Greenply Industries Limited (GREENPLY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Greenply Industries Limited Q3 and 9 months FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa of CDR India. Thank you, and over to you, sir.

Thank you. Good day, everyone, and thank you for joining us on Greenply Industries Q3 and 9-month FY '21 earnings call. We have with us today, Mr. Sanidhya Mittal, Joint Managing Director; Mr. Manoj Tulsian, CEO; and the Chief Financial Officer, Mr. Mukesh Agarwal. Before we begin, I would like to state that some statements made in today's discussions 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. Manoj Tulsian to begin the proceedings of this call. Thank you. Over to you, Manoj.

Thank you, Gavin. 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 Q3 and 9 months FY 2021. To begin with macro perspective, as everyone is experiencing, we are also witnessing positivity in our business environment. Although not as buoyant as capital markets, but we are experiencing good demand traction across the market, and across all the product range. In the last reported quarter, we had seen major uptick in demand side. But due to some logistics issues in certain pockets, we have not achieved our desired revenue numbers. Considering the fact that most of those issues are resolved now, we are expecting better H2 of this year as compared to H2 of last year. On margin front, as discussed in earlier call, we will maintain our this year target of double-digit margin at operating level for the full year. From long-term perspective, we are committed to improving 400 basis points in overall margin points by FY '23 end. Our continued result on optimizing credit discipline is yielding results in terms of sharp reduction in working capital. During the previous year, we had debtor days of around 89 days, which is on March 31, 2020, which has been reduced to around 72 days in last quarter. As we continue to further strengthen the credit monitoring processes, we aim to reduce it further to under 60 days levels. Primarily due to this exercise, I'm glad to inform that first time in the history of this company, we have bank FDs of over INR 100 crores currently. At stand-alone level, we are not net debt-free. And as per our existing business plan, we are targeting to be net debt-free on consolidated basis by the end of FY '23. Through this channel, I would also like to communicate that although our efforts, investments and strategies are focused towards immediate performances, we are also preparing the organization for our long-term growth prospects. To name a few such initiatives, our increasing rural penetration across the country would provide very prolonged reach to mass consumers. To appreciate our strengths and areas of improvement in making the organization employee friendly, we have participated in prestigious Great Place To Work survey. I'm happy to inform, we got certified as a Great Place To Work. And in addition, our plants have achieved the distinction of being in the top 50 manufacturing companies. To strengthen our way of working, we are investing in IT and systems, process orientations and cost optimizations as well. These initiatives and investments are expected to yield results in the long-term for the company in terms of growth, profitability and sustainability. I would now like to hand over the call to Mr. Mukesh Agarwal to discuss our financial performance. Over to you, Mukeshji.

Thank you, Manojji. Good day, everyone. I thank everybody for joining us to discuss Q3 and 9-month FY '21 financial performance of Greenply Industries. I am happy to say that we are doing much better and moving towards normalcy businesses wise. However, I do hope that all of you and your loved ones are safe and healthy. Our consolidated entities net sales for the quarter stood at INR 339.2 crore compared to INR 344.9 crores in Q3 FY '20, a decrease of 1.6% and higher by 15.1% as compared to Q2 FY '21. Consolidated gross margins for the quarter improved by 92 basis points to 41.9% on Y-o-Y basis. Consolidated operating margins remained healthy at 12.8% versus 11.6% in the previous corresponding quarter, despite the decline in top line. Stand-alone net sales in Q3 FY '21 stood at INR 308.9 crore versus INR 318.4 crore in Q3 FY '20, a decrease of 3% and higher by 30.1% as compared to Q2 FY '21. Stand-alone gross margin for the quarter improved by 283 basis points to 41.1% on Y-o-Y basis. Stand-alone Q3 FY '21 EBITDA margins are relatively strong at 12.8%, an improvement of 173 basis points on Y-o-Y basis, despite a decrease in sales, while PAT stood at INR 24.3 crore versus INR 18.6 crore in Q3 FY '20. Our average realization in plywood remained the same at INR 219 per square meter in Q3 FY '21 against the corresponding period last year. Receivables as on December 20 have declined to INR 201.4 crores, while debtor days too have reduced from sharply to 72 days from 90 days as on September 30, 2020, and 89 days as on December 2019. Working capital days too are lower at 60 days when compared to 80 days and 70 days at the end of the sequentially and corresponding quarters, respectively. All these numbers, which are on a consolidated basis is a reflection of improvement -- improved collections and discipline across our supply chain. The lockdown in Europe and non-availability of containers impacted order flow and consequently, revenue and profit growth in the quarter under review. We believe normalcy will return for our Gabon operations after Europe opens up and improved availability of containers. Maintenance CapEx incurred in 9 months FY '21 for Greenply consolidated amounting to INR 16 crores and expecting further maintenance CapEx of around INR 4 crores in Q4 FY '21. Our balance sheet continues to be robust. Consolidated debt has reduced to INR 188.8 crores in 9 months FY '21 from INR 267.4 crore as on March 2020. At stand-alone basis, Greenply is now completely net debt free, having made a net repayment of INR 77 crore in the ongoing financial year. Consolidated debt equity ratio also continues to decline and standing at 0.46 as on December 2020 as compared to 0.65 as on December 2019. I would like to hand over the call to the moderator to open the floor for Q&A session. Thank you.

[Operator Instructions] First question is from the line of Nehal Shah from ICICI Securities.

Yes. Congratulations for a good set of numbers and more importantly, on the robust cash flow management. I think the entire team should be really proud of what they've delivered with respect to cash flows. Now the question would be on the growth side. Now we have almost come to par volumes compared to last year with a decline of just about 2%. Now this was obviously done along with sharp curtailment and receivables, which have been now down 20 days compared to 3 quarters ago. Now with such tightening already under the belly, and -- so now we have all the ammunition to fire, particularly with the industry tailwind now been pretty strong than in last 3, 4 years. So is it fair to assume that we should be now clicking in almost a very high decent double-digit growth going forward considering the low base we have and the levers as far as industry growth also seeing much better than earlier?

Thank you, Nehal. Actually, you have answered your own question also. So yes, it was a tough journey. It looks easier when you people are able to see the numbers. But I can tell you that -- and every company when it goes through this process, it's a real challenge. It's not only managing the external environment, but it's also managing the internal environment and bringing in that belief system in the internal team also. Plus that we have been able to give a decent performance in Q3. I think we could have been even better in Q3 performance also, but we were also caught in a few areas, a few operational areas, I would say, where at times, logistics was slightly a challenge in getting the logistics support. At times, some issues were there even on the raw material side for a brief period. So if those challenges were not there, possibly, we could have given you a flat quarter on a Q-o-Q basis. Now -- so now coming back to your point, yes, we had maintained this in the past that we will give our best. The best part is that, as you rightly said, the market traction is also there. It's good for all the organized businesses. We have seen many other companies also doing very well. And even for us, the signs are good. January has been very robust. I think we will definitely look at a higher double-digit growth for next year, looking at the base being low. So I'm with you.

Sure. And my second question would be on margins. So again, commendable on the kind of margins we have had, despite the fact that our capacity utilization has been a lower Y-o-Y and assuming that the product mix would have been muted because of the current environment, so are we likely to hit that 14% margin bracket much earlier than what we envisage for considering that we have levers up our sleeves like higher utilization going forward, operating leverage and also product mix change. What's your sense on that?

The sense is, again, what is coming out is greed, right? Now that we have given certain positives in a shorter time. Look, as I said, that the journey looks easier than when we actually travel it. I can only assure you and the entire investor community that we are well on target for the 400 basis points what we have spoken about. And nothing stops us. It's not that, that is the place where we are just going to be casual, and we feel that we have arrived, right? So if any given, even we had internally not thought that we will maybe cover half of that journey so fast. Okay? And having said that, I think the moment our pocket size increases, our investment on the business also goes up. Because as I had mentioned in the last call that we are not looking at this business on a short-term basis. We are now looking to build up the company for the next 1 decade minimum, if not more. So we'll invest also good amount of money. Keeping those upsides from the investments also, which will come and reflect in the quarters to come, I think if you are able to do 14%, 14.5% by FY '23 and it will be a good job. So there will be a higher spend also, which should go in building up the organization on every front.

No, but with the kind of numbers being shown, it comes -- it seems coming much, much earlier than what we are targeting by FY '23, probably it may come in the next couple of quarters also?

So that is always -- as I said, that is always good and healthy, okay? And we will continue to invest back on the business.

The next question is from the line of Arun Agarwal from Kotak.

Congratulations on a great set of numbers. Sir, my first question is on the demand side. So could you just help us out how now the metros have been doing because metros have been a laggard as compared to Tier 1 and Tier 2 cities. And how are we panning out on the rural side also, I think we started something last quarter, so you could just throw some light on that?

Thanks, Arun. On the metro side, we have improved our business market share by around 5% to 6% on a quarter-on-quarter basis. I'm saying about my own -- if I break my own 100% sales, we were at around 36%, 37%, which has moved to around 40% to 43%. Okay? And still, we feel that it can improve further because the tightening -- so the last leg of improvement is actually happening in the metro cities in terms of receivable tightening. So we feel that there is a scope. And of course, there is a traction also, which is there. In terms of rural, we continue to strive on that rural penetration story. And our team has worked, they continue to work, and we will continue to work on the same. Last quarter also, we have added close to around 100-plus dealers into the kitty.

Okay. And these 100 for -- the total number of rural dealers would be now how much?

It's close to around 200 plus.

Okay. Okay. And sir, if you could also just throw some light on the premium and economy, how these 2 segments are doing for you?

Premium and economy?

Yes.

Arun...

Mukesh if you want, you can share the numbers with him.

Arun, on the premium side, in the volume terms contributed around 60% in the quarter. And on the economy and the low end contributed in the volume terms around 40% whereas in the value terms, premium contributed 70%, low end and mid-segment contributed around 30%.

All right. Sir, my other question is on the margins front. We talked about, we may have some operating leverage benefits going ahead given that better volume growth going forward in double digit. But on the cost side, have we sort of gained all the benefits of cost control measures that we have taken in the past 2 to 3 quarters? Or there is some more benefits we can see from those measures going forward?

No. See, if you see on the direct cost control side, whatever we could have done, we have done it. Now with the business growing, some of those costs will even come back. On the efficiency side, we continue to work. And there are projects which keeps coming. So I'm sure that we will get more benefit out of building up efficiencies. If you ask me today, I don't have that -- I have clear cut projects today, which can say how much benefit it can actually give us. But as an organization, we continue to work in each and every area of the business to see that how we can continue to build up efficiencies. So I'm sure that -- and that is one of the reasons when we spoke about this 400 basis points improvement and I think this, we mentioned around maybe 2 calls back at that point in time, we were at the peak of pandemic. And we still had that confidence looking at the way we were running things that this looks to be possible. And this is precisely the reason we mentioned that. So -- and I think with positive growth also, better growth, we can also get some amount of benefit on account of operating leverage. And we are more confident now that delivering this number will not be difficult, possibly as Nehal asked sometime back, we can even do better. But we are not, at this point of time, willing to revise the guidance because that puts a lot of pressure on the type of projects and improvements what we need to do in the next 2 years.

All right. Sir related question to cost, on the logistics side, we saw 100 bps increase on your logistics cost, both in Y-o-Y and Q-on-Q. So could you just highlight as to why exactly this was? And will it sort of move back to the earlier level?

Well, we are also working on that. There are 2, 3 reasons which I can give you because of which the costs have gone up. One, as I said, some time back, that logistics slightly was a challenge in Q3, getting the transporters and the trucks, the way we desire. And that is where there was some amount of increase. Also, the diesel prices also went up during this period. And the thing third is that we have also opened up some regional warehouses to cater to this rural demand. So there is an additional cost, which is getting reflected. But the same thing, we are also recovering in terms of our sales side. So it is not affecting my margin overall.

Okay. And sir last question from my side, is on the raw material side, if you can just help us out how the raw material prices are behaving? Did we see some pressure, I mean, maybe somewhere in third quarter? Or we are seeing some pressure in fourth quarter? And did we take any price hikes in that quarter?

Yes, in the fourth quarter, definitely, we have seen increase in the raw material prices. And we have also taken a price increase effective 1st of February. So basically, it's a pass on.

So we'll be able to pass on 100% of those increase or we are absorbing it?

We have -- I mean, the type of increase, what has happened till date, we have already passed it on to the market from 1st of February.

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

Sir, I wanted to understand what could have been the plywood industry growth in 3Q '21? And is the logistics issue only reason for our underperformance versus our peers?

No, no. See, the first point, honestly, we don't have the answer. I maintained in the previous call also that there are no such data, which clearly tells us about the market size, right? So we are concentrating on how and what we can do in the company without looking at whether the market is growing or not, we have to grow. So that is one. Second, as you said, your question was that whether the de-growth was only because of the logistics, is that what you said, or?

Yes, yes. And like our underperformance versus our peers, was it only because of the logistics and supply issue?

No. Logistics and supply issue, of course, would not have given us a 15% or 18% growth from what we have delivered. It was clearly of the way we have done the credit control in the system. And if you ask me, I am personally not worried about it because it is a given fact that when you correct the credit policy in the trade, your primary drops, okay? Because the dealers have the typical mindset of actually reducing their inventory, converting that into cash and giving it back to the company. So my secondaries has been good. My primary has been slightly weak to the extent of maybe the receivables extra money, which we have collected from the system. So I'm not worried. And now that most of it has been done, we will be back on growth trajectory.

Sir, my next question is in the Gabon business, initially, we were expecting 18% EBITDA margin. But now we are expecting around 14% to 15% EBITDA margin. So has our project ROCE expectations fallen for Gabon business?

Well, Gabon, slightly -- we keep facing some challenge or the other. If you see last quarter, we have been facing a typical challenge that one, of course, COVID has played some spoilsport in the last few months. 1 or 2 cases also if it surfaces there, suddenly, the government takes some very stringent measures. So that actually hits a very normalized operations. Second, we are facing challenge in terms of getting containers and vessels there. So as of today also, we have a huge inventory, which is actually lying at the dock, waiting for vessels. And because of that, we have reduced our order intake on a big way. Because if my old orders are still lying at the dock, I can't look at taking fresh orders and create pressure on the system. So looking at all these things, the sales is also lower. And when the sales is lower, we cannot even think of a margin of 18%, 19%. It's not a very, a different -- it's a different basket of products. It's a simple business, and the volume only plays a key there. And given the other type of situations like logistics supports and other things, if they are in control, I don't know, in the near future, immediate near future, I don't see a margin of anywhere near 17%, 18%.

And sir, Gabon realizations were around 54,000 in second quarter. And in this quarter, I can see it is 39,000. So what was the main reason for such a sharp drop in realization at Gabon?

Realizations.

So basically, it's a product mix. So Shrenik, in the earlier quarters, we sold some -- in veneer, we have different grades, A grade, B grade and C grade. So in this quarter, we reduced our inventory for B grade and C grade. And that is the reason why we have drop in realization in Q3.

[Operator Instructions] The next question is from the line of Pritesh Chheda from Lucky Investment Managers.

I have 2, 3 questions. One, in plywood, if you have to make incremental investment, at what asset turn will that incremental investment come at?

Yes, you can answer, Mukesh.

Okay. So one thing, first of all, we have decided that we will go for light asset model. But we are open for any new investment going forward, okay? So in that step, we have invested in 2 companies based in UP, okay? And one of the units already started production in Q3. So going forward, we will explore such type of opportunities. And coming back to your question, if asset turnover in plywood for new investment in greenfield projects, could be anything between 3 to 3.5.

Yes, yes. Correct

Okay. What is the current -- what is the capacity utilization of your assets last year at 14 -- INR 1,300 crores, INR 1,400 crores of revenue?

So in 12 months, our capacity utilization was 142% last year. Existing capacity is 24.9 million square meters, including decorative veneer.

Okay. Then on the working capital side, sir, what is a more sustainable net working capital now after the changes, what we saw in the last 6, 8 months?

So wherever we are -- today, we are at...

60 net working capital?

Yes.

. At a stand-alone basis, we are at around 42 days and at the consol level, we are at around 60 days.

So this 42 days with further work on the sale, it can be brought down to around 36, 37 days.

Okay. So there is further scope?

Yes, there is.

Okay. And my last question is, you mentioned that you will report or revert to double-digit growth. Should it mean -- also mean that you would go -- your sales would be higher than what you recorded in FY '20 in the corresponding year?

Well, look, we are doing our budgeting process. But looking at the type of traction it is there, we are also very bullish. But give us some more time, we'll come back. Definitely, the number will be a good number.

The next question is from the line of Bharat Sheth from Quest Investments.

Congratulation, Mr. Tulsian.

Thank you, Bharat.

Sir, I mean just want to get sense. I mean, of course, I mean, when we are talking that premium volume is higher. And -- but if you -- we look at -- I mean, our volume -- Q-o-Q growth is much higher, 26%, whereas value growth is 15%. So just if you can help us in understanding, what exactly is playing out?

Just repeat your question.

Can you -- Bharat Bhai, can you elaborate the question again? You're comparing which period?

Q-on-Q, Q2 vis-à-vis Q3. Q2, volume sales million square meter was 11.1. Q3 it is 14 million, so which gives a 26% growth, whereas value growth is around 15%. So I wanted to get some sense what exactly is playing out there?

So we had, in the mid-segment and the low segment, out of that 11.1, mid-segment contributed 4.48 -- 4.5 million. And in quarter 3, currently, out of 14 million mid and low segment contributed 5.6 million. So that is the main reason. So there is a -- you can say, growth over quarter-on-quarter basis and Y-o-Y basis in mid-segment and the low segment, including PVC segment.

Okay. So how do we really see -- I mean, going ahead, I mean, I think down trading is really playing out when volume is growing, but down trading is a normal thing? Or how do we see from here onwards?

So Bharat Bhai, it is not actually down trading, we have a basket of products, right? And what we really see is there are different markets for the same. So we are also now penetrating and we are trying to penetrate in a big way, as I mentioned some time back, on the rural side, where we were not so strong. So -- and our initial thought process is that in the rural market, it will be mid and lower segment, which will go well. So if that happens, then there will be some change in terms of the product mix. But it remains to be seen. Sometimes, we also get feel from some other companies that this perception is not right. Actually, the rural market is flushed with money, and they want to go more premium than the urban market. So it remains to be seen. Give us a few more quarters, I think we will also get more clarity on this.

Okay. So of course. So this double-digit growth that what we are talking, say, that is in value term or volume terms going ahead?

Both, both.

Okay. Sir, when we are talking of this 400 basis point margin improvement in a couple of years, so which are the area that we are targeting and in this whole journey, of course, we have just begun. So where we are and how do we see in '22, '23?

If you really look at, there are certain discipline on the sales side also, which we have done in terms of reducing the discount percentages in the market more now going on the MOP practices, right, strengthening the market operating practices also. We are building up efficiencies, as I mentioned, that in each and every area, we are looking at how we can automate things and bring down our cost. So it's no single area, which can give us this type of an incremental margin. We have to work on every area. And every area, we feel that there is a scope when we really look at with critical eyes that there is always a scope to improve. And then some portion, if you really see, which has already traveled into the margin, better margin is a few things which has been done possibly in the rightful manner.

Okay. I mean taking this mix and realization, if you really look at, I mean, in FY '17, when our volume was around 50 million square whereas I mean realized total sales was 1,600 plus. So realization was around INR 354 which has come down to, say, INR 258 or INR 243 in Q4 -- Q3 and INR 258 for 9 months. So what exactly has really mix has changed over a period?

Merged entity numbers.

Yes. So one of the reasons what number you shared for 2017 is a merged entity number, okay. So at that time, Rudrapur unit was part of Greenply. Now after demerger that entire unit transferred to Greenpanel. And from there, we were producing a decorative veneer and premium plywood, okay? And the composition of low end was nil at that time in 2017 because we started low end in Q4 2018. And the contribution from mid-segment, which is Ecotec brand, was low in the total plywood segment. So all these factors, the realization in the low segment and the mid is 40% lower as compared to the premium segment.

Okay. So going ahead now when we want to expand our market reach so what is our strategy? I mean, investment in increasing number of optimum dealer in rural or and metro, how do we really see? And how do we see the mix also metro vis-à-vis rural?

No. As I said that when we are doing expansion in the rural market, we're also trying to expand in the urban market. But you will always see that the growth in the rural market and the opportunity is much higher. So our first belief is that in the rural market, we will be in the mid and lower segment. But time will only say because there are also precedent theories which says that rural market, they look for more premium things, they look for better brand, better quality and higher value-added products. So maybe in next 3 to 4 quarters, when we will have a decent size of growth there, we can be able to see that how this mix has undergone a change. And there's nothing which stops us. Even if we start with mid- and lower segment with them, we can always even add premium products with them over a period of time.

And sir, last question. Sorry, I missed that. How much is the total gross debt and net debt at consol level?

INR 188 crores and INR 80 crores...

So at consol level gross debt is...

INR 188 crores.

INR 188.8 crores and at a stand-alone level, gross debt is INR 66.14 crores.

And net debt at consol level is around INR 80 crores to INR 83 crores.

Yes.

[Operator Instructions] The next question is from the line of Sonaal Kohli from Bowhead.

Congratulations on a very good set of numbers, especially on the balance sheet side. I had 2 questions. In terms of -- currently, you're only focused on plywood. So do you intend to remain that way or at some point of time, considering you have a much better balance sheet, you may consider entering into new areas, allied areas at some point of time? Secondly, you mentioned about January growth rate, if it's possible for you, can you share that kind of growth rate? And can we extrapolate that for the quarter? Or it's difficult to say right now?

So I'll answer the first question first. Yes, our balance sheet is very healthy, and we definitely want to be present in other building materials also. So we definitely keep on exploring the idea of entering different products. But we are very, very clear that we will enter only that category, which kind of goes with our existing line of products. And we are in the process of thinking. And maybe in the coming quarters, we will be able to tell you where we are thinking to invest and further grow the story of Greenply. That was the first question. And the second question, as far as January number is concerned, it's very difficult to comment right now because just by looking at January, we can't say how February and March will be. Overall, the environment is good, the numbers should be good. But I think it is not the right time to comment about quarter 4 numbers.

And sir, maybe that there's a lot of pent-up demand, which is helping you in January and February numbers and some point down the line maybe in June quarter, there could be a revenue shock or something like this as the pent-up demand goes away? What are your thoughts about it?

Well, actually, this is something which we should be checking with you people who are sitting with so much of data on different industries and different companies. Because most of the businesses are showing good traction and good growth. And we are also in the same boat at this point of time. I personally feel that post COVID, there is lot of change, which is coming in the way people worldwide are looking at things. It's a change in the method of living. It's a change in the method of thinking. And this is something which we are also -- I mean, we means when I'm saying I've even heard other companies that we are not able to decipher at this point of time that how is it going to work? Second, to some extent, it has dented the unorganized market, maybe for a limited period. But during this period, there has been a dent on the unorganized market. Whether they again bounce back because in the past, they have bounced back is something which remains to be seen. If not, then for sure, that also helps the Indian domestic business. And the third thing, I think all this China story and this is also helping India as a base because there are restrictions which is there today on import categories in many of the areas. And at the same time, there are industries or big houses, which is looking at now India as the base. So there are a lot of positives, which I actually see post the pandemic. And I'm sure that we will continue to grow much better than the other countries in this next decade. So keeping all these things in mind and the type of work when we come to our individual business, the type of effort, what we are putting here in the company, I'm very sure that we would be doing quite well.

Sir, lastly, 2 things. Firstly, on the ROCE side, for any new businesses, you look to on a steady state, is there any minimum ROCE, which you would look to before you get into a diversification? I'm not saying about year 1, but let's say, year third or fourth once you're settled in that business? And secondly, when you talk about unorganized market coming back, what are you, as a firm, taking steps so that you take advantage of the current weakness, so that even when the unorganized market comes back, we have capitalized this opportunity and therefore, even if they come back, your base is much higher than what it was before the organized sector was hurt?

I think...

Sanidhya, you'll answer?

I'll answer the first part of the question. For any new business, we will at least look at 18% to 20% ROCE to start with. If we are getting those levels, then only we are going to enter any new business. And we are definitely not going to go to any unrelated category even within building materials. So anything which goes with our line is the only thing we're going to focus on and with minimum 18% to 20% EBITDA margin.

And can you just say your second question again, I mean, in a brief, you're saying that if unorganized market comes back, what is the things which the companies can do before that, so that it does not affect us? Is it something you're saying?

Sir, let me rephrase it. What I meant was any great management take steps to capitalize on the opportunity. So even if the status quo returns, is there anything you have done or you intend to do that, let's say, 6 months down the line when unorganized sector comes back, you have capitalized the opportunity not only from a 2-quarter perspective, you reach a new normal in terms of your share as compared to the unorganized sector, assuming everything is back to normal and the online sector is also coming back. Is this something which you could do to have a relatively higher market share than was in the pre-COVID period for yourself?

So the first thing itself is to work hard on the tertiary side on the secondaries, okay. The team is putting all the effort to generate demand. The second thing is, as I said, that we are doing a rural penetration, right? So once we are able to create a good base, and we are able to improve the logistics support to them, right, I think they will remain with us. Because what has happened during this pandemic time, many of these small dealers, they have also faced a lot of challenge who were totally dealing with the unorganized segment. And there is a convert, which I feel personally is taking place for all the segments, where certain level of the dealers are now willing to work with the organized players. And over and above that, as I mentioned, that as our kitty grows, we would be doing more activity on the brand building side also. So when there is a brand-building activity, along with that, we work on the logistics and the secondaries, possibly, we'll be able to hold back our share or grow our share.

Also, I would like to correct myself. I meant 18% to 20% ROCE, not EBITDA, sorry at entry level.

Sir, lastly, you said that in terms of -- these are the various steps you would take or are taking to have a higher share. But from a regulatory side, do you think GST is now working? Is it much better than the last 1 year or do you expect it to be much better than today now in 6 months, and therefore, you could benefit in any way from that?

On the GST side.

Yes, the compliance of the GST. The GST is already there, but any material change in that currently as compared to the past or expected in next 6 months?

Well, my belief system is extremely strong in this, whereas many others differ on the same. But I think India as a country is improving on the digitalization platform in a big way. The government's network, the way they are linking their portals is commendable. And keeping all these things in mind and the level of surveillance and watch with the government has improved. I sincerely feel that in next 2 years' time, the unorganized segment will have to take a hit when it comes to non-GST compliances. So I don't see any negative for businesses like ours. We can -- it can only be better.

[Operator Instructions] The next question is from the line of Sachin Kasera from Svan Investments.

Congrats on a very good set of numbers. My question was regarding comment that you made that there was a difference between primary and secondary. So -- and you mentioned this is because you were tightening the norms, the primary sales whereas the secondary was much better. So if you could give us some sense, what was the secondary growth vis-à-vis the primary growth for the quarter?

No, no. See, that's what I tried to mention that again, there is -- there are no applied sciences, which can say that what exactly was the number. But normally, what we have seen when we correct the credit cycle in the market, okay, the traders have the mindset of selling the material and paying -- and squaring of the receivables. So the ballpark calculation is that if we have reduced our receivables by close to around INR 130 crores, INR 140-odd crores during this period by tightening the credit days, that is the type of inventory reduction, which has happened in my pipeline. So that is what, in a way, you can say, is the incremental opportunity. If we had not corrected this policy, we might would have at least done maybe half of that during this last 9 months itself. At least INR 60 crores to INR 70-odd crores could have reflected in our 9 months number.

Sure. Sure. Sir, my second question was regarding your subsidiary. So if you could tell us what is the long-term thought process there, say, over a 2, 3-year period? Are we looking to dispose it up, quite good valuation if we get it? Or what exactly -- how does that company fit in the overall scheme of things from a medium term perspective?

So I don't think there is any such thought at this point of time. It is -- also, it helps us in a way in our captive consumption because we also draw veneer, the face veneer requirement from the same operations. And it has been doing well other than that there has been hiccups, which has been coming and hitting that operation for some reason or the other. We have developed good Europe market. We have developed good Southeast Asia market. As I mentioned in my last call, we had just started our journey even in the U.S. market. The first container, which is there, got good response. We got orders for one more container. So I think -- and this is the way the export business also develops over a period of time. So business per se, we don't see there is anything negative. Yes, margins can take a hit for the reasons, which are sometimes very cyclical in nature. But we definitely feel that the team has done a good job there. We are quite settled in terms of the team, which is there, quite settled in terms of the way we are managing the business. So there is no such idea at this point of time to sell it off. In fact, I mean, too early to say, but in the near future, if we are able to improve our margins to something, then we might look at whether it calls for any further investment there or not. But that's too early a statement to make.

Sure. My last question is on the capital allocation policy. If you look at this stand-alone level, at a net level, you're almost INR 39 crores, INR 40 crores of cash and going by the performance, we should have another INR 100 crores, INR 125 crores next year. You mentioned to the core business, not too much CapEx is required, and that you are only looking at some adjacent categories. If you could give us some clarity over the next 2, 3 years, how are we looking in terms of utilizing the cash flow in the sense, how much will be used towards CapEx for either core business or additional categories? And how much probably you are looking to return to the shareholders?

Look, I think we have scope to grow in other categories. Clearly, we have scope to grow in other categories. The scenario was very different, maybe a year back. In terms of the strength of the balance sheet versus where we stand today. So now at least you are able to raise this question, and we are able to think on those lines. 1 year back, you would not have raised this question, and we would not have even answered anything on that line. So things keeps changing. And at this point of time, I think we have opportunity to create new verticals to create new business. And as Sanidhya mentioned, that the one thing which is very clear is that we will only look at related products. We will only focus in Building Materials segment, okay? Keeping these things in mind, we are also -- we would be now -- so one way is that we are today looking at strengthening the core business. Once we feel that we have reached the comfort level, we also start looking at opportunities where to invest, how to invest. And what type of capital allocation we can do and what type of free cash would be there. Too early a question really to answer explicitly on the way forward.

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

Sir, my question -- it was heartening to know about market share gains in the metro market, which you mentioned. But if I look at your competitor, I think in the last 2 quarters, at least, we have seen superior performance from them in terms of swift recovery. So is there anything missing in Greenply? And -- or Century is doing much, much better than Greenply and gaining more market share? Any comment on that, sir?

No, Ashish. No, no. Let me again explain what I said. What I said is that in my 100% sale, okay, the share of metros, which was around 37% to 38%, has grown to around 42%, 43%, okay, because we were doing this correction in the credit policy and metros were the last one to get corrected. So it's not about gaining market share from competition. I have never mentioned or tried to mention.

No, no. So that is one aspect, sir. But if I look at your Y-o-Y growth number vis-à-vis your competition, I think they have done much better in the last 2 quarters. So I'm guessing from that.

So that's what exactly I tried to mention, even just time, full-time -- some time back also, that since we are doing a credit correction, right, there is a channel pipeline correction which has taken place. So earlier...

But sir, on the working capital, they have also tightened their working capital. So it's not like they are giving more credits to the market. So we have seen the similar things in the case of Century also.

If you ask me, I would say they were already disciplined on this particular aspect. And we are just catching up on this particular aspect now that you are taking that name. And because they had done this correction, maybe, I don't know when, but that is purely the reason that since now we have done the credit correction, there will be pipeline inventory correction, which has happened.