavor has been to constantly keep improving the working capital cycle.

Okay. And what was the domestic and export mix in laminates?

In -- Ashok, can you -- so exports in domestic.

Yes. In the laminate, 56% is export last year and 44% is domestic.

42% is?

44% is domestic, 56% is export for the full year.

The next question is from the line of Pritesh Chheda from Lucky Investment.

I have one question on the export market for laminates. So that market seems to be growing for us and for the whole industry. First of all, what outlook do you share on the export market? And what unique proposition that we, as India, have to offer on the laminates export side?

The international market, we think we continue to grow. And -- so I don't know if that [indiscernible] We think the international markets will continue to grow. And we think we'll be able to expand both volumes and value sales in international markets. And there are still certain geographies where we are not meaningfully present. In several geographies where we are present, we're still not #1, #2. So I think there's an upside in both quantities and realization in the international market. Regarding what does India have to offer? So I would say -- I'll talk more from our company's perspective. So our export model is not just a cost-driven manufacturing efficiency business. It's a combination of product quality, manufacturing efficiency, branding, distribution, specification. So I think it's an entire value which we bring to the customer in terms of product offering, certification, supply chain, large color pallet, several options of texture molds and local teams in many markets to support the distributors and customers. So I think it's an entire package we end up offering. There's no one specific advantage, which I can mention.

Sir, the decorative paper usually gets imported. And I think if German suppliers and a couple of others, where the most important part gets imported. So is it that the industry is more manual in nature? And which other countries you'll end up competing with in the export market?

So deco paper is largely imported, either from Europe or from Asia. And the ones which is produced or printed in India, the base -- the print base of that on which the printing is done is -- which was imported. So you can assume that deco papers, by and large, I think, 90%, 95% either directly imported or the print base is imported. And the -- what was the question? Manual in nature -- what was...

Yes. [indiscernible] is the industry more manual in nature? And second, which countries do you compete within the export market as your competitors?

So industry is -- I would say it's like semi-auto. Certain parts of the plants are automated. Certain parts still need certain amount of manual intervention. And which countries do we compete with? I think it, again, depends. There's no one country we end up competing with. Because very few companies have a model where the manufacturing is centralized and distribution is across various parts of the world. So in different geographies, we end up competing with regional players, local players. In the very low end segment in certain markets, we have certain competition coming in from Chinese producers. But that's really in the low end of the market. As Greenlam, we're not prevalent, we don't operate in that space. But in certain commodity items, one ends up competing with Chinese also in certain markets. But otherwise, it's regionalized. Every region would have its own set of competition.

And lastly, sir, the raw material prices, whether it is paper, formaldehyde, phenol, everything has shot up really a significant way.

Sure.

What is the cost inflation that you are seeing? And what kind of pricing have you already taken? And what incremental pricing is left to be taken? And what is the strategy there?

So raw material costs in laminates across various kinds of paper, chemicals, freight inwards and imports. Across every RM, literally, there's -- there has been a significant price rise. We have been able to pass on the entire RM cost to the domestic market.

So what is the RM? Why is it blended?

I have to run the math because some -- certain costs have gone up like 2x also in certain chemicals. But -- so whatever was the increase in domestic, we've passed on completely. In the international market, I said that earlier in the call, in my opening remarks, we've been able to pass on part of the cost increase. And most of the [indiscernible] rate increase has been passed on to the international market. So some parts still remains to be in the international market. So this is where we are.

So what is the price hike in domestic?

What is price hike? I have to run the math. If I do a total from, I think, November onwards now, it would be approximately 12% to 14%, x. We combine because RM cost has gone up in stages, right? So I think November -- October, November, we did one increase, then we did one more. Then so there are 3 increases which have happened as far as I remember in the domestic market. I think, it's in the band of -- Ashokji, correct me if I'm wrong, I think it will be about 12% to 14%.

In the -- category to category, it will vary, but what you said is correct, that we will be [indiscernible]

The next question is from the line of Saurabh Patwa from HDFC Mutual Fund.

I just wanted to understand -- this one -- first is a bookkeeping kind of a question. So our capital employed in Laminate business has grown up in this year. This is despite a slight fall, marginal fall in the revenue. Is it due to some CWIP as in some CapEx? I think we have done some CapEx also. So is this because of that?

No. It's because of the...

Ashok...

Yes, it's because of the new project, which will be coming in the South and which is we have announced for the laminate. So that's why that is being captured here as well.

So some part of it has already been started coming in the books now?

Yes, we paid for the land.

Okay. Understood. Sir, second is...

It has been there since March '20, this land payment. So it has been there for a year.

No. I was comparing this with March '20 actually. So I think our CWIP -- capital employed in laminates has increased by 8%. So if the land was there last year, so this must be something else actually.

No, it shouldn't be.

Okay. And moving to second question, sir. Our laminate volume growth has been very flattish from the last few years in fact now. So I think in FY '17, when we did 12.8%, this year after the second half, then we have done a really good comeback. But still, it is almost more or less there only. So the growth in revenues come largely from price hikes. So where do you see, sir, going forward? What's your view, like maybe like 3 years from now, how do you -- where do you see the volumes going to?

So if you see, this year was impacted for April and partially May and June. Last year too, March month was, FY '20, things got bad. So I think if you look at this year, the production and sales and volumes, I think should be meaningful unless there's some disaster with the COVID and all that stuff. I can't put a percent. But if you see, we've done about over 110% utilization in quarter 4. So we can maintain those levels of utilization and maybe slightly improve to in terms of volume. So we will have to see how the market behaves, but...

Are we impacted by the second wave, either in terms of demand or in terms of supply in anyway?

So the second wave hasn't impacted the running of the plant. The plants have been running. We haven't had much challenges on the manpower availability and RM supplies, et cetera. The international markets are not affected, rather it's running pretty positive. The domestic markets obviously have been impacted, and we will be impacted by the sales in the domestic market because nearly 75%, 80% markets have been shut at various points from second or third week of April until now. And most of these markets are shut. While sites are still open, construction sites in some places, the OEMs, the furniture producers are still working. And most of our warehousing in the country are -- is out of the city limits, so they are also functioning, but still have been impacted in the domestic market. So whether we've been impacted or not, yes, domestic business has been impacted. The international is doing okay. There should be no negative impact on the international business as we see things now.

Understood. Sir, just one last question, if I can just add in. Do we -- since we have been a very strong player in laminate from a very long time now, do we plan to get into the pre-lam board business? Of course, it is more commoditized business, but we being -- having a large-scale in terms of laminates, can do some value-added play there. Do we have any plans of -- or in any other adjacency which we believe are right for our business?

So we do have some pre-lam business currently with us. But those are largely in the premium category of the market. So yes, we are looking at opportunities in adjacent spaces. And we will -- we're still kind of finalizing our plans, and we shall come back to you once we have sorted out with that plan. So to answer the question, yes, we will be looking at some more adjacent opportunities. And there are adjacent opportunities.

The next question is from the line of Bhavin Chheda from Enam Holdings.

Congrats on record set of numbers. Just a few questions. First on the product mix. If I see your laminate NFR, they have moved up quite a bit in quarter-on-quarter basis. I see the last quarter's commentary, I think there was more sales of 0.7 mm sheet, and that's why your realizations were low. So this quarter, despite record production and sales volume, has product mix again shifted more towards 1 mm and that's been reflected in a higher [indiscernible]?

Bhavin, I'm not able to hear you clearly. Can you repeat, please? Bhavin?

Yes. So it's clear now?

Better. A bit better.

So I've seen the laminate realizations have improved on a quarter-on-quarter basis.

Yes.

I think last time when we spoke during last quarter, I think the realization was low because sales...

Yes, 0.7.

Sales of 0.7 mm had increased. So has it got corrected this quarter despite your volumes being very high? So have you sold higher 1 mm volumes this quarter?

So Bhavin, 1 mm volumes clearly have gone up in Q4 versus Q3. As a percent, I think 0.7 volumes have also probably, as a percent of the mix, I don't think that has come down, though, right? So probably the volumes of 1 mm and 0.7 have gone up -- have been maintained, sorry, as a percent. With volumes going up in 1 millimeter, the percent is still the same because in Q3 -- Q4, we had a launch of 1 product category in the 0.8. It was actually in Q4. And Ashok, correct me if I'm wrong, right? I think the 0.8 numbers have also gone up a bit, Bhavin.

Okay. Or what I can say, the realization, which is up quarter-on-quarter, is it because of price hike or just product mix?

I think this will be largely price hike because as a percent of 1 millimeter, although volumes have gone up, but volumes of all categories have gone up, Bhavin.

Sure. And how much percentage of price hikes we took in the quarter, across products, roughly average?

Ashok?

Mostly 1% or 3% in Domestic, Bhavin. I'll come back with the exact number on that.

Sure, 3%, 4%. Okay. What would be the next year's CapEx would be?

So Bhavin, on CapEx, the routine CapEx will be in the band of INR 25 crores, INR 30 crores on completion of construction, et cetera, spending at the Behror factory. And then depending on how and when we get the approvals to start the construction at Andhra Pradesh, that will get added on. And assuming that we are able to start building the plant sometime in quarter 3 of this financial year, so that might add another INR 50-odd crores -- INR 60-odd crores this year. So depending on how that goes, Bhavin, because we do need to immediately add more capacity. And in Q4, also, we ran out of -- we were running full. And we can spread a bit more, but -- so we want to rush the process of adding more capacity. So once approvals come in, that CapEx will get added on.

Sure. And if I -- I missed the number of engineered wood flooring and engineered wood door EBITDA losses, if you have shared in the opening remarks for the quarter.

Ashok, will you do that?

Yes, Bhavin. For the quarter, the -- for the floor, the EBITDA loss is INR 2.8 crore and door is INR 0.9 crore.

INR 2.8 crore and INR 0.9 crore, right?

Yes.

Okay. And FY '22, we expect a breakeven there? Or it will take another year or so before we start seeing EBITDA breakeven in this 2 segments?

It depends on the market. [indiscernible] last year, then again numbers came down. So it really also depends on the market situation, but endeavor obviously is to break even at the earliest possible.

Sure. And has the quarter 4 momentum been carried on because, again, there have been lockdowns? And are our factories running full or they are running partly utilized in the month of May? And how is the scene overall first on the factory front? And again on -- second on the overall demand trend, both in domestic and export markets?

So factories have been running, Bhavin. Factories have been running RM inwards, availability of manpower resources, batches, all that's by and large under control. Nothing very significant. We've been able to run that part of the business pretty well. On the demand front, the international markets are looking pretty okay. So we are maintaining the momentum of quarter 4. Domestic clearly has taken a hit post like second, third week of April. So sales are going on. It's not as if it's collapsed completely, but numbers are extremely weak. So if you look at quarter 1, I guess international numbers will maintain the momentum built up in last quarter. Domestic will surely take a hit. Depends on how June goes and how this unlocking happens because mostly, all the traders markets across the country, 75%, 80% markets are shut or partially shut, et cetera. So this is the way everything looks like.

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

Congratulations on a good set of numbers. Sir, just a couple of questions from my end. Firstly, with regards to -- you, of course, mentioned the raw material prices have gone up significantly. And then the domestic market, you have taken price hike. But in the export market, you're taking it partially. So the question here is, last time, you gave margin guidance of 15% to 16.5%. Will you be able to maintain that, is the first thing?

So when you said, 15% or 16%, you asked me for maintaining in laminates or overall?

Laminates. Laminates.

So actually, answer is I don't know, right? It depends on how the second wave goes on, when the markets open, how things shape up. So really -- so last quarter, laminates, consol EBITDA was at 17.9%, right? So it really depends on how things go. So on the prices, we said domestic, the entire cost increase has been taken. And exports also, actually, in terms of percent increases, if you add the sea freight, which charges the customers, percent increases to the customers are similar band of what we've done in the domestic market. So it's not as if we did not increase prices in exports. But on exports, the current disadvantage is RM costs have gone up as well as the shipping costs, right? And shipping costs have gone up like it's like nobody's business, 3, 4x, sea freights have gone up. And we put -- we've added all the sea freights to the market. But on the RM cost, we've been able to partially put in the hike. So it depends on how the markets move, Sneha.

Got that. That was helpful. Sir, second question is related to phenomenal volume growth that we've seen. Of course, since last 1 -- 2 to 3 quarters, I must say that you're already highlighting that there's a pressure on unorganized segment, which was not even said at the time of GST and which is now being said. How much do you think it's sustainable given that this time it has come on the back of raw material price increases and of course, because of this continued COVID environment that the cash flow issues at their end? So I mean what's your rough sense how much of this competition could just stay away? And for how long?

I'm not sure exactly how long and how many companies, et cetera. But we do know and we do hear that several manufacturers, both mid size, small size and even some large manufacturers are having challenges in availability of raw materials. Costs are high. Cash flow is a problem. Even manpower availability in certain smaller plants is a challenge. And besides 3, 4 companies, most of them are completely or largely dependent on the domestic market. And with the second wave, that's also been a bit of a challenge. So we do hear that the unorganized mid-size manufacturers are under a lot of stress. Can't exactly quantify how many of them and how long, et cetera. So really tough to say that. But yes, we do hear that there are -- several of these manufacturers are under stress. And with this e-way and FASTag clubbing and compliances, that's also there, which has been -- which is also -- has been a matter of concern with the unorganized guys. So yes, we do know that they are under stress. Does that answer your question?

Sure. Got it, sir. And sir lastly, on the inventory in the system. So last time, when wave 1 occurred, I think there was a fair amount of inventory. And in fact, after the market opened, there was some amount of resistance in this channel to pick up. What are you sensing now since the situation has not come to standstill, in fact? As you also said, there's some material still flowing in. So what's your expectation here, I mean about the current inventory in the channel, and would there be any resistance?

So as far as we are concerned, our inventories with our distributors have always been quite controlled and systematic because our credit terms are quite tight versus any other manufacturer. And so as demand picks up, I think as they start selling secondaries, they will have to pick up primaries from us. So we don't see a situation whether there's excess inventory of our products with distributors or in the channel. So demand picks up, I think secondary sales should start. Now whether they have lessor inventory, I'm not sure on that. I don't think so because mostly our primary and secondaries match. So it's not -- if secondary issues go up, primary issues also go up. So I think as demand picks up, they'll have to pick inventory -- they will pick inventory.

That was really helpful, sir. Just last one. By when can we expect the new South plant? I know it's getting delayed and you may start the work in the next 2 to 3 months. But some tentative time line to that?

So like I said earlier, we are in the stages of certain approvals from the department. We've got some cabinet approval. We need environment clearance. So all that follow up is going on. Due to the COVID, it's been a bit slow. I think last stages of getting all of that. The moment it comes in, we'll start building the plant.

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

Congratulations for the great numbers.

Thank you.

What I wanted to check was in terms of the South plant, since it's getting delayed and we kind of run out of capacity in last quarter itself, is there any scope for us to add capacity at the existing location? Is there any thought on that? Any fears, what kind of capacity addition we can see? Or would that cap our volume numbers for the current year, if everything is normal?

So in the existing plants, we don't have more potential to add capacity. So I think we're already quite -- the space of the plant, the balancing of equipment is all quite down. So we cannot add more capacity in existing locations. The capacity utilization is something we can still squeeze out a bit more. And what was the next question, Achal, sorry?

Basically, with respect to South plant, it's getting delayed. So you're saying that you could squeeze in some more volumes out of the existing capacity. Is that understanding correct?

Yes.

But no thoughts about brownfield expansion at the existing location as of now?

No, we've already done all of that. So now with the plant space, size, equipments, the boiler system places, it's all designed in a way that it can't take in more capacity in the existing locations. And in South, I think, we're in the last stages of approvals, so we don't want to kind of turn back and take a different decision. So I think once we get the approvals, we can rush the creation of the new capacity.

And what would be the time line? Let's say, theoretically, it were to come in, in June. How much time would we take to have the Phase 1 and what kind of capacity would that be?

So assuming from the time of construction, it would take anything between 12 to 15 months to build the laminate plant. And we've done things in this time and in the past too. And currently, we've announced 2 lines in the new plant that we are actively discussing, maybe add some more lines, so which -- that decision we'll take in the coming months.

Understood. And fourth quarter, it appears to us that it is fairly normal quarter. I mean there is no disruption, so to say, in terms of supplies in the inward or outward side. So if the situation is normal, can we assume -- or can we extrapolate the fourth quarter volume numbers? And is there any exceptional items which have driven the margins to record numbers, sir?

So in fourth quarter, we did have challenges on RM supply. It's not visible in the numbers in terms of imports and in terms of container shipping delays. And so it doesn't show up so much, but there still are challenges in certain RM availability, goods inward and goods outward for imports and exports. On the volumes, the markets are open, are sustainable in the sense we can produce on a run -- within run rate basis, these kind of volumes. And so there was not much one-off -- there is not any one-off stuff on this. Ashok, do you want to add something, please go ahead.

No.

So there were no one-off in terms of costs or margins or anything of that sort.

Understood. Just one more question. With respect to the exports, what is typically the sea freight in terms of the percentage of the cost for the importer? Let's say, if somebody is importing from India, what is the sea freight? Because the sea freight has gone up. What I'm trying to understand, does it hurt our competitiveness actually in terms of we losing out to the peers or the shipping cost has gone up for everyone?

So shipping cost has gone up for, I think, every exporter and every exporting nation. What is the cost will depend on the location, right? So locations in South America and U.S., the percent is higher. Locations in Southeast Asia, Middle East, percentage is lower. But costs have gone up depending on the location and the lines and the timing, et cetera, 2 to 4x across. Now will that hurt our competitiveness? Maybe not because costs go up for everyone. And just because of the hole we have in the market in terms of inventory on ground, marketing support, sales support. So I don't think that's a big challenge. Several regional manufacturers are also having challenges at least on RM front. And we do know in a couple of markets due to RM not being available, certainly international producers have cut down production -- suspended production for some time, et cetera. So I think it's mix. You can't say this is the only thing which is going to kind of make you noncompetitive.

The next question is from the line of Ashish Poddar from Anand Rathi.

So basically I have 2 questions. So in the domestic market, you spoke about consolidation, smaller players getting hurt because of operational challenges, despite our domestic value in laminates was down about 12% in FY '21. So if you can give some sense about the industry in FY '21, what kind of decline would be there? And what kind of gain the large guys have gained from the disturbance than the small guys? This is my first question.

Frankly, Ashish, I don't have a math on that and it's something we'll have to probably get back to you on this math. But this is just a hunch, and I'm not sure whether I can clarify this with really data. If domestic guys are down 25%, 30%, we are down only 2% or something of that sort. I'm not sure, but this is a sense we get with our various documents.

But if you can directionally give that, is the decline for industry much higher or it's closer to our number? I mean any directional thoughts would be helpful.

Well, so again, I cannot measure that. But we do hear that local plants are minus and some people say, 15%, 20%; some say, 30%. So I don't have a math on that honestly. So giving you a number will be tough. So if you see our numbers, in volume, FY '20 versus FY '21, the full year, we're nearly flattish, domestic and export put together. Value sales were down about 2%, 2.5% on an annualized basis, right? Domestic value down by about 10% for us.

Yes. On your export business, you spoke about your strategies in market. So is China Plus One strategy also helping us in getting better traction for our kind of player?

No, not necessarily in our laminates because we said earlier, we're not really competing with China, at least in the markets we are operating in. So I don't think that's the driver for the export business.

Okay. So it will be largely driven by the penetration in the existing market and in terms of the new markets?

Yes. And we said, our business is not very -- like it is export, it's not very -- it's not based on pricing and manufacturing efficiencies, it's also about supply chain and deco papers, marketing, distribution. So it's more like a routine growth. It's not something which is triggered by China Plus One strategy in exports.

Right, right. So my last question, I think...

Mr. Poddar...

I have just clarification on a question earlier, but didn't get satisfactory answer. So Q4 revenue of INR 400 crore plus and a margin of 16% plus. In a normal quarter, barring Q1, so in quarters ahead, do you think that these are the normal numbers for upcoming quarters? Or do you find that Q4 was abnormal in some sense and maybe you will find some taper down in growth and margin?

So revenues and production capabilities, capacities are absolutely in play. So it's not something which can be done or even higher can be done. As far as the margins are concerned, if those volumes -- those numbers happen, I guess margins should also happen. Obviously -- currently, we think there's so much uncertainty with second wave and third wave or whatever. So I can't say much over it. But I think with those kind of volumes, probably margins can also happen.

The next question is from the line of Gaurav Agrawal from Bowhead.

Just a couple of ones. Sir, you mentioned that your export proportion in your -- for FY '21 in the laminate segment was 56%. So firstly, is this volume or is this value? Or there is no difference since you mentioned the margin is the same for both, for domestic as well as exports. So if you can clarify whether the 56% and 44% breakup that you gave was of volume and of -- or of value?

This is percent of value.

Okay. And would it be similar for volume also?

Volume will also be similar. One second, volume will be -- lost my CFO. Volume will be about 54% -- 52%, 54% -- 54%.

Okay. So that -- so in terms of margins, I think exports would be a bit better in terms of margins. Will it be like this?

Well, I can't say similar, like I said. It can't be so specific.

No problem. And sir, I missed one thing that you mentioned. From the date of getting the approval for our new plant in AP, how much time will it take to operationalize it and get it running?

For laminates, I think it should be like a 12 to 15 months.

That is from the date of approval, that you get the approval?

No, no. From building. How can you say approval. Date of starting the construction.

Okay. So I would presume, once you get approval, the construction will start maybe in a month or so. So that would...

It depends on COVID, depends on so many more issues.

The next question is from the line of Mithun Soni from GeeCee Investments.

Just a couple of questions. You said that the domestic market is in the ballpark range of about, say, INR 4,000 crores, INR 5,000 crores. We do about whatever INR 500 crores, INR 600 crores. Wanted to understand how much of the domestic market is what you will call as your target market where the realizations are high? Whether it's decorative? I'm talking of laminate percent. So how much of that market is what we can really get? Because there is a huge market, which is at the lower end with INR 150 or INR 200 of realization also. So just wanted to understand that, please.

You can assume -- I don't know, maybe 50%, 60%.

50%, 60% of the market in terms of value wise would be at our price point?

No, no. This won't be at our price point. It will be lower. So I think...

I mean, let's say, above 500 or something.

No. That will also be -- so see -- if you see sheet value, you can say there's a 1 millimeter market. There's a market under 1 mm, up to 0.8, and then below, right?

Correct.

Floor sheet value even in the 0.8 for most local companies will be INR 500 sub. So if your question is, what can be the addressable market? If you're saying that or are you saying -- what...

I'm trying to understand what is that market we are targeting? We will not be there in plain vanilla laminates, so...

We are now present across price points from 1 millimeter, 0.8. We also launched 0.7 last year in the COVID time. We're also in the -- for fab laminates, compact laminates. So currently, as we say, besides maybe few smaller segments, a very, very low-end segments and some more segments, we have products across those prices. But obviously, we are premium in most categories and most price points.

Okay. So from that perspective, it -- hello? Yes. So from that perspective, the growth -- we still have a huge leg room to increase our market share because with only 10% market share, the growth should be much, much higher, right, given that -- or we are only targeting a very small part of the market, which is the premium end of the market and where we already have 25%, 30% market share. I'm just confused on that part.

So yes, obviously, in the premium end, we have a higher market share. And with us introducing the lower category and all these cost increases, compliance, pressure, et cetera, et cetera on the local companies, we think the market we can go after is larger and wider. And obviously, for that, we need more capacities and we need some more time. So yes, the addressable market, I think, is getting larger for people like us.

So what would be the premium end of the market where you earlier were targeting?

No. When you said premium end, is it like in terms of thickness or value of that market?

In thickness and value-wise, both. I mean in value-wise, I would say, because it...

I have to run the math. Probably, I don't have the data right across me. But maybe you can have a dialogue with Ashok, and we can probably run that math a bit better. Otherwise, I will just give you general numbers right now.

And my second question is -- perfect. And my second question is with respect to export. Over the next 3 to 4 years -- next 3 to 5 years, given the market is huge out there, how do you see the potential for us -- for the exports in terms of the size? Can we be like a much, much larger piece -- can the export be a much larger piece for us?

Yes, we're quite positive about the opportunity we have in the international markets. And we've been at it for the last 15, 17 years in terms of building those markets. And we have opportunities in both volume growth and realization improvements. So yes, this -- we can do...

Have we reached like a critical mass? Yes, I'm just finishing this. Have we reached a critical mass where we can see a sharp strong growth from here on, like in the export markets?

I'm not sure on that question on whether we are at a critical mass or we will reach one. But I think with more capacities, which we are looking at building in Andhra Pradesh and -- we've taken a large piece of land. So I think we can expand very well if the demand and the market opportunity do show us. And there is an opportunity for sure.

[Operator Instructions] The next question is from the line of Kedar Kailaje from Fortress Group.

My question is on the engineered floors and engineered doors segment. So firstly, what is the market size of the floors and doors? Secondly, what is the competition that you are facing there? And what is Greenlam's market share? And thirdly, do you see this as a growth driver in the next 3 to 5 years? And what would be the growth drivers? So those would be my questions.

Right. So the competition, I'll start with that. So engineered doors, we end up competing with traditional way of producing or setting up doors, which is the wooden flush doors and carpenter doors at site by customers and certain other manufacturers who have also started a similar model of engineered doors produced at the plant and fitted on site. The market size of engineered doors, I think, has to be looked at -- if you look at the entire door market or the entire opening market as an opportunity, this can be quite significant and large because we are doing non fire rated doors, some fire rated doors and also looking at doing some specialty doors, right? So this is a significant market size, but the ramp-up has been fairly slow, I would say that, yes. In engineered wood, we end up competing against imports in the same category. There's no other local -- meaningful local producer as far as we know. And we end up competing against laminate flooring too and with vinyl flooring at times. So competition is imports, laminate flooring, vinyl flooring, at times marble, carpet, all the premium flooring material and sometimes laminate flooring because it's like a look-like at a lower price. So these are competitors. Market size of engineered would flooring would be in the band of INR 350 crores, INR 400 crores imports and domestic company level. And yes, we have capacities in both the categories. And we are looking at building the business in this category.

The next question is from the line of Arun Baid from BOB Capital Markets.

I have 2 questions, sir. So one is what's the peak capacity our current plant can run at? Like, we did 112% in Q4. Is that a peak number? Or we can go ahead of that?

You can say this is in the range of that peak because 110%, 115%, I think, that range, we can run the plant on a consistent basis.

Okay. And second question is, sir, are we looking at any new categories besides the current ones in the near future?

[indiscernible] categories.

Sir, your voice is breaking.

Sorry, I -- can you hear me now?

Yes, yes, I can hear you better. Yes.

Yes, I am saying, we will be looking at some more adjacent categories in the future.

Is that after the completion of the new plant, the South plant or it can be before that?

Well, it could be aligned with the South plant itself.

And that would be based on manufacturing again or outsourcing, sir, because as the CapEx...

So our model of business is largely manufacturing led. And my guess will be manufacturing led. We will [indiscernible]

The next question is from the line of Ronald Siyoni from Sherkhan.

Hello? Am I audible?

Yes, sir.

I just had 2 queries. First one is why are we not going for acquisitions since this plant is still away, more than 15 months away? And the unorganized sector itself is reeling under pressure. So what is actually stopping us from acquisitions?

Yes, right. So actually, if you look at the unorganized manufacturing setup in the country who are potentially weak or have got weak or could be up for sale or could be acquired, most of these companies, their equipments, their land size, plates, their deco paper, will not be aligned to the kind of manufacturing setup we want to build. And these are largely just maybe 1 or 2 press factories with very inferior quality of equipments, poor speed, no energy levels in terms of the power energy, which is needed to run the presses and [indiscernible] machines. So practically, it looks good on discussion. But I think our guess is that will rip apart everything and put everything brand new. So my guess is we will just wait and get -- rush the approvals in Andhra Pradesh and start building the plant because it's a 65-acre plot, and we can keep expanding brownfield like we've done in the past at Himachal Pradesh. And every 18 months, we've done 1 brownfield expansion. And each brownfield expansion has lower CapEx and incremental EBITDA. So I think that's a more longer-term view. There could be some stress on capacity for a few -- for some time, but we still think that's a more long-term and a better route. That's the reason the acquisition opportunity is not something we're very excited about in the laminate space.

And sir, second one, the last one is that how much capacity does 1 line add to the total capacity [indiscernible] one line?

Yes. Yes. So it depends on which product you produce and what size and all that. But you can assume about, in our kind of business model, INR 120 crores, INR 125 crores, on an average, 1 line can end up producing because normally, our presses are larger, more number of day lights, higher value production. So you can safely assume, average INR 125 crores. If you're doing larger-sized laminates like 133 or 135, 4.25 x 10 feet products, or 6 x 12 products, then the value can be slightly higher also.

The next question is from the line of Shrenik Bachhawat from JM Financial.

I want to understand that commodity laminates that we make, can we -- do we plan to do it on outsourcing model as you would like to use our capacity for the premium products?

Actually, in our category, this outsourcing model, at least with our experience, does not work well because your number of SKUs are higher. Unless -- the local companies are cheaper not because they are more efficient than us in manufacturing, it's because it's cheap, right? And they will do -- they will not bill, they will not pay the compliance taxes and all that stuff. Otherwise, ex-factory production product, our manufacturing costs will be lower than theirs. And even the quality standard, supply chain with the local companies is always a challenge. So till first time, we've build up more capacity, we can reduce the commodity categories a bit, but we are not keen at getting the product outsourced.

Okay. And sir, in April month, when did we start seeing weakness in the domestic demand scenario?

I think, second week, maybe. 15th, 20th of April, I guess.

2nd week of April?

Maybe half in the month, I think.

And sir, sorry to repeat the question, but could you please help me with the CapEx guidance for FY '22?

Say again, please? Say, again, please?

CapEx guidance for FY '22?

I couldn't follow that.

CapEx guidance?

CapEx, yes. So routine CapEx will be like INR 25 crores, INR 30 crores. And depending on when we start the Andhra Pradesh plant, the construction of plant, that will get added on.

Ladies and gentlemen, we take the last question from the line of Kedar Kailaje from Fortress Group.

Sir, getting back to the engineered floors and doors. Sir, you mentioned the market size is huge. Could you give a sense as is it bigger than the laminates market or equal to the laminates market? Just -- or some numbers regarding that?

I can't give you a number right away. But if you add the wooden frames, because we are doing a door sets and the leafs, right? So when you say door sets, even the [Foreign Language] the frames are being done with the doors. So I don't have the math right away in front of me. But my guess is it will be slightly smaller than the laminates market, I guess or maybe similar, I'm not sure. I don't have the data right in front of me right now.

Okay. And if I understand correctly, this would be only for the OEMs, not retail, right?

So currently, what we are doing with the doors is largely doing projects, right? So premium residential builders, hotels, right? Some retail also, but largely focused on mid to larger size premium door requirements. So we're not doing those 1, 2 doors, and we're not serving the trade. It's through specification and to the builders and to hotels and schools and all that stuff.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you, friends. Thank you for your time and patience hearing. And we appreciate the questions which have come across our way. And be safe, and thank you so much.

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

Thank you, all.

Thank you, all.