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

Ladies and gentlemen, good day, and welcome to the Hindware Home Innovation Limited Q4 FY '25 Earnings Conference Call, hosted by Arihant Capital Markets Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Osthwal from Arihant Capital Markets Limited. Thank you, and over to you, sir.

Good evening, and welcome, everyone. On behalf of Arihant Capital Markets Limited, we welcome you to Hindware Home Innovation Limited Quarter 4 and FY '25 Earnings Conference Call. From the management side, we have Mr. Nirupam Sahay, CEO of Bath Business; Mr. Rajesh Pajnoo, CEO of Pipe Business; Mr. Naveen Malik, CEO and CFO of Hindware Home Innovation Limited; and Mr. Sandeep Sikka, the Group CFO. Kindly note that some of the remarks or observations made during today's call might be forward-looking such as financial projection or statement regarding company's 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. With that, I would now like to hand over the call to management for their opening remarks, post which we will open the question-and-answer session. Thank you, and over to you, Mr. Malik.

Good evening. Naveen Malik this side. Welcome to Hindware Home Innovation Limited FY '25 and Q4 FY '25 Earnings Call. Kindly note that some remarks and observations made during today's call might be forward-looking. These may include, but are not limited to, financial projections and statements regarding company's plans, objectives, expectations or intentions. The company does not have any obligation to revise these forward-looking statements to reflect any future events or developments. For a comprehensive disclaimer, please refer to Slide #2 of the results presentation. I will start with a brief summary of our performance for the FY '25. Our business CEOs will then share updates on the respective segments. For quarter 4 FY '25, the company reported consolidated revenue of INR 699 crores with an EBITDA of INR 51 crores. And for FY '25, consolidated revenue was INR 2,523 crores with the EBITDA at INR 184 crores. We are undertaking strategic initiatives across Bathware, Pipe and Consumer Appliances businesses. Key priorities include optimizing product portfolio for high-growth premium segments, expanding market reach and focusing on top key cities, fostering innovation, strengthening brand loyalty and enhancing operational efficiency. I would now like to turn it over to Mr. Nirupam Sahay to take you through the Bathware and Consumer Appliance business. Over to you, Nirupam.

Thank you, Naveen, and good evening, everyone. For quarter 4 FY '25, the Bathware business reported INR 360 crores revenue and INR 37 crores EBITDA. For FY '25, revenue was INR 1,384 crores, and EBITDA was INR 147 crores. Despite the challenges in FY '25, our robust foundation provides a significant advantage to us. Hindware's leading brand position, characterized by high brand awareness and strong recall, remains a key asset for future growth. The past year has been a period for profound strategic introspection for our business, during which we rigorously identified critical areas to not only recapture market share, but also to significantly bolster overall profitability. This deep dive immediately propelled us into decisive action across our businesses and operations. We have implemented comprehensive cost optimization by rationalization of our employee cost structures, strategically focusing our efforts on top-tier cities, streamlining our supply chain and fundamentally strengthening our aftersales service. Concurrently, we've reinforced our go-to-market, our quality control measures and achieved tighter inventory control by prioritizing domestic sourcing. Our forward-looking strategy centers on premiumization, a weighted dealer approach and strengthening distribution in top cities. Our sales force is actively driving demand through architect engagements, contractor collaborations, lumber connect and strategic project partnerships. These concerted efforts are already proving instrumental, and we are now observing early promising offshoots of growth within our Bathware and Consumer business segments. Despite challenges, our robust foundation and leading brand position remain pivotal assets for us. We anticipate a positive impact on performance within 2 to 3 quarters, and we are confident in recovery of significant market share so that we achieve numbers higher than our past performance of FY '24 to start with. Moving to our consumer business. We reported revenue of INR 92 crores for the quarter with an EBITDA loss of INR 7 crores. For FY '25, revenue stood at INR 352 crores with an EBITDA loss of INR 17 crores. We have taken decisive steps in the Consumer Appliances business to cut losses driven by a thorough product portfolio rationalization and driving operational cost efficiencies. We have rationalized our offerings, prioritizing high-demand all-season kitchen appliances like chimneys, cooktops, hobs and sinks and accordingly optimized our resources to strengthen our business returns. I'd like to reiterate that with all the efforts and investments made over the last few years, our kitchen appliances, chimneys, hobs and cooktops business has made significant strides in terms of sales and market share. And going forward, we'll put all our energies in driving strong profitable growth in this segment. To maximize impact, we are concentrating our efforts on top-tier cities, efficiently targeting key demographics and bolstering our brand presence. Additionally, we are sharpening our focus on institutional sales and streamlining our e-commerce portfolio, ensuring a lean, effective approach to drive accelerated growth. I'd now like to hand it over to Mr. Rajesh Pajnoo to take you through the Pipes and Fittings business. Over to you, Rajesh.

Thank you, Nirupam. This is Rajesh Pajnoo from Pipes Business. Good evening, everyone, and welcome to our investor call. It's a pleasure always to speak with you all. In quarter 4 FY '25, we reported a revenue of INR 247 crores and EBITDA of INR 24 crores. For FY '25 complete year, revenue was INR 786 crores, and EBITDA was INR 61 crores. Despite challenging market conditions and volatile raw material prices impacting revenue growth, we achieved strong 12% year-over-year volume growth in FY '25, demonstrating the effectiveness of our strategies and the strength of our operations. CPVC remains a key contributor, representing 39% of the revenue during the financial year, highlighting the continued strength of this product line. Our new plant in Roorkee, Uttarakhand is nearing completion and will soon commence production, significantly boosting our manufacturing capability and establishing a key footprint in Northern India. We are also actively expanding our product portfolio to capture new market opportunity and enhance overall value. We have successfully launched the new offerings, including foam core pipes for underground drainage very recently and the products which are lined up for this year are Double Wall Corrugated pipes, polypropylene random copolymers. We have fire sprinkler system, and we have PTMT faucets. We also are focused on implementing initiatives across all business functions to optimize resource allocation, leverage technology and enhance productivity and cost effectiveness. Finally, we have made strategic investment in our brand and distribution channels to significantly boost our market presence and penetration. We are confident that these initiatives will drive substantial profitable growth. We are now ready to open the floor for your questions.

[Operator Instructions] The first question is from the line of Rohit Prakash from Marshmallow Capital.

So my -- I have 2, 3 questions. And my first question is on the long-term strategy -- long-term trend that I see in the business. So if I go back to late 2000s, around 2006, 2007, Parryware and Cera together barely formed Hindustan Sanitaryware or Hindware sales. So I mean Hindware sales was equal to the sum of Parryware and Cera. Now it's not a short-term trend, but over the -- if you see over the last couple of decades, what's happened is each of them are either equal or larger than us individually and Jaquar also, which is larger than us. So over -- I mean, the long-term trend seems to be that we are losing mind share in the customers' mind and because of the losing market share as well. So just wanted to hear your comments on that. I mean, how do we plan to restore Hindware to the old dominance that we had?

So I'll take that. Nirupam Sahay here. So I think there are a few things which I mentioned in my opening remarks, and I'll elaborate a little on that. I think what we are focusing on is over the next few years, clearly driving growth ahead of the market, basically meaning that we gain market share year-on-year. So how do we plan to do that? The first is really our go-to-market strategy. So I mentioned that we are really doubling down on distribution, really focusing on making sure that we have strong distributors across the country. So wherever we have relatively weak distributors, we are strengthening the distribution in those places. We are also going in for a weighted dealer strategy. We've already kicked that off, which means that we're focusing on the weighted dealers or the larger dealers in each one of the key markets. We are also driving a strategy on products of clearly distinguishing between our mass, mass premium and premium products. So between Hindware, Hindware Italian Collection and Queo, which are our 3 brands for mass, mass premium and premium, clear delineation between the brands and making sure that we have robust product portfolios for each one of those segments. What we are also doing, and this has already kicked off starting from Q4 of FY '25 and has accelerated in Q1 of this year, is focusing the sales team on demand generation. So not only getting in sales, but also generating demand, whether it's through architects, whether it's through plumbers, whether through contractors. So really making sure that our sales force spends about 40%, 50% of their time on demand generation. So through a combined impact of the go-to-market changes we're making, the product portfolio changes that we're making, the way of working of our sales team in terms of more focus on demand generation, we are extremely confident that we will get back to good growth in this business and a significant growth above the market growth rate, which means that we then gain market share year-on-year. A lot of our internal processes are now geared to driving this growth. So whether it's incentives for the trade or its incentives for the sales force, they're all now focused on driving growth. So I think with the combination of all these factors, we're extremely confident. We're already starting to see the impact of it. And as we had said in the opening remarks, over the next 2, 3 quarters, we will definitely see the impact of all these actions in terms of good positive growth ahead of the market.

Mr. Sahay, there's hopes on you because -- I mean it was interesting to see some of your interviews from when you worked on Philips and how in a declining revenue business, you improved margins. So we hope to see the growth and margins coming back here. See, my second question is, if I see the last decade in Hindware, right, we've had a lot of internal structurings, like we have had 3 corporate restructurings, one demerger, one sale of assets and then another demerger that we are going through right now. On top of that, we have had other organizational restructurings also. So we combined the faucetware and the sanitaryware sales force. We combined the support system of both the Consumer Appliance and the Bathware business. Now we are separating these businesses. Now I mean, at least, it's a very small sample set, but I mean, it seems like there's a lot of confusion within the ranks on what is happening strategically. When you compare that with some of your competition like Parryware or Cera or somebody, they're just in the bathroom still. They've not gone out of the bathroom, and they're just focusing on doing more of the same as they did 5, 7 years back. So are we done with all the structurings, restructurings and going forward, will we be just plain old vanilla running the business as is?

So basically, if you -- a little bit -- we have seen this over the last 10 years. But when I talk about -- first, I'll talk about the corporate restructuring, and then we can talk about restructuring. So in terms of the corporate restructuring, when you see we had a demerger and then followed by a slump sale, and we have communicated this also in the past very extensively. This was for unlocking the values. Like when you see a previous company, which was HSIL, it was having packaging as well as the consumer-facing sanitaryware, faucets and other businesses together. So the first 2 restructurings were purely focused on segregating the subset of our B2B businesses on the B2C businesses. I think from any shareholder, who would have -- who would have held the shares pre [ 2019 ] until now, it would have been a substantial value creation. The proposed restructuring, which is right now underway for which the Board has approved and we are waiting the approval from the stock exchanges, that is further to unlock 2 subset of businesses separately. One is on the consumer side and second is on the Building Products side. So a lot of -- when you do all these exercises, you learn also and you should take steps to improvise wherever the market demands needs so. Right now, our Building Products business and our Consumer Product businesses were getting clubbed. So as a result of this whole demerger and balancing and amalgamation is as proposed in the scheme. We strongly feel it will further create a new subset of value for any long-term shareholder. I think that's one part on the corporate restructuring. Second, on the businesses, like over the last 10 years, we have focused on certain -- including certain more segments into our businesses like pipes. We are not a faucet player from 15 years back. Now faucet plays a bigger role. And also on kitchen chimneys and hobs and cooktops. We have definitely not been successful on some seasonal businesses, like air cooler, fans, and we had some air purifiers. So these are the learnings which we are improvising on. And now when you see as a combined entity of HHIL and Hindware together, obviously, they will get demerged. We are very focused into 4 key businesses, which is sanitaryware, faucets, pipes and kitchen chimneys and hobs. And in each one of these businesses, we have a significant, I'll say, market share and a growing market share for each one of them. So we feel that now having made investments over the last 6, 7, 8 years, now is the time over the next 2 years, we have done a lot of internal -- over the last 2 years, we have done a lot of internal rejects in terms of optimizing the cost, realigning the teams. So all I can assure you is for the good of the organization. Nothing against. Nobody plans for a bad. It's always for the good.

My last question is on debt. I think a couple of years back, when the market cap was above INR 4,000 crores, there was a suggestion by a shareholder on raising equity to pay down debt. But the belief at that time was that the cost of equity is much higher and we have debt for strategic reasons. And then we've had to dilute when the market cap was half that level at around INR 2,000 crores to pare down debt. And if you see -- I mean, some of the leaders in the business, they tend to do the opposite. They dilute and make the balance sheet strong during the up cycle, and they take on debt and become aggressive in a down cycle to gain market share. So in the context of business cycles and the learning, is there any rethought on balance sheet strength and debt and of hopefully becoming strong there so that we don't have to dilute equity at a very low price in the future?

So I take your point, but we keep evaluating all this stuff in terms of how we make our overall balance sheet much stronger. Financial year '24, '25 has not been a great year for us, especially, and that has led us to a lot of introspection internally where we need to improvise and where we -- what are the strengths on which we further leverage on. I think you will have to give us another 12 to 18 months in terms of first stage, we feel that in the next 12 to 18 months -- 12 to 15 months are restructuring and putting both the companies in the listed mode will be there. And definitely, this is backed up by a very robust internal as we have worked out a very strong business plan for each of the business segments we are in for each other company, which then technically should throw out of free cash flows and will require maybe 24 months to get back into a situation, wherein a major chunk of the debt is actually paid out of the free cash flows.

So over the next 2, 3 years, the idea is to reduce debt to a more reasonable level. Am I right?

Yes. Yes.

Our next question comes from the line of Parikshit Gupta from Fair Value Capital.

I have a couple of questions across segments. First, on Pipes and Fittings. Can you please help me with a split between B2B, B2C and if there was B2G as well for FY '25? And the aspiration going forward in the next 2 to 3 years?

See, as far as this business is concerned, the quantum of B2C is always around 65% to 70% of the total business, and B2B is around 30% to 35%. And as such, we are now -- we were a new player, but we have -- we are enrolled with almost all the projects in the country, all the consultants approvals are in place. So we are at a threshold of around 30% of our business comes from B2B and the rest is from retail segment. And going forward, in any case, this is going to be the trend, 30% to 70%. But yes, we presume that -- coming forward, we will be doing better. But at these rates, which are now of raw material rates, we only see volume growths happening in the coming future and not the value growth.

I understand, sir, with the depressed PVC pipes. I believe recently, there was a green shoot basically and a slight uptick in the PVC price. What is the third...

Yes, that's happened in the last 1 week. just last 1 week, and that's the silver lining. It has happened after a long, long time, maybe after around 2.5 quarters, we have been waiting for this. So there is a slight upward price, which has happened at INR 1.5 per kg. So we presume -- this is too small at a base of around INR 67 per kg last -- if we see last 3 years' figures, last 1 year has been from INR 78 to INR 67.5. But last 3 years, it has gone down from INR 140 to INR 67.5. So INR 1.5 -- but we definitely aspire that, yes, maybe down the line 2 months, we'll be having some upward movement in resin prices when the things will be stabilized. Otherwise, as a company, as our policy and whatever we have been doing last 3, 4 years, we are -- as far as percentage is concerned, we are the fastest developing player in pipes. So we'll be continuing our volume growth, but value growths will only come once the resin prices go up.

Understood. In terms of the volume growth, we all understand that with the Roorkee plant commissioning 100%, it will add 12,500 metric tonnes. However, are there any further near-term plans for further augmenting capacity, maybe for the new product segments like DWC or other ones in the FY '26?

See, the product lines, which I talked about was like DWC is already in place. The machines have come. We have taken the trials. We are waiting for the BIS approvals because this product has a BIS license. So we have applied. We are expecting the licenses to be there in the next 15, 20 days, and we shall be commercializing this product. As far as other products are concerned, it's like fire sprinkler system, which takes some time. And this will be somewhere -- launched somewhere around last part of quarter 3. And there is PTMT faucets, which will take another 1.5 to 2 months to get launched. But these all are value-added products. As far as volume is concerned, it will only come from your PVC and CPVC products. As far as Roorkee is concerned, we are starting with a capacity of 12,500 metric tonnes. That's right what the figures you have. But seeing way forward, like once we commission it, I think by 1st of July, we should be commercializing the operations there. We are at the fag end. We have almost closed down all the things which have to be done here. Once we start the operations, seeing for the next 3, 4 months, how the market behaves, we have created the entire plant, and we are just installing some machines there. So we'll be in a position to install more machines because the full plant is ready, and we'll be enhancing our production capacity there. But that would be totally dependent on the market exception.

Understood. These are very helpful. Just one more question before I rejoin the queue. In sanitaryware, can you please help me with the share of faucets in terms of the top line? And just on that, I recently visited the Vibrant Buildcon Expo. During that, I was able to meet with a couple of manufacturers from Morbi. We understand that there was a downturn in the Morbi industry because of the mass segment players. Losing out on volumes because of the export tensions. However, at a general trend, they have also started to expand domestically be it through B2B or even B2C channels. Some players even are on e-commerce platforms as well as have their own brand presence in Northern and even Central Indian markets. So just on this, do you see this as something which has been happening since a while now? Or is it a new imminent sort of a threat to players like us?

So on the first question, the share of faucets in our overall sales is between 35% and 40% quarter-on-quarter. So we've seen good growth in faucets over the last few years. So the share has gone up to between 35% and 40% every quarter. On Morbi, this is something that has happened over the last 1.5 years since the export issue came up, particularly the U.S.A. And there was a little bit of desperation in the Morbi manufacturers to try and make up for that loss of export sales. So it's not very recent. It's been happening for more than 1 year, 1.5 years. I am firmly of the belief that at the end of the day, the consumer is looking for quality product. And in our case, since we have our own manufacturing units, both for sanitaryware and faucet, we are focusing on offering the best quality products at the best possible prices. And if we continue to do that, I think Morbi will be there, but I think it will eat away a little more at the smaller brands or the unbranded segment rather than the top 3, 4 players. So I think we'll just stay focused on providing quality products at the right price, and I think that should hold us in good stead. If we continue with our strategy on the go-to-market on the product portfolio, et cetera, that I talked about earlier, I think we can overcome the potential threat from Morbi local suppliers.

This is very helpful. But just a final follow-up. In terms of the portfolio of Hindware in terms of sanitaryware, I believe there is a wide range, which essentially caters to almost all segments of -- almost all economic segments of the consumers. Although you mentioned focus on more premiumization in your opening remarks, but the products that I witnessed at the expo were also of high quality. And the price point, be it in sanitaryware or even in Consumer Appliances, was relatively competitive from all the A-grade players like ourselves. So I mean, given this context, are we further rationalizing our portfolio? Or is there something that is incorrect here?

Yes. So there are 2 steps that we are taking on the portfolio. One is a rationalization. So low volume, low gross margin products, we have rationalized and are continuing to rationalize. And the focus in the new product introductions over the next 1.5 years, you already made the plan for the next 6 quarters is basically largely on the mass premium and premium segments, making sure that we plug any gaps that are there in the portfolio, whether it's in terms of products themselves or price points and really focusing on the categories that are growing in the market. For example, in sanitaryware, wall mounted is growing. So really making sure that we have a strong, robust portfolio in wall mounted, which is higher value and higher gross margin. Similarly, in something like basins, for example, making sure that we have a robust product portfolio in over-the-counter basins where, again, there's a disproportionate growth happening in the market. So really making sure that we are with the market or ahead of the market in terms of trends and having the right products and largely focused on the mass premium and premium.

Our next question comes from the line of Utkarsh Nopany from BOB Capital Markets Limited.

Sir, my first question is for your Bathware segment. So if you can just guide us like how has been the industry growth rate in FY '25? And what is your expectation for FY '26, sir?

So the overall industry has grown in single digits, if I look at sanitaryware and faucets. The tiles business has grown in actually low single digits in FY '25. Going forward in FY '26, the expectation is that tiles will continue to be in the low single digits in terms of market growth. Sanitaryware and faucet, again, likely to be in the mid- to high single digits. So the expectation is that there will be marginally higher growth in FY '26, but still in single digits and in tiles in low single digits.

Okay. Fine, sir. And sir, like we have -- our bathware revenue has degrown by around, say, 12%. So we have lost market share in FY '25. So if you can just help us understand, is it because that we are facing some stiff competition from our major peers or like we are facing stiff competition in any specific geography? If you can just highlight, it would be very helpful, sir.

Yes. So I think there are a couple of aspects of the degrowth in FY '25. One is I think there were some gaps in our portfolio in line with the market trends. So when I talked about focusing on things like wall-mount, over-the-counter basins, et cetera, those are the areas in which we potentially had some gaps in our portfolio. That is what we are very quickly plugging and making sure that we have extremely strong portfolios where the market is growing. So that is one aspect. The second was in terms of distribution. So there was a little bit of disturbance in the course of the year in terms of distributors and dealers. We've gone back, as I mentioned in an earlier comment, on really focusing on strengthening our distributors, making sure that they're actually performing the task of a distributor, which is reaching out to multiple dealers across the geography, giving credit in the market. Wherever we're finding distributors are not playing that task, then we are making sure that they either improve or we find an alternative distributor there. The second is, I think, in terms of focusing on the large dealers versus the mass of dealers. So we have a very large number of dealers that we reach out to, which is a strength. But really making sure that we're gaining counter share in the weighted dealers, I think that is a key element, which probably didn't go as well as we planned in FY '25 and a strong focus starting end of quarter 4 last year FY '25 and in quarter 1 of FY '26. We've gone back to these weighted dealers, identified across markets and really making concerted efforts to gain share in these weighted dealers. So I think a combination of these 2 things is what is going to get us back to gaining market share overall and gaining market share in weighted dealers.

Like you mentioned that we are targeting to gain market share over the next 2, 3 quarter period because of the initiatives, which we have taken. So like in the H1 FY '26, can we expect to grow at a market level, if not more than market level and start posting positive revenue growth? Or you see that in H1 FY '26, it would be a difficult thing to say right now, maybe after 2, 3 quarters only, we would be able to say more confidently?

So what we've said very clearly is that we expect all the measures that we've taken over the last few months and continue to take to have an impact over the next 2 to 3 quarters. So in this financial year, we are confident of hitting double-digit growth and growth ahead of the market. So if you look at it, it's going to play out over the next 2, 3 quarters. And if I look at the whole 4 quarters of this year, it will definitely play out in terms of double-digit growth and growth ahead of the market, which I mentioned is likely to be in the single digits.

Okay. Sir, my second question is on your consumer division. So like earlier, we have merged the sales and marketing, customer care, warehouse, logistics operation of our Bathware division with our Consumer Appliance division. And as we are now looking to demerge the Consumer Appliance division, so whether we should -- whether we are looking to create separate back-end functions for Consumer division in future as well?

So that is still under internal discussion, so not at liberty to share right now.

Okay. Sir, my third question is on your water heater JV business. So like in this quarter, we have provided an impairment loss of around INR 30 crores, which is roughly as per our calculation, is 45% of your initial investment amount of INR 68.5 crores for this business. So can you please help us understand the rationale for such a large impairment made for this JV business, which recently commenced operation in FY '24? And are you going to book any further impairment loss in future? And we have made also incremental investment of INR 17 crores for this business in this March quarter? And what was the rationale for that?

So if you see in the year 2021, the water heater was part of the wholly-owned subsidiary of HHIL by name of a company called Hintastica Private Limited. And all the investments which were done into that subsidiary was technically at a face value. However, in May 2021, we did a joint venture with a French company. And they infused -- they also infused equity into the venture to make it a 50-50 venture. So as a result of that, when you see the results of the quarters of FY '21, '22, in the consolidated results on account of the loss of control, we had to acknowledge an upside of somewhere around INR 65 crores as a fair valuation of the investments in the subsidiary. Also, we acknowledged there was a gain on a slump sale because initially when we slump sale this business into a subsidiary, since it was a wholly-owned subsidiary, we did not acknowledge the gain, but -- as we lost the control. So overall gain was around INR 100 crores as such, which was in the consolidated books, but not in the -- consolidated financials, but not in the stand-alone financials. So now as we -- as the subsidiary -- as the joint venture has started with the production. So there are initial factory costs, which are there, which we are trying to see how we can work on. And for that, we had to infuse INR 17 crores more during the quarter 4. And that was done -- all these investments into a subsidiary are made -- into this joint venture are made on the fair valuation based on an independent valuer report. And accordingly, we had to take the impairment, both on the stand-alone as well as on the consolidated financials.

Okay, sir. And sir, can you please give us the budgeted CapEx for FY '26.

You mean to say that overall CapEx or what?

Yes, overall CapEx for FY '26.

For FY '26, I think the overall CapEx should be in the range of INR 100 crores to INR 125 crores, considering the fact that part of the equipment for our pipes new plant at Roorkee is being done in quarter 1. And also this considers -- takes into account the proposed investments into opening our brand shops and other manufacturing-related investments.

The next question is from the line of Nikhil Gada from Abakkus.

Firstly, on the Bathware business front, we have seen a continuous deceleration in our margins. And when we compare to what this business inherent margins are, we are somewhere around 500 or 600 bps off. And I assume you have given some incentives, et cetera, as well. But going forward in this next year or 2 years, when we are predicting such high level of growth, then do you think these margins are something which will go back straight to 14%, 15% levels?

Yes. So there are 2 impacts on gross margin, which are built into our plans for the coming years. One is increased operating efficiencies as capacity utilization at our plants increases with increased volumes. So in our annual operating plan for this year itself, for example, that leads to greater capacity utilization and therefore, operating efficiencies which come in, which will help us to improve gross margin. The second is that we are -- I mentioned a lot of new product introductions coming in over the course of the next 6 quarters, largely at the mass premium and premium segments, which will all be at a significantly higher gross margin than existing products. So that's built into the. So I think a combination of the operating efficiencies from manufacturing, the new product introductions being at a higher gross margin and rationalization of the portfolio. I mentioned that we are weeding out the low-margin products from our portfolio. So a combination of these 3 things will lead to the increase in gross margin. So I think all 3 are already in play, and we'll start seeing the improvement in gross margin in the coming quarters itself.

So yes, so it partially answers my question, but I'm just looking for a number here. Are we looking at a 200, 300 bps improvement straight away in the next year? Or since all these measures you are going -- you have implemented are going to benefit in the coming quarters, right? So from that perspective?

Yes, I probably won't put a number to it, but significant improvement in gross margin in this financial year itself and then going forward.

And sir, secondly, just on your guidance for '26, where you're saying there is going to be a double-digit growth that we expect in Bathware. Are we already seeing some green shoots for us in these 2 months that have gone by?

Yes. That's a clear...

Okay. Got it. Sir, secondly, on the pipes business, there is some confusion in terms of your capacity. So if we see from third quarter to fourth quarter, there has been, I think, 8,000 metric tonne increase in our capacity. So firstly, just needed an update on that. And the Roorkee capacity will be over and above this 66,000 capacity, 12,500?

Nikhil, what you are saying is right, there has been an increase in capacity because we have received 2 extruders at our Isnapur plant, that is the Hyderabad plant. So that is why that capacity has got increased to it. And as far as the Roorkee is concerned, yes, that 12,500 metric tonnes is over and above this capacity. That will be only mentioned once we start the commercial production.

So apart from the addition that we have done in Isnapur, is there any further land available for doing more expansion in Isnapur or we have maxed that out?

No, we have not -- we have the capacity, we have the place here. The plant is already built. We can just increase the number of machines. So we have a provision for expanding our capacity in the current factory itself.

And I assume that max can go, you can double from what we are currently in that particular plant, right?

Not double, but we can definitely go 40% to 50% above the capacity in our current...

Understood. And just on the Pipes business, the margins, we have seen a difficult sort of a year in terms of how the overall PVC business has gone in terms of pricing. But we have done a good job in terms of our margins overall. So safe to say in a very stable sort of an environment, which we assume the next year should be, we go back to the 10%, 11% EBITDA margins we always wanted to reach in this business?

See, Nikhil, it is very difficult to tell you at this stage because everything depends on the moving price of the raw material, which will be there for the whole year because what happens is when your prices go down, which is currently there, your fixed costs are same, right? And in terms of percentages, then your margins in terms of absolute value don't go up. You cannot commit 10% unless the resin price goes up to INR 80. So what we have tried this year is we have hold on to our expenses, we have tried to see that we don't lose much on our bottom line as well as we have taken care of the top line also, if you have -- because almost every competitor's result is out, right? So I think in terms of percentage of volume and value growth, we have surpassed all of them, like 2% growth in value and 12% growth in volume. But as far as the margin in terms of percentage of 10% or 11% can only be committed when the value -- the price of this raw material goes up.

Understood. Got it. Sir, just one last question for Sandeep Ji. Sir, if you can call out what kind of a debt reduction are we expecting in '26 and then in '27?

I think in next 2 years, we should reduce it by a level of somewhere around INR 200 crores to INR 250 crores.

And this is something which looks achievable on the surface, right?

Yes.

[Operator Instructions] We have our next question from the line of Vinod Krishna from Avendus Wealth.

So given that we have lost market share, it continues from the first question, Rohit asked, what is the diagnosis that we have done that why we have lost market share in sanitaryware? We were the leaders once upon a time in bathware, especially. And unless you do the right diagnosis, you can't take the right steps. And what steps have you taken? So because the market share -- and now what is -- where do you think our market share will go to in the next 2 to 3 years? In both faucets and...

Yes. So I answered that question in a few different ways, but I'll just try and go through it again. So the fact is that, yes, we've lost some market share over the last couple of years. I think that's given. Our effort now is in making sure that we continuously gain market share for the next few years, right? So that is really the focus. Can't change the past. We need to focus on the future. For the future to gain market share, we are working on a few key levers. One is the go-to-market, strengthening our distribution, both in terms of distributors and dealers. Second is reorienting our sales team to further the focus not only on driving top line sales, but also on driving the fund generation. So tertiary sale is what we'll stay focused on. And the third is really the product portfolio and making sure that we have the right portfolio for not only today, but also for tomorrow and driving growth ahead of the market. Along with that, we are obviously working on a lot of levers to improve profitability as well. So one is gaining market share from a top line perspective. The other is making sure that we improve on gross margin and optimize cost and the combination of that leading to higher EBITDA. So those are the efforts that we are making. And as I mentioned, we are already seeing the green shoots in quarter 1 of this year itself. And we expect, as we've committed over the next 2 to 3 quarters to show significant improvement in top line and bottom line. I think that will be visible as the results come out in the next couple of quarters.

But you need -- ready to explain -- because even in the last con call, I was asking the same what is -- the diagnosis part, why -- is it the product or the brand or distribution, where did we lose enough or where did we lose out? So we are not ready to discuss that on the public forum?

I answered that earlier as well. There was an issue in terms of some of our distributors who are not performing up to the mark. We've taken action on those distributors and either they are improving based on our feedback or we're replacing them. The second is we didn't focus enough on weighted dealers, the larger dealers. We lost some counter share there. We've taken steps to regain the counter share and actually gain market share at those weighted dealers. The third is that we had some gaps in the product portfolio, which we've now filled and will continue to fill over the next few quarters to not only catch up with the market, but stay ahead of the market. That's in terms of top line. Then in terms of increasing capacity utilization, greater volumes to our plants, so that improves our operating efficiency. Working on new product introductions at a higher gross margin. So all of those steps which I mentioned are basically meant to then take us to the next level. So those are the factors. I don't want to dig too much into the past, but I think that distributors, dealers, product portfolio, those are the [indiscernible] which we've addressed.

The next question is from Moksh Ranka from Aurum Capital.

Can I know the mix between mass, premium and mass premium product for your Bathware division?

Sorry, I didn't catch the question. You're asking for the share of mass and mass premium?

Yes, mass, mass premium and premium.

Yes. So today, mass is about 50% and about 30% would be mass premium and about 20% is premium, 50%, 30%, 20%. Over the next couple of years, we plan to obviously increase the share of mass premium and premium significantly.

The next question is from the line of Darshil Jhaveri from Crown Capital.

So sir, I think a lot of questions of mine are answered. So just wanted to get a brief like maybe a more macro type of view for you. So currently, like when we said like FY '25 has been a struggling year. So in terms of like FY '26, we are seeing a double-digit growth. So the margin that we've seen in FY '25 would be a rock bottom, right? So because if we are getting growth, then you are also seeing about a multiple levers. So we should be able to get back to maybe like at least 8%, 9% in current year, sir? Will that be a fair assumption?

So in the Bathware business, the EBITDA we delivered in FY '25 was already 10.6%. We're looking at an improvement on that EBITDA Yes.

And the Pipes, you said that it will come as the price becomes better, right?

Yes.

Okay. Okay. Okay. So I just wanted to know on a consol basis, we would see better margins going forward. That's the key thing for us. Could you -- would it be 100, 200-basis points? Is it a fair assumption, sir?

Yes, definitely, because when you're talking of growth, [indiscernible] leverage to come into the play. And when you see with the slight degrowth, it hits us on the adverse side. But when it's a growth, definitely, it will come back very fast.

The next question is from the line of Parikshit Gupta from Fair Value Capital.

The next few questions are on the Consumer Appliances business, please. I understand that the industry CAGR overall is over 20% for the next 5 years. However, there is a large amount of competition. And we do understand that the brand recall of Hindware. However, with a growing market, a growing consumer base, high competition, there are very low cost of switching. So in addition to the brand legacy, what differentiates Hindware, kitchen appliances and heating products for a consumer to select those?

Yes. So in the Consumer Appliances business, so strategically, we have decided to focus on a few categories. So I think the relevant comparison is the growth in those categories. So if I look at kitchen appliances, which is our primary business in Consumer Appliances, and that's a strategic call that we've taken. On chimneys, cooktops and hobs, one is the quality of our product is excellent, even if I do say so myself, and this is feedback from the market. So from consumers, from end consumers and from our dealers, the feedback is very, very positive on quality. The other is differentiation in the product. So we have, for example, a range called Max Silence, which is one of the most silent chimneys in the market. So we're working on several innovations within that space. So we are doubling down on innovation in the categories that we are focusing on, making sure that we provide extremely good quality, better than market in many cases and differentiated value proposition. The other is that we are investing money in our brand stores for Consumer Appliances as well. Today, we have about 130-odd brand stores. We'll be putting in another 50, 60 this year itself. So really making sure that we give the right consumer experience for people to buy the products of that. So a combination of the product portfolio, innovation, brand stores as well as shopping stops in multi-brand outlets, really making sure that we give the best quality products at the best prices and provide environment where the consumer experience is great. So we have in-store promoters that we are putting in these brand stores, who have been able to really explain the product to consumers. We are also putting in a lot of money on digital activation and below-the-line activities to really drive consumers to our brand stores and to the multi-brand outlets. So through a combination of all of these, we are very confident about our growth in the kitchen appliances space. There is a lot of growth happening even in hobs and cooktops. So we're making sure that we have the right portfolio to drive that growth as well. Then there are adjacent categories in kitchen appliances like sinks, for example, in-built products, microwaves, et cetera, microwaves, ovens. So really making sure that in each one of these adjacent categories, so chimneys is the hero product, but then also cooktops, hobs, sinks and in-built products really, so give our whole kitchen appliances portfolio to the consumer. The second, in terms of water heaters, Groupe Atlantic is our French joint venture partner. They're one of the leaders in terms of technology of water heaters globally. So they're providing us technology, and we are providing the go-to-market. So really, the products there, again, are top-notch quality. So really focusing on product categories where we can provide a differentiated value proposition, top-notch quality and then making sure that we have the physical presence for consumers to go, also leveraging e-commerce. So we are also leveraging e-commerce for our kitchen appliances products and our water heaters. So really focusing strategically on a few categories and making sure that we win in them rather than spreading ourselves thin and trying to win in 10 different categories. That's really the focus right now. So even when we expand our product portfolio, we'll look at adjacent spaces within kitchen rather than trying to create a new category. So that's really the medium-term strategy for us.

Understood. This is very helpful. In terms of the overall market share, how -- I mean, a tentative -- what would be a tentative number for Hindware in terms of kitchen products, appliances?

So difficult to give a number because, unfortunately, there's no really good, syndicated data available for this category. Having said that, we are a clear top 3 player in the kitchen appliances space.

Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, everybody, for joining us. I hope we have been able to articulate and answer your questions in the right perspective. So if you still have more questions, you can still write back to us. And once again, thank you again for joining us.

Thank you.

Thank you. On behalf of Arihant Capital Markets Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.