Hindware Home Innovation Limited (HINDWAREAP) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and a very warm welcome to the Hindware Home Innovations Limited Q4 and FY '22 Conference Call hosted by Monarch Networth Capital. [Operator Instructions] I now hand the conference over to Mr. Vineet Gala from Monarch Networth Capital. Thank you, and over to you, Vineet.

Thank you. Good afternoon, everyone. On behalf of Monarch Networth Securities, I welcome you all to the 4Q and FY '22 earnings call of Hindware Home Innovation Limited. We are pleased to have the senior management team of the company, represented by Mr. Rakesh Kaul, CEO and the Whole Time Director; Mr. Rajesh Pajnoo, CEO of the Pipes business; Mr. Sudhanshu Pokhriyal, CEO of the Bath business; Mr. Sandeep Sikka, Group CFO; and Mr. Naveen Malik, CFO of Hindware Home Innovation Limited. I would like to hand over the call to Mr. Naveen Malik for his opening remarks. Over to you.

Thank you. Good afternoon, ladies and gentlemen, and a very warm welcome to Hindware Home Innovation Limited Q4 and FY '22. I'm joined today by Mr. Rakesh Kaul, Whole Time Director and CEO Hindware Home Innovation Limited; Mr. Sudhanshu Pokhriyal, CEO, Bath business; and Mr. Rajesh Pajnoo, CEO of the Pipes business; and Mr. Sandeep Sikka, Group CFO. I would like to remind all participants that some of the statements or comments made on today's call may be forward-looking in nature. These may include, but are not necessarily limited to, financial projections or other statements of company's plans, objectives, expectations or intentions. The company disclaims any obligation to update these forward-looking statements to reflect future events or developments. Kindly refer to Slide #2 of the earnings presentation for a detailed disclaimer. Before I begin the discussion for our quarterly performance, I would just like to discuss 2 significant recent developments. First, our company, the erstwhile, Somany Home Innovation Limited has been rebranded as Hindware Home Innovation Limited, aligning it with the mother brand, Hindware, and the best leverage is impressive and hard earn legacy. In line with this, Brilloca Limited, our wholly owned subsidiary, has been rebranded as Hindware Limited. A brand Hindware, as you know, is owned by Hindware Home Innovation Limited. Secondly, Hindware Limited acquired the building product manufacturing business of the erstwhile SHIL via a slump sale for a total consideration of around INR 700 crores as of 31st March 2022. The transaction has been consummated from the closing of our of stock on 31st March 2022. As you know, our building products business has delivered rapid growth over the last several quarters. This transaction offers several benefits. It helps our building products business to secure control over manufacturing processes [indiscernible] to the management to align product placement with evolving customer needs. It also strengthens our complete position and translate to better efficiencies. In addition to it, it indicates the entire value chain into a single entity, minimizes related party transactions and reduces compliance and administrative costs. Lastly, but equally importantly, given as well below us strong financial position and cash availability, the company is optimally positioned to augment its manufacturing processes and technologies. Let me now walk you through our financial performance post which the business CEOs will discuss the key highlights of their respective businesses. We are pleased with our performance for the quarter and the complete year despite the challenging macro and economic environment amid which we have to operate. For the complete financial year FY '22, in terms of top line, we delivered a growth of 29% over our FY '21 with consolidated revenue from operations of INR 2,294 crores. Margins, though, were slightly benign, largely on the expected line given valuated input of material inflation. In terms of absolute profitability, consolidated EBITDA grew 27% and amounted to INR 204 crores. Consolidated PAT after conserving rest of JV for the year stood at INR 202 crores, registering a growth of 268%. The reported PAT also includes the exceptional items comprising recognition of trade value gains of INR 66.11 crores from its investment in HPL, Hintastica Private Limited on account of loss of control of subsidiary and gain of INR 34.75 crores on account of slump sale of water heater business undertaking by the company to Hintastica Private Limited, a wholly owned subsidiary. As you are aware, Groupe Atlantic France, a EUR 2.2 billion company with a dominant presence in manufacturing, developing and distributing ecofriendly heating products and hot water production invested INR 68.3 crores for a 50% stake in the water heater business, subsidiary of Hindware Home Innovation Limited, at this time, Somany Home Innovation Limited. That JV, Hintastica Private Limited, is setting up a stage of hot water heater manufacturing service in Telangana. For Q4, while the company sustained the top line momentum, margins were lower, largely owing to the higher input and commodity prices, supply chain disruption which got further exacerbated as Russia-Ukraine war pushed up the prices even further in turn exerting more pressure from the profitability. Consolidated revenue from operators for the quarter stood at INR 686 crores, raising a growth of 12% year-on-year. EBITDA for the quarter stood at INR 67 crores. PAT after considering JV results came in at INR 37 crores, growing by 68% year-on-year. All these numbers are the consolidated numbers. Coming to segmental performance. The building products segment delivered yet another robust performance during the quarter and the year. Revenue from operations for FY '22 stood at INR 1,795 crores, registering a stellar growth of 42%. EBIT for the full year stood at INR 158 crores, growing by 49% for the quarter. The business delivered revenue growth of 20% year-on-year with -- for the quarter, the business delivered revenue growth of 20% year-on-year with revenue coming in at INR 550 crores and EBIT at INR 57 crores. For FY '22, our young and fast-growing plastic pipe and fitting business reported sales of INR 606 crores, registering a growth of 51%, and for quarter 4 FY '22, sales stood at INR 205 crores, registering a growth of 36%. That business has maintained its strong growth momentum. And over the past 2 years, the business has grown from INR 250 crores in FY '19, '20 to [ INR 696 crore ] in FY 2022, driven by strong fundamentals and our business strategy. The consumer appliances business. During FY '22, reported revenue of INR 431 crores. EBIT for the year stood at INR 6 crores. For the quarter the revenue stood at INR 121 crores. EBIT, at a loss of INR 0.6 crores. Overall performance of business was subdued primarily on account of higher input costs and disruption in the quarter due to third wave of COVID. In FY '22, the retail business revenue stood at INR 67 crores. During FY '22 registering a growth of 15% with an EBIT of INR 4 crores over an EBIT loss of INR 8 crores last year. For quarter 4 FY '22, revenue stood at INR 15 crores, having grown 12% year-on-year, while EBIT stood at INR 1 crore, having grown by 16% year-on-year. Despite the various challenges faced during this year, we have delivered a stellar reflection of our value proposition and effectiveness of our unique business model. While profitability for the quarter was under pressure, we are optimistic about our future performance. We remain committed and focused on our goal of delivering robust revenue and profitability growth and believe our brand salience, innovative products and strong distribution networks are well placed towards achieving the same. With that, I would like to call Mr. Sudhanshu Pokhriyal to take you to the Bath business. Over to Mr. Sudhanshu.

Thank you, Naveen. Good afternoon, everyone, and a very warm welcome to all of you. Before discussing the performance of the year, I would like to talk a bit about the acquisition of the building product manufacturing business. This transaction ensures we have greater control of supply chain and provides us with requisite scale to deliver consistent growth going forward, and we will see the contribution to our margin through Q1 FY '23 onwards. Our benefit at faucet segment continued to outperform the market and registered one of the best performances during the year and the Quarter. In FY '22, revenue stood at about [ INR 11,090 ] crores [indiscernible] growth of 38%. And in Q4 FY '22, revenue grew by about 12% year-on-year to INR 345 crores. We've been able to deliver strong quarter-on-quarter results on the back of new product innovation, strengthening of our distribution network in Tier 2 and Tier 3 markets, enhance the [indiscernible], a booming industry and renovation market demand. Going forward, we believe we'll be able to further [ enter ] the leadership position by continuing work on our strategy. I would now like to hand over the call to Mr. Rajesh Pajnoo, to take you all through the plastic pipes and fittings business. Over to you, Rajesh.

Yes. Thank you, Sudhanshu, and good afternoon, everybody. In the last financial year '22, our plastic pipes and fittings business improved a sales of INR 606 crores, registering a growth of 51%. And in quarter 4 -- quarter 4 year-on-year, business rose to INR 205 crores, registering a growth of 36% year-on-year. I'm happy to report that we continue to be the fastest-growing brand in India in this segment owing to the widespread popularity of our brand and the high quality of our products. Aligned with our company's exponentially growth strategy, we continue to tap into newer geographies. Thus, the Board of Directors have approved an investment of INR 180 crores towards setting up a new manufacturing plant for the plastic pipes in Roorkee, Uttarakhand with an initial manufacturing capacity of 12,500 metric tonnes. Both capacity expansion at our existing [indiscernible] plant is expected to be completed by 31st December. From these 2, business capacity will increase from 35,000 metric tonnes to 48,000 metric tonnes per annum. In addition to the pipes and fittings business, following the success foray in the North for the NCR market, we have also started the manufacturing overhead water tanks at our Telangana plant to cater to key southern cities. The brand and products both continue to gain popularity across markets, and we plan to gradually introduce this product category to other market. I would now like to hand over the call to Mr. Rakesh Kaul to take you through consumer appliances and retail business. Over to you, Rakesh.

Thank you, Mr. Pajnoo. Good afternoon, everyone, and thank you for our Q4 and FY '22 earnings call. For FY '22, consumer appliance business revenue came in at INR 431 crores. And for the quarter, our revenue stood at INR 121 crores. The quarter performance was largely subdued given the challenging operating environment, elevated raw material prices and overall inflationary trend moderating the demand sentiment during Q4. E-commerce sales were also much lower during the quarter, in line with the overall trend, where in the e-commerce industry, in general, actually saw a dip in demand due to supply chain constraints and higher costs and lower demand. We had undertaken price hikes in calibrated manner during the year and the quarter to counter the impact of higher input costs. However, we believe we'll be able to see the benefits of this strategy over the coming quarters. We'll continue to focus on introducing innovative products in the market to ensure we cater to the increasing needs of our consumers. We remain committed to our goal of building an exciting and innovative product portfolio. In Q4 FY '22, we launched more than 12 new products with over 35 SKUs across chimneys, air coolers and fans. We have a presence across the 1,350-plus distributors, dealers and modern retail outlets to capture the growing consumer demands. And our strong footprint of 12,500 retail touch points help us to connect with our consumers directly. Our retail business of FY '22 grew by 15% to INR 67 crores. And for the quarter, revenue grew by 12% to INR 15 crores. Despite the margin pressure, the business remains positive for yet another quarter and for the year and reiterate the strategy of focusing on franchising and e-commerce platforms. That concludes the opening remarks, and I would like to ask the moderator to open the floor for the questions and answers. Thank you very much.

[Operator Instructions] First question is from the line of Puneet Khanna from BOB Investments.

First of all congratulations, Mr. Sudhanshu, for the amazing results of sanitaryware and faucet. So to begin with, I want to understand a couple of things about the building products business, the breakup of B2B and B2C sales for Q4, the Tier 1, Tier 2, Tier 3 breakdown and also the capacity utilization since you guys also have now the manufacturing facility with Somany Home? And also, what are the future plans for the growth of building products business?

Yes. Thanks a lot for your kind comments. So we've had a pretty good year, and we've outperformed all our listed peers who will have declared their results in the year. We had pretty strong growth within retail as well as project segment. In fact, in retail, our strategy of landing our distribution, we've started with the distribution in sanitaryware business, which are not usually the way the go-to-market is in this industry has really paid off. And our growth in both projects as well as retail business has been excellent. In fact, we created our institutional team in Q4 of FY '21, and that team has really started delivering superior results in project business as well. At this point in time, our contribution of our project business, in fact, is about 26%, 27%, while 70%, 75% of our business is actually retail right now. So absolutely a good response in both the segments. It's not that only one segment is doing well and the other is not doing well. Secondly, our guidance has been that we would be outperforming the market in both sanitaryware and business in faucets we continue to hold that guidance. We believe we can outperform the market by 1.5x over the market growth rate. We have done this in this year and we've significantly outperformed this year, and we intend to do that in the coming year as well. As far as the capacity utilization is concerned, what we have done is we have expanded our vendor base to -- so there are some strategic vendors, which we have appointed in both sanitary and faucet business as well as pipes business. And also reduced our dependence on China in the last year, this is what we had mentioned in our previous investor call as well. As far as our own plant is concerned, we are running upwards of 80%, 90% in sanitaryware, but we have adequate capacity of faucet business right now. So that's the status. We intend to expand our vendor base for the sanitary business within India as well as in China and continue to source from there.

Okay. How much in faucet?

Faucet is around 65%.

Okay. And what are the -- like next year projection, what is the run rate you are targeting the growth, FY '23?

So as a part of the management philosophy, we don't give the next year projections as such. I think Sudhanshu has spoken about the guidance, and we should be able to outbid the market by almost 1.5x. So if you recall last year, we spoke about similar figures. And after the year, you can see that we achieved those targets. So apart from this, one more important critical part of the game was that last year, we had stated that we should be able to reduce the inventories also and overall net working capital. So we have been able to do that. And if you see on a consolidated basis, we have been able to reduce this by almost 25%, 26%. But the better impact is there in the building product side, where the figure is much, much -- the reduction in the working capital is much higher.

The next question is from the line of Rahul Picha from Multi-Act Portfolio Management.

Sir, my question was related to the manufacturing undertaking. So if I look at the disclosures for AGI Greenpac and discontinued operations classified there, we have a INR 26 crore operating profit in the manufacturing business, while there is a one-off of INR 38 crores GST refund. So adjusted for that, I think we have a loss on the manufacturing side this quarter. So can you just elaborate a bit on that and how that is likely to shape up going forward once it is combined with our company?

It's very important to understand. Actually, if you see last year, we had one big COVID event wherein most of the plants or many manufacturing facilities got impacted. Since our sourcing model from AGI Greenpac was on a cost-plus basis, and as per the accounting center during those periods and the plant closure happened and the labor was not available. So all the normal cost was retained in AGI Greenpac itself, so which impacted their profitability during quarter 1. So if you see those losses are to that account. So if you see our old transcripts also, so our acquisition, the product acquisition formula, which is the finished good product acquisition was linked to a factor that whatever is the normal cost of production plus the markup. So now since we have acquired it and given this right now, we don't foresee any forward in the near future. So we'll get a normalized number there, and we have given a guidance and an overall consolidation to say, we feel around 2% to 3% addition to the EBITDA margin of around 3% EBITDA margin should increase on an overall basis due to the acquisition of the manufacturing facility.

Sir, that's the reason for loss in Q1 of FY '22. My question was more on the fourth quarter, wherein we have a segment profit of INR 26 crores, but I think there is a one-off income of INR 38 crores pertaining to GST. And adjusting for that, we have, I think, loss in Q4 as well. So we just wanted some clarity on this.

So normally, going forward, that loss won't be there because I don't have the data right now or any during this call. Maybe we can take off separately. But going forward, I'll give you the broad guidance in how we are sorting this.

The next question is from the line of Sonal Minhas from Prescient Capital.

This is Sonal Minhas. I hope I'm audible. So I had a question on the building materials business. If we take out the pipes contribution, from the overall top line. I see that the balance building materials business, to my understanding, hasn't grown that much quarter-on-quarter. And also, I think if I compare this to March last year, we were at roughly INR 310 crores, which we've grown to around INR 345-odd crores. So I hope my numbers are correct, but I'm just -- I think, given these numbers are part of the disclosure, just wanted to understand from you, like, your comments on this.

So yes. So if you see on a quarterly basis, year-on-year basis, we have grown by around 10%. That means on an overall.

Yes, yes, yes. So March to March, you've grown by 10%. And compared to December this year -- sorry, please go ahead, sir.

And on a full year basis, we have grown at around 37.4%.

So sir, my question was more around, are you happy with the growth on the balance building material business? And are you seeing any challenges or there is a friction in the market? Just want to understand that if at all there is?

I think I would request if you can further clarify your question. Like you said, are you happy with the growth. So what are the...

Sir, so, okay, so I take out the pipes business from the overall top line of the building materials.

One important point you need to take in. Sudhanshu would like to answer this, maybe it was there in general.

Yes. So what happened is that in Q4, you had the COVID wave 3, which impacted your Q4 numbers. So I don't really read that 10% as any indication of the way the market is growing. So in fact, like I said, we are growing even in a halftime market, and market did not grow by 10% in Q4 last year -- in the Q4 FY '22. So as far as our -- are we satisfied with the growth of this business? I mean, like I said, we are well beyond our guidance we have given earlier. And we're extremely satisfied with the overall growth of more than 37% for the whole year, extremely satisfactory. And we intend to keep beating the market as we've used to.

Okay. And sir, between this year, December quarter and this year March quarter, has the market grown? Because if I strip out the pipes business top line, the balance business has grown from a top line of INR 341 crores to INR 345 cr, which is largely, I think, flattish. So just wanted to understand this year, December quarter to this year, March quarter, have you seen market growth? Or this is just specific to you?

The market is doing good. I think Sudhanshu spoke about it, that the December quarter was a normal quarter, but March quarter was impacted in the month of January due to the restrictions on the COVID 3 wave, which did have a major impact, but it had an impact in the market in terms, obviously, people not going out.

Sequentially, from Q4 did not grow over Q3 for us. Overall, at an overall level, even in the market, there is no growth.

Yes. That's what I wanted to understand. What was the reason for that in particular? Any subjective to comment on that, sir?

It is largely because of the third wave of COVID, which impacted retail demand at that time.

Okay. And you're seeing that phase off as we enter this particular quarter because you're already like middle of this quarter. So how do you see the market now? So this is more directionally around the market, I think.

The market is absolutely much, much better. I can -- I mean, of course, I cannot share any numbers, but yes, it's much, much better at this point in time. Yes.

Okay. And sir, just if I were to ask you a ballpark of a number for the consumer business. If -- like at what top line would this business actually be breaking even or, let's say, be at a profitability, which you aspire it to be at. If you could just throw some light on it? Because right now, I think we are probably like pretty much like breaking even or like barely negative in terms of profitability. So I just want to understand what is the steady state margin for this particular business? And what is the top line corresponding to that?

May I request Rakesh, if you can take this, please?

Yes. Thanks so much. Yes, it's only for the quarter that the margins are negative. It's not that in the past, we've not been profitable. We've been fairly profitable in the preceding quarters also. So the primary reason for -- so from a run rate perspective, even at this current run rate perspective, our business is also slightly seasonal so we cannot really compare the sequential performance of previous quarters. This quarter 3 and quarter 2 happened to be much bigger quarters for consumer appliances business given the seasonality piece. And so from a run rate perspective, even at the run rate, what we are doing right now, we can be profitable. The challenge for the quarter 4, starting from the end of the quarter 3 were massive, price hikes in the entire industry, the ocean freight from imports moving from $800 to $9,000 per container, which astronomically increase the price. Despite taking price increases, our margins dropped substantially to almost 4.6% in the quarter which impacted the profitability. So from a run rate perspective, the margins would have been fine and which subsequently impacted the supply chain cost, the service cost and the fixed cost as well, so which impacted the overall profitability. So from a run rate perspective, I believe that even at this level and with the growth which we are targeting this year, we should be fairly profitable.

And sir, if I were to just maybe zoom out 2, 3 years, not asking for numbers. Like what is the margin that you aspire to run this business at? And what is the corresponding asset turn that you basically expect or whatever the return on capital do you expect to run this business at? Can you just help put some context? Because I think previous to the water heater business, we could understand and there was a linearity in the margins and the return profile. Now I think we've -- it's for us as investors and analysts, I think it isn't difficult to put a finger around that where are the margins for this particular business heading in a steady state?

As far as the gross margins are concerned, our gross margins of the company are hovering between -- if we deduct the -- on the Ind AS hovering between 35% to 36%. So with...

Consumer product EBITDA margin, sir. It is a consumer products EBIT margins?

Yes. EBIT margins, we're looking at around 7% to 8%.

Okay. And if you run this business, is this aspirational to say that the consumer products business should have a return profile of roughly 25%, 26% for it to qualify as a business which is in steady state? Because right now, it is not. That's why I'm just trying to like, I think, understand where this is heading?

Yes, that's a good figure to target that.

Okay. And then what top line do you see this being achieved at?

So I mean, from a top line perspective, I think we were in a growth phase. So if you remove '21, '22, we had a CAGR growth of more than 35% up until of '20, '21 despite the COVID. So primarily, the business suffered on account of 2 reasons for the last 2 years. One of our key product categories is the cooling products. And as you know, COVID 1 and COVID 2 struck both in the quarter 1, which constitute to 65% of the early demand for this product, which was massively impacted. So I think, again, I'll reiterate that apart from this and apart from the escalation in ocean freight and raw material prices even if you would have had a normal quarter for the cooling products, we would have been still at an EBIT of 7% to 8%. So I think having said that, so we had a -- we are having a magnificent summer right now so hopefully, things will turn around for that. So from a run rate perspective, we continue to look at desirable growth of 20% and 25% plus every from at least this year. That's what we are looking at.

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

Sir, just a clarification. So I can understand that the balance sheet seems to have given the reflection of that asset that we have purchased, the asset from HSIL, the sanitaryware asset. Do the P&L also reflect the benefit of manufacturing?

No. So if you see the notes to the accounts, the transaction got consummated after the close of business and stopped 31st of March 2022. So the asset transfer took place, but all the profits, which were there leading to those plant, the manufacturing facilities, so they will start coming to us only with effect from 1st April '22.

Okay. So the margin change, which was margin of manufacturing, margin will start getting reflected from next quarter, right?

Yes, this quarter. It still like Q1 of this financial year.

Then my other question is what is the gross debt now in the balance sheet and the net debt number because now the balance sheet seems to be reflected in 3, 4 places, the debt number should be helpful for us to know what is the gross and the net debt, both?

Yes, I appreciate your question. So basically, what has happened is until 31st March of INR 700 crores of concentration, we had paid only INR 109 crores, and balance is being paid off in the quarter 1. So we -- and we expect a closing debt based on some sales section if we compare it beyond 30th June 2022. We will have a debt -- overall debt utilization ranging between INR 550 crores to [ INR 555 crores, INR 565 crores, INR 570 crores ]. In the subsidiary, which is Hindware Limited or Brilloca Limited. So that will increase the list. But we have given our guidance and a major part of this debt, we should be able to pay out in next 2 to 3 years.

Sir, why is the debt then reflecting something like INR 1,100 crores today? So it's like, say, other financial liability, short-term borrowing and long-term borrowings than other financial liability in the noncurrent. So all these totals up to about INR 1,100 crores.

So what you are doing is you shouldn't double comment, so since the transaction has been given effect on 31st March itself. So as we acquired the business, so since the consideration is not paid, so the unpaid consideration of INR 600 crores is reflected in the other financials. So that will convert into [indiscernible].

Perfect. So what will be your total debt? Your total debt will still be something like 8-plus INR 2,000 crores, right?

No. But what I'm talking is the bank debt. So then there are other normal creditors. We have exclude the normal creditors for the whole business. So what the figure which I'm giving you is relating to the bank interest-bearing debt.

Including working capital and short-term, long term, both, right?

Both of them together, ranging between INR 550 to INR 560 crores of Hindware Limited.

Okay. My other 2 questions are specifically on a category. So -- how do you look at the sanitaryware category per se, specifically, the marketplace there -- the market there? And second, I wanted to understand your thoughts on the growth rate of the chimney category. Because they're also -- we are a fairly large market player.

I think for sanitaryware I'll request Sudhanshu and I'll request Rakesh, after that to answer the chimney part.

So sanitaryware as a category, we're seeing good demand right now and the market is growing upwards of 10% to 12% right now. So as such, there are no syndicated surges, which are there in the marketplace. We don't give actual numbers. These are numbers which are coming as an estimate on results, which have been declared by listed companies and our own market. So overall level, the market is growing at a, I would say, a pretty healthy clip. In fact, we -- because of the increase in input prices, there has been so many price increases which have also got passed on to the market to the consumer. And it's actually been taken well by the consumers. Our rebranding exercise for Hindware Italian Collection, which is ongoing right now, has also really impacted and helped us in terms of gaining share in the country directly. In fact, last year, we launched many new products as well, which were first in the category like tankless water closet and some touch-free water closets, which were totally new to the category, have been -- have seen absolutely brilliant response from the consumers. So we see -- we are extremely positive on the sanitary category right now, and we believe that we will continue to grow in double digits, and we'll continue to outperform the market.

So this 10% to 12% is volume growth rate you are mentioning because there is already a 20%-plus price hikes, which have been taken.

Yes, yes. I'm talking about the volume, yes.

Okay. So 10% to 12% and then whatever is the price hike we have to add that, right?

Yes.

Okay. And there is no disruption in demand as of now, according to you?

No, no.

Okay. And in terms of availability of product line?

Yes. So what there is -- we have reduced our dependence on China for sanitaryware. But we still have sub 10% contribution of volume coming from China. So that is always a bit of, I would say, difficulty at times. We were able to secure a large part of that in Q1 of this year. But again, there have been some lockdowns, which got announced in the last 30-odd days. So that is also -- so I really can't comment exactly how much is the impact of subsequent supply chain. But like I mentioned in my previous answer, we have also developed a large number of local vendors which have really helped us. We've, in fact, done from strategic tie-ups with some local vendors. And through that, we've ensured that there will not be any major supply disruption. There may be some replacement of specific brand or specific models to China specific to domestic models. But I firstly do not see a major disruption in the overall cycles.

And sir, this volume growth which you mentioned, but it seems that last year, whether it is us or another listed company, there is hardly any volume growth in the 20% plus revenue growth that you have shown. So it must be hardly a single-digit volume growth. So why is that the volume growth was so low last year?

If you see our results, we have a year-on-year growth of 37.4% on value terms.

But sir, that is including pipes, right? Pure sanitaryware will be about 23%, 24%.

No, no, no. With pipe, so you see, pipe growth is 51%. And sanitaryware growth is 37.5%.

Sir, you gave the pipes number of INR 606 crores, right? Which has grown 50%. I have to reduce that from the building product to get the sanitaryware plus faucet ware growth, right?

Yes.

So that turns out to 23%.

No, what is the figure you have with you?

INR 1,189 crores. Pipes is INR 606 crores of the segmental that you reported is INR 17 -- INR 1,795 crore.

Okay. If you see on sanitaryware, we did INR 1,151 crores, which last year was INR 837 crores.

This is including faucet or?

This is sanitaryware and faucet. So this is including everything other than pipes. Pipes, we did this year INR 606 crores and last year was odd INR 400 crores.

Okay. Okay. I'll check my numbers, sir. My other question was on...

Actually, you reduced the INR 600 crores about this year.

Maybe I would have done some error there.

Volume growth is extremely healthy impact. Sanitaryware, in terms of volume growth, we are around 22%. And the product mix, another 3% and rest is the price increases.

So the price increases happened during the course of the year. So the complete impact of the price increase is not yet into revenue.

So my question on the chimney category.

Yes. So I'd like to answer that. So in fact, we continue to be a dominant player in the category of large kitchen appliances. In the subsegment of consumer appliances business, we have grown by 33% in the large kitchen appliances, which predominantly consists of kitchen chimneys. We are a very, very strong #2 player in this category with a 20% share. And overall and in the category of e-commerce, which contributes to 25% of the total volume of the business of this industry. We are a clear #1 player with a 37% share as reported in the last year. So as far as the outlook of the industry is concerned, last year, the industry reported anywhere between 15% to 18% of growth, and we almost doubled that. I mean, our growth is almost double of the industry growth as such. We continue to have one of the largest ranges of kitchen chimneys augmented by a very, very superior range of technologically enabled products. We were the first in India to launch an IoT chimney, the first in India, so we have the most silent chimney in the country, which is 32% more silent than the -- more silent chimney actually by an Italian in nature. So we continue to build our portfolio on the kitchen chimney in large kitchen appliances in the back of our strong innovation. We have got more than 32 patents in the business so far, which have been registered in the last 3.5 years. And we continue to believe that our growth in this category of large kitchen appliances will again be 2x of the market. We continue to believe that. And we are on that path of doing that as such.

[Operator Instructions] The next question is from the line of Nikhil Gada from Abakkus.

Sir, my first question is regarding our building products division. The EBIT margin. So if we see year-over-year, there has been some amount of correction in the margins. Can you please help me with the reason, what has specifically has happened?

So if you see this overall growth in margins expansion as good. Like on sanitaryware, faucet, tiles, EBIT margin has grown by almost 1.4%. There has been some drop in the margin on the pipes because of the fluctuations -- EBIT margin because of the fluctuations in the...

Sir, could you please share the numbers, as in what was the pipes margin in 4Q FY '21 versus 4Q FY '22?

I'm giving you year-on-year rather than the quarter because quarter has been too much of a up and down.

Sir, I need year-over-year itself, for 4Q FY '22.

So basically, last year -- so this -- when I'm talking margins for both sanitaryware and faucets as well as pipes these are excluding the manufacturing margins just to be on the clear side. So this particularly on an outsourced basis on a third party. So like last year, we had an EBIT margin on pipes of 9.27%. And this year, we had on a yearly basis 8.15%. So if you see the overall sanitaryware and faucet margin expansion is there. But on a net-net basis, we expanded it by another 20 basis points. As such, I'll request Sudhanshu to talk about it, how we pick up in the margin expansion. This includes various initiatives of -- into the market, which led to the expansion. So one is definitely, the increased volumes and better use of operating leverage, about distribution and about product mix. Sudhanshu?

Yes. So in the sanitaryware, faucet and tiles business, our margin expanded by 1.64% for the year, year-on-year. And it largely came because of an improved mix, which of the products which we're selling in our portfolio. We have moved from a lot of basic products in the sanitaryware and faucet category to higher-end. I would say, about upgraded products, one pieces and wall mounts in the sanitaryware category. And similarly, diverter-based [indiscernible] as well as the higher-end faucets in the faucets category. One product mix improvement is a significant lever, which has really helped us in terms of our improvement. Secondly, we've also done a lot of what we call DTV work, which is a design-to-value work, wherein we've been able to reduce and mitigate some of the improved price increases, which have happened during the course of the year by redesigning our products -- or reengineering our products, so to say. There have been, let's say, lightening of some of the products. There have been -- in terms of some specific design elements have been removed, improved so that the cost of goods for these products have actually come down substantially. So this has really helped us in terms of improving our margins during the course of the year. Both these things, of course, I think these have been taken to pass on whatever is the balance input margin. The price increases -- the input price increases have been far too many. But because of these initiatives around changing our product mix as well as doing design-to-value exercises, we've been able to, in fact, expand our margin, which is not the case for most of the other organizations in our category right now.

Understood. And sir, this 1.64% expansion you're saying is for faucets specifically, right?

What is it?

The 1.64% expansion in sanitaryware and faucets margins, this is 4Q FY '22 versus 4Q FY '21, right?

No, I'm talking year-on-year. Full year.

Okay, understood. Understood. And sir, the pipes margins that you gave, can you give it for FY '22 versus FY '21, the EBIT margins?

The figures which I have given you are for the financial year. So basically, it was last year at 9.27%, and this year is 8.15%.

Okay, sir. Got it. Sir, secondly, in terms of our consumer appliances business, I think we have given a guidance of 7% to 8% EBIT margin. This is for FY '23? Or this is more from a long-term perspective?

So this is more of a long-term perspective because we are building up this business. Right now, if you see this business got impacted due to the higher input prices. And if you see industry per se also, many players in the market on this particular site, they have raised the challenges. But slowly and slowly, the pass-on effect is happening. The pass-on impact for the consumer goods is not that as fast as like pipe is a weekly adjustment. For sanitaryware, faucets it has happened 3, 4 times. We have increased the prices. But for consumer, we feel that price increases will happen over a period of time. And that's why we'll say that it's an 18- to 24-month guidance.

Understood. But sir, any near-term FY '23 guidance because we have seen a very strong summer and definitely for FY '21, '22.

The only guidance we can give is that the quarter 1, the market was -- the temperatures are really high, and we could do a good sales on this.

Understood. Understood. Okay. And sir, lastly, when I look at our balance sheet for consolidated, the inventory has seen a sharp spike up and the inventory days have gone up specifically. And the overall working capital cycle when we look at, there has not been any major change post the acquisition of the manufacturing division. So could you help me out as in how we can go about this inventory days -- reduction in inventory?

So typically, it would be almost on consolidated basis, without considering the impact of the slump sale because although the numbers, which we are seeing. When we acquired -- when we've paid INR 700 crores, we paid money almost INR 150 crores, plus [ sanitary ] and also which we acquired from them. So now we'll rationalize the inventory, further pull it down. But if you see apple-to-apple basis, the inventory, which was around 31st March '21 without slump sale -- without the acquisition versus the inventory at the 31st. So it reduced from 114 days to 80 days, net working capital, I'm saying. And if you adjust this on an overall business, we have been able to the major correction here.

But this would sort of in terms of liquidation of the inventory, is there some stale stock that is there that we have to write off or something like that? Or...

No, no write-offs as such. So whatever it is there, we have acquired the clean inventory from as part of the purchase consideration.

So this will -- sort of over the course of business, we'll try to improve on this?

Yes.

The next question is from the line of Sandesh Barmecha from Haitong Securities.

It might be repetitive. I didn't hear you right. So what were the gross margins and EBITDA margins of pipe division specifically?

Given the EBIT margins last year, so we don't disclose gross margins and the EBITDA margin as well. So the segmental reporting is at EBIT level. So we have already disclosed the EBIT level numbers for both sanitaryware, faucet separately and pipes separately.

Okay.

Sir, I request you stay connected. It seems the line for the management is disconnected as I just rejoin them. The management line is disconnected -- I think you may want to repeat your question.

Hello. Am I audible?

Yes. You are now audible, sir. Let's just go for the next question, it seems Nikhil is also disconnected. The next question is from Deepak Poddar from Sapphire Capital.

I think many people got disconnected. Yes. Are we audible?

Yes. So we move to the next one, Dixit Doshi Whitestone Financials.

Can you just also add Mr. Rakesh Kaul? I think he... Are we still connected?

Yes, you all are connected. Just allow us a quick moment, we are trying to check the participants.

I think call is not getting through.

No. Rahul Picha, can you hear us?

Yes, I can hear you. Hello?

Rahul Picha, can you hear us?

Hello?

Yes. Please go ahead.

Yes. So sir, my question was on the debt a little while back, you clarified on the debt for Brilloca. I wanted to understand on a consolidated level. When I look at the balance sheet right now, we have I think INR 140-odd crores of debt. And if I look at the presentation and the disclosure that you have for pending consideration to be settled for the manufacturing business that we are taking over, I think, INR 590-odd crores need to be paid. So that would get added to the INR 140 crores that we have right now, right? And we would end up with around INR 725 crores, INR 730 crores of consolidated debt.

Not debt because we earned some profits also. It's not that we are getting 100%. So if you see, we had said that we -- the total acquisition size was odd INR 700 crores. We had almost around INR 100 crores in our kitty. So incremental debt was INR 600 crores. So the parent company was using a debt of odd INR 130 crores, I'm giving broad numbers here. So when I gave a figure of INR 550 crores to INR 560 crores as of 30th June target bank utilization. So that is both the term loan as well as the working capital. Plus apart from it, there will be another INR 140 crores of utilization the parent company. So the total INR 700 crores of it.

Okay. And sir, what will be the cost of this debt?

Most of this debt is getting contracted. Term debt is at around 6.7%, 6.8%. Working capital is cheaper by a percentage, but interest rates are changing. So I think with the quarterly reset, this should increase by another 30, 40 basis points.

Okay. And sir, for FY '23, what is our target in terms of debt reduction?

So then now what we have done is now there is an expansion. We feel that we should be spending odd INR 170 crores around on the CapEx, which will include setting up of initial payments to setting up the pipe plant. Then we are investing heavily into creating our branding on retail stores or doing a massive expansion there. So we'll set up many stores, the visibility of the brand will be much higher. And then there is a normal CapEx, which is linked to sanitaryware, faucet plant, wherein we have keep debottlenecking the facilities and further enhancing to the portfolio. So we feel that overall spend during financial year '22 will range somewhere between INR 150 crores to INR 175 crores in terms of CapEx. As a matter of prudence, any CapEx which is there, we tend to borrow almost 70% of that as a debt. And if any surplus cash we generate, it go and settle down the working capital. So basis the numbers, we have a target to earn money. So we feel that overall debt should be in a range of INR 700 crores to INR 800 crores as such.

Okay. And sir, what is the amount that we will be spending on store expansion?

This is spread across various categories. So on average, we feel that across the businesses, which should be doing around INR 50 crores to INR 60 crores in terms of creating all these brand stores across the country.

Okay. So sir, if I broadly understood it correctly, right now, we are somewhere around INR 700-odd crores of consolidated debt. After the CapEx that we intend to do for the year, we might end up somewhere between INR 750 crores to INR 800 crores. And broad plan is that we want to...

I'm missing your voice. I'm not able to hear your voice. Am I audible?

You're audible. Please go ahead.

Yes. Sir, did you hear my question? Or should I repeat it again?

No. You have to repeat because I couldn't hear your question.

Okay. So sir, so what I've broadly understood is that right now, we are at around INR 700-odd crores of debt. And eventually, by the end of the year after the CapEx and investments that you plan to do, we might end up at around INR 750 crores to INR 800 crores. And over the next 2 to 3 years, we intend to bring it down significantly while this reduction is likely to be back-ended because initially, we'll be investing more, and the debt repayments might happen maybe in FY '24 or '25. Is that broad understanding, correct?

Yes. Because since we don't have any more -- any subsidiaries as such, so whatever profit which we earn, that gets towards the reduction of the working capital. And once the major chunk of working capital is fixed, then we'll start focusing on prepayment of the loans.

Okay. And sir, any targets that you have in mind for FY, '25 like the debt number that you are planning to get it down to by FY '25?

We will let you know over a period of time. Right now, it is difficult for us to comment.

The next question is from the line of Puneet Khanna from BOB Investments.

Sir, how much price increase we have undertaken in building products over the period of last year? And any price increase we are planning for the upcoming months? And also I want to understand the working capital as well. Can you bifurcate this in the sales days and the payable days and the inventory days we are setting up on it? These 2 things.

If you see the full weighted average impact during the financial year for sanitaryware and faucets, it's odd 15%. But if you see the price hikes, there has 4 price hikes on the sanitaryware, another 2 to 3 price hikes on the faucets. And this was SKU by SKU. But if you quantify this together, I think the overall price increase should be ranging between 25% to 30% of the impact, if you take on a particular set of 7 days as compared to the 7 days of the previous financial year. But the impact of this will come in forthcoming quarters. As such, as Sudhanshu already told like since the price hike happened spread over the year, so the net impact is 15%. On the overall working capital side, if we see, we have been able to bring down our receivables quite substantially for Hindware Limited. And like last year, the number of days of receivables was, just a moment, was at odd 81 days, so which right now is at 34 days for this business. Inventory has remained there. And inventory, which I'm talking is on a net-to-net basis without slump sale impact and even trade payables, it is the similar value of 16 days, inventories at around 63 days. So with the initiatives, as we are focusing more on the domestic sourcing, so our ability to downsize the inventory will further enhance over a period of time. When we import, we have a higher lead time and we had to do for a higher stock out, stocking at our warehouses.

So just a clarification, price increase average has been taken 25% to 30% across sanitaryware and faucet, right?

Average for the full year is around 15%. But when I say 25% to 30% is the net impact. So basically, for any particular SKU on faucets, the price -- the net selling price of the March '21 versus March '22, because even the input prices have increased substantially. So that weighted average I'm giving sanitaryware and faucets are together ranging between 25% to 30%.

The next question is from the line of Sandesh Barmecha from Haitong Securities.

Just wanted to ask you on the pipe division itself. So if you can give what was the geographical revenue mix for pipe division, sir, if possible?

If I take your question, you're talking geographical spread of the pipe business? Is that right?

Right, sir.

Yes. Rakesh.

Yes. I'm here. I got dropped out, but I'm here. See, since we are just 3 years old into the market, but we have been able to target pan-India market. Predominantly when it comes to PVC category, we are very strong in Southern part of India, Northern part of India and Western to a certain extent. East is a little bit new. We are yet to open because we have our capacity constraints at the moment. Otherwise, geographically, we are there expanding.

Okay. Great. First of all, congratulations on having a fabulous growth on the volume side. So what kind of -- where will we be targeting to increase our presence geographically, sir, over next 2 years, sir?

You're asking about the pipe business?

Yes. The pipe business.

Yes, yes. We would definitely be trying to go deep into the rural markets because we targeted the urban initially and it will be mainly Central India and Eastern India. Otherwise, we have covered the whole country.

Okay. Sir, what kind of demand, obviously, in the first quarter specifically for the pipe segment and what will be the target for FY '23, sir, margin [indiscernible]?

Generally, we are not giving the current year numbers as well. So I think, Rajesh, on an overall basis, you can comment. But I think we'll like avoid giving margins.

See, we don't give the figures, but overall, we are seeing definitely a growth in the market. And as such, our products have been accepted. We are the fastest-growing company in this segment as of today [indiscernible] . We are growing at a CAGR of 54%. And we see that the demand will be there, and we will be doing better than the -- at the moment, I can tell you.

So if you recall, last year, we had given guidance that in May '21 that in another 4 years, we feel that pipe business will be INR 1,000 crores plus. So we are holding on to that guidance right now.

The next question is from the line of Sonal Minhas from Prescient Capital.

I have a follow-on question. If all else was equal, and I think we just were trying to put FY '22, '23 perspective. Because of the debt rupee on one side, and the margin attribution to the manufacturing business coming on the other side, we -- can we believe that FY '23, the margins would squeeze because the manufacturing -- sorry, am I audible because there is an echo in the background?

You are audible as far as I can understand. So we will have addition to the EBIT margin. So as I told you, because many people, they are comparing the margins of AGI Greenpac, which I told was impacted with [indiscernible] margin. So if you net off that, since our model for sourcing from this was on a cost-plus basis at EBIT level. which was 4.5% for the sourcing value for the sanitaryware, faucet and 3.5% for the pipes, so that EBIT will definitely get added. So it will be value-accretive. It is not that it will erode the EBIT value.

Thank you. That was the last question. I now hand the conference over to Mr. Vineet Gala for closing comments.

I would like to thank the management of Hindware Home Innovations for giving us the opportunity to host the call. Also to all the participants for attending the call. Thank you, and over to you, sir.

Thank you. I thank everybody who is just attending the call. I think we got disconnected in the interim, but I hope we have been able to answer most of your queries. If any other queries are there, you can obviously get back to [indiscernible] and we'll be really happy to make a response to the same. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Monarch Networth Capital, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.