Jyoti Resins and Adhesives Limited (514448) Earnings Call Transcript & Summary

Ladies and gentlemen, I welcome you all to the Q4 FY '24 Post-Earnings Conference Call of Jyoti Resins and Adhesives Limited. Today on the call from the management we have with us Mr. Utkarsh Patel, Managing Director; and Mr. Chief Operating Officer. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risk and uncertainties. Also a reminder that, this call is being recorded. I would now request the management team to detail us about the business, and performance highlights for the quarter and the year that went by and their growth plan and vision for the coming years, post which we will open the floor for Q&A. Over to you sir.

Welcome you all in quarter 4 FY '24 Post-Earnings Conference Call. In this call, I think -- I believe you all have went through our investor presentations. And most of the people, I believe, knows about the business. And in this call, I'd like to hear you all. I'd like to take feedback from you all to take this journey next level. So we can start for the question-and-answer.

Okay. So you want to go to directly question-and-answer?

Yes, please. It is better to make this conversation matter, so it will cover all the points.

[Operator Instructions] We'll take the first call from Saket Kapoor.

[Foreign Language].

Yes. So [Foreign Language] with good efforts from total Euro 7000 team and this was very critical as the market scenario, you all know in building construction materials slightly slag in the first 2 quarters. But we covered the things in quarter 3, quarter 4 better. [Foreign Language] that is including Delhi and UP [Foreign Language] and we have started to penetrate more into carpenters and users into new territories and [Foreign Language] Western part, Gujarat, Rajasthan, AP, Maharashtra, Karnataka [Foreign Language] so we can go with the detail [Foreign Language].

[Foreign Language]?

Yes, please. [Foreign Language] Maharashtra is a different territory [Foreign Language] So this type of activities done by the company.

[Foreign Language]?

[Foreign Language].

[Foreign Language]?

That is not only for this quarter. That is for the entire 4 quarters. [Foreign Language].

[Foreign Language]?

Not because of the elections only. But yes, all the things, I think, on track now. [Foreign Language]. Yes, of course, [Foreign Language] quarter 1, quarter 2 always be a soft, as you all know, like in quarter 3, quarter 4 [Foreign Language]. And yes, of course, quarter 1 [Foreign Language].

[Foreign Language] margin expansion in terms of cost of material consumption [Foreign Language]?

[Foreign Language].

[Foreign Language]?

Right.

[Foreign Language]?

[Foreign Language].

Should I answer that?

Yes, yes.

So Saket, on an annualized basis, the tax rate is 25% which is a normal corporate tax rate. What was your first question?

Sir, first question was the employee benefit expenses that are lower by INR 3 crores on Q-on-Q basis.

Yes. So there was an increment in the salary of the top management and promoter. But since that was approved only after AGM, so the 3 quarter effect was taken in the third quarter and now the fourth quarter is a normalized quarter.

Okay. And total you said INR 25 crore employee benefit expense, how much has been paid as remuneration to the promoters?

That is 10% around [Foreign Language]. So that is below that limit.

10% of the profit?

Yes.

That is we have a PBT of INR 19 crores. So [Foreign Language] closer to INR 9 crores?

Exact amount that I have to check.

[indiscernible].

We'll take the next question from Agastya.

[Foreign Language]

You are very right. [Foreign Language]. So yes, you are very right, [Foreign Language] especially for the last 2 quarters. [Foreign Language] And yes, of course, this is a very positive thing. I always look in that aspect [Foreign Language] So we are more focused to give more service to our clients, to give more detail of the data [Foreign Language] there will be a path for us also.

Very good, sir. Sir, [Foreign Language]?

[Foreign Language]

[Foreign Language]

See, always, [Foreign Language] So I think this is the phase [Foreign Language] they are getting more benefits from the companies, plus [Foreign Language]. So I believe, yes, aggregations are [Foreign Language] And if you talk about the leader, [Foreign Language] consistent quality, consistent service and detailed focus [Foreign Language].

[Foreign Language]

See, as early I explained -- earlier I explained, already [Foreign Language] and for the building construction material, all the material, I think in next 10, 15 years [Foreign Language] for the rural also and for the urban also. And yes, you are very right [Foreign Language] as you know that Grasim came with the paints and JSW Steel [Foreign Language] though Asian Paints is a market leader [Foreign Language] So I'm very optimistic for the next 10 years.

We'll take a member from the chat. [Prajita] you can go ahead.

I have this question. If I want to buy Euro 7000 in the market, where do I buy it from? Like Fevicol [Foreign Language] I don't get to see where can I buy it? Like I stay in Mumbai. [Foreign Language] Mumbai is a very big market, I believe. So where do I buy this? How do I get hold of Jyoti Resins [Foreign Language] Euro 7000?

Mumbai market [Foreign Language] so that is 850 counters in the Mumbai.

So do we have a list of distributor or shops, [Foreign Language]?

See, [Foreign Language] and always, we have focused to our dealers, and we want to be loyal to our dealers. So [Foreign Language] so that's why we are not online and [Foreign Language]. So this is a trade business. So hardware plywood shops are our customers [Foreign Language].

So like will I get -- can I have an access to the dealers list [Foreign Language]?

Actually, I didn't get your...

Prajita are you looking at the kind of white glue that you get for stationary or that you get for furniture work?

Furniture one.

For furniture work, there are dealers in every region. Post the call you can connect with us, we'll help you connect with our dealer in your area.

We'll our next question from Jatin Chawla.

So I have 2, 3 questions. First is, I visited a few white glue dealers in Mumbai market and my understand -- I don't recollect the name right now, but my understanding was that Pidilite has launched a low-cost brand to compete with Euro and because of that, there has been some impact on our growth. So how are we responding to this? Are we kind of saying that we will sacrifice our margins a little bit and still go for growth or we are using some alternate strategies? What is our strategy to counter this aggression from the market leader?

[Foreign Language]

[Foreign Language]

Yes, of course. Yes, of course, they are aggressively [Foreign Language] that competition always exists. [Foreign Language] So that is not only the one-way solution [Foreign Language] Yes, of course, that is needed. [Foreign Language] to acquire more confidence of that, but there are so many aspects [Foreign Language] 360-degree efforts [Foreign Language] branding, advertisement, sales promotion discounts, better service, fast deliveries, new products, better products like that.

And in this segment from what I understand, carpenters [Foreign Language] connect or loyalty programs, that play an important role. So how are you going about that?

So that is already [Foreign Language] as compared to last year. [Foreign Language] So we'd like to more focus on this program.

And when you say focus on customer, do you see carpenter as your customer or the end user as your customers?

See, right now, we are focusing for the carpenters. [Foreign Language]. So very few consumers are involved to purchase these products [Foreign Language].

Got it. And -- so [Foreign Language] for somebody like us to gain share?

Unorganized [Foreign Language] retail is always a long term and very tricky process. And as we have do the survey, unorganized players retail [Foreign Language].

Got it. Got it. Last question from my side. How is our distribution different to the market leader? And I'm asking this question because our receivable days are significantly higher than the market leader, four months-plus of receivable days in a retail kind of business, normally, we don't see that high. So what is the reason for such a receivable days?

So I believe that is our strength. [Foreign Language] So we are dealing directly to the retailers. [Foreign Language]. But still, as you know, Jyoti Resins is debt free [Foreign Language]. So we are comfortable with that days. But the reason is [Foreign Language]. Otherwise, 80 to 90 days is a regular policy for the any building construction materials excepts the cements.

So you offer a slightly higher creditor to your -- credit period to your distributors? How does it work? [Foreign Language]

Yes. [Foreign Language] we have 36 depots across 14 states [Foreign Language]. So this is the channel partners [Foreign Language].

Between you and the hardware or plywood shop, there is no middleman in between [Foreign Language]?

Yes. 85% revenue is by this model only.

[Foreign Language].

Yes, you are very right. But [Foreign Language] see, as an example, [Foreign Language] So that is newer market for us. So we cannot do any terms and conditions because my product is not familiar, not [Foreign Language]. So in that condition, we cannot ask for the payment terms and conditions. Our priority is to focus more to grab the market first [Foreign Language].

Got it. Got it. Understood.

So it's like Asian Paints and Berger Paints policies, as you know that [Foreign Language] across India.

Understood. So any plans to gradually reduce this as the brand becomes stronger in particular states or regions?

See, [Foreign Language] as an example, Gujarat, Rajasthan, MP [Foreign Language] and we are managing from the business [Foreign Language]. We have the data, we know [Foreign Language].

We'll take one person from the chat, Mr. Naitik.

Sir, [Foreign Language]?

That is a competitive data [Foreign Language]. But we can say [Foreign Language].

We'll you go to the next participant. Chirag, you can go ahead.

I just had a question on the geographic part only. Sir, [Foreign Language]. Is that possible to share?

Yes. So [Foreign Language] that is Gujarat, Rajasthan, MP, Maharashtra and Karnataka.

Understood, sir. Understood. Perfect. And [Foreign Language]?

Existing states [Foreign Language] if we talk about the Gujarat [Foreign Language].

Understood. [Foreign Language]?

Telangana and West Bengal, [Foreign Language] West Bengal, Telangana and Andhra, so these 3 states we want to focus more with Delhi and UP also.

Understood, understood. And on these 5 states, Utkarshji, [Foreign Language]?

Maharashtra and Karnataka [Foreign Language].

[Foreign Language]?

Yes, of course. [Foreign Language].

Understood, sir. Last question, sir, just a bookkeeping question. [Foreign Language] average selling price?

INR 230 to INR 235 [Foreign Language].

[Foreign Language]?

Yes.

Thank you, Chirag. We'll take the next question from Umesh Gupta.

[Foreign Language]?

Yes. See, [Foreign Language] and not for the first 2 quarters for this year I'm talking about [Foreign Language] quarter 3, quarter 4 is more better as compared to quarter 1, quarter 2. And [Foreign Language] So there are so many reasons. But [Foreign Language] and right now he is penetrating more to expand this business. [Foreign Language] So it is the process, and [Foreign Language] so you'll get the numbers, okay? [Foreign Language] what we are planning to execute [Foreign Language] that I'm explaining you, okay? I think...

[Foreign Language] This is practice of a good governance. [Foreign Language]...

Umesh, let me answer that question. We are not guiding for annual volume growth. We are guiding for compounded annual growth rate, which is over a period of 3 to 5 years. A compounded annual growth rate over 3 to 5 years does not keep changing every quarter. We had given the guidance for a compounded annual growth rate of 3 to 5 years, 20% on the base of FY '23, which we have clearly written that we are now guiding from the base of FY '24...

[indiscernible] [Foreign Language].

So no, no. So we have revised our guidance now on the base of FY '24, which was previously on the base of FY '23 and we have mentioned that...

Exactly my point. As I said, it is not a question, it is a suggestion. If you want to take it, take it, you want to leave, it's up to you. [Foreign Language] based on your past track record of...

[Foreign Language] I'd like to hear you all, [Foreign Language]. And I understand what you are saying [Foreign Language]. What about the long-term strategy? I always think for the customers-first [Foreign Language].

Thanks, Umesh. Before we go to the next participant, I would like to take a few questions from the chat. Mr. Raj Shah has asked the question, sir. It is regarding margin. Company has 33% in FY '24 and consistently, we've been above 30%. Any specific reason you are guiding for 22% to 25% margin going forward?

So as we already explained [Foreign Language] that is because of the raw material, so we are expecting [Foreign Language] branding more and also to pass our retailers and our carpenters for the loyalty programs. [Foreign Language].

Okay. Then there is a question, Mr. Pratik Bagaria, how does the company plan to utilize its cash?

[Foreign Language] plus also, we'd like to spend more into product awareness, branding and marketing strategies, also in team building.

There's a question from [Sanjit Chawla]. As mentioned by the management, the company has 30% market share in Mumbai. I have been to 5 hardware stores across Mumbai, I have not been able to find it. Although it was available with 2 plywood stores, is there any strategy to expand distribution to hardware stores also?

Yes. Actually, communications [Foreign Language]...

[Foreign Language].

Yes, Mumbai [Foreign Language]. So that will also give a more expansion in the hardware market also.

There is one question on chat from Mr. Manjunath Reddy. Sir, any plans of adding additional related products to product portfolio other than white glue I presume?

[Foreign Language] And there is a scope [Foreign Language] So till INR 1,000 crore, we don't want to add any product.

Sure. There is another question from Rohan Patel. When do you plan to do the new CapEx? And what was our capacity utilization for FY '24?

With new CapEx [Foreign Language] and that will be completely executed within the next 3 years. So within 2 years that will be executed.

One more question from [Sanjit Chawla]. Are there any price cuts taken in Q3 or Q4 by you or competition?

That is 2% around -- 2% to 3% around that price reduction, in-built discount we have passed to retailers.

Sir, we'll take the next question from Saket Kapoor.

[Foreign Language]?

See, I think 22%, 25% EBITDA margin [Foreign Language] I think it is not lower EBITDA, it's a good EBITDA margin. So [Foreign Language] branding, advertisement, and to pass through the channels because of the competition, because of the loyalty programs, so there are always 2%, 3%, 2%, 3% [Foreign Language] we don't want to lose our customers. [Foreign Language].

[Foreign Language].

You are very right.

Sir, [Foreign Language]?

For the revenue number you are asking?

Utilization levels in terms of volumes, sir, [Foreign Language]?

Right now, [Foreign Language].

Sir, significantly, [Foreign Language]?

INR 450 crores to INR 500 crores revenue.

[Foreign Language]?

[Foreign Language].

Okay. [Foreign Language]?

This year [Foreign Language].

[Foreign Language]?

[Foreign Language].

Because H1 is also the monsoon quarter, so we tend to go soft in that quarter.

[Foreign Language]?

On H1 basis, [indiscernible] quarter to September quarter [Foreign Language] because it's quarter year-on-year.

Right, sir. [Foreign Language]?

[Foreign Language].

This is the provisioning that we do for the redemption points, as liability for expenses it's that.

[Foreign Language] INR 89 crores?

Yes. This has always been in the INR 80 crores to INR 90 crores range. Against that, we have cash and cash equivalents of around INR 112 crores.

Okay. [Foreign Language]? How will this get -- this lability gets executed? [Foreign Language]?

So as and when the carpenter will redeem the points, right? This liability goes down. And against whatever he redeems, he gets given the gift, against that the cash go down proportionately. And whenever there is any new point created, this liability goes up.

Okay. [Foreign Language]?

Utkarshji, would you answer that?

There are loyalty programs [Foreign Language] so that depends upon the carpenters, but [Foreign Language]. So that depends vary to vary state-wise and season-wise.

[Foreign Language]?

[Foreign Language] as we all know that UP and Rajasthan, the state [Foreign Language].

So sir, net of balance [Foreign Language] that is what the understanding should be.

True, true.

[Foreign Language]?

[Foreign Language].

We'll go to the next participant, Pawan Kumar.

[Foreign Language] as was telling even Pidilite is not able to grow for the last 1 year and same with us, do you see early signs of revival in the industry? [Foreign Language], can you share some maybe green shoots what's really happening in the industry? That's why you're so confident that you are able to grow faster?

[Technical Difficulty] hand over these questions to Mr. Milan-bhai. Milan-bhai, would you like to answer this question?

Good morning, everybody. Okay. See, overall, our analysis is that the industry is growing at 5% to 7%. And we as Euro family we have larger growth plans because our -- the not so major states, we are putting a lot of efforts, Pawanji. And [Foreign Language] because of the election because so many reasons. Last year, we saw stagnated growth. But this year, we are very bullish about the growth plans. And also, the way we are approaching the market and the preparation we are doing on the ground to look at our developing states, which is West Bengal, Telangana, Delhi and UP is where we are going to put more effort and we are going to see a little more growth vis-a-vis the standard growth of the industry, if this answers your question, please.

Okay. [Foreign Language] some sense on that?

See, [Foreign Language] we know potential, the mature states which we spoke about [Foreign Language] we are working hard in terms of taking a little more market share, but that will be a smaller pie. For example, if Gujarat at 35% that can go up to 40%. But [Foreign Language] developing states where we can expect a little more because the base is low [Foreign Language] where we can see a little faster growth in terms of volume, which will give us a little good standing in the market. So parallel effort [Foreign Language] but you can expect more growth from the developing states vis-a-vis the developed states, if that helps you to understand.

Okay. And one question, like if I really see for the next 4 to 5 years, our aspiration is to go pan-India or like we want to grow gradually in geographies? What's our broader plan?

See our approach and our success mantra has been gradual penetration because as [Foreign Language] business is a ground-up business. Our business is not that you start the territory, and it's a very, very detail-oriented retail-focused business. So [Foreign Language] we are going counter to counter, and we are looking at penetrating the market in the right way. So we will go district by district where we have a stability where we have repeat customers, where we know our payments are streamlined, then we will go on new state. And that has always helped us because this is in the past also [Foreign Language] the way the last 17 years progress has been this is the similar effort and which has worked for us as a business strategy rather than -- so eventually, [Foreign Language] But once we mature in these states, we will open new territories faster and mature them faster. That's what you can expect in course of time, Pawan.

Okay. And as Utkarshji also telling that now UP and Delhi might be our maybe big geographies to look into, so going forward, would the capacity come into these area or would we keep sourcing from where our plants right now?

Existing capacity is at 55%. And it is -- we will source from our existing capacity itself. And in the long run, we are -- currently, we are -- we can serve these places. And [Foreign Language] so we will serve and feed from the existing capacities, but in the course of time, as need based, we will expand geographically, Pawan.

We will take the last question of the day from Rohan. Rohan, you had raised your hand, you want to ask the question? Since he has pulled down his hand, so we'll bring an end to the conference call. Would you like to give any closing comments, sir?

Yes. [Foreign Language] that is nice to hear you all. Thank you for the feedback and suggestions. And we and Milanji, including all the top management, will try our best and put our best to grow from here. And thank you very much for this call.

Thank you, everybody. Thank you, Vinayji. Thank you all the participants. We appreciate your time and effort, and we will keep seeking your guidance in course of time, and we promise to grow together. Thank you so much.

Thank you to all the participants for joining on the call, and thank you to the management. This brings us to the end of today's conference call. You may all disconnect now. Thank you, sir.