Greenply Industries Limited (GREENPLY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Greenply Industries Limited Q4 and FY '20 Conference Call. [Operator Instructions] Please note, this conference is being recorded. And I'd now like to hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Good day, everyone, and thank you for joining us on the Greenply Industries Q4 and FY 2020 Conference Call. We have with us today Mr. Sanidhya Mittal, Joint Managing Director; Mr. Manoj Tulsian, JMD and CEO; and Chief Financial Officer, Mr. Mukesh Agarwal. 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 results presentation which was sent to you earlier. I would now like to invite Mr. Manoj Tulsian to begin the proceedings of the call. Thank you, and over to you, sir.

Thank you, Rishab. A very warm welcome to everyone present and thank you very much for joining us today to discuss Greenply's operating and financial performance for Q4 and FY '20. Firstly, amidst the crisis, I hope that all of you are safe and also taking care of your health as this is most required for all of us to win this battle against the pandemic. I'll touch briefly upon the numbers shortly. However, I would like to take some time out to mention to you on how the pandemic has affected us and also measures which we have taken to come out strongly during this crisis. Our business was doing well before the crisis began, and then we were hit with the nationwide lockdown. Our factories were shut for almost 2-month period which has affected business overall. Now at present, our factories in India are running at a lower capacity utilization of anything between 50% to 70%. Gabon operations was much better during this period and was not affected so badly and only saw a shutdown of close to around a week. Currently, in terms of safety and precaution, we are taking adequate precautions for all our employees and especially following the WHO guidelines which have been enforced and we hope that we will be able to take care of this pandemic with respect to all our employees. We have done multilevel of sanitizations wherever it is required, and all our employees are absolutely comfortable working in this environment. Logistics and labor is another area where there has been some impact. The former has now smoothened out and the impact from the later has actually been minimal with large number of our workers being local. However, construction labor and carpenters are still missing from the scene in most parts of the country, especially south and west. The consolidated net sales for the quarter stood at INR 343.8 crore, which includes INR 47.5 crore from our Gabon facility. Gross margins are lower by 98 basis points at 38.9%. Our stand-alone entities net sales for the quarter stood at INR 296.3 crore compared to INR 342.9 crore in Q4 FY '19, a decrease of 13.6%. Because of the lockdown, we could not service orders worth almost INR 60 crore in Q4. Otherwise, we would have reported a growth of somewhere around 3% to 4%. Gross margins have reduced by 18 basis points at 37.1%. Our average realization in Q4 FY '20 in plywood increased from INR 216 per square meter against INR 219 -- to INR 219 in Q4 FY '20. Q4 PAT includes a onetime impact of INR 49.97 crore, which is -- it is shown in the exceptional item because of the excise duty refund matter, as per the apex court order. During this unprecedented time, we received this unprecedented order and almost around 100 companies who were involved in the same has to face the music. But in any case, we have to respect the apex court's order. And on a conservative basis, not only the principal amount but we also went ahead as per the Board's direction to provide the interest. Mukeshji will share more detail about the same. I'd also like to inform you, however, that under the advice of our legal counsel, we are making a representation to the union government for relaxation on the order and also filing a review petition before the honorable Supreme Court. The environment continues to be uncertain, making it inappropriate for us to give any guidance at this point of time. You would also appreciate a reasonable proportion of our business is dependent on the real estate sector, which is also faced with its own set of headwinds. Home renovation, which is another area of opportunity for us, looks to be attractive. So there are the negatives and the positives which is all going ahead for our type of business, which we can discuss at length when we open up for Q&A session. However, we have some comfort also on the part of homeowners with regard to allowing carpenters and other skilled labors into their homes. So let's see that how that works out and pans out and that may quickly again regain a lot of traction back to our business. The Board of Directors of the company, at the meeting held on 27th June, also recommended a dividend of INR 0.40 per equity share for the face value of INR 1 for the financial year ended March 31, 2020. We will be happy to discuss your thoughts and views during the Q&A. I would now like to hand over the call to Mr. Mukesh Agarwal for the financial numbers. Mukeshji?

Thank you, Manojji. Good morning, everyone. I thank everybody for joining us to discuss Q4 and FY '20 financial performance of Greenply Industries. I hope and pray that all is well with you and your loved ones. Safety is the most critical at this time. At Greenply too, while we have begun operations in our facilities, safety for all our employees is our key focus. Manojji has touched upon top line and gross margins for the quarter. So I will start with discussing EBITDA. Consolidated EBITDA stood at INR 31.2 crore. Consolidated margins were lower by 343 bps year-on-year at 9.1%. Stand-alone EBITDA stood at INR 26 crores. Stand-alone EBITDA margin decreased by 148 bps year-on-year to 8.8%. Consolidated loss after tax amounted to INR 21.5 crore compared to PAT of INR 29.7 crore in Q4 FY '19. Stand-alone Q4 FY '20 loss after tax at INR 24.6 crore compared to PAT of INR 18.4 crore in Q4 FY '19. In Q4 FY '20 number includes onetime exceptional item of INR 49.97 crore. That we'll discuss in detail in the following. Consolidated working capital cycle as on March 31, 2020, is at 78 days compared to 63 days in March '19. Stand-alone working capital cycle as on March 31, 2020, is at 68 days, which is higher by 15 days as compared to March '19. Consolidated debt-to-equity ratio at 0.71 as on 31st March 2020 and 0.75 as on March 2019. Stand-alone debt-to-equity ratio at 0.40 as on March '20 and 0.43 as on March '19. Our consolidated long-term debt has reduced by INR 20.5 crores in FY '20. However, short-term debt increased by INR 37.9 crores, primarily because of low collection in last 2 weeks of March due to the onset of COVID. In FY 2020, consolidated net sales stood at INR 1,415.8 crore, an increase of 0.8% from FY '19. Gross margin increased by 174 bps at 41%. EBITDA stood at INR 157.7 crore, an increase of 7% and PAT stood at INR 47.3 crore. On a stand-alone basis, net sales stood at INR 1,263.1 crore, a decrease of 1%. Gross margins increased by 179 basis point at 38.9%. EBITDA stood at INR 133.9 crore, an increase of 6%, and PAT stood at INR 32.6 crore. PAT includes impact of INR 49.97 crore as onetime exceptional item of excise refunds along with interest. CapEx incurred in FY '20 in Indian plywood business amounted to INR 23.85 crore and CapEx incurred during FY '20 in Gabon was INR 18.5 crore, basically for the new expansion that happened in November 2019. I will now discuss in detail the exceptional item of INR 49.97 crores which we have accounted for in this quarter. Pursuant to an order passed by honorable Supreme Court, the company may have to refund a maximum principal amount of INR 27.09 crore in respect of excess refund which has -- which was received from excise department. While there is no clarity with regard to applicability of interest in line with our conservative accounting policy, we have estimated an interest amount of INR 21.20 crores from the date of various refunds till 31st March 2020 at the prescribed rate. In addition to this, the company has to reverse income of INR 20.99 crores in respect of pending refund receivable from excise department for the period from April 2008 to 16th May 2015. Since this amount has not been received by Greenply, there is no cash flow impact. The honorable Supreme Court ruling pertains to year prior to the demerger of the company. As a result, our principal amount of INR 27.09 crores, along with interest, if any, shall be shared by Greenply Industries Limited, the demerged company, and Greenply Industries limited -- Greenpanel Industries Limited, the resulting company, in a ratio of 60:40. Therefore, the company has recorded provision of its share of 60% for principal and interest amounting to INR 16.26 crore and INR 12.72 crore, respectively. These 2 amounts, along with the noncash reversal of INR 20.99 crores, add up to the total amount of INR 49.97 crores. Our balance sheet and our efficient operations have contributed to an improved financial and operating performance has also held us well during the quarter. While the environment continues to be fluid, we are confident that our attributes, along with the determined team, will see us coming out of the pandemic as an even stronger company. I would like to hand the call over to the moderator to open the floor for the Q&A session. Thank you.

[Operator Instructions] We have our first question from the line of Nehal Shah from ICICI Securities.

Sir, my first question would be on the demand for the plywood segment, particularly in the wake of current pandemic. What is the kind of disruption are we likely to see through the year? Obviously, again, it's very, very difficult to quantify that. But considering the ground checks what you guys would have done so far, what is the likely disruption you're seeing in the near term for the next couple of quarters? And my second question is on Gabon as to what is the kind of, again, the disruption in volumes are we likely to see for the rest of the year?

Nehal, coming to your first question on the demand side, as you also mentioned that it is very difficult at this point of time to really predict how things will go, so what we are really doing is we are taking now a short-term strategy of one quarter after another quarter, okay? So April, as you know, was a total washout. But in May, the activities picked up and we started our factories also to some extent for the demand. And in June, the activities have further picked up. The entire team right now is on the field. And we are seeing traction -- improved traction in some parts of the country. And I think more traction is seen from north and east and maybe central part because what is happening is this labor -- migrated labor may have mostly worked in the western part and the southern part of the country. They have all moved back to their hometown. So we are seeing that the labor availability in the some central part and east is much better and also some part of north is much better compared to west and south. So we have a lot of focus in these territories at this point of time, and we are making sure that we don't miss out on this opportunity at all. In terms of Gabon, actually, Gabon was not really affected so badly. In my opening speech, I mentioned that we only had to take a shutdown of anything between 7 to 10 days. And even in the first quarter, Gabon has done decent numbers. They had some problem with respect to the logistics again and because of which whenever we declare the June numbers we will talk about it that some of the material which was in ready position, they could not dispatch because of the logistics issue. But otherwise, the demand scenario for our Gabon operations is quite good. At Europe, Europe has been giving orders to Gabon continuously, and we have been supplying to Europe even in the month of April, March -- April, May and June, all the 3 months. And now we are seeing some traction even coming from U.S. That, I think, might turn out to be a big boon for us going forward because U.S., right now this -- all this debate going on between U.S. and China, somewhere U.S. has put a lot of restriction on Chinese-made material. The supplies which were going actually from China or even Chinese material going via Southeast Asia has been put on check, and U.S. is now looking at other alternates. So I think that might be a good inroad for us going forward. So it's too early to say. A lot depends also on the election, how the things works out in U.S. in November.

Right. Right, sir. And sir, on the cost side, how are we working? So probably sales disruption probably is not in our hands. But the only thing which is in our hands in such kind of crisis is only the cost savings at this point. So what are we doing as far as cost-saving initiatives are concerned? And where are we curtailing our costs in specific?

So Nehal, I think, it's a good question, and I know that everyone will be thinking about this. Let me put it now in a very positive way that this crisis situation Greenply is trying to come out even stronger and we are able to create some platforms that we feel will help us now in future also. During this entire lockdown, the full lockdown and the partial lockdown period, our team actually worked extremely, extremely high. I mean I can tell you that most of our team members, maybe 70% of the company people were working for 14 to 16 hours during this period. And during this period, we have not left any area of cost being untouched. In every area, whether it is related to plant cost, whether it is related to our sales and marketing cost, whether it is related to our distribution cost, whether it is related to our corporate cost, whether it is related to our HR cost, each and every area, we worked headway during this period to see that how we can be lighter on the cost side. And that has shown a lot of advantages to us during this period, and we are quite comfortable now the type of cost-reduction measures which we have taken. And I'm sure that this will help us a lot in the future.

So can you quantify these costs? And what are these costs where we have done these exercises, largely?

See, as I told you, I told you all the areas. I mean we have not left any areas untouched. But just to give you a feel, all these costs somewhere is giving us a 1.5% to 2% of reduction to sales value.

Okay. So 1.5% to 2% accretion on margins, largely?

Yes, yes, yes, provided everything else remains same, yes, accretion on margins. But this year, since we know that sales is not very sure, that's the only thing where nobody is sure, so this will definitely help us during this year to protect our margin, and we continue to take action. It's not that we have just left it, okay? We are working on our working capital management in a big way, whether it is receivables, whether it is inventory, right? We are also working on other productive -- productivity enhancement proposals at plant level in terms of how much labor we can cut down. We have almost cut down maybe 10% of the labor workforce, and we are able to produce the same quantity which we were doing earlier. So we have gained major insights into many of those areas where we felt that we can improve and we have taken quick actions. And the team -- the best part is that the team has responded extremely, extremely well during this situation. So that's a big plus point for us as an organization.

[Operator Instructions] We have next question from the line of Achal Lohade from JM Financial.

Can you help us first in terms of how has been -- how was Jan, Feb and March, specifically? And number two, in terms of Y-o-Y, you've talked about the capacity utilization, but if you could give some indication about how the May month was comparatively compared to last year May month and June as well? That would be helpful.

Sorry, I didn't get your first question about Jan, Feb and March. What exactly you want to understand on that?

In terms of the volume growth in Jan, Feb and what was the quantum of decline in the March?

Okay. So -- and your second question was with respect to Q1 scenario in May and June, right?

Yes, May and June. That's right.

So let me answer the second question first, and then maybe I'll ask Mukeshji to answer with the numbers, exact numbers for Jan, Feb and March. So in terms of May, we were somewhere around 50% of our normal month. April, as I told you, was like almost a washout. And in terms of June, we are now improving to somewhere around 70% to 80%.

Okay. Okay. And Jan, Feb and March?

Mukeshji, can you answer Jan, Feb and March volume query?

Yes. So Jan and Feb as compared to last year Jan and Feb, we were almost at par. But March, because of the onset of COVID, we lost volume for last 2 weeks. And basically, in March, you -- last 2 weeks were very important because of the quarter-end month and year-end month. So that loss of volume has resulted in the overall capacity utilization less by around 17%. So March was around, you can say, 60%, 65% only because in last 2 weeks, we do more than 40%.

And March, as I mentioned in my opening speech also that we had orders worth almost INR 60 crores which we could not finally dispatch and also somewhere, it affected our collection also because you know that in March, most of the dealers also tries to complete their annual target so that they get entitled to the volume discounts. And normally, the last week of March is always very good for our type of businesses, any consumer businesses. So that was straight hit to our Q4 numbers. And also, to some extent, collection, also got delayed. So whatever we had planned in Q4 in terms of our closing numbers, we could not do it because once everything went under lockdown, we just didn't receive anything in the month -- in the last 7 to 10 days in terms of collections.

Got it. This is very helpful, sir. My second question was with respect to the industry. Now as you've kind of said in your remarks that there are some labor issues in terms of the carpenter availability, et cetera. And in terms of home renovation, we also hear that consumers might be a little uncomfortable. So in terms of the ready-made furniture, what is your opinion in terms of the total size? Where do we fit into that? And if you are seeing any trend in pickup in ready-made furniture in terms of any structural change you're looking at? And how do we participate in the same?

So post this COVID situation -- I mean, we are still in the partial lockdown situation, okay? So it's very difficult at this point of time to really gauge whether the ready-made furniture market will pick up further or what will happen. Maybe you people have to give us some more time and when the market opens up and we see the behavior trend in the next 2 or 3 quarters, we'll be in a better position to answer this. But let me highlight a few things, which I think it is worth discussing. The first point itself is because of so much of spat which is going on between China and other countries, so whether it be China-U.S. or whether it be China-India, I think a massive amount of imports which happens from China in terms of furniture somewhere will get fed. We don't know what exactly the government will come out with policies because this in any case is a nonessential item. So I think government may take steps to make sure that the imports are being stemmed. If that happens, then in any case, for our type of business, there will be a big opportunity. Coming back to the domestic demand side also, I feel that this new culture of working from home, on the one side, we feel the real estate right now is going through a tough time, but I personally feel that actually, there is a huge opportunity which may come up going forward on the residential side of real estate. Today, real estate might also be suffering at certain price points. But at a decent affordable price point, I feel real estate will jump back into good volume very fast. And what may happen as a scenario change because many companies, including even our company, has started contemplating and has started allowing many people to work from home and it is working extremely, extremely well and very productive. So you may see actually going forward that many of the houses instead of 2-bedroom starts becoming 3-bedroom and one of the bedroom gets converted into an office room, where people can work from home and you really set up your desk and everything as per your office environment. So that may call for a lot of renovation work in this household going forward. And the new houses may also have 1 extra room which can be used for these type of work-from-home culture. So I feel that there's a lot of opportunity in terms of demand metrics. And the third most important thing, this is the time when the branded players with the strong balance sheet can really do much, much better than the unbranded ones because the unbranded ones have not done much in terms of their working capital management. We all know that, that they are not so strong in managing their working capital. They just play a price game, right? And this is the time when we are seeing that there is a traction which is also that the unbranded players or the dealers who were dealing in unbranded material is now slowly willing to and happily willing to shift to the branded goods. So I think, GST which happened around 2, 3 years back and now this COVID will actually accentuate this process of dealers moving from the unbranded to the branded goods industry. And that can be a big upside for us going forward if we work well towards it.

Just a clarification on the same. Have you already seen kind of the unbranded -- the dealers catering to unbranded products are now moving or asking for our dealership? And B, have you also heard anything about Yamunanagar, if the plants are still shut down, have revived? What is the current situation out there?

So initial signs are positive, to answer your first question. And in terms of Yamunanagar, whatever I mentioned at this point of time is based on some of the experiences which we have felt in the last 1 month that many of the small operators are not even able to kickstart their business once again. They are not even able to come out of this blow, and these are all very positive signs for us, for all branded goods player, I would say, not only in our category, but I think even for other businesses, this will be a paradigm shift towards branded goods players because in India there is a huge unbranded segment in most of the categories.

We have next question from the line of Arun Agarwal from Kotak Securities.

Sir, my first question is on the raw material side. If you just throw some light how the pricing on the raw material side is panning out currently? And in the fourth quarter, we also saw gross margins being a bit on the lower side. Could you just explain the reason for that?

Arun, I think on the raw material side, whatever we have experienced in the last 30 days, we've had some inventories also at the time of closing which -- and we started -- we keep started our real production in the month of June only. But I can only tell you that the prices are on the softer side. So there is no incidence where we had to give an increase compared to the prices at what we were actually buying in the month of Jan, Feb and March. So that's also a good sign at this point of time.

So no major correction on the raw material front? I mean it is a marginal correction from what it was given that the demand...

As I said, the price is soft only. So there will be some advantage only in the near-term for people like us.

And sir, on the first quarter -- sorry, fourth quarter gross margins were lower. Any specific reasons for that?

Mukeshji, would you like to comment?

Mr. Arun, the gross margin for Q4 FY '20 was 37.1%, whereas in the corresponding year-to-year quarter it was 37.3%. So basically, the product mix, so in the -- in this quarter, the volume from the low end and Ecotec segment was comparably good as compared -- better as compared to the premium. So though there was a product mix from decorative segment for the quarter, like we had a good volume, but we lost volume in last 12 to 15 days because of COVID. So basically -- and from the raw material side, as Manojji highlighted, there is no such pressure. In fact, in the chemical side, we had a gain because of the crude.

Sure. Sir, on the working capital and on your loan, could you just help us out -- you had explained a bit on increase in working capital and we understand the reason for that, but could you help us out how is it panning out now? And I mean we are closing the first quarter now. So how the collections have been -- I mean we have been able to get the collections on the receivables and on the inventory, how the situation is right now?

So Arun, as I mentioned, that one of the area where we are working extremely, extremely passionately, including our entire team, is on the working capital management, and we are pretty happy with the type of improvement what we have seen in Q1, okay, especially on the receivables front. And as far as inventory is concerned, inventory, we have not been able to do much during Q1 because, as I said, we have to get realigned because there were certain raw material we suddenly -- we had to stop producing in the last week of March and April. So we are just realigned. But yes, going forward, we are trying to see that can we bring down our overall inventory by at least 10%, if not more, during this particular year.

Okay. And sir, one small last question here. Could you just help us out on your new joint ventures that we were talking to start about? Any changes in the plan? Or are they still as per time line?

No, mostly, they are as per the time line only. A few months here or there may be based on the basis the demand. But I think somewhere between the first facility can kickstart anytime in Q2, maybe Mukeshji since you -- Mukeshji you are updated on this, you can answer this with some exact date.

Sure. So Arunji, initially, our target was to start the first equity participation company. Now this is not a joint venture because our stake in both the companies is less than 20%. So it's associate. So initially, our plan was to start in Q1, but because of COVID thing, so any day in Q2 we can start as per the demand, okay? And the second unit, initially, we plan to start in Q3. So we have not yet changed the date. We'll see the performance of the demand in the quarter 2 and we'll take a fresh call when we can start, maybe in Q3 or early Q4. So second unit is basically for the doors and the GCWP sheet and first unit is basically for the plywood.

Okay. And sir, CapEx for this year?

Sorry?

CapEx, we don't have much CapEx during this year, except the normal operating CapEx, operating CapEx which we will do. We don't have any major CapEx plan as of now.

So as Manojji said, this year, we are -- we will have around INR 5 crore to INR 10 crore of maintenance CapEx in India and around INR 4 crore to INR 5 crore of maintenance CapEx in Gabon.

We have next question from the line of Bhavin Chheda from Enam Holdings.

Good presentation which has majority of data. The one data which I missed out if you're sharing the face veneer volume numbers in the quarter and full year?

Sure. Bhavin, so face veneer volume is around 10,761 volume in Q4 FY '20 as compared to 9,465 CBM in Q4 FY '19.

Sorry, last year was?

Q4 FY '20 was 10,661 CBM, cubic meters, and Q4 FY '19 was 9,465 cubic meters.

And full year volume, sir?

For the full year, face veneer volume was 33,660 CBM; and last year, it was 27,400 CBM.

And how much is the quarter veneer?

This is only face veneer. We have other small businesses in Gabon. We also sell sound timber and timber. So -- but the volumes are less as compared to the face veneer. So we supply timber, but volume of timber is -- that business contribute only 10% to 15% of the total business at Gabon.

And sir, these are the production volumes. I believe face veneer is internally consumed also when it is transferred to India. So if you can share the merchant sales volume?

So these numbers what I shared for quarter and 12 months are the sales number. Production numbers...

These numbers are from Gabon, okay? These are the sales number from Gabon, right?

Yes, without including the supplies for captive consumption to Greenply India, okay? So Greenply India, for the full year, we supplied 6,287 CBM as compared to 500 -- 5,970 CBM for the year. And in the quarter, we supplied 1,063 CBM as compared to 2,689 CBM in the corresponding quarter.

So Bhavin, let me give you a picture when you are looking into so much of these numbers. For our Gabon operations, to some extent, we have derisked our dependence on the India volume. So if we talk about last year, in Q1, if the dependence on the India volume was close to around 75% to 80%, in Q4 it just dropped down to anything around 20%. So that is a big derisking which has even happened. And then during this year also, whatever we have seen in Q1, there was hardly any sales to India. Q2 also, we feel the Indian demand may be tepid. And in Q3 and Q4, maybe the demand from the India side can pick up, so which can actually only add up to the Gabon number for this year. That's a good shift which has happened. So it has become India agnostic.

And I believe as your presentation said Gabon capacity has been expanded from 36,000 to 96,000 CBM in logs. And you also mentioned 70% utilization. So then this number doesn't tally with the 70% utilization number. So how should I look at it into FY '21?

So Gabon -- Bhavin, this number, what you said, the installed capacity is not for the full year in FY '20 because the increased capacity was available from November '19. So it's pro rata only for 5 months. And for FY '20, the increased capacity will be available for the full year.

Right, right. No. Sir, I'm saying last quarter, it was available. So last quarter, our number was close to 11,000, including internal consumption at Greenply. So if I take 11,000 x 4, that's 44,000. So that is also less than 50% utilization. So I was just trying to figure out that.

Well, annualized output utilization of 31,000, and we achieved 10,000 for the quarter only. So average utilization of the capacity in Gabon in Q4 was 137% in Q4 FY '20, whereas it was more than 200% in Q4 FY '19.

Okay. Sorry, sir, quarter 4 production sales volume you mentioned was 10,660 plus 1,000 internal consumption.

Yes, 10,760 and production was 10,641, and we purchased locally 1,067 CBM from the local vendors, and we supplied that to Indian market, okay? Our production in Gabon for Q4 was 10,641, Bhavin, and purchase of veneer in Gabon was 1,067 CBM.

Yes. So if I divide the 10,661 by 24,000 a quarterly capacity...

No, this 96,000 is not the output capacity. This is the peeling capacity of logs. Output capacity is somewhere between 50% to 51% of the input capacity.

Okay. So we have to calculate on that number, okay?

Yes. So our output capacity is close to 49,000 CBM.

Output is 49,000. Okay. Okay. So we should calculate on 49,000, you mean?

Yes, 51 -- 50% to 51% of 96,000 CBM. In the presentation also, we highlighted that 96,000 is the capacity of peeling of logs.

Okay. So output capacity will always be 52%?

Yes. And that is the reason, Bhavin, that we have also started, to some extent, outsource model there also. So we are using, to some extent, outsourced model also at times.

Right. Right. And last...

Sir, I'm sorry to interrupt. Please come back in the question queue, Mr. Chheda. We have next question -- [Operator Instructions] We have next question from the line of Kaustav Bubna from Rare Enterprises.

So I had a few questions. Basically, post demerger, what would you say would your vision be for this company's different segments it would be? And the CapEx it would incur for those respective segments, plus the debt levels going ahead? What's the overall vision for this company post the demerger of 5 years down? And the next question would be on the premium plywood segment. Just wanted to understand, according to you, what -- how do you see product competitive dynamics looking like? So I mean, I understand that Bison Board is like a competitor to premium plywood for partition walls. So just like that, what different competition do you see coming up in the premium plywood space in the next 10 years? Are we secure from any disruption in those things?

Kaustav, I think any strategy at this point of time, we are not very sure that how it is going to work out. In the next 12 months or so, we have to be extremely, extremely careful about a few things, which is the cash flow management. And when I say cash flow management, I think that is something which you can put into that block of even a long-term vision because as a business we want to be higher on ROCE and ROE. And keeping that in mind, we will continue to work quite a bit on our working capital management, whichever way. In the short run, for sure, it is more of tactical, but this, even in the long term has to continue the way it is. The other areas where, for sure, we want to concentrate in terms of our vision statement, it's slightly early for me also to comment on a few things, but I would still like to add a few pointers. We will continue to work on productivity enhancement across, whether it is today, whether it is after a couple of years, we'll continue to work on our distribution network across the length and breadth of the country. And then we will continue to invest on the various brands which we have. So this is for the given set of business what we have, mainly in the plywood and veneer segment. And then we will continue to look for opportunities for expanding the business profile, the product profile going forward, right? So -- but I think we will be in a better position once we strengthen our balance sheet in the next 12 months. We past this COVID episode into this country and we are totally out of this, then thinking of new investments or thinking of adding new product line would make a lot of sense into our business. But that will also be one of the way for us to grow in future, keeping our ROCE always higher, keeping the working capital management and spending a lot of money on the branding side.

Okay. And on the debt -- so on this question, what's your stance on your current debt levels? And assuming that you won't have any major CapEx, could you get these -- do you have any aspiration to be like a net debt-free company? Or that's not a concern. I mean that's not a priority?

No, no, no. Aspirations will always be there to be debt free, okay? But I think the first point, what is important at this point of time is to make sure that our debt level doesn't goes up and we are working towards it, even during this tough time, to bring it down. And I'm quite confident the way the team is working right now, the level of energy which is being exuberated by the team during this year, we are -- I mean it's a bold statement to make at this point of time, but I'm quite bullish that we will be able to reduce debt during this year also.

Okay. And could you just comment on the premium plywood aspect of the question and the competitive dynamics over there product-wise?

Well, I think on the premium product side, we will continue to work on that side. We have our own product lines where we will work further because we feel that the market on that side also would be there. In fact, we have a very different thought process. When you see today the way the government is working on initiatives towards the rural side, we feel the pocket size on the rural will improve further, and they will have a lot of aspirations actually to even look at niche products in all the brand categories. So we are bullish on that, that on the premium side also, if we continue to work, we -- like in Q4, we launched a product which is 0 emission. So from a health and environment perspective, that is extremely, extremely positive that the emission level will be 0 and especially the COVID times when most of the people are working from home, bringing out such product is like a winner. So we'll continue to work on those areas where there is a lot of R&D which is being involved and continue to give market some niche products going forward. As of competition, the competition will always be there. And I think that the size of the market itself is so big and looking at the way the India is going to grow in the next 5 to 10 years, I think more and more players will also have their own space. Today, if you really see the entire plywood business itself, our own numbers, some internal working and whatever we could gather from various agencies, is anything between $3 billion to $3.5 billion. And looking at the size of our company, we are miniscule though we are a branded goods player. So I think there is a lot of opportunity for us to grow and even for others to grow and that only strengthens overall market. If we get actually a fair competition on the niche side, it only grows the market because more and more companies will come and spend towards branding and that will bring in much more awareness about different categories of products, and I think that will be good for the industry as a whole. And we being in the industry for last 30, 35 years, we, for sure, will work, and we will have an advantage to work on the technology side and this to come out with good nice products in the premium segment.

We have next question from the line of Aasim Bharde from IDFC Securities.

Just 2 questions. Firstly, you talked about residential real estate, rather renovations and perhaps people going for an extra room for a home office per se. So does this mean that you see headwinds in commercial real estate going ahead? And would this prompt MDF and particle board players would compete even more with plywood at the regulation level because my sense is MDF and PB is more prevalent in commercial currently. So yes, what is your sense on this?

Well, I think, how I would take your question is that, yes, I personally feel, and that's what we also internally discussed that the resi side can actually see a big uptick going forward, okay, which means that for some point of time there might be pressure. See, all these things, for sure, depends on how long this COVID lasts because somewhere in the past also we have seen that the memories of people are short-lived. If this COVID vanishes in the next 2 months entirely worldwide, then I think work-from-home culture and everything, again, will go back to the same working from office and people will just forget it quickly. But if this is something which is here to stay for another 12 months or so, and I'm sure that this becomes the new normal, I mean, this is out of compulsion rather than anything else, and we see a lot of advantage also. As I said, we also with a very progressive mindset, even we have allowed so many of our people to work from home. I mean just to give you an example, we were running almost 25 commercial establishments in the country and during this period, we have closed down 6 such establishments only to test that whether we can work from home and whether.... [Technical Difficulty]

Hello?

Sir, I'm sorry to interrupt. Please stay connected. We seem to have lost the line of the management. We're calling back them. Please stay connected. Sir, we're back in the conference, please go ahead.

So actually, my question more was pertaining to the fact that -- hello?

Sir, please stay connected. We lost the line again. Sir, we are back in the conference, please go ahead.

Hello, Aasim, sorry, I got disconnected. The call dropped.

Yes, yes, sir. No problem. No problem. Sir, I take your point on the residential fee that you were addressing. Sir, my main concern actually was that any uptick in residential through work from home would possibly come from -- I mean would come at a cost of commercial real estate going down, which is where MDF and particle board are more prevalent, that's what my sense is. So I just wanted to understand that we, as a plywood company, how save -- I mean how can we safeguard ourself from this competition like we target this new market opportunity that you were talking about?

No. So first thing first, Aasim, since you have a concern on MDF, we are not there in MDF at this point of time, right, and very miniscule on the particle board also. So for us, there is nothing negative even if -- as I said, it all depends on how long this COVID environment continues. If it dies down shortly, then I think everything will be back to the way it was. If it continues, then we personally have a feeling that you might see a lot of uptick in residential. Commercials may come down for some point of time or the commercial has to rethink about maybe a co-sharing of offices and all those concepts, which means, for sure, to some extent -- you may see, to some extent -- or for some time, commercials, there might be some slackness. So let's see. It's early days. Every month, we get a very different scenario. Every day, we get a very different scenario, whether it is in this country or abroad. So let's wait for some more time rather than making a very bold and conclusive statements on these things.

Sure, sir. No problem. Sir, just second question. I just noticed that in -- for Gabon your EBITDA margin in Q4 is only 11% versus 21% Q-o-Q and 28% Y-o-Y. So could you just help me understand what happened there?

Right. So I was expecting this question, both me and Mukeshji, thanks you raised it. See, actually, what happened is maybe Mukeshji can throw some more color on this, but [Foreign Language] I'll tell you that we had implemented SAP S/4HANA in Gabon facility also during Q3 only. And Q3, it has not got fully implemented. So the margins in Q3 what got reported was slightly on the higher side which got corrected in Q4 when SAP fully got implemented and they did their full valuation of inventory and everything. So if you really see for the full year, the margin profile is somewhere around 15.6%, okay, which is very much in line with the previous year, which previous year was slightly better. But this year, again, as I said that since we have taken a lot of effort in terms of cost initiatives and cost reduction and efficiency buildup, we, again, feel unless things become abysmally bad in the country or worldwide, we will be able to protect our margin in both the places, both in India and as well as in Gabon.

Yes. Aasim, if you see our Q3 numbers, where our margins reported was around 73% for Gabon in the quarter 3, so, as explained by Manojji, we implemented SAP in Q3 for Dubai and Gabon Company and there was some system error for which -- which we rectified in Q4 this year. So the effect of that was around 6%. So if you add that 6% in the 11% what we achieved in Q4, margin would be around 17 -- 16.75% to 17%.

We have next question from the line of Arun Baid from BOB Capital.

Sir, just a few questions. One is, can you highlight what's our rural and urban mix in sales?

Rural and urban mix -- hello?

Yes, sir, rural and urban mix in sales in plywood in India?

We have -- we don't have the numbers being measured at this point of time, Arun, in this fashion. Maybe we can do some tabulation and we can come back to you.

Okay. Sir, let me put the question the other way around. If you can just give us some indication about what's our top 10 city sales in the overall business of INR 1,260 crores, roughly?

Business from the top 10 cities?

Yes.

Mukeshji, do you have it somewhere readily?

Yes. So Arunji, so out of 4 reasons, so if you see south contribute the maximum in the plywood segment, followed by north and then west and east is around 15%. So from the city-wise, we have Bangalore, Delhi, then Calcutta, Mumbai. So if you consider top 10 cities in India, so they contribute around almost 40%, 45% of our total revenue.

Okay. Okay. And just one more follow-up was that somewhere earlier Manojji had mentioned that 1.5% to 2% savings would be there in case of margin because of the initiatives you've taken. So the question is this 1.5% to 2%, are you trying to say, is based on INR 1,260 crores turnover we have? Or when we look at is the absolute number, if I do a broad number, is 1.5% of INR 1,260 crores, it brings INR 20 crores to INR 25 crores. Is that the right number, sir, we're looking at sales?

Yes, yes, Arun, you're right. Somewhere in terms of absolute number, it works out to anything around INR 20 crores, okay, plus or minus a couple of crores. And as I told you that the team is very gung-ho. So many of these projects we have already even implemented, some of them are still in the pipeline, and we continue to work on the pipeline. So I'm sure that even if a few places there are a few surprises which may happen going forward, we will get a few more projects where we will continue to save cost, this is the most -- and make it the business lighter in terms of the expense proposition. So that's why I mentioned that maybe 1.5% to 2% is something on the overall last year sales is something which we can look at an absolute level of savings. But depending on this year sales, it will all pan out that whether this adds up to margin or whether it protects my margin. As of now, we feel the way our team is working, the way we have the plans, assuming that things start improving from the month of September, October, we feel that we will be in a position at least to protect our margins.

Okay. And sir, just to reconfirm, you mentioned on the call that we will look at reducing our debt. Is that correct, sir?

Absolutely.

For FY '21, it is?

No second thought.

Sir, when you're saying -- I mean because the consol debt has gone up if you look at for the full year, right, so that will go back to its FY '19 numbers or more?

Honestly, not -- I'm not putting any numbers as I told you because the year is very, very challenging. If I come to know that yes, COVID is out of this country from July end, I can give you some better number or picture. But by the initiatives which we have taken, I'm sure that we will be able to reduce our debt for this year, for sure.

Sir, but it should anyways happen because if you look at you don’t have any CapEx, I'm sure like all other companies, your debtor collection will be very good in the first quarter. You don't have CapEx. So logically, there should be a good reduction in debt anyways, right, sir? So why this innovation...

That's the reason I have this confidence. That's the reason I have this confidence.

Sir, more looking at a number of perspective, that confidence -- debt reduction by INR 5 crores is reduction and debt reduction by INR 30 crores, INR 40 crores is also a reduction. So if I was look at what's -- are you looking at the higher end or it's just like a normal reduction? I was just trying to get back way.

Okay. Let's do one thing, give us one more quarter and we will give you much better and clear picture. Does that sounds better?

Sure. Sure. Yes.

Arunji, in the current year, we have a repayment of long-term debt which is close to INR 23 crores at a consol level. And last year also, we reduced our long-term debt, as we mentioned in the opening remarks, by around INR 20.5 crores. But because of COVID in last 15 days, we lost collection both in India and at Gabon. So -- otherwise, there would have been a substantial debt reduction in the month of March, but we lost collection in last 2 weeks of the March.

Yes, but Mukeshji, the fact is that debt in the short term went up by INR 40 crores. So you're right, you reduced the debt by INR 20 crores, but debt actually went up by INR 17 crores on a consol level because of whatever happened, right? So...

If I could answer?

Yes, yes, yes.

Yes, Arun, you are right, and that is the reason we are talking about the consolidated debt, okay, irrespective whether it was short term or long term. And whatever we are promising you is on the overall debt, okay? See, the year at this point of time, I can tell you that sometimes it is so easy to discuss for us also this, but trust me the way our team is today working in the country, hats off to our team with the level of energy. At times, there are still restrictions for them to move around easily and they go to the market or they go and meet the dealer at 5:00 in the morning or 6:00 in the morning or sometimes -- so these guys right now are giving their best to the organization. And we are trying to make sure that we become much more efficient on our working capital management. We have already initiated certain actions. And we hope we live to those actions, and that's why I'm saying, maybe by September we will be in a much better position to give you a much clear-cut position because by the time, a lot of these things on COVID will also get clarified and we will also see that some initiatives which we have taken, how it works out. But my promise is that for sure we are only trying to see that we will not allow the debt to go up.

We are taking the last question from the line of Karan Bhatelia from Asian Market Securities.

Sir, how are things shaping up on the Myanmar side because in FY '19 we had a good profit of INR 5 crores, INR 6 crores? So how are the things shaping up there? And what is the update?

Well, not much happened in the previous year. The demand from India side was also weak. And maybe, Sanidhyaji, you want to add something on this?

So the face veneer market in India in the last financial year wasn't that good and there were a lot of challenges in the Myanmar operation. Hence, we see this result. Though at cash level, there is no loss. I think Mukeshji will be able to add here.

Yes, there is no cash loss.

One thing. Last year, which you referred, it was a gain of around INR 4.9 crore. So basically the profit was because of the revaluation of our underlying currency. Earlier, we were preparing our balance sheet and financial statement in the local currency which is kyat. And last year, we converted that to U.S. dollar. So entire profit was because of the revaluation of the currency or you can say reallocation of our financial balance sheet in the new currency. And the -- and our share in [indiscernible] is only 50%. And at the cash level, still, we are gaining. So at cash level, there is no such loss. So this year also, this Myanmar market is -- this Gurjan timber is totally dependent on Indian market. And Indian market was not good in Q3 and Q4. Q3 in the Gabon also we felt a lot of challenges from the market, and that was the reason why we shifted our [indiscernible] in Southeast Asian market. So same there we cannot shift to Southeast Asian market and Europe. So we still -- we are dependent on Indian market. So as the things improve after the COVID or maybe during the COVID, so probably this year we may have marginally profit or we may have a loss but not at cash level.

Correct. Correct. And sir, secondly, now that many plants would have relocated from Myanmar and Laos to Gabon. So how is the competitive intensity shaping up in Gabon? How do we see the realization and the margin trajectory on a very sustainable level?

So in last 3 to 6 months, we have not seen players moving to Gabon, okay? So only 1 large payer we heard that they are moving to Gabon. Otherwise, there are a few small players from India and other part of the globe, a few from China, they are operating in Gabon. But after the March, they are struggling. And before Q2, we were totally dependent on India and Southeast Asia. And after Q3, we started supplying to Europe. And now, as Manojji said, we are focusing also on the U.S. market. So that helped us in Q4 and in the Q1. So other players, they do not focus on the European market because this new plant which we started in November 2019 is totally to supply material to the European market and going forward to the U.S. market.

Right. And sir, if you can like broadly segregate our plywood portfolio into like mass product, mid category and the premium end of sales? So if you can like throw some ballpark number because what we have witnessed in -- since last couple of quarters, there have been more sales of the low end and the Ecotec kind of products. If you can broadly break up the plywood portfolio in terms of percentage-wise, that would be good?

Sure. So in Q4 FY '20, premium product contributed 64% and Ecotec and the Bharosa, Jansathi, including PVC, contributed 36%. And in the value terms, premium product contributed 73% and in value terms, Ecotec, Bharosa, Jansathi contributed 27%. As compared to the corresponding quarter, 64% contributed in this quarter and the corresponding quarter it was 65%. So almost at 1% loss in the volume. But at the value level, it was 73% in the corresponding quarter and in this quarter it was 73%. And for the full year, volume from the premium segment was 63% as compared to 64% in the 12 months FY '19. And in the value terms, premium product contributed 72% as compared to 73% in the corresponding 12 months.

Ladies and gentlemen, that was the last question. I'd now like to hand the conference over to the management for closing comments. Sir, over to you.

I would like to thank you all for taking the time to participate in this call. We are happy with our performance in the quarter under review. These are unprecedented times, but we have found ways to combat the challenges while ensuring safety is given top priority. I pray that all of you and your loved ones too stay well and safe. We look forward to speaking with you in the next con call post our quarter 1 FY '21 results announcement. Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of Greenply Industries Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.