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

Ladies and gentlemen, good day, and welcome to Hindware Home Innovation Limited Q1 FY '24 Earnings Call hosted by Monarch Networth Capital. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Dani from Monarch Networth Capital. Thank you, and over to you, sir.

Yes. Thank you, Aman. Good afternoon, everyone. On behalf of Monarch Networth Capital, we are delighted to host the senior management of Hindware Home Innovation. We have with us today Mr. Salil Kappoor, CEO, Hindware Home Innovation Limited. Mr. Sudhanshu Pokhriyal, CEO of Bath Division; Mr. Rajesh Pajnoo, CEO, Pipes Division; Mr. Sandeep Sikka, Group CFO; and Mr. Naveen Malik, CFO, Hindware Innovation; and [indiscernible], the Investor Relations team. We will start the call with the opening remarks and the management, then we'll move to Q&A. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen, and welcome to Hindware Home Innovation Limited Quarter 1 FY '24 Earnings Call. Kindly note that some of the remarks or observations made during today's call might be forward-looking such as financial projections or statements regarding the company plans, objectives, expectations or intentions. The company does not have any obligation to revise these forward-looking statements to reflect any future events or development. For a comprehensive disclaimer, please refer to Slide #2 of the results presentation. At the outset, I am pleased to introduce and welcome Mr. Salil Kappoor, CEO, Hindware Home Innovation Limited. Salil brings with him over 30 years of diverse experience primarily in the consumer [ durable ] field. His sector expertise and insightful perspective will play a vital role in shaping our strategic objectives. In his earlier assignment, he has led Orient Electric Appliance division and held leadership position at LG Electronics, Samsung, Voltas, among others. Salil will be representing consumer and retail business in this investor call. Now let me briefly touch upon our performance for the quarter post which the business CEOs will discuss the key highlights of their respective businesses. Our quarter performance was largely impacted by a challenging external environment resulting from increasing inflationary concerns impacting demand of consumer discretionary goods. Against this backdrop, the company registered revenue for the quarter, which stood at INR 634 crores. Despite lower top line growth, our EBITDA and margin improved, on a year-on-year basis, to INR 68 crores and [ 10.10% ], respectively. This is primarily the result of a better product mix and operating efficiencies along with initiatives towards optimizing working capital management in alignment with our provided guidance. Our focus in the near-term is to identify and adopt business strategies that will help us navigate the inflationary challenges. We continue to make steady progress towards building a pipeline, both backbone in innovation and customer [ entity ]. Our long-term endeavor is to introduce a wave of smart, connected products that indicate innovation and aesthetics, we're [indiscernible] our customers' lives and living spaces. We remain confident about the prospect of our businesses and its ability to drive growth. I would like to call Mr. Sudhanshu Pokhriyal, to talk you to the bath business. Over to you to Sudhanshu.

Thank you, Naveen. Good afternoon, everyone. In quarter 1 FY '24, our revenues were flattish compared to the corresponding quarter last year. We delivered a revenue performance of [ INR 362 crores ] over last year, quarter 1 of [ INR 364 crores ], and the degrowth of about minus 11% in Q-o-Q terms, quarter-on-quarter terms, and you will see the full year CAGR of 15% over quarter 1 of pre-COVID FY '20. Our [indiscernible] growth is largely because of the base of last year quarter 1, where we had taken an extremely high price increase considering the input situation -- input price situation there at that time. So additionally, the market demand has also been muted in Q1, albeit with a lag, increased input and land prices, along with higher interest rates with significantly increased EMIs has impacted the demand in the building business space. This is also visible in the results of many other listed companies which have declared the results. While the demand in the premium real estate is relatively okay, mid and affordable segment demand has seen larger impact, and which is expected to last for 1 or 2 more quarters. This is also visible in town tier level sales, where we see degrowth in smaller towns. Unpredictable rains and erratic overall weather situation has also impacted consumer demand, especially for renovation. While we're already seeing offshoots of improving demand situation in quarter 2, we expect the demand to revive from quarter 3 onwards. In Q1, we've managed to improve product mix of sales. This, along with lower input prices and a stringent focus on working capital management, enabled us to deliver a strong improvement in bottom line. We've seen a good improvement in our profitability and margins during the quarter. Our EBITDA reached INR 61 crores, marking a 27% increase and translating to an EBITDA margin of [ 16.47% ]. Our EBITDA margins improved 360 basis points year-on-year and experienced a notable improvement sequentially with 140 basis points as well. This improvement is largely going to our efforts for increasing the share of high-margin products. We have also informed the market about our strategy of moving to produce larger more premium sanitaryware products in-house, and I would like to inform the investors that we are on track for the same. The entire exercise will be completed by quarter 3 end. During the quarter, we reduced our working capital by 7 days over [ March '23 ], aligning with our 15-day commitment for the year. Moreover, we plan to direct our capital investments towards creating brand stores for market expansion and efficiency enhancement in existing manufacturing. These initiatives aim to elevate product ASPs and margins. For our bathware business, we have beaten the other listed entities in growth by a large margin and gained significant market share in the last financial year. We are confident of continuing to gain our market share on the back of a well-crafted growth strategy that we've adopted. The first is to continue to launch innovative products across segments and categories. Secondly, we'll continue to build the brand Hindware. Thirdly, to consistently expand our distribution reach as we believe there is significant opportunity in tier 2, tier 3 cities. Our fourth area of emphasis in strengthening premium and luxury category of products. All these efforts are underlined by our strong influencer programs for key stakeholders such as architects and plumbers, amongst the others, and strong [indiscernible] integrated marketing campaigns for all our brands. We continue to retain our guidance of 1.25 to 1.5x mark -- of the market growth rate for our revenue. We've given a guidance in 2021, and we've been achieving our guidance, and we believe we are on track in the mid- to long-term. I would now like to hand over the call to Mr. Rajesh Pajnoo to take you all through Plastic Pipes and Fittings Business. Over to you, Rajesh.

Thank you, Sudhanshu. Good afternoon, everyone, and thank you for joining us for this earnings call. TRUFLO, our brand for plastic pipes and fittings aims to maintain its status as the fastest-growing brand in this sector. In this quarter, the segment reported revenue of INR 156 crores Q1 FY '24. The revenue was impacted primarily due to a sluggish demand mainly coupled with reduced raw material prices. EBITDA reached [ INR 10.4 crores ] with margins at 6.6%. While our volumes experienced an increase of 13% year-on-year during the quarter, lower PVC resin prices pulled down the same in value terms. Our PVC products exhibited improved performance, while CPVC sales saw a marginal dip, contributing around 40% in value terms as compared to 47% last year. In Q1 FY '24, we've connected actively with plumbing consultants, plumbers and organized multiple training sessions for our channel partners and influencers. We intend to maintain these efforts in subsequent quarters to reinforce our presence. Our commitment to expanding our distribution network remains steadfast with our [ 280 ] active distributors and around 25,000 retailers currently in our network. Despite these challenges, we remain committed to our goal of expanding our market share, and we are actively making efforts towards price realization and incentives to drive volume growth. Our unwavering dedication to enhancing brand awareness also remains a top priority as we aim to fortify our position. Our foray into PTMT faucets and other accessories provides customers with a comprehensive solution for all their plumbing needs, and our exclusive collaboration with Reliance Worldwide Corporation, we introduced TRUFLO SharkBite, a revolutionary line of multi-layer composite pipes. These are [indiscernible] certified and hold a European patent for push to connect joining system. In line with our accelerated growth strategy, we continue diversifying into new regions. Our Roorkee greenfield project is on track, with operations expected to commence by [ Q3 ] FY '25. Our performance gives assurance that we are making good progress towards exceeding the sales targets of INR 1,000 crores before the projected FY '25 guidelines. I would like to hand over the call to Mr. Salil Kappoor to take you through Consumer Appliances and Retail Businesses. Over to you, Salil.

Thank you, Rajesh. Good afternoon, everyone, and thank you for joining us for our Q1 FY '24 earnings call. I'm excited to be a part of the Hindware Home Innovation team. I do believe the company has a lot of exciting opportunities, and we are in the process of chartering a strong growth path. Our continuing endeavor will be towards consolidating and enhancing our portfolio with innovative and customer-centric offerings, and supporting these initiatives with effective operations and supply chain and focused sales and marketing. Our quarterly performance is largely effective of the challenges prevailing in the sector at present. Particularly in small towns and rural areas were impacted on the back of inflation concerns. Our kitchen division though demonstrated strength on the back of our technically superior product portfolio and our focused multichannel distribution strategy comprising both online and offline and of exclusive brand shops. For this business, we have both gained market share and improved the margin front. The demand for our cooling products, however, saw a decline due to a delayed monsoon. Increased inventories compared market players to offer discounts in order to stimulate sales. As inflation begins to taper and the festive season commences, we expect the demand environment to strengthen. We will continue to leverage our core strength of innovation and introducing technically superior products. We have now submitted applications for over 33 patents, and we'll continue to build on that. Our unified commerce approach will continue to drive performance across channels, both online and offline. That concludes the opening remarks, and I would like to ask the moderator to open the floor for questions-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of Udit Gajiwala from Yes Securities.

Sir, firstly, on the bathware side, if you see then you stated that the peers have not reported growth, but when we look at your closest listed peer they have reported growth on a Y-o-Y basis, but we have reported a flattish number. Is it because we are losing market share? Or is it because the metro is low versus their concentrated geography?

Yes. So that's a fair question. And what I would like to say is that for the last 2 consecutive financial years, we've beaten the closest competitor in FY '22 by 40% over 20% of their growth, and last year around 29% over 22% of their growth. So for 24 months, we've been gaining share on them. This is the first quarter phenomenon. I gave a number of quarter-on-quarter growth itself. The decline for the closest competitor has been 19% over the previous quarter versus our decline on quarter-on-quarter at minus 11%. So what it clearly indicates is that we had a higher base in quarter 1 of last year. It's a technical point because last year, we had a larger price increase, which gave us some substantial gains in quarter 1 of FY '23. And that's the key reason. I would really urge all the investors to look at market shares and trend on a slightly longer-term basis. And in my view, reacting to on a quarter-on-quarter basis on market share term is, I would say, something which can be avoided.

See, most of our guidance is like we always add a [indiscernible] for guidance that we've been giving. Always say that [indiscernible] on quarter-to-quarter basis. We have a strategy in place, and we are working our part. And if you see last 24 months, we have improved whatever we are doing. So markets at all times are not under our business control like market, some of the quarters, too, have upsides and downsides. So that's the point which we are trying to reiterate here and what Sudhanshu is trying to comment here.

Fair, sir. And sir, secondly, when we say it is 1.25 to 1.5x of market growth. Do you have any, like for pipes, we have a target of INR 1,000 crores. Is there any ballpark number that you all are internally targeting by '25 for the bathware division?

See, we have maintained that we would grow by 1.25 to 1.5x. The growth is because -- and we maintain that and not give a percentage term or an absolute, because we peg ourselves to market growth. Now as we see in this current quarter, the market growth has actually come down quite significantly. So in my view, I think we should stick to the fact that we will beat the market by 1.25 to 1.5x. I dare say the market, which was growing at 15% plus in the previous 2 years, has cooled off, and I believe it will be in mid-single digits. So by that logic, we should be going in teens. But I would still refrain from giving you an exact number.

And sir, coming to the pipe business, have we -- the other peers have reported volume growth in the north of 14, 15x percentage. I understand that we are not a part of [ Jal Jeevan ]not much because we are more towards the plumbing end only. But on volume front, would you like to throw any guidance for '24 and what kind of EBITDA per kg are you expecting for full year?

See, we definitely are into the addressable market of plumbing and not the agricultural side. And since plumbing had a pressure and we still have grown by 12.5% of the volume, wherein the CPVC, there is a decline. And our last year, our percentage of -- which I already said in my opening remarks, percentage to sales was around 47%. The [indiscernible] on plumbing. And we are looking forward -- and also the declining prices of PVC. We have increased our volume by 27% in PVC and declined around 12% in CPVC. But all said and done, we are hopeful that, yes, a lower side of double digits this year, complete year will be having our EBITDA.

EBITDA margin, sir, is that...

Yes.

Okay. Okay. And sir, just last question from my end. So we are seeing a falling prices in CPVC as well. Was there any element of inventory loss this quarter? And is that also a reason where the dealers are not stocking inventory because they are anticipating falling prices?

[indiscernible] that any inventory as far as CPVC is concerned.

Okay. And anything on the PVC market?

PVC is definitely there was a little -- because since we are not now carrying huge inventories in the, say, last 1, 1.5 years, people are not carrying inventories. So there is hardly any impact of their own approach [indiscernible] impact of inventory loss.

The next question is from the line of Harsh from PMS.

Am I audible?

Yes.

Yes, you're audible.

I wanted to understand how are we on our initiative for adding new dealers for pipes? And what is the current revenue per dealer and what is the dealer turnover which we are seeing. Is there any dealer who is leaving Hindware specifically for the pipes division?

Yes. We operate with [ completely ] this business is on a super distributor model. So we operate at the moment with around 280 distributors. And we have increased the distributors to the tune of 30 to 35 distributors in the first quarter. But the growth is not there because of the pressure on the sales. But we have built more people than the last quarter.

Okay. Okay. And are we seeing the revenue -- so the revenue per dealer is flat? And are we seeing any dealers leaving or the net -- this is the net 30, 35 dealers added.

It has come down. In fact, we have built more -- 34 people more in this quarter, but the revenues have come down. There is a pressure on secondaries and the stocking of the product.

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

Sir, firstly, on the plastic pipes division. I just wanted a confirmation. You said the decline in CPVC was 1% and the growth in PVC was 27%, right?

Yes, the growth in volumes of PVC was around 27% and almost around the same degrowth in volumes in CPVC, which are most around [ 12.4% or 12.7% ] of volume growth -- overall volume growth. Because you process more in PVC.

No, you mentioned CPVC decline is how much, sir, sorry?

This outlook is around same decline, 27%.

Okay. Because mathematically, see, that would -- I don't know whether it would work. Because if we have...

If you process -- Nikhil, tonnage wise, you process your PVC.

Okay. Okay. I'll confirm that later. But just coming to the reason because when you say that the housing demand has been weak. But when we see the growth that you have seen in PVC, is it fair to assume that because PVC has become more affordable, we are seeing the consumer switching more to PVC, and hence, we are also seeing this sort of a decline in CPVC?

No, precisely not -- to a certain extent, yes, but the growth in PVC has reported throughout the industry because the Q1 has been too good for agricultural market. So PVC contributes to agricultural market also. But that is not in our addressable segment. So lot of people who we report some growth in there, because Q1 is almost -- for the plumbing sort of a market, it is around -- close to around 17% to 18% of the total revenue as of Q1. But when it comes to the -- we have 2 different segments. When it comes to the agricultural segment, it's almost around 26% to 27% of the whole year. So people who are into -- more into agricultural segment have definitely done well in this Q1.

I'm assuming that we are not selling any agri pipes. So basically for us, it really should not matter, right, whether how the agri demand pans out or does not, especially if our major channel is going to be to housing, right?

Nikhil, we do manufacture agricultural pipes. But what happens is the agricultural pipes are also used in the household applications. They are used in place of when it comes to, it comes to your joining system. There is a pasting type of a joint. So people tend to use agricultural pipes than the [indiscernible] pipes, which makes it a little cheaper. The system gets cheaper. So people have used it. And I think we have sold in that segment. That's why our PVC growth is there.

So in that case, can you share the agri versus housing mix for this particular quarter? And can you share it on a year-over-year basis so we get a better understanding?

So it's a very small component. I think, Nikhil, what Mr. Pajnoo was trying to say is that when you see the results of various competitors, they are showing a PVC growth, and that PVC growth is primarily coming from the agricultural segment rather than the plumbing segment. That's the one which Mr. Pajnoo was trying to go for.

Okay, sir. Fair enough. Sir, just on the margins front for pipes. When we mentioned that we have not seen any major inventory loss. So is it fair to assume that the margin impact that we are seeing is probably because of mix?

See, the margin impact is basically weakened because we are -- the base is very small since we are a very small player. We are just [indiscernible] and we are in [ our fifth ] year of operations. So all our operational costs are there. And the sales was...

Sorry to interrupt, sir. I understand that. I'm just trying to say because fourth quarter as well, we have done close to 10%, 10.5% sort of an EBITDA margin. And barring any inventory impact, because I assume that we would have still been closer to 8.5% or 9% sort of levels. So I think the only reason could be mix, right?

No, it's like Q4 was a very high -- it was the higher sales for the industry does and we have also done. In Q1, we had just seen [ INR 156 crores.]. So those operational things are only overheads, which are fixed costs are there, and then they have impacted a bit.

Okay. Fair enough. And when you're guiding for a full year EBITDA margin of double digit is what I heard, if I heard correctly. So from that perspective, you are expecting this mix that we're seeing in CPVC to improve, right, over the coming 9 months?

Yes, it will improve. It should improve especially in Q3 and Q4. So on a year early basis, we can definitely aim to achieve double-digit EBITDA on lower side.

Got it, sir. And sir, secondly, just coming on the sanitaryware and faucets part of the business. So firstly, just on the margins front, can we give a breakdown between sanitaryware and faucets for this particular quarter versus year-over-year, please?

You want a ratio specifically?

Yes, sir. Yes, ratio, please.

For quarter, in this quarter its [ 35%, 36% ].

And what would the same number be year-over-year, sir, last year, same time?

Almost same number [indiscernible].

Okay. So just on the overall EBITDA margin that we have seen, and we have seen an improvement even on a sequential basis. So is there any sort of benefit in terms of any onetime benefit? Or is it some more product mix benefit, if you can sort of highlight it a bit in detail.

If you recall, Nikhil, like we had a similar discussion while we were on a quarter 3 call or quarter 2 call last year. And at that particular time, there was a steep increase in the input prices, and we have communicated to the market that we are in process of enhancing our selling prices, which has been done. But of late, what has happened is now there is a moderation of the input prices and yes, prices are also coming down. It's the pure impact of that, plus the product mix which is there. We have given a guidance for margin expansion, and we are holding on to that, I think, whatever it is. We've given around 2%-ish, which we said that we should move the expansion of margins in this particular next 12 to 18 months. We are working that path. And the [indiscernible] in the market, especially on the steep increases in [indiscernible] prices has normalized market share on the table. But I think what is impacting is the high inflationary rates, higher interest rates. The EMIs have further their respective consumer classes increase. So there has been some headwind on this business on the building materials business on account of all these factors. We feel that that's a phenomenon, and I think Q3 will be more over when the festival season comes. Like there is always a certain reaction to the market. And then as the festival season comes in, the mindset of the people they've gone into spending more. So it's [indiscernible] fashion. In the history, we have seen a number of quarters happening like this.

And just to add, I think it's not only about what is the faucet contribution or [ managing ] the contribution, it is within the sanitaryware and within the faucetware. That shifted to a more premium. And that's what I mentioned in the -- in my opening address. So within the sanitaryware and within the faucetware, there has actually been a better mix for us. We've been able to procure better. We've been -- input prices have come down. So this is -- that's where the margin is actually.

Yes. I think one point we should highlight -- like to highlight is, I think we have [indiscernible] our media sports, which were done with IPL for [indiscernible].

So I think -- sorry, your voice is not very clear.

Yes. And in Q1, we also had a major event on major sponsorship of IPL, which we had done, which I'm sure most of the investors would have seen. So that also was focusing on the more premium products. So we continue to focus on our premium products, and that's been one of our key strategies in terms of improving our margins.

Sir, then just on the -- just to close out the EBITDA margin part. So do we see this sort of margin that we're seeing run rate improving further because we are also going to add higher margin products in-house? Or do you think this sort of a run rate sustains for FY '24?

So I think this should sustain right now. Then like what we're trying to focus in Q1, there was a media sport, and IPL is an event which happens in Q1. So we expect it in there also. So -- but there are some -- again, on the media sport, there are -- Q2 is a little bit lean, but then Q3, again, even all the festive season comes in and then the media sport will also struck. So there's an opportunity always to spend the margin here, but we are taking an optimal call here. Spending very judiciously on the marketing, supply chain, product. Everywhere there are a number of initiatives which are being done. And on the back of it, we are very confident that, like whatever growth numbers we are talking on a medium to long-term range. And also the margin expansion, which is known, with the guidance we are given, we should be able to do that.

Got it, sir. Just one last question from my side before I join back in the queue. I guess you mentioned that you are targeting a 50 days working capital commitment in the sanitaryware and faucet business. Did I hear it correctly?

15 days not 50 days. 1-5.

15 days. We said we would improve our working capital by 15 days in this year, and we've already done that by 7 days is Q1, is what I mentioned in my opening remarks. .

So that basically goes to 90 days, 90 to 100 days?

Yes. I think -- like we were referring [ 112 days ] for bath business now we are at [ 105 days ].

And which basically means below 100 days, 97, 98 days for the year.

Sir, is it also that we have tightened our working capital cycle? Is EBIT also impacting our growth by any chance?

No, our DSOs are very similar to last year on our receivables. It's our inventory which is actually we have tried to control.

Okay. Go ahead, sir. Sir, coming just on the consumer durables part of the business, and I understand that air cooler sales might have been lost because this being one of the major seasons. Just from the perspective of how we see this business, especially now in '24 as well as in '25. What kind of growth can we target in this business? And is it going to be from the existing products? Or do you think that some new products need to be introduced to basically scale this business up so that our fixed costs also get sort of used up and we get the operating leverage benefits?

So if you look at, we already have 3 strong pillars of growth, the products that we have already invested in past, both on the product portfolio front as well as the distribution front. The first one being called kitchen segment, chimneys and other associated products around it. The second one being water heaters, where we have now a [ JV ] and our own production facility, which will improve not only the cost per se, also on the margin front. And third, of course, the air coolers, where we have a very strong digital presence and we have both -- a lot large share -- large chunk of the online sales. Now we will go further deep into these categories and build on that going forward. There are other segments also which are available. We have quite a few of them. We might want to [ revisit ] those and look at certain categories like air purifiers and heat convectors and others, which are highly seasonal and the sellout [indiscernible] is too brief. So those, we might want to revisit. But we'll certainly go deep and build up further on the 3 large growth pillars that we have invested in already.

Understood. Sir, any guidance for '24, '25 that you would want to give at this point of time so that we'll get some clarity how to evaluate?

I think I will take about the quarter before I can give some guidance, and I will also get some more time to look at the opportunities that we can unlock. So let's wait for 1 or 2 quarters before we can actually come down on exactly the numbers and on the projections.

Sure, sir. And sir, just one last part from my end. If you could highlight our debt reduction plans, I think we were mentioning somewhere around INR 100 crores FY '24. And if you can also give some numbers for '25 as well, how do we see the net debt numbers going? Because we're still seeing an increase in the net debt levels if we see from a quarter-on-quarter basis?

So Nikhil, we had stated that with the given CapEx of all -- ranging from [ INR 140 crores to INR 150 crores ] in this financial year, we should be able to clear up our debt by around INR 100 crores. Next year, we had some spending again on the pipes plant, which is set up at Roorkee, so that plant cost is INR 180 crores, we should expect INR 60 crores, INR 70 crores on the project investment next year. So we'll take another figure of another INR 100 crores repayment next year. But we are very [indiscernible] on our businesses like by business. So we see that there's a good potential in this business. That's why we want to do this project much faster now actually.

So is it fair to assume that our net debt still would be in the range of INR 650 crores to INR 700-odd crores by FY '25 as well?

How much you have on -- how much is the figure you have on '23?

'23 was, I think, somewhere around INR 720 crores, if I'm not wrong.

So INR 720 million minus INR 100 million, another minus [ INR 100 crores ].

But we've also doing the CapEx, so that was the reason I was asking.

But we're earning profits also now.

So then basically, we just have to say that INR 200 crores reduction would happen in the net debt?

Exactly. Yes. That's the plan actually as on...

The next question is from the line of [ Yash from Steinberg ].

And I have one broad question, one more specific question. On the broader question, since Hindware is obviously operating in the whole real estate space, the real estate market actually is doing quite well, at least as per my channel check. So why is it that our revenue growth has been sluggish in an environment where, let's say, the industry growth has been pretty strong?

Yes. So as I mentioned in my opening address, the real estate market is recently growing very well, relatively well in the premium segment. However, mid and affordable segments are basically under stress. And if you want, I can quote some numbers, the affordable part of the segment actually degrew by 21% in the last 6 months as per reported numbers. While mid segment, I don't have exact numbers for that. Affordable is defined as a segment because government decides the selling price of the affordable segment. It's a very well defined segment. So that new launch has degrew by about 21-odd percent. So what we're saying is real estate market is actually seeing actions only in the premium segment in the metros and but not at an overall level. So that's what our position is.

Understood. And one question on the margin side, where -- let's say, after the Q4 results, there was a guidance of about low teens margin for the full year. I want to understand, let's say, it's been about a year since we have taken the manufacturing in-house, where initially, the margins didn't reflect because raw material prices were high. In this quarter, we've seen the raw material prices compressed quite significantly with most of percentage points, in fact, improvement quarter-on-quarter. What -- I'm just surprised where is the balance margin going? And in terms of ideally, the thought process was that on the year before -- let's say, there was -- before the manufacturing was in, we were at the 8%, 9% margin range. The thought process was that when manufacturing would come in, we will see about a 400 bps improvement in that margin. It just seems that, that has not played out in the current quarter despite the improvement in raw material prices.

You see -- how much is the number you have for bathware business of Q4 FY '23?

Q4 FY '23, I have 15.3% EBITDA margin.

Sorry, my apologies, FY '22.

FY '22, I have about 11.5%.

16.7%.

Okay. Correct.

So mathematics which you have to do is -- basically, what you have to see here is where we gave a guidance whatever -- like if you see till 31st March 2022, we were buying from our other group company on cost-plus basis. In those periods, we were buying at an EBIT margin mark of -- our bathware business around 4.5% EBIT margin level. So whatever the cost was being incurred there, 4.5% at EBIT level cost was being passed off. Now since there is no factory there, there is no cost other than the rentals, which are there for the factory. Because there are 2 parcels of land and building, which we did not book because of the higher -- very high cycle rates and higher annuity impact. So rest the entire margin is already happening into the business. So your apprehension where the margins are going, is margins can't go anywhere, there's no other factory now other than Hindware.

Understood. Understood. No, I'm saying that it could also because of negative operating -- like adverse operating leverage. The idea was to understand that you've seen 5 quarters of the transition play out. So...

It has not been a natural quarter because if you see -- if you just benchmark the input prices over the last 24 months, you will have all those answers with you. From [ INR 30 to INR 60 ], right now at 40 -- INR 40, INR 45 import in prices, [indiscernible] prices, everything moved up. And on the CPVC prices, again, it had a big swing on either side. So the point, I think, which I've been trying to reiterate is that we bought those factories. Now it's a consolidated operation, a focus company. So there are no other substantial related party transactions as it was happening before. Whatever the factory margins was there, they are now being a part of Hindware only. It's not that we have started producing inefficiently, no. It is producing very efficiently. So whatever the margins are there, there's a combo of -- it's not an [ effort ] that we compare right now. That's why it's difficult to maintain. .

So would it be fair to say that this margin -- let's say, suppression of margins, at some level is partly because of the fact that 2, 3 businesses are operating at suboptimal margins. which is the pipes and consumer business at this point, and even the retail business? .

So pipes I will not say is suboptimal because, to be very frank, we just won't make any commitment on the guidance on the quarter because it will see persistently of like when we did our results last year, last we have been disclosing how much is our inventory loss. If you add the inventory losses, which the entire industry suffered actually [indiscernible] certain prices moved from [ INR 160 ] to almost [ INR 75, INR 80 ]. So whatever the inventory loss annuity is holding in this industry, the entire pass-on is passed on to consumer. So if you add, you will see that there is a consistency in the margin which is happening. We are making a consistent gross margin in the business. We are making -- but this again, a mathematical trick in a sense, like sometimes the month -- the rate goes up, sometimes some other factors are playing. But what you have to see from the perspective of the gross margin, we have been able to maintain our gross margins in our business. In fact, we have been expanding that over a few years.

Understood. And sir, given that there is -- given that all the segments are operating at different numbers. And as you also mentioned, what's happening is the multiple moving parts are not resulting into, let's say, the current reported margin being similar to what it was earlier. I just thought it would it be possible for you, sir, so to kind of give, let's say, on a steady-state basis, assuming normalization, what could be the kind of segmental margins that we should expect? And if that's possible, sir, that was very helpful.

I think we can look at it, but I don't confirm right now. Because then we have to create a segmental margin correlation over the last so many years. And the market has been volatile. We had COVID events in between. So we'll try to do that. It's a good question. We'll try to work on it.

Understood. And sir, one question. The 16.7% margin that you mentioned, is that after allocation of corporate costs or before allocation of corporate costs, right?

Yes, yes, yes.

Sorry to kind of just double-click on this. But essentially, historically, we've -- in the previous upstart, which is the HSIL and for 5, 6, 7 years, we actually did more than 20% margins or near about 20% EBITDA margins in this segment. So do we see our margins for the bathware segment, which is basically ex pipes and fittings, going to 20% plus?

So I think if you see in the history, we have been doing ranging 19% to 21% margins on sanitaryware. But predominantly, during that time, we were primarily the sanitaryware business. Our faucet business was during that time was ranging INR 200 crores, INR 250 crores. But the sort of margins, percentage margins, which we have in sanitaryware are still high. But what happens is as the faucet business is also growing, it just average out. To be very clear, we don't make [ 20% ] plus EBITDA margin on faucet business. So it's a mix of the bucket. So as the business is -- as the growth on the faucet side and the market size is much bigger. As the growth of the faucet increases, absolute EBITDA will increase, but the percentage margin is decreased because the input factor in sanitaryware is at play, but in a sector in faucets is [indiscernible]. So you have a numerator and a denominator effect coming on there.

Understood. Understood. And sir, if -- with your permission, I'd just like to ask one more question. On the retail business, so what is the thought process here? Because it doesn't fit perfectly within our scheme of things. So just thought maybe I could ask you about that.

So we have spoken about this business. As on date, the status remains the same. We are looking at various alternates, what should we do with this business. Definitely, I understand what your question is. We are -- I can only sum up saying we are evaluating various options of this business right now.

Yash, may I request you join the queue for any follow-ups as there are several participants waiting for their turn. [Operator Instructions] The next question is from the line of Abhishek Ghosh from DSP.

I have 3 questions. If you -- in your bathware business update, your net working capital days has come down by about 7%, which I think Sudhanshu also mentioned in the call. But your net borrowing has increased. So has it -- is it on account of higher CapEx? Or what is it that related to?

The -- Abhishek, Naveen this side. We have [indiscernible] Hindware given the dividend to the Hindware Home Innovation. So that is why this it's around INR 29 crores.

So that was last year -- I think last week of June.

Sorry. Could you repeat that again, sir?

So basically, we compare the borrowings as on 31st March 2023, versus 30th of June. So there was a dividend of [ INR 29, 30 crores ], which has been paid by Hindware to the parent company. As a result of which, one time the borrowing increases as such.

So it should not impact consol level debt -- from net debt from that perspective?

Yes, technically so because the money will move from [indiscernible].

So on a bathware segment basis, the debt has gone up, but on a consol level, the debt should have come down because the working capital has also come down and plus. So how should we look at it in that light?

Yes. Mathematically, yes.

So on a consol level, has the net debt remained stable Q-on-Q?

It has come down from INR 113 crores for the consumer business to INR 95 crores by [indiscernible] by around [ INR 18 crores ].

Sorry, your voice is not very clear, sir.

For the consumer business, if you see the Slide 25 of our presentation, so it has reduced from INR 113 crores to INR 95 crores.

Okay. Okay. And the same thing is with -- if you look at the pipe division as well, Rajesh, we have seen a good working capital reduction in 4Q. Again, the net working capital days has increased. Any thoughts on the same? And what is a stable net working capital days that one should probably look at?

Sorry, Abhishek, we would request you to please remain connected. It seems we have lost line for the management.

Sure.

Okay. This is the operator. We have the management line reconnected. Sir, over to you, Abhishek may I request you to repeat the question, please.

So in the plastic pipe division, we have seen a net working capital seeing an increase on a Q-on-Q basis from about 62 to 92 days. So what's the stable net working capital days that one should work with in the pipes part of the business?

So number of days -- net working capital on number of days should be ranging around 80 to 90, [ 75 to 85 days ] .

Sir, should -- in between 80 and 90, is it?

Yes.

So last quarter was an aberration.

Yes, because it's very difficult. When the sales are down, everything goes for a spin.

Fair. Fair. Okay. And just in terms of your retail business, you have seen about a INR 3 crores, INR 3.5 crores kind of EBIT loss in the current quarter. Any thoughts because that's a segment that was barely breaking even. So any thoughts in terms of going forward while you've spoken about briefly in terms of evaluating the business. But in terms of losses, is there any exercise being done to kind of control the losses there?

If you see, like I talk about the strength of the businesses, like this business used to do INR 100 crores odd business while within the retail model. A very good brand -- EVOK brand. The recall of people on the EVOK brand is very high because we had a familiar presence. Now the business models over the last 4, 5 years have changed. A lot of searches are happening on online portals. And again, the competition there is also being increased every day. Like we had dedicated online furniture businesses. They are going from online to off-line. Then there are other Amazons and others who are also selling furniture. So in the interim, we shut down -- around 3 years back, we shut down our retail business and we moved on to the primarily franchise business, plus the online business which is there. So we are evaluating what we can do with this business. We understand this is not the core business on which we should attack. But we have to understand and evaluate various options before we take a decision. I think another 3 to 6 months, we may do something with it.

[Operator Instructions] The next question is from the line of Darshil Jhaveri from Crown Capital.

So from what I understand, maybe our major segment, some pressure in the next 1, 2 quarters. But we might see trend coming back. So overall, on a broad basis, in maybe FY '25, could we achieve better growth? And when can we see our consolidated margins maybe going to 11%, 12%? And I also just wanted to ask about the level of tax that we had this quarter was a bit higher. So could really help some reconciliation on that.

So your voice was not clear to us. I think the question which you had was...

Hello, hello? Sorry. Am I audible, sir?

You are audible. But your voice. I think you're holding your microphone too near to your mouth.

Sorry, sir. Is this better, sir?

Now it is much better. So I think what I could understand is one question is on the margin expansion and second is on the tax, right?

Yes. Correct, sir.

So I'll request Sudhanshu will talk broadly on the margins, what -- number of initiatives which we are doing internally on the product mix, putting material side. And on the tech side, I think I don't know whether you read the note to the accounts 2B and 2A. So there was a dividend, as told, being paid by Hindware to the parent company. And as a part of the consolidation, what happens is the dividend gets knocked off because it's the relationship between the parent and the subsidiary. But the tax on the dividend is provided. So what happens is on a stand-alone basis, you will find the rationality of this now for the tax rate. But on a consolidated basis, you will not see that rationality because dividend gets knocked off amongst the parent and the subsidiary. In terms of margin, Sudhanshu can talk about a few initiatives, which we can talk.

Yes. So margin, I think like -- I think I mentioned in the previous question as well. One of the key initiatives that we're doing is, which we talked in the last investor call as well, is that we are planning to reduce our import dependence and increase domestic procurement of both our sanitaryware and [indiscernible] largely sanitaryware. And we are well on course for this transition. There is a transition which is happening in our manufacturing plant, which I mentioned in my opening remarks, is going to be concluded by end of Q3. We've also developed extremely strong suppliers within domestic markets. So we believe from a number of about 17% -- say 16%, 17% of import dependence on FY '23, FY '25 should be in low single-digit number in terms of percentage point of view. And that will be a massive impact on our profitability. I can't really give you a number here, but that's -- these are all initiatives will add on to the committed numbers in terms of margin expansion. Additionally, like I said, a lot on premium products, depending on [indiscernible] and basically [indiscernible] is now converting to one and [indiscernible]. And clearly, for example, in faucets to premium [ divert ] the base of the faucet product. So that's something which is expanding and definitely will give us margin expansion. We are also working a lot in terms of in terms of reducing our cost. There are lots of DTV, design-to-value initiatives which are happening in this organization in terms of light-weighting of products, in terms of looking at reengineering the products to make sure that the products are basically satisfying the needs of the consumer and not overdesigned. And then that really adds a lot of value in terms of expansion margins. So all these things, which is really helping us in terms of increasing our margins and overall level to be delivered.

Mr. Jhaveri, I request you join the queue for any follow-ups. The next question is from the line of Abhishek Ghosh from DSP.

A couple of questions. One is on the Bathware side of the business. Has there been any price hikes, which has been taken in first half and outlook for the second half?

So we have not taken any price hike in quarter 1 and even not yet in quarter 2 as well. So no price hikes. And as we discussed, the input prices have stabilized for most of the product categories. So at this point in time, I don't see any price hikes happening within the business in the second half of the year as well.

Okay. And sir, in terms of raw material index, is it kind of stable now? Or is it still kind of declining?

I would say it's pretty stable. I would move it with the government. I think they have kind of actually increased the inflation forecast for the year from [ 5.1% to 5.4% ] I would say even material indexes at this point is stable, I don't see further declines happening. I can say that about bathware part of the business. For the pipes business, I would request, Mr. Sudhanshu...

Sir, I was -- sir, my concern was more around the bathware only on the raw material...

I do not see too much of drastic reduction. Of course, they can be natural variation which happens in commodity pricing. But I don't see any drastic change in pricing happening at this point in time.

And the benefits of lower fuel prices has already flown through the P&L?

It is a -- at some point, yes, it is definitely flowing into our P&L. That what we have....

Inventory, which was made in the high-cost materials, we [indiscernible] it gets sold. So it's a process over a period of time. But the first sort of in terms of margin expansion are already visible there. .

Okay. Just on the pipes part of it since you have a large exposure of CPVC with respect to peers, any thoughts in terms of growth from here on? Because there's a lot of growth which are coming in from agri and other things. So in that context, how should we look at your growth for next 12 to 15 months? And what are the peak volumes that you can do over the next 12 to 24 months given your capacity?

See, this is probably, I think, after 13 quarters that we have been giving growth over growth from the time we launched. Now it is for the first time, and we are also seeing a decline in CPVC last 3 years probably, after 3 years. So we don't see any reason that it should not grow. But maybe timely, there is all around the world the demand for the housing has come down a little bit and because of all this China effect. But we definitely see from Q3 onwards, there will be a growth in this segment. And we stick to our aspiration of INR 1,000 crores FY '25.

Okay. And in terms of your -- given wherever your capacities, what is the peak volumes that you can do in over the next 12 to 15 months?

So we have a capacity of 44,000 metric tons as of today, which we are scaling up slowly. Last year, we had a capacity utilization of highest in the whole industry. We almost utilized -- we had a 90% capacity utilization. This year, it's almost around -- because the average is 65% to 70%, we are at around 78% of capacity utilization.

You mentioned your current capacity is 44,000 tons, right?

48,000 metric tons.

48,000. And what should it look like over the next 12 to 15 months?

We have additional interest. In around 18 months, we should get another [ 12,000, 12,500 tons ] of Roorkee investment capacity, which we can further scale down in another 12 months to -- whenever is required, whenever the Board approves it, to [ 25,000 ] installing additional machineries. So [indiscernible] building and infrastructure is being created actually for [indiscernible], but the machines will come in peak.

But the work for the Roorkee plant has already started.

Yes, yes, yes.

Okay. So within 18 months, we should see that. Okay. Got it.

[Operator Instructions] The next question is from the line of Chandresh Malpani from Niveshaay Investment Advisors.

Yes. So my question is on the PVC pipes. So if you can brief me about the -- like what ideal would be the volume mix on yearly basis, between CPVC and PVC? What are we targeting?

See, our product mix as of -- as I said earlier in my remarks and in another questions also, we are basically a plumbing category company. So our model was like right from the day 1 to gain a market share in CPVC, which we did till last year. We had in our product mix, we had around 47% of CPVC share. But unfortunately, in Q1, because of this sizing and the housing demand, this has come down to around [ 40% ]. What we have sold in Q1, 40% contributes to CPVC. So we aim that the day we are at 50% of the market -- total market of our product market, then we are among the top -- we're in CPVC. That is what is our aim, and we presume that from third and fourth quarter, we should have that.

Okay, okay. And sir, secondly, on the advertising and promotion expense, what is the budgeted number for this year, sir, if you can...

Your voice is not clear. Please hold the mic a little bit away from your mouth, please.

Hello? Now it's better?

I request you use the handset, please, yes.

Yes. So my question is on the advertising and promotional expense. What is the budgeted number for this year? .

Which business you are talking about?

On Consumer if you call -- like mostly on sanitaryware or bath, Building Products business?

On a consol annual basis, please remember this is for annual basis, we try to allocate on a consolidated basis around 3.5%, 4% of our sales towards building the brand. But this will include many activities like Sudhanshu spoke about IPL. So IPL happens only and it's a big [ cluster ] of media expansion opportunity. So that we'll do in Q1. But then we will see Q2 maybe little bit lean but then Q3, again picking up. So but I'm giving you a figure on the annualized -- annual business, which is around 3.5%, 4% funds allocated for the marketing activities.

Mr. Malka, request to join the queue for any follow-ups. The next question is from the line of Udit Gajiwala from Yes Securities.

Yes. Are there any capacity expansions that we are taking place for sanitary faucet? You mentioned multiple times, we are doing some improvement for the sanitary thing. So how much should that boost the capacity? And second, what was the outsourced mix for sanitary faucet for the quarter?

We couldn't understand your first question. Your voice is not clear. [indiscernible] the second question. What is the first question?

Are we doing any capacity expansion in our sanitary and faucet segment?

No, we are not doing sanitary expansion in this. But Sudhanshu, if you go for the transcript of the last call, we had given a complete guidance that we are moving single pieces inside the factory and moving the low-end product outside. That's a part of the strategy, which we are doing step by step. And on this, Mr. Sudhanshu has already given guidance, that this should be complete by the end of the quarter 3 of this financial year. Second question was on the mix of outsourced to...

I'm sorry, sir, I missed your voice.

It's about 70% in-source for sanitaryware and about 45%, 46% in-source of faucet.

The next question is from the line of Rusmik Oza from 9 Rays EquiResearch.

Sir, I have some observations and some suggestion. Since our business is become very asset heavy, we -- and I know that the promoters own [ 51% ] of the company, still at today's market cap of INR 4,000 crores, if you can dilute 10% equity, we can raise INR 400 crores and straight repay debt. So even if you consider post-tax, it could almost -- even if you take 10% dilution, it could almost enhance your repays by 40% or so. So I just wanted to bring this to the management if it's worth your time. Because this will improve your debt equity also and it could lead to a lot of accretion to the shareholder value also going forward.

Basically, if you see -- like I take your question, I appreciate your question. But on the financial part, each company -- each growing company should be optimally leveraged. The debt on the whole level and with much bigger growth path, we feel that we are optimally leveraged right now. And we may look at diluting equity at the right stage at the right time. But I think proposing to the Board of Directors and raise equity to pay off 8% debt, I think the cost of equity is much higher as compared to the cost of debt. Plus post-tax cost if you see, we have 25% tax-paying company. So if you're getting funds at 6% and the post-debt equity cost are below market expectation, which you -- each one of you would like to have. So I think we'll work on the rationality of our optimal working -- optimal debt other than having a debt [indiscernible]. We have also spoken about this in the last call. I would request that if you can refer there also.

The next question is from the line of Vaidik from Monarch Networth.

My question would be, can you give us an outlook on the future growth performance for next 2 years on a blended basis? Currently, we saw a decline in the quarter, but as we believe that from Q3 onwards, the demand should revive back. So on a blended basis, what kind of growth you're expecting for the current year and for the next year?

So we will hold on to our guidance like which we gave on our bathware business and the pipes business way back 2 years, and we have been holding on and we have performed as per those guidance. We are internally not [indiscernible] down by a quarter of performance. We are working a part, and we are working with strategy. We are still holding on to that. So only leeway is that we have given a guidance on the consumer business, which we feel that we may miss it by 12 to 18 months, and that guidance was on a consumer business will be INR 1,000 crores, 1,100 crores plus by 2025. But based on our performance over the last 12 to 18 months with the market conditions here, then, on that particular business, on the consumer side, we feel that we may miss it by 12 to 18 months but rest of the guidances are intact. So if you see our performance, we gave guidance on margin expansion on the bathware, which is very visible by businesses. Ultimately, if you've seen the last 4 years has been growing. That has been the real gem of an investment which the company has done in terms of building the growth into the company. By spending about INR 300 crores, we have generated around INR 800 crores of sales, which create a lot of intrinsic value. Similarly, on our consumer business, we have been talking about a very tough business. But we have been very successful 3-pillar story, which Salil has already spoken about, that we have made distinctions in our business on kitchen chimneys, hoods and all. And secondly, also market -- I'm not saying market is in very strong position, but a high growth position, both on the water heating segment as well as air cooler segment. So there is a good amount of growth story, which we are there, and we are really hungry for all the growth, which is there. And we'll continue to invest our time energy, resources in building a very strong business over a period of time.

Okay, sir. And sir, my final question would be for Salil, sir. What steps are we looking at? And what would be the key for this area for the company?

Sorry, I couldn't understand your question. What checks...

What steps are you looking at? And what would be the key focus area for you?

So basically, I just spoke about it. Each of the business is a special focus area for us. It's not that we are looking at one business and one company. So we have 3 core businesses which is our bathware business, pipes business as well as our consumer business. Each one has a dedicated lead which is run by very experienced CEOs and we are here to grow in each one of them. We have given those guidance historically a number of times, and we are walking that path and we'll -- we are very, very sure based on the current market conditions that we'll achieve those targets within that time. Other than the consumer, which you know I've [ already spoken ].

The next question is from the line of Chirag Fialoke from RatnaTraya Capital.

My first question is could you just guide us to what is the gross and net...

May I request for you use the handset, please? Your voice is slightly muffled.

I hope this is better. Sorry, my first question is just could you guide us on the gross and the net debt number for the quarter? What was the number for this quarter?

For the June -- on a consolidated basis, it is INR 843 crores. [indiscernible] INR 790 crores.

INR 790 crores on -- this is net debt.

Yes.

Understood. Just another question, just a minor bookkeeping question on the segmental information that is available on Slide 25 for the Consumer Appliances business. Broadly, the Consumer Appliances business seems like it's paying around INR 4 crores, INR 4.5 crores of interest. That's the difference between EBIT and PBT that's reported per quarter on a debt net borrowing of around INR 100 crores average and INR 110 crores, which seems like more than 12%, 13%. Is that right? Or is that just some accounting that is happening here?

So there are some accounting matters into this. So basically in consumer business, since we don't own any factories, we don't have any warehouses of our own, and all of them are outsourced. So all the warehouse rentals is a contract of a long-term nature. So the entire rental as per the accounting standard gets allocated to depreciation and interest, which increased...

Understood. That is the right sort of -- is that the accounting that is happening there, this liability accounting that is making...

Yes.

Understood. That's helpful. My only other question is from the Consumer Appliances business, and you partially answered that to one of the earlier participants. If you broadly look at last 6, 7 quarters, right, I understand that the INR 1,000 crore guidance you might miss. But even just nominally, it looks like we are in the INR 120 crores, INR 130 crores range for the last 6, 7 quarters, maybe even if you go beyond. Even if you go to December 2020, without water heaters, you were probably at that same number. Just wanted a little bit more color. Is this something where sort of you guys feel that this has hit a little bit of a ceiling and a couple of new products will take us to the next notch? Or is it something that you're not worried about? Just wanted color on that. Last 6, 7 quarters have been around INR 120 crores, INR 130-odd crores.

To answer your question very candidly, like this was a new business which we launched on 7 years back. We had a full [ plethora ] of product portfolio. But what we have seen operate is that out of the whole gamut of the product portfolio, a few of the product portfolio needs some rationalization and some review. Basis that we are looking at a newer focus, wherein the potential is good, the brand acceptance is very high. We have worked on innovation and technology, and we have spoken about it, you can visit our website. We are the leaders in creating one of the few smart appliances for the first time in India. Only thing is, here, we spend it the canvas. We have to shrink the canvas and that should lead to a much higher growth. That should lead to a much higher focused growth in terms of the segments which we have spoken about, which is kitchen, chimneys, hoods [indiscernible], and also our water heaters as well as the air coolers.

Understood. And do you expect to do that rationalization over the next couple of quarters. Is that correct?

Yes, Salil spoke about it, and he has requested the market to give him some time to get back, because he has just joined now 30 days back.

Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for their closing comments. Thank you, and over to you.

Thanks, everybody, for joining on the call today. I know a few of you would not have liked the numbers which had come on the quarter. But I think, again, my request is all -- we are working the part, we are working the strategy. And we are confident that the momentum which we have built on a medium to long-term range, we should be able to carry on that momentum as per the plan. Thank you very much. If you have any further questions, we are always happy to answer your questions. Thank you.

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