Greenpanel Industries Limited (GREENPANEL.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Greenpanel Industries Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar, CDR India. Thank you, and over to you, sir.

Good day, everyone, and thank you for joining us on Greenpanel Industries Limited's Q1 FY '26 Earnings Conference Call. We have with us today, Mr. Shobhan Mittal, the Managing Director; Mr. V. Venkatramani, President, Finance; and Mr. Himanshu Jindal, CFO. Before we begin, I would like to state that some statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in the result presentation that was sent to you earlier. I would now like to invite Mr. Shobhan Mittal to begin the proceedings of the call. Over to you, sir.

Thank you, Rishab. Good afternoon, ladies and gentlemen, and welcome to our quarter 1 FY '26 earnings call. While sequentially, our domestic MDF volumes grew by 2% versus quarter 4 FY '25, there was a degrowth of 8.5% versus quarter 1 of last year, largely due to the discontinuation of 37,000 cubic meters of commercial-grade MDF sales post implementation of BIS QCOs. Excluding this, domestic sales grew by 47% on a like-for-like basis. On the domestic front, though demand continues to be robust, growing at a lower to mid-double-digit CAGR, the recent bunching up of capacity additions led to pricing and credit aggression by players to quickly gain relative market share, impacting volume growth. The excessive buildup of inventories at the channel, both domestic and imported before implementation of BIS are yet to be fully liquidated is also another reason for a less-than-expected volume growth in quarter 1. On the exports front, our volumes were almost flat sequentially, but degrew by 40% year-on-year. Obviously, exports has been more of an opportunistic play for us, and we have been taking conscious calls based on possible volumes versus margin play. The recent geopolitical situation, especially in the Middle East, also disrupted movements impacting volume growth. Plywood sales are yet to stabilize, although we've already taken steps to improve synergies with our existing MDF business, both in markets as well as on costs. This will take a bit more time, but we're confident of a revival over the next few quarters. Our domestic realizations, both for MDF and also plywood remained flat year-on-year, while the MDF export realizations improved by 7%. As a consequence, our MDF revenue degrew by 12% last -- versus last year, and our plywood revenues were lower by 3% as well. Consolidated revenues from both segments being INR 323 crores in quarter 1. On the operations front, we were able to stabilize the new thin panel plant at Andhra Pradesh. This, though, came with the initial hiccups and cost inefficiencies impacting margins and should get normalized from quarter 2 onwards. Timber prices are on course correction already and were lower by 7% sequentially, leading to an improvement of 2.5% on gross margins. Consolidated gross margins being 47% for quarter 1. Consolidated operating EBITDA, excluding the impact of currency movement on the euro borrowing for the new plant was INR 13 crores or 4% of revenues, MDF at 4.4% and plywood at 0.6%. On the industry front, the tailwinds for the sector are becoming more and more visible now with each passing month. Some very clear green shoots, which should play out over the short to medium term being; further expected reduction in timber prices, no further meaningful capacity additions in the sector; slowing down of MDF imports, run rate for quarter 1 already being 1,000 to 1,500 cubic meters versus recent historical highs of 52,000 cubic meters per month. Lastly, the play of BIS norms and strict implementation of these covering the smaller domestic players from September onwards, apart from the QCO expected on furniture next year. Moving ahead, to facilitate sales, apart from some of the more visible actions we took recently, example, the change of sales lead and convergence of ply and MDF sales team to complement product offerings to the channel, we simultaneously continue on our quest to strengthen our branding presence and channel connect. In quarter 1, we rewarded 150 top-performing channel partners at Bali, Indonesia, reinforced ambitions to scale up via our annual sales conference, restrengthened our in-shop branding across 2,000 dealers and subdealers, ran HDWR campaigns both physically and also digitally, launched thin MDF and HDWR doors and also revamped the loyalty program app for a more seamless experience for our partners and the associated carpenter fraternity. This should help improve our connect and savings of our products going forward. To summarize, while quarter 1 was fraught with a few exceptions, some clearly beyond our control, example, FX movements. And while there are still challenges especially on the pricing for now, our renewed focus will be to recoup lost volumes and regain market share going forward over the next 9 months. Our aim is to counter pricing pressure through expected reduction in both raw material and other variable costs as well as fixed cost optimizations and operating leverage by increasing volumes. With this, I request our CFO, Himanshu Jindal, for the financial and other updates. Over to you, Himanshu.

Thank you, Shobhanji. Good afternoon, all. Since we have already covered revenues along with the underlying details on volumes and realizations, let me briefly give you more details on the exceptions impacting quarter 1 and along with the balance sheet aspects for the quarter. On the exceptions which impacted quarter 1 results, the first one was the impact of adverse currency movement, the euro-INR. The ForEx loss on euro borrowings, which is the ECB being INR 27.6 crores. And on CapEx, there's another INR 2 crores. Almost INR 26.5 crores of this is unrealized, which is nominal mark-to-market, noncash. The second piece was initial stabilization of the new thin panel plant, which Shobhanji already talked about, which is what led to a higher consumption largely on power and fuel. This impacted margins by another 3% versus the last fiscal. Apart from these, there was also the first-time capitalization of the new plant, which was absent last year obviously, which is what resulted in a higher interest and depreciation expense of INR 10 crores. Counting these in, the reported EBITDA was negative INR 12.4 crores, the PBT was negative INR 47.4 crores and the PAT was negative INR 34.6 crores. On the balance sheet front, our working capital requirements did increase mildly as expected, given the new MDF plant coming into operation March end last fiscal. The core cash conversion cycle expanded by 11 days to 47 in quarter 1. Our gross debt at June end was INR 386 crores, bulk of which is for the new plant at AP, which is almost at par with the March figures despite repayment of the scheduled tranches in quarter 1 due to the unrealized FX loss on the euro-denominated borrowings. Counting the cash and bank balance at end on hand, the net debt was INR 233 crores. And there was 0 utilization of our funded working capital facilities, implying a comfortable leverage and liquidity position and thus financial strength for the company. On that positive note, I think we can open the Q&A, please.

[Operator Instructions] The first question is from the line of Keshav Lahoti from HDFC Securities.

Sir, as you know, possibly Q1 should have not been how possibly we might have expected earlier. So what sort of -- will there be any curtailment in guidance on the volume and on the margin side, what you have guided earlier?

Yes. So no, we are not changing anything on the guidance side in terms of volume or margins at this point of time. As mentioned earlier as well that we are going to -- there is pricing pressure in the market, but we're going to counter that with cost savings, both on the variable and fixed side as well as operating leverage. And as of now, we want to maintain our guidance for the volume as well as our margins.

Understood. So this implies that you need to sort of achieve a big growth on the later 9 months, so that means you will be more possibly aggressive on the pricing side? And what sort of price cut you have taken in the last few months?

So there have been schemes already in place from July. And as a company, we are very comfortable with our balance sheet at this point of time. So now the focus of the company is strongly going to be on recouping the market share that we have lost and on the growth side. So yes, pricing pressure will be there. We will work strongly to negate that with optimization of cost and leveraging our volumes. And that's our expectation at this point of time.

Got it. What sort of schemes you have given in July? And secondly, possibly, as the new plant has came up for you, normally players take -- give higher discount in the market. So will Greenpanel follow a similar practice?

Sorry, can you repeat the last part of your question? I didn't catch it.

So as I was saying, right now, your new plant has came up so the capacity utilization is low. Normally, what happens in player practice, giving higher discount than other players in the market to gain market share. So your commentary is more aggressive on the growth side. So will Greenpanel follow a similar strategy?

We are monitoring market and geographies very closely. The new panel is catering to a certain segment of the market as -- sorry, there is some disturbance. The new plant is also catering to a certain segment of the market where pricing is slightly different than the retail market because thin panels is going into a different segment of consumption. So we're responding accordingly how each segment and each geography is playing out and accordingly tailoring our schemes to that. So there will be a dynamic approach to -- there won't be a sort of blanket kind of scheme. There will be a dynamic approach to how we address schemes in different product segments and different markets looking at the competition.

Can you quote any number? What is the average scheme you have given a discount in July month? What would be the average...

So in July, I think on an average basis, I would say it could be somewhere around about 3-odd percent.

Got it. I possibly ask you one more question. So what is happening on the -- earlier you used to sell commercial-grade MDF, which you have stopped now. So a big sales growth is coming on that side. So how you are handling that part? Possibly that dealer -- you're not able to possibly regain that dealer and possibly convert that to more quality MDF, better get it from thin panel other than...

No. What we have noticed is that we've been able to convert a lot of that volume into a standard industrial grade because commercial grade was basically competing with industrial grade or the cheaper industrial grade from unorganized segment. So we've been able to convert those volumes into our industrial grade sales, albeit not entirely, but majority of it has already been done...

Got it. So was that done in Q1 because you -- Q1 appears to be the...

[Operator Instructions] The next question is from the line of Ritesh Shah from Investec.

I'll just pick up from the prior question. Sir, if one had to understand the market sizing, what historically we have indicated is around 2.4 million, 2.6 million CBM at the country level. What part of this would be commercial grade? The reason to ask this question is it's a sizable knock-on volumes that we are taking when you indicated around 37,000 foregone. So just trying to understand the market landscape, and I'll just take a pause over there.

So actually, there is no -- I would say the commercial grade was an offering on our part. It falls in the industrial category only. It was an offering on Greenpanel's part to be able to compete with the imported segment and the unorganized segment. So there is no commercial grade segment per se. It was, let's say, a more competitively priced product with some cost savings in terms of volume -- sorry, in terms of density and glue consumption to be able to compete with us. But this category falls in the industrial segment. And in today's market, I would say the industrial category would still account for about 60% to 70% of the total market size.

So to just add to what Shobhanji said, there was a lot of inventory lying with the channel partners from imports, which happened before the implementation of BIS and also from unorganized companies, the smaller MSMEs to which BIS implementation will be effective from August. So I would say that we are not able to convert our entire commercial grade to the industrial category. So possibly, the balance conversion will happen during quarter 2.

But just a follow-up question over here. I understand the price point math. Basically, we want to be competitive, but it honestly perplexes me when we say that it is because of BIS, the volumes have fallen. Like how should one read into it? Is it about price point or is it about quality? Because the production should go, price point was always correct? Or is it like the market is undercutting us significantly specifically for the unorganized space, that is where our volumes are actually taking a knock.

So I'm not saying that because of BIS volumes have fallen. We had a certain segment of voluminous sales coming to us from the commercial grade in anticipation of BIS and for complying with BIS because I had to be fully compliant with BIS by -- from February onwards. We removed that segment offering from our portfolio, which was helping us compete with the imported as well as the unorganized segment, both in terms of quality and in terms of price competitiveness. So as Mr. Venkat is saying, now that we see that imports getting more and more diminished and the volumes disappearing from the market, even the inventories are disappearing from the market, it provides us with an opportunity to now go with our industrial segment and convert that even further. Because that category of material is becoming lesser available in the market, imports have gone out of the picture. So even our OEM customers...

Yes. Sir, sorry. So what we are saying is we had certain non-BIS portfolio, which was there. Would you draw a parallel for the other industrial player -- other peer set, the listed companies in the space? Like will they have a similar problem to what we had or is it something which is specific to Greenpanel?

No, the commercial grade offering was specific to us.

I will explain that further. Since the commercial grade was primarily going into the OEM segment and a large number of OEMs are based out of South India, it was not really applicable to players operating in North India specifically. So North players would not have been impacted by that because most of the OEMs are operating out of South India.

Correct. And sir -- Shobhanji, you just touched upon this. Sorry to dig in a little more. You indicated that we'll move from commercial to noncommercial. So is the market ready for that? Is there appetite for that? And if you could highlight what is the differential? Is it like [indiscernible].

So noncommercial is industrial. And of course, the largest segment of the market is industrial.

Correct. So what is the price point [indiscernible].

Well, yes, absolutely because...

Ritesh, I'll just add to what Shobhanji and Venkatji just mentioned. I think please try and understand this as a product offering that we had to compete against unorganized play or imports. That category was not applicable for the others in the industry. Why? Because obviously, a lot of entrants came in very recently, last 2, 3 years in the organized space. So we were there in the market with this product to be able to compete against a particular section of suppliers. Now that the BIS has already kicked in, this product offering has already been shut down, voluntarily upfront by Greenpanel. And now we are converting everyone into industrial. This is exactly what is happening. So there is enough market for industrial where people are buying. Obviously, this is a low-value, low-margin product, but people are -- the bulk of the market is this.

Sir, my question is...

Okay. Just to add to that, what Himanshuji is trying to explain is that the commercial category will disappear from the market over a period of time because it's a non-BIS compliant product. Imports, like Shobhanji mentioned, have already come down significantly, I would say, approximately by about 90% what we witnessed during quarter 1 and the current month. And since BIS is applicable for MSME players also from August, assuming that implementation happens from that date, they will also not be able to produce the commercial grade. So over a period of time, the entire market for commercial grade will be converted into industrial grade.

Sure. Sir, just last follow-up. What I was trying to ask is what will be the price point [indiscernible].

Sorry to interrupt, Mr. Ritesh, may we request that you return to the question queue for a follow-up question. The next question is from the line of Praveen Sahay from PL Capital.

Yes. Just a continuation of the last participant question. What is the realization difference between the BIS-compliant versus noncompliant MDF?

So the general difference of the industrial and commercial grade product was anywhere between 6% to 8%.

Okay. And next question related to the pricing. As you had said that the price -- timber price correction is there and there is some price challenges. Last quarter, you had given for a month, 5% of a scheme. Now again in the July, 3% of a scheme. So the way forward or the rest of the quarters in a year, what kind of a price correction you are building in because you had given volume and the margin guidance already? So what's your take on that?

So you see, I think a lot of the schemes are also dependent how -- the raw material price corrections are going on for all the producers and people are reacting to the market pressure accordingly. So I would say to give a very far-sighted sort of information on what the schemes will be, it's very hard to say. That is why even as a company, we are also releasing very short-term schemes to counter the month-on-month pressures. And if this month is going to be, for example, I mean, hypothetically 5%, it's hard for me to say that will it continue to be 5% next month or will it go down to 3% or will it go up to 6%. So it's not possible for me to factor that in right now and tell you that this is what's going to happen. Because a lot of players are at -- in the picture right now, competitors' activity, raw material prices, market conditions. So it's not easy for us to predict that.

Anything on the industry capacity, sir? How much is the addition this year or next year expected?

Sorry, I didn't understand that. Venkatji, did you -- can you answer that?

Yes. So we are not expecting any major capacity addition in the MDF segment during FY '26 and '27. There might be a couple of additions in the unorganized segment, but we are not expecting any major capacity additions in the organized segment.

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

Sir, just to reiterate one part that you mentioned that you are sticking to the volume guidance, which was 5,50,000 CBM. So that just translates your ask rate in the north of 35%, 40% for 9 months. So can you just explain how is that possible for you to achieve? And what will be the base impact of this commercial grade, which you have discontinued for the balance 9 months?

Sorry, what was the second part of the question? What will be the...

For the last, I mean, 9 months of FY '25, what was the contribution of this commercial grade? So the Q1, you had mentioned is [ 36,900 ]. What was it for the balance 9 months?

Yes, it was 43,000 for Q2 and Q3, and as you know, there was 0 commercial grade in quarter 4. So we had approximately 70,000 cubic meter of commercial grade sales last year. 37,000 happened in quarter 1 and the balance, 43,000 over quarter 2 and quarter 3.

Yes, sir, precisely. So sir, if that will continue to be in the base for these coming 2 quarters, how are we confident of achieving that 5,50,000 CBM mark for this year?

So what we mentioned earlier, we are now focusing very strongly on the market share expansion. And as I mentioned earlier, I think cost is working in our favor. And as a company, our focus is now on the market share. We are not chasing margins. We're not trying -- I'm not confident that there will be any price increases in the market. But we are confident of cost savings, both on the variable and the fixed side. That will enable us to be able to compete with -- even with the unorganized segment to a large extent because we have a lot of operating leverage available to us by way of increasing volume. So we're going to play on that. So as of now, our target is to stick to our guidance and achieve that number.

Can I add something, Shobhanji...

And there will, of course, be a bit of aggressive play both on the pricing side, cost-cutting side and taking market share from what we've lost.

Yes. Maybe if I can add to what Shobhanji said, I think what we need to appreciate as Greenpanel, we have the biggest capacity today with Line 3 coming up. Operating at less than 50% capacity utilizations don't make sense. We have been disciplined all this while playing by whatever the market norms were. Today, the ask is very simple. We need to deliver volumes. I think that's the #1 priority. To be able to do so, whatever it takes in terms of -- whatever it takes as schemes or discounts going out to the market to supplement that will be met out from the savings that we are expecting, both from the variable and the fixed cost optimization that we are undergoing right now and also from the operating leverage that is going to play out with the volumes coming in. I think that's what we are chasing. We've got a very strong balance sheet today with untouched working capital lines and a lot of cash reserves available already. I think that's the whole thing which should drive guidances and achievement of results. See, quarter 1 is a very, very short period. I think just on the basis of 1 quarter where there were multiple things happening apart from the Line 3 stabilization, et cetera. There is still good 9 months. The only request that I have is at this point in time, let's discount quarter 1 and let's work on what is remaining for the balance [ year ]. Yes, 9 months are going to be critical. And we'll see every quarter, every month how things go.

Precisely, sir. I mean I completely buy that point. The only challenge is the 9-month ask rate. So are you all factoring your internal targets, excluding the commercial grade and that is what you're working and stating that it can be a 40% growth? There is some disconnect on achieving those numbers or maybe we may see how 9 months pan out for sure or -- but there's still that disconnect that the ask rate is too high for 9 months, given that you still have 43,000 each quarter...

Completely with you, but please do appreciate there is something already like Venkatji shared, [ 36, 37 out of the 80 ] is already in the base on quarter 1. So half of it is in quarter 1. The balance is spreading out into quarter 2 and quarter 3, largely in quarter 2. So thereafter, quarter 3, quarter 4 are largely quarters where there is no base impact coming into play. So let's hold on to it right now. Let's see how quarter 2 goes by. A lot cannot be said on the call in terms of how we're going to work. But there are things very clearly on our minds along with Shobhanji. He's already chairing a lot of meetings with our sales and operations also. I'm sure things are going to happen. Just wait for it. Quarter 1 was also, like my peers explained, was also fraught with this BIS, people moving away post the BIS implementation. They still had stocks, which are getting liquidated in the market as we speak. It's come down but it's not completely disappeared. Let August happen, let the MSMEs also get covered by the BIS regulations. We'll see how things progress.

[Operator Instructions] The next question is from the line of Akash Shah from UTI Mutual Funds.

So just wanted to ask, sir, I mean, what are the -- if you can quantify the cost savings, that would be great. If quantification is not possible, then at least directionally, can you please share what is being done? And I mean -- and how the fixed and variable cost will be coming down in future, I mean, in the coming quarters?

Sure. So we start with timber, first of all. Timber, the prices are already cooling off as you already know. So there is some impact which has already come into picture in quarter 1 consumption. We know our purchase rates, they are coming down as well. So there is still some 2%, 3% at least on gross margins, which can improve via the timber cost saving. The other piece is, like I shared with you, quarter 1, we had this new line coming up, which was going through stabilizations. I had to run this line more as a compulsion to ensure that everything that I need to produce on this line at the best economics gets done, right? So there were multiples, let me say, restart, shutdown of these other 2 lines plus a continuation of Line 3 at economics which are not going to be the economics going forward. So there is automatically 2%, 3% of additional contribution, which is going to be available the moment I run my lines consistently. So all in all, my margins should automatically improve. There is a lot of work which is being done, as I speak, which is privy to us. We'll demonstrate and then things automatically you can see. Now coming to the fixed cost, see, I've invested for 100%. My capacity utilizations are 50% today, correct?

Yes.

So from 50% to 100%, I have 2 options possible. Either I cut down all my cost and bring it down to 50%, number one strategy. The other is I focus on volumes, right? Do everything that I need to do to be able to recoup volume share losses, right, regain market share, given the capacity that I have and simultaneously work on these other things that I told you, which is work on working capital, the variable costs, et cetera, et cetera, and optimize my fixed cost. Things which I can defer, I'll defer, which are luxuries at the moment. Things which are discretionary are things that I'm going to cut down very clearly. This is something which is already happening. On the other fixed cost, things which I don't think are necessary, I'll take a call maybe in quarter 2, quarter 3, any time, right? So we are gradually progressing. I don't have a very definitive answer right now. But yes, on margins, I think with automatically volumes coming in, the operating leverage is going to play out, and that should also solve some part of my problem. Does that answer your question?

Sure, sure. This certainly helps. And I mean, just one more follow-up question is if a company focuses sort of on improving the volume growth and certainly, if there is a sort of aggressive focus on volumes and there is certainly competition in the market, so there is certainly a possibility that we have to try and give a bit higher discounts or schemes to the channel to try and push volumes. So don't you think because of this, realization will come down a bit and as a result, there will be some impact on margins as well?

See, I said we have buffers to play with on the cost front, correct? I'm saying again and something that Shobhanji reiterated, we'll see as how -- see, it would depend on the markets, it would depend on the product, et cetera, et cetera, how the schemes are going to be structured out. More importantly, please do appreciate there is premiumization also happening, right? This will eventually play out, which should help me arrest the decline in my realizations, right? The costs are not going to increase so much. They are going to come down, right? And realizations, maybe they'll dip a little. But I'll try and manage the entire equation in a way that we are able to come back with stronger margins over a period of time.

Sure. Just last one. So what are the changes in the sales team that we are doing? I know that we have converged the ply and MDF business sales team and also, we have recently changed the sales head. But apart from that, any other changes that you would like to call out on sales front?

Shobhanji, would you...

No. So basically, you're asking if we can predict how much would be the sales price reduction. Is that what you...

No, no. No, sir. No, sir. I'm not asking that. I'm just asking any key change that we have made on sales team front. So -- or let's say, sales strategy front?

No, I think on the sales team front, there's not -- I won't say like, of course, it's a constant endeavor to improve the sales team, the workings, et cetera. We do have a new sales head in place who's joined us about 4 months ago. A few of the zonal heads have also been put in place and they have been added as well. We've divided some of the zones for better focus. So I mean, on a top level, those are the changes that we've done. But apart from that, there's no major restructuring, I would say.

The next question is from the line of Utkarsh Nopany from BOB Capital.

Sir, I just made a few data points, so if you can help me. So over the call, you mentioned that we are offering average scheme of 3% to our dealers for July month. What it would be on an average for the June quarter?

Sorry. For the -- in the June quarter, we only had -- for a month, we had a scheme going on, on industrial grade. And what I said about July was that on an average -- an average payout across the schemes that we ran would have been about 3%.

And we are offering the scheme for both the unit, for the North and the South unit for July month?

No. So it varies from like products and geographies. So for example, in certain markets, it would be on value-added products. In certain markets which are more concentrated on the industrial product, we will only offer schemes on that. In certain markets, it's on both.

Okay. And sir, like second question is on the subsidy side. So we have stopped recognizing the subsidy benefit from this June quarter onward. So if you can help me how much subsidy amount we have accounted for in Q1 of FY '25 and in FY '25?

So yes. So we -- sorry, do you want to answer that, Himanshu?

I can. Yes. So there is nothing which has been accounted for in these 2 years, Utkarsh. See, more importantly, I think that this note has been going out for quite a while. There is something like INR 116 crores of subsidies that we are supposed to receive for the old line that we installed in AP, out of which we have accounted for INR 35 crores. The balance is on hold. Till the time we get more clarity, we are hopeful that this money will come in soon, but let's see.

Okay. So we have not accounted...

Himanshu, we stopped recognizing it a while back. It's not from this June. I don't know if I misunderstood you that...

Absolutely. Absolutely.

So we stopped recognizing it a while back.

Long back, long back.

Okay. And sir, another question is on the thin MDF plant. So if you can just help me out at what rate we operated our thin MDF plant for July month? And how much you expect that the plant utilization to get ramped up by the coming March quarter? And what would be our sales volume and revenue for thin MDF plant in the June quarter?

Himanshu, do you have that data ready?

So I can share something for sure. And maybe Venkatji, please add whatever you wish to. So see, I think the idea is to run this plant at, at least 30%, 35% this year. In quarter 1, we were running already at 33% this capacity. Not everything got sold though. In July, let's wait for the full quarter to come into play. Maybe October, November, whenever we are having our next call, I'll give you more data, more insights.

Okay. And sir, volume and revenue of thin MDF for June...

Sorry to interrupt, Mr. Utkarsh, may we request you return to the question queue for a follow-up question.

Sure.

The next question is from the line of Shivkumar Prajapati from Ambit Investment Advisors.

The first question is on the margin front. Like how sensitive is margin to, say, INR 1 per kg change in timber prices? Or if suppose there's 5% or 10% of decline in the timber prices, then how much of the margin expansion we can expect on an estimated basis?

Yes. Can you repeat the question, please?

Yes, sir. So actually, sir, I just want to understand the margin sensitivity in respect to the decline in timber prices. So for example, if we say there's a decline of, say, 5% to 10% of price in the timber, then how much of margin expansion we can expect, either it is 2%, 3% or -- on an estimated basis?

See, with the rupee, I think it should be roughly around 2% to 3% on the margin.

[indiscernible] of decline?

Sorry? With the rupee change...

Not the rupee change.

No, no, no. He's talking about specific timber prices.

Like if there's a 10% decline in timber prices, what will be the gain in the operating margins?

A 10% decline in timber prices should contribute about, I would say, about 4% [indiscernible].

It will contribute 3%. Keeping the current realizations and raw material prices, it will contribute 3% at the margin level.

Understood, sir. And sir, my next question is on the MDF imports. So post this BIS implementation, you had already mentioned that 90% of the imports -- I mean, the imports are down by 90%. So sir, what about the BIS licenses? I mean, how many players did got the license? And how much time did it take to get the license and the players who have already got the license, they belong to which country?

So as far as my information at the moment is, is that 2 players have so far obtained licenses to continue to supply [ MDF BIS-compliant ]. But please do keep in mind that it is not as simple as just getting licenses. It's also them modifying their production quality to comply with BIS. Now India is still -- for these exporters out of Southeast Asia, India is still a small dumping ground. Every supplier is maybe sending 3,000, 4,000 cubic meters individually. So in order for them to produce specific BIS-compliant material and increase cost, it's not that straightforward that they will just get a license and start supplying. It will also result in cost increases. Given the domestic market pricing, cost competitiveness will also come into question. So with BIS compliance and with the current market conditions and pricing that is prevailing in the Indian market, at the moment, I don't see imports to be a threat going forward.

That's helpful, sir. Sir, another question is on this EPCG amount. Did we record any EPCG amount for the quarter?