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

Ladies and gentlemen, I welcome you all to the Q4 and FY '25 Post Earnings Conference Call of Jyoti Resins and Adhesives Limited. Today, on the call, from the management team, we have with us Mr. Utkarsh Patel, Managing Director. We also have the Chief Marketing Officer, Mr. Samit, on the call. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to detail us about the business and performance highlights for the period ended 31st March 2025, the growth plan and vision for the coming years, post which we will open the floor for Q&A. Over to you, sir.

Ladies and gentlemen, I welcome you all to the Quarter 4 FY '25 Post Earnings Conference Call of Jyoti Resins and Adhesives Limited. As you would have gone through the investor presentations uploaded to the exchanges, we have delivered nearly 15% volume growth on Y-o-Y basis quarter 4 FY '25 versus quarter 4 FY '24, while on a quarter-on-quarter basis, quarter 4 FY '25 versus quarter 3 FY '25, our volume growth is 24%. For the full year '25, the volume growth stood at approximate 12%. This was mainly due to a flat quarter 2, as was explained also in our quarter 3 con call. Revenue on an adjusted basis grew 14% Y-o-Y, driven by this volume growth. Further, I'm happy to share that we have signed Mr. Pankaj Tripathi as our brand ambassador, which will help to grow our business, create visibility and support in the marketing efforts for national visibility for the brand in consumers and also in dealers, retailers and carpenters. We have continued to put in strong efforts in our ground level work with carpenters and dealers with several meets conducted during quarter 4 to showcase our product portfolio and improve our penetration in existing markets and create visibility in the new markets also. This activity is also expected to continue aggressively in quarter 1 FY '26 as well. While we gained market share in this quarter in some of our strong cities and states, we have witnessed good response in our new states as well as our mature markets. The higher margins of more than 30% was lead higher volumes and thereby offering us better spread and operating leverage. We have further increased the number of branches to 42 during quarter 3 to 48 in quarter 4, while we had increased our sales and marketing teams as well. In terms of our capacity expansion and CapEx plans, we are looking to add another 1,500 tonnes per month over end of this financial year at our existing plant. That will take us to capacity of 3,500 tonnes per month. That can generate INR 650 crores of revenue in existing plant. In next 2 years, we will start to plan for greenfield expansion for future growth. Now I'm opening the floor for questions and answers.

[Operator Instructions] We'll take the first question from Manan Shah.

I'm relatively new to the company. So please pardon if you have already answered these questions in the earlier call. Can you please talk about which are the top 3 states for us? And I believe you hinted that we have around 35% market share in Gujarat. How has this market share improved over the past 2 or 3 years?

So we are doing good business in 5 states, the Central and Western part. And these are the Gujarat, Rajasthan, MP, Maharashtra and Karnataka. For Gujarat, we have 35% market share, and that grew by 10% in last 2 years.

By 10%, you mean that 30-something has become 35% now?

25% to 35%, so 10%, yes.

Okay. And the growth in the current year that we have achieved, is this from these 5 states, or this growth is driven from the newer states where we have entered?

So majority growth comes from the existing 5 states. The reason is the volume is higher in these 5 mature states. And we have also taken the growth from the newer markets also.

Okay. Understood. We've recently hired Pankaj Tripathi as a brand ambassador. So going forward, what will be our average marketing and branding spend that we are targeting for the coming year?

So we are targeting 7% to 8% of revenue, and that will be led by -- half is trade marketing and half for the brand communications.

Okay. And which are the newer states that we are targeting?

So right now we are targeting into UP, Delhi. We are also focusing more into West Bengal and to Chhattisgarh also and Telangana, Andhra also.

Okay. And these new geographies where we are targeting, have we built a warehouse or a depot or something to quickly service these markets? Or what is the strategy? How do we go about that?

So we appoint consignee and sales agents. So basically, they are out stockist. So we have 48 stockists right now across these 14 states.

We will take the next question from Sameer Barot. Sameer, you can unmute and ask.

Sir, new to the company. So slightly basic, but sir, what is the hindrance this company has in growing much faster from a base of -- because you have a low base of around INR 250 crores. Is it sacrifice some margins and grow faster, and if you are not ready to compromise on your higher margins, then you grow at a more measured base. Is that the way the market is? If u can just explain that dynamic?

See, actually the distribution market is always -- I believe that is always 15-20 years of investment of entire team to make this type of network. So we have invested 18 years into this journey. So now, in that scenario, we have experienced so many things and now the speed has become more faster compared to as earlier. So right now as we have explained that 14 states network we have established, the 48 branches we have established, the team of 430 people of sales force now working to make this Euro family much bigger than right now. So the expansion is on that mood. And right now we have associated with 350,000 carpenters. Among that, almost 200,000 carpenters we have registered into our loyalty program. And we have also increased the base of the retailers also. So that are now 12,500 retailers we are working with them. So it is the journey. So we believe that into the tertiary sales, the profit always depends on that only. So we are not only primary focused company, we always believe that tertiary pool should be there. So maybe we are taking the time for that, but the fundamentals will be strong by this journey.

Sir, so what does it take for you to move from, let's say, 12,000 retail distributors to, I don't know, 25,000 or 30,000. Is it that this process just takes time and it will take 2, 3 years for you to double your reach?

Yes, you can say that. Because see, right now, we are taking at least 2 to 3 years to make one state as a mature level. So that was earlier 4 to 5 years, 6 years, we have taken. But that time we had not a strong base and we were very new in earlier states, so no experience and no team were there. But right now, we are in that situations and that positions that we have now enough matured our team and matured enough and experienced in our business and strategies. So we took at least 2 to 3 years to take that state at that level. So yes, we can say if we want to go for the 25,000 or 30,000 retailers, it will require at least 4 to 5 years from here.

And sir, your consignee agents and your retail touch points, what are you offering them which makes them switch to Euro instead of, let's say, whatever other brand they were selling earlier? What is it that -- are you giving more commissions? Is the product quality a differentiator, rate [Foreign Language]? What all do you need to do to get penetration once you have -- or why does he move to you?

See, [Foreign Language] it's a journey of that trust, what we need to build to the retailers first. If we talk about the stockist, then stockist -- the CSA is the dispatch partner. So they maintain the stocks, delivery, dispatch and accounting mainly. And for the retailers, yes, of course, there is experience of the services and the quality should be on a regular basis that we need to do particular transactions to get that trust for that. So in retail business, always that takes time. It is not like that we do one placement of 100 kg or 200 kg and then that's it done and now the retailers move to the euro. No, that is not like that. So initial that is basic placements. Then we need to prove ourselves by giving them the best service and ease of doing policy, what as a Euro we are always as a preferable brand with the retailers. So that different policies and not only pricing or discount or credits, but mainly the commitments, the promising what we are giving to the retailers, how we fulfill that promises, how we deliver that commitment, that matters. And consistently, you prove yourself, then you can gain more market share for that.

So sir, let's say, for the like-for-like kind of product, if Pidilite is priced at INR 100, just as an example, what would be your pricing? And what would be your commission into the full channel, including consignee and retailer versus somebody like a Pidilite?

So for the consumer MRP level, we are almost same. For the dealer pricing-wise, we are almost same. But for the total landing of the price, that is more attractive in Euro as compared to the others.

Sorry, I didn't understand that. Landing for whom?

To retailers and to carpenters also. So for retailers, as an example, we are passing 8% to 12% of margin to retailers.

Right. And what would your competition be doing, at least Pidilite for that matter?

I cannot disclose in this investor call for a particular company name, but I can guide our margin to the retailer. So that is comparatively to 8% to 13% that is more attractive than what others are offering that is almost 4% to 6%.

Understood. And now do you -- sir, last question, would you feel confident that now you're getting a brand ambassador, so there will be much more sort of traction for the brand on the sort of retail end on the carpenter, and is it likely that we will now see a much faster growth over the next 2, 3 years? Not asking for the next 1 or 2 quarters, but more like a medium-term objective, can we grow at a much faster pace than we have in the past?

Yes. Yes, we can go for that, because as now we are in that position that now we have onboarded Mr. Pankaj Tripathi as a brand ambassador. So we want to create more visibility. We want to give more confidence to our retailers, to our consumers, to our carpenters. And yes, we are very optimistic with this journey. And these 3 years of associations maybe put this brand into the next level, what we are targeting for that.

We'll take the next question from the line of Shubh Shah. Shubh, you can unmute and ask.

Sir, you have any comments on realizations for this quarter? How have they changed?

Realization has not changed much into this quarter.

And from 1 year back?

One year back, it is also not much, maybe 1% to 2%. I have to look into the exact data, but it is not much that change, because the pricing and the raw material pricings are more or less same last quarter -- since 1 year.

Understood. Understood. And second question is, I see we have both distributors and branches. So how exactly these 2 play different roles in our supply chain? Do we also employ distributors in all states, or it's only a particular few states where we use distribution model, others we use only CSAs?

Yes. So our model is basically CSA stockist model. So that are the stockist. And as I mentioned that they are the partner for the dispatch and stock maintain and billings partners. So the model is the same. In distributor, when it is Tier 3, Tier 4, small villages, town, we appoint a distributor where he can take care of 70, 80 or 100 retailers. But if we talk about the metro, mega, or any major cities, then we go with these channels only. So the market can be open and we can put our entire strategies, the marketing, branding, advertising or sales strategies as a universal level. So these are the reasons. So right now, 90% of revenue is generated by these 48 stockists and 10% by the small distributors.

Understood, sir. And can you share in which geographies we added the new branches?

Sure. So in UP, we do. And in UP, we have done Agra and Gorakhpur. Then one Chhattisgarh branch is there. And in Punjab, we have added Patiala and Chandigarh.

We'll take the next question from the chat. The question is from Vishal Pandya. As I understand, VAM, a crude derivative, is our key raw material, which, as per my understanding, is majorly imported in India. With the fall in crude, what is the impact on VAM prices and any scope of margin expansion? Also, is there any impact of tariff war on VAM prices globally?

Sure. So VAM prices generally is stable since 3 years. Recently, in last quarter, little rise in the VAM around 3% to 4%. So as an industry leader has also declared the price rise of just 1.5% to 2%, and also we have declared. So in the current scenario, it will be not much different into the margins because as it is a matter of 1 month, and we can again take the price rise in the next month. So yes, VAM is totally 100% imported, and there is no manufacturing in India. And generally, VAM is very stable nowadays, just a little bit higher side that increase the things, yes, 2% to 3% only.

We'll take the next question from the line of Keshav Garg.

Sir, what was the volume growth for FY '25 year-on-year?

That was 14%.

Sir, so our revenues -- sir, this you are talking for the full year, right?

Full year.

Sir, so our revenues increased by around 10%. Sir, so that means there was a realization degrowth of 4%. Is that understanding correct?

No, no. Just one correction. The quarter 4 versus quarter 4 is a growth of 14%. The annual is around 12%.

Okay. Sir, but despite that, so that means there is a marginal 1.5%, 2% price degrowth?

It's flattish over last year.

Okay. Now sir, the concern is that the receivables have jumped from around, if we see, INR 94 crores last year to around INR 126 crores, which is like an increase of almost 34%, whereas revenues went up by 10% only. Sir, so now we are giving, it seems, 5%, 6% credit to the channel. Sir, so it's like for a retail product, mostly the cash is done on cash and carry basis. If you see majority of the companies, the distributors hold the inventory. And they -- so here, we are giving 5%, 6% of credit. So it's really a concern. So what's your thought on this?

So yes, you are very right that from INR 94 crores to INR 125 crores in this March balance sheet. The reason is we have generated a very higher volume in March month, and that was around INR 47 crores. So this is the reason that this jump at this level. But this will, again, come back within these 2 months, because, see, in B2C, in this trade business, it is generally 70 to 90 days, 100 days is expected by the retailers. So that is the scenario that is set up into the mind. So in our mature states, we are offering them 75 to 80 to max 90 days of credit cycle. And as we can see, as Jyoti Resins is always debt free, so this is the reason that we rotate that cycle in a proper timeline since long years. And we have right now 17 years invested into this business and that model I have explained about that 48 stockists, that 90% revenue is generated by this channel partners. So it means that the debtors are spread into the 14 states, into the 12,500 retailers, so it creates a lower risk by this model. So I don't think so there is much risk and that Jyoti Resins has proved by delivering that below 1% bad debt. So it is just a matter of just 1 or 2 months, then that will become again in a routine cycle for that. Because in B2C business, every dealers want to finish the deadlines of the volume growth and the schemes of yearly basis, the trips or gold, silver, et cetera. So in March month, we have taken the higher growth. So that is the reason that growth to the INR 94 crores to INR 125 crores.

Sir, now you think that next year we will be able to achieve our target of INR 450 crores to INR 500 crores revenue?

So yes, we have given the guidelines of -- we have targeted INR 500 crores in FY 2027, but we are very optimistic. Yes, we are working hard. Our team is much focused. Yes, the last quarter 2 was not at that par at that level because due to the rain and festival constraints and all over strain into the demand. And that gives us a little back of 5% of this year what we have expected to grow by 20% CAGR. But yes, we are aiming that for the 20%, 25%. And so that's why we have onboarded the celebrity to gain the major pool for our brand. So yes, so we are targeting for the INR 450 crores or INR 500 crores of revenue in 2027.

So in FY '26, what should we expect?

We are targeting, as I mentioned that 20% to 25% of revenue growth. So we can say that INR 360 crores, INR 370 crores, we are targeting for that.

We take the next question from the line of Bhavin Chadha.

Good set of numbers in quarter 4 and good recovery. And as you mentioned, March sales of INR 47 crores, so looks to be a very good exit. Just coming back to the strong guidance which you're guiding basically, also last year, quarter 2, quarter 3 was a little off and so your sales were lower. So what gives you confidence? Are you seeing recovery across industry and you are participating? Or basically, your base effect was low and something happened in last year first half? So your growth would be higher this year?

So I don't want to give that type of excuse that because of the flattish things or -- because the industry growth is 8% to 9%, as we have seen. But the opportunity is very vast in our segments as INR 7,500 crores of market, and we have achieved just INR 300 crores near number for that. So aiming INR 12,000 crores is not wrong, what I believe, because we are totally focused. And we want to stay focused till this INR 1,000 crores of journey, what I have explained. So that is the plan. And yes, we are on it. And I think the very detailed things we have now put into our organizations, and we are now into the micro management, and we are using our CRM and improving our ERP, CRM systems, data works and team building and induction training program, new hirings, onboarding of new people, new talent also. So we are on it and I think that is the reason that the journey is -- I believe the journey has started now. And now we have that experience and the strong base with this INR 70 crores of PAT. So I don't think so that there are more challenges now. We need to just become very streamlined into very well focused. So maybe we'll deliver 1 year around, maybe we can late. But I believe on the strong fundamentals business.

Sure, sir. And sir, since the raw material prices are largely stable, so do we expect to maintain over 30% EBITDA margins for next 2 years at least?

So as I mentioned that we have now target for the 7% to 8% into the brand communications and trade marketing. So I have always guided for the 22% to 25% of EBITDA in a longer term. So this year, maybe if the gross margin remains same and raw material prices remain same, so we can come to the maybe 25% to 28% of EBITDA, we can say.

25% to 28%. Okay. And sir, our 1,500-tonne expansion will be at what cost and when would it commission?

We are targeting for actually this end of the year and maybe early than this. It will cost around INR 5 crores to INR 7 crores max.

So except this, there is no other CapEx, right?

Right now, there is no other CapEx, because we are adding 1,500 tonnes per month by doing these facilities in a brownfield. So that will create a revenue of INR 650 crores into the existing plant for that.

So I think you are now 2,000 tonnes. So 1,500 will make you 3,500 tonnes, which will have a sales potential of INR 650 crores, assuming a seasonality in the business, right?

Yes. So 85% capacity utilization is what we can expect. So if we do for the 3,500 tonnes, then 3,000 tonnes we can expect. So it is INR 650 crores of revenue.

Sure. And this year, which new states -- are you adding any new states? Because I think when we last met, you said you are targeting 9 states and to replicate our successful model already there in the 5 states. So what is the progress in other 4 states? And what was the sales or market share, if you can share, in the other 4 states over and above the core 5 states?

Sure. So we have done much deep dive. As an example, I mentioned that we have opened new branches into the UP. So UP is the state what we are expecting our new journey and more penetration into UP, the Delhi is also there. So this is parallel all the states what we are looking to grow for. So the 9 states is the UP, Delhi, the Punjab, West Bengal, Telangana, Andhra. So efforts are ongoing and all the cities are very good into the real estate infrastructure [Foreign Language]. And that replica, the formula now we have got by working so many years into these 5 states. So it is in pipeline for that.

We'll take the next question from Mahesh Attal.

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language]. So right now we have a team of almost 50 people of team. [Foreign Language]. So this is a B2C business and that always takes time. [Foreign Language]. We don't want to come back for that. [Foreign Language].

[Foreign Language].

[Foreign Language] as we all know that the single dominant player since 65 years and Euro is the only brand who has generated this INR 300 crores of revenue after that. [Foreign Language]. If we talk about the Amazon or Flipkart or Domino's, [Foreign Language]. So it is always that, but [Foreign Language]. But initial period is always painful and little bit stretched for that.

We'll take the next question from the chat. It's from Vatsal Dedhia. I have a question on volume growth for upcoming 3 years. Considering our volume grew flattish or 2% to 3% in FY '24 and 12% in FY '25, as compared to the guidance of 20% for FY '25, how much volume growth do you expect for upcoming 3 years?

[Foreign Language].

We'll take the next question from the line of Rupesh Tatia.

Congratulations on good set of numbers. All my questions are number related, sir. So first question is FY '25, what was our total volume that we sold?

It was approximately 12,400 tonnes.

12,400.

12,400. Okay. Another question, sir, is this other current liability is INR 95 crores. Can you give a split between how much is the Carpenter program and the rest?

80% is the carpenter loyalty program. 20% are the dealers, yearly volume programs, trips, then this gold, silver or home appliances, kind of. So 80%, we can say.

And last year, what was this proportion?

That was INR 88 crores, I think.

Yes, yes. So INR 88 crores, out of that, what is the bifurcation between carpenter...

Same, 20% around.

Similar, sorry?

Similar, 20% around.

Okay. Okay. And then, sir, third question is this -- you said 8% we want to do spend on Pankaj Tripathi and other marketing spend. I wanted to tie that up with accounting. So in the annual profit and loss report, I see sales promotion expense INR 46 crores, and sales commission expense INR 7 crores. So INR 46 crores plus INR 7 crores is roughly INR 53 crores. So that number is very high, right? I mean, on INR 284 crores, it's roughly 17%, 18% number. So can you just help me reconcile this? And then where will this number be, this INR 55 crore number, INR 53 crore number, what would this number be for FY '26? It will be INR 60 crores, INR 70 crores?

So this is actually, sales promotions offers lies into this. [Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language].

That is around 2%. I need to look for that. INR 5 crores to INR 6 crores, I think.

[Foreign Language] that number will be roughly INR 25 crores next year.

Yes.

So from INR 5 crores to INR 25 crores is where that number go. [Foreign Language] Maybe Vinay, if you know where is this number captured in accounting?

Yes, yes. So it comes in the advertising and marketing expense in the annual report. So if you see over there, it will be approximately 2% of revenue. So this is expected to go up to almost 5%, 7% of them.

We take the next question from the line of Manan Shah.

So my question was again relating to this loyalty liability that we have created on this balance sheet. So I wanted to understand how can the carpenter community -- how can they encash this loyalty benefit that they want?

So we have given them the digital app and we have registered them. So it's one kind of shopping mall for them. So they can choose the different home appliances, Honda Activa, example, refrigerators or TVs or what they need. The tools also, ply cutter machines, drill machines, et cetera, the bags [Foreign Language]. And we have a separate team for this marketing and these promotions and loyalty program to handle. So we have onboarded 200 people who are looking for the dispatch and the redemptions and the things for carpenter programs.

So for purchasing these items, they can use 100% loyalty programs or they have to give some cash also to purchase these goods?

No, they don't have to give any cash. That is 100% points.

Understood. So now since we have this large liability on our balance sheet, what is the company policy to create a similar asset on the balance sheet as well to service this liability as and when it crystallizes, because there is no asset in terms of, say, debt or liquid investment that the company seems to be creating to service as and when this liability crystallizes, because as you mentioned, there is no limit on spending or redemption of these points within a year. So very high chance that this liability can crystallize within a year as well, right? So what is the company's thought process on creating an asset on the balance sheet to service this liability as and when this crystallizes?

See, INR 147 crores fixed deposit company [Foreign Language]. But it is also not going to come in a single day. [Foreign Language]. See, we want to focus more to give the best delivery and services to the carpenters. That can differentiate our brand into the market. So right now we don't think that we need kind of service partner for that. But yes, we can definitely think about in future. And so right now, for 48 depots we have created, that is also the redemption center for our carpenters. So partial delivery is done by ourselves -- our carpenter team and partial they collect from our 48 depots also. Carpenters do direct collect from this redemption center also. So right now we are focusing to give the best immediate service to our carpenters. And as the model is like that [Foreign Language]. But we have started some small shop redemption program [Foreign Language]. But that liability will remain same, around INR 90 crores to INR 95 crores.

Is there any expiry to...

Manan, I request you to join the queue again.

It's just a follow-up. Is there any expiry to these points that they have earned?

Right now we don't have put any expiry, but we have started the auto redemptions, and we have started to acquire the talent for the telecaller type and that females call to our carpenters to do the redemptions for this experience. So that we have started, but we cannot push them for that [Foreign Language], but like that. So it's a regular process for that.

We take the next question from the line of Piyush.

So I just want to know that many new players are entering into this segment like Astral and Asian Paint. So can you give your view on the same?

So both companies are in multiple solutions of building materials. So as Euro -- I can give you the comparison that as Euro, we are totally focused into the white glue. And I believe that, that is our strength of our team. And for other players what you name, they have the multiple products and they have the own challenges also into their core products. So that is the reason that we can differentiate Euro as compared to them.

We take the next question from the line of Rajat Sethia.

[Foreign Language].

It is a parallel process. Still more penetration should be there. So it is not like [Foreign Language], but more penetration is the key to get the volume, because percentage-wise [Foreign Language].

[Foreign Language].

[Foreign Language] more penetration to the existing market. [Foreign Language] always tertiary and the existing penetration works. [Foreign Language]. That is the plan actually.

Sir, I mean, to answer my question. In terms of the mix, are you targeting anything [Foreign Language].

[Foreign Language].

[Foreign Language].

[Foreign Language] I think that's a good growth into the mature market for the 5%, because the volume is already there in that, so that's why.

[Foreign Language] what kind of revenues a state has to do to become a mature state? Revenues, margins, retailers...

For any city, it is INR 25 crores of revenue we are targeting. [Foreign Language].

[Foreign Language].

400 to 600 retailers, we can say.

We'll take the next question from Anupam Agarwal.

Sir, just reconciling the math, you talked about your capacity earlier. You mentioned that incrementally, with the 1,500 tonnes per month and at 80% utilization, we'll be able to do about 30,000 tonnes -- 3,000 tonnes per month, which will lead to INR 650 crores revenue. Sir, just doing a reconciliation of realization per kg, it comes to about INR 185 compared to FY '25, we closed at INR 230 a kg. Am I missing something here, sir?

[Foreign Language] 36,000 tonnes and INR 230 per kg. So that will become INR 650 crores.

[Foreign Language].

Sir, I think Anupam is correct. We'll be doing more than INR 700 crores, INR 700 crores, INR 750 crores.

Conservative, always 80% [Foreign Language]. So always I have guided for the conservative because, see, it's a chemical plant and maybe the plant maintenance. [Foreign Language]. So that is a conservative guidance what I have given. So that can go to INR 700 crores also.

Understood. Understood. And are these expanding, the incremental 1,500 tonnes, is this new product grades, existing products into new markets? What are we looking at? Any ballpark color on new product addition, R&D, what we are doing in terms of better grades of products, if you can touch some points there.

So in the past years, we have added these products as applications wise. [Foreign Language]. So I don't think so in right now, current situations, there is any product needed. We have the enough basket to grow from here. So we will focus more into the market spread and more penetration and more network to build for that.

Understood. So sir, FY '25, as you mentioned, we closed at 14 states. How many states in FY '25 would have turned profitable?

It's a different thing, that profitability. See as an example, [Foreign Language], but that is not the goal plan. The goal plan is always like that [Foreign Language]. So this is how it works. It's not like that each and every state is -- how it has become profitable. [Foreign Language] 3 years is the plan what we are expecting [Foreign Language].

Understood. So every 3 years, new state should breakeven?

Yes.

Okay. Understood. My, sir, last question was, you have INR 150 crores of cash in the balance sheet. Any plans for utilization since you don't have any big CapEx announcements? Are we looking at some acquisition? Why do we have such huge cash reserves?

So as I mentioned that right now, as we have onboarded Mr. Pankaj Tripathi, and right now we are moving into that journey for the consumer branding also. So we are planning for 7% to 8% utilizations of that liquid what we have generated. And as this model has the beauty of that less CapEx [Foreign Language]. And mainly investment is into the market [Foreign Language].

Got it. [Foreign Language].

Right now, it is tough to say exact number of states, but we are also planning for new 3, 4 states in nearer journey. But for 1 year, it is very tough to say, because as I mentioned that [Foreign Language] just we want to create this INR 500 crores, INR 600 crores of revenue with the existing states only.

Sir, entering new states is just -- I mean, how do you enter new states? Is it just that you sign contracts with your touch points, retail touch points and stockists? Or is there some sort of regulatory certifications or anything that you need to enter into a new state?

There is no any regulatory like this. Just we focus on the stockists first, the inventory stock availability and then after the channels we need to set for that.

We'll take the next question from the line of Vijay Shah.

Sir, just 2 questions from my side. One is, first, I know we've already discussed the debtors part. But sir, whilst you said we did have a push in the month of March, I'm sure we would have had a similar push in the month of March last year also, right?

Yes.

So the fact is that, sir, debtors have gone up from 36% of sales to 44% of sales. Effectively, sales this year has grown by INR 27 crores and debtors this year has grown by INR 31 crores.

[Foreign Language] that will be covered within 2 months because [Foreign Language] so that support we need. [Foreign Language]. So I think that is manageable. And we have managed this in so many years. So I don't think so there is any much risk for that. We are very confident to cover this in a time line.

And Utkarsh ji, this should not be in any way saying that we wanted to book March sales at the expense of Q1. [Foreign Language].

[Foreign Language]. See it's about the tertiary and about the pool. [Foreign Language] the main businesses rely on the pool, how we can generate the tertiary business. So we are very well focused. And right now, all territories, dealer meets and carpenter meets, we have already executed in quarter 1. So we are on it and no need to worry about that.

Sure. Sir, second last question, sir, is that out of the growth that we expect in FY '26, how much do you think will come from mature states and how much will come from new states?

Percentage-wise, it is tough to say. [Foreign Language].

[Foreign Language].

That is really tough to say with a number right now on the call. But we can definitely come back with the details for that.

We take the next question from the line of Pritesh Chheda.

So first, I want to check what portion of our territory is profitable? How much portion of our revenues is profitable? And how much portion of our revenue is breakeven or not profitable? So when you say it takes 3 years for a state or for a territory to become profitable, so in our, let's say, INR 280 crores revenue, what is the proportion which is not profitable or breakeven?

[Foreign Language] 80%, 85% is profitable states. But in a newer state, the volume is not much higher and also overhead is not much higher. [Foreign Language] it's a parallel process to investing. So this is the business to invest in people. It's not like a CapEx [Foreign Language]. So it is a journey that we recruit the talent and we onboarded [Foreign Language]. So that's why this is not a risky model what we have created.

The second question is between the 0% volume growth in '23 and '24 and the 14% volume growth in '25 and expected plus 20% volume growth in '26, what is the swing factor? So why is it that those 2 years where generally things were fine, the volume growth was 0. And last year where generally, the things were a little difficult, but your volume growth was 14%. So what is the swing factor?

So it's not only one swing factor. There are so many factors. I can explain. See, it's a B2C model [Foreign Language], right? So it is a B2C model. And that always took time to set the ERP, CRM, consumer behaviors, the survey, the team building, the marketing, the branding. And retail business always is -- I always say that B2C is always one career that demands, at least 20 years that demand. And as you know that what the giant has created this type of business like Pidilite or Asian Paints that benchmark what they have created. So it's a number of years of investment into that. So it's the patience game always, the B2C business. So it is like that. So this is the reason that we took this time and that consolidated period, we have improved our CRM, ERP systems, a few channel partners we replaced, few team we replaced, we onboarded new talents, the induction training programs, type of.

My last question is on this marketing spend and the marketing ambassador selected. So I must congratulate you for selecting a fairly amazing marketing and brand ambassador, which can have a good connect with the carpenter. So congratulations for this selection.

Thank you. Actually, that is feedback actually we got from almost all the people we know and what we have onboarded that Mr. Pankaj Tripathi is the face we can cover both categories actually.

Yes, he can well associate with the carpenters. So my question is, his engagement is for how many years? And this 6% extra spendings will flow in immediately with effect quarter 1, right?

No, that -- yes, immediately effect, but that is a different strategies for that and the contract is for the 3 years. So the 6% to 7% what we are targeting for the yearly wise for that. So it will be...

So this 2% of sales, which is your A&P expense, will head to 8% of sales as A&P expense between quarter 4 and quarter 1, right? Because your presentation says he's already live across TV, print, OH, digital in May 2025, right? So...

See, it's not that in quarter 1, quarter 2 only. That is yearly numbers what we have given actually. It depends upon the different strategies. It depends upon the strategies basically.

We'll take the next question from the line of Vasu Patel.

So my question is what the percentage of sales come from the carpenter, retailers, and from the distributors. Can you give us a percentage on that?

This is the channels actually. So actually, I didn't get your question, how the percentage is defined.

Means let's take an example, from carpenters, my revenue comes -- 15% of my revenue comes from carpenters.

No, no. We are not dealing with the carpenters actually. Retailers only. Total sales come from the retailers only.

Okay. Total sales from the retailers. Okay. And my second question is, sir, are we doing any planning for B2B business?

We have created this model already, and that is the modular furniture makers. So right now, 5% of our revenue come from this model and maybe it will go to the -- 10% to 15% B2B we'll get in the next 2, 3 years.

Okay. And for the B2B, the margin will remain same, right?

No. B2B is a little suppressed margin for that.

Okay. So can we expect 15% to 20% of margin?

Yes.

Next question from the line of Moksh Ranka.

I wanted to ask, we are entering certain states like Delhi and UP, which are in the northern area. And I wanted to understand our products are generally higher-margin products compared to if I compare with Jivanjor. So what is the product difference which makes our product high margin?

So as Euro, we have differentiated ourselves as multifunctional gluing solutions what we are on that. So the elements what we have added that differentiate ourselves. [Foreign Language]. So we are giving the waterproof, anti-termite, weatherproof, fast drying, high coverage solutions. So the furniture has not only the requirement of [Foreign Language], not only the strength. With the strength, we are giving this type of elements also. So that differentiates ourselves.

Okay. So other brands like Jivanjor and all, they are -- you mean to say their quality is inferior to us, and that is because they only provide the strength and not other benefits like waterproof.

On this call, I cannot give this detailed clarification of the other companies or other brands or comparison with that.

We'll take the last question from the line of Rajat Sethia.

Just 1 or 2 quick questions about the carpenter business that we do. So how do we measure the sales that are done by carpenters?

Sorry, can you come again?

How do we measure the sales or the business that is done through the carpenter channel?

Okay. So we have the loyalty programs and digital platform. So by the points they have scanned, we can measure the carpenters for that. So that CRM, the customized CRMs we have developed.

Okay. Okay. So every carpenter will have a unique ID in a way?

Yes.

Okay. And sir, any particular reason why are they not spending this money? I mean this INR 95 crores is a big number. They are just accumulating these points.

See, as an example, in Gujarat, if we talk about Gujarat, [Foreign Language]. In earlier stage, it was not like that. [Foreign Language] then when he finds the better solutions of his works, the applications, the quality, the service, the entire things, and then slowly carpenters, the customer moves into that particular products. [Foreign Language]. We need to understand the behavior and mindset of them. [Foreign Language]. So he will do the plan [Foreign Language]. So that emotions relate to our business and then Euro provides the Activa. [Foreign Language]. So we are not stopping them to do this. [Foreign Language]. So that's why I always say [Foreign Language]. It's not liability I think, because we have created INR 147 crores of cash against that. So this is how it happens.

[Foreign Language].

[Foreign Language].

[Foreign Language].

Vinay ji, can you explain this?

No, Rupesh (sic) [ Rajat ], what's the question? Because...

Sorry to interrupt. I'll just lay out my whole question. So is it fair to say that this expense or this liability that we are talking about INR 95 crores, it hasn't been passed through the P&L yet?

Yes. So as per Ind AS revenue recognition, as and when these points get redeemed, all of this eventually will come in the revenue as well as other expenditure.

When they get redeemed?

Yes, as and when it gets redeemed. So it is effectively an absolute EBITDA neutral event when it gets redeemed.

Okay. So INR 95 crores will also be shown in revenues, you are saying?

Yes, yes. It will be proportionate. As and when -- let's assume INR 20 crores gets redeemed, INR 20 crores will get added to revenue, INR 20 crores gets added to other expenses or redemption.

Understood. So it will be basically a pass-through entry?

Yes, yes. That's how the accounting is. And when it gets redeemed, against that, the cash flows out.

Why will it be shown in the revenues?

Because this is deferment of revenue. Proportionate expense [Foreign Language] related deferment of revenue [Foreign Language]. So proportionate revenue, proportionate expense moves out to liability for expenses, right? It stands on the receivables on the other side of the balance sheet. And when it gets redeemed, it flows back to the revenue and expense in the same size.

So expense getting deferred being shown as liability is fine. But what about revenue? Where are we showing it in the balance sheet, deferred revenue?

It stands in the receivable.

Receivable. Okay. But in a way, our true margins of the business, which we are reporting right now is 30% will get reduced, right, to that extent?

See, in absolute terms, it's an EBITDA neutral event. Now if I keep doing this adjustment every quarter, so there is some redemption and some creation happening every quarter, right? So what you're seeing is the net result of that. Yes, because like we've said in previous calls also, the total creation versus total redemption, the net impact in revenue will not be more than INR 5 crores to INR 10 crores per year, right? So there is something getting redeemed and there is something getting created. So the margin that you're seeing today is a result after that exercise.

Sir, can I request for a one-on-one call to understand this concept in detail?

Yes, yes, yes. Sure, sure. Definitely.

Sir, since that was the last question for the day, would you like to give any closing comments, Utkarsh ji?

So thank you very much, all of you. And I hope what we have guided and we are on it, and we'll try our best as a Euro team to make this brand most preferable brand into the white glue solutions, and we'll keep continue growing. Thank you very much for believing us and supporting us. Thank you.

Thank you, sir. And that brings us to the end of today's con call. Thank you to all the participants and the management team for joining on the call. Thank you.