Kajaria Ceramics Limited (500233) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Kajaria Ceramics Q2 FY '22 Post Results Conference Call, hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking. Thank you, and over to you, sir.

Thank you, Vidiya. On behalf of Antique Stockbroking, I would like to welcome all the participants on the call of Kajaria Ceramics. From the management, we have Ashok Kajaria, Chairman and Managing Director; Mr. Chetan Kajaria, Joint Managing Director; Mr. Rishi Kajaria, Joint Managing Director; and Mr. Sanjeev Agarwal, CFO on the call. Without further ado, I would like to hand over the call to Mr. Ashok Kajaria for opening remarks, post which we will open the floor for Q&A. Thank you, and over to Mr. Kajaria.

Thank you. Thank you. Good evening, everybody. This is a great pleasure to welcome you all to quarter 2 F '22 earnings call of Kajaria Ceramics Limited. We sincerely hope that you and your family are safe and healthy. I have with me my sons, Chetan and Rishi, Sanjeev our CFO; and Pallavi Bhalla, looking after Investor Relations on this con call. With the rapid pace of vaccination business in the country, as you all know, yesterday, we touched 100 crore vaccinations in India. We have so far kept the third wave at bay, and we have hope that we are through with this pandemic without any further repercussions. We are glad to witness a sharp turnaround in our numbers and performance. Also second quarter growth, which was much better than what our initial expectations were. Economic activity is expected to further gain momentum led by favorable monetary conditions, improved customer sentiment and government focus on infrastructure study. The opportunity landscape is poised to get better, and Kajaria continues to strengthen its customer value proposition with ever-expanding bouquet of products, designs, and riding high on economies of scale with upcoming expanded capacities. Our business has shown resilience and delivered a good performance. In quarter 2 F '22, consolidated revenue from operations increased by 37% year-on-year to INR 974 crores from INR 713 crores in quarter 2 F '21. Revenue from Bathware segment grew from INR 53 crores to INR 74 crores in quarter 2 F '22 year-to-year. Revenue from Plywood segment grew from INR 9 crore to INR 17 crore in quarter 2 F '22 year-to-year. Absolute EBITDA increased from INR 144 crore to INR 181 crores in quarter 2 F '22. EBITDA margins for the quarter stood at 18.54% as compared to 20.17% in the corresponding quarter of previous year. Consolidated PAT in quarter 2 has increased to INR 116 crores from INR 89 crores in quarter 2 F '21. As of 30th of September '21, working capital days have come down to 56 days as compared to [ 86 ] days as on 30th of June 2021. Going forward, we are looking at around 15% volume growth and around 20% revenue growth for the second half of this financial year. With this, I take the opportunity of thanking you for joining us today. Over to you for question-and-answer, please. Thank you.

[Operator Instructions] First question is from the line of Girish Choudhary from Spark Capital Advisors.

Congrats on a very strong performance. Firstly, if you can talk about the quantum of price hikes seen during the quarter across verticals? And then further in the month of October, how much more has been taken to counter the gas price inflation? So that's my first question.

You can ask all the questions together. I'll try to reply as much as possible.

Yes. So just a follow-up on this itself, this [indiscernible] the average debt cost, which we booked in Morbi, and outside of Morbi and where that is the same currency.

See, we have -- we are here, myself, Chetan, Rishi, you can also address to anyone of them for any questions. But this question, I'm answering to you. So what we did -- as you are all aware, gas prices have gone over in the country. With this, we took 3 price increases in April '21 we took 2% to 3%. July '21, we took 3%; in October, 20%, 21%, on an average of 4% we have because the gas costs have gone up. All other infrastructure costs have gone up like [indiscernible] have gone up. Transport costs have gone up. So looking at everything, we have taken this cost -- increase in the prices. On gas cost, currently, our northern plants, it's about INR 38 and Morbi is about INR 50. For the Southern plant, it is -- as of today, the prices have gone up very high. It's close to about INR 60.

Got it. Sir, you did share on the price hike for tiles, if you can share for the other segments, bathware or faucets.

Bathware, also the prices have gone up 2 times in this financial year so far. Again, it's going up because the price of brass has gone up [indiscernible] currently about INR 535. All other components is going and linked to brass and plastics and rubber have also gone up. So you can roughly say that overall, there will be -- in this financial year, there will be a price increase of close to about 20% to 25%. As far as Sanitaryware is concerned, since our plant is at Morbi, where the gas prices have again gone up on 24th of August and 5th of October, so the impact is close to about 8% to 10%. So that is also been passed on from 1st of November.

So my next question is regarding the closing of a new subsidiary in [indiscernible]. So just to understand, is there a renewed focus towards entering export markets currently, but I think earlier we did [indiscernible] from the export market.

That's right. So basically, the idea of...

Yes -- answer the question. We never shied away from exports. Exports was not very competitive because in exports, as we have said earlier, and within the same stand. In domestic markets, Kajaria is in #1 brand. We also get a premium. When you do exports, you are going to be suppliers, you get no premium whatsoever. But since with current scenario, just for your information, why we are opening this rebate thing, is to see and to see that how we can market to these countries in Africa. For your information, gas prices, which you might be again, but let me tell you -- let me tell for the benefit of everybody. Gas prices in Europe have gone up by 300% to 400% in the last 1.5 months. Europe has become expensive by almost $1.50 -- [ EUR 1.50 ] per square meter because of this increase in gas cost, increase in plastics, increase in all kinds of transportation, it has gone up. So today, again, it may be viable for us to do some exports. That's not our focus. Our focus will never be exports, let me be very clear, but we'll be able to do some exports. Currently, our exports are hardly 2% to 3%. Our vision is to take it to about 5% to 8%.

[Operator Instructions] The next question is from the line of Rahul Agarwal from Incred Capital.

Congratulations for a good set of results. Sir, 2 questions.

I would like to add on only one thing, with congratulations go to [indiscernible].

Congratulations to the entire team, sir.

Okay. Thank you.

First question was essentially on the entry [indiscernible] pipe company has announced entry into Sanitaryware and faucets. Just wanted to get some sense of your perspective because, obviously, the demand is robust. housing is recovering. Time demand obviously looking much better Y-o-Y. Your thoughts on how will basically this pan out, that is first. And second, on the gas pricing, obviously, you gave the current pricing for your North, South and West plant, but broadly speaking, will -- if Kajaria, overall on a company level, having a lower gas price versus Morbi guys because my sense is, the Gujrat price is much higher than what you produce in North. And your West and South volume share is pretty low in your total volume. So overall, fiscal '22, will Kajaria be beneficial versus Morbi purely on the gas prices. Those are my 2 questions.

I think 2 good questions, I would say. First, as far as [indiscernible] is concerned, they are coming. I also was told that it can -- but I am aware for the last 2 months, let me tell you, one. Two, we are a very young player in this field, we have a lot to do. We are only INR 200 crores last year. This year, we are close to INR 280 crores to INR 300 crores that we are talking about. So we have a lot to do. So I think markets are good. And any new player coming in, if they have a thirst, they'll come, and we have to do our job well rather than worrying about who's coming and who's not coming. That's one. As far as gas prices are concerned, what you are seeing has never happened before. Normally, the gas price difference was INR 2 to INR 3 on either sides. Sometimes, Morbi was cheaper. Sometimes, north was cheaper. This is the first time the gap has become where we are paying close to about INR 38, as you've just said, and Morbi is now INR 50. There is -- let me -- for the knowledge of everybody, let me tell you there is a possible expected hike by another INR 15 in Morbi before the end of the month. That's what GSPC has been telling all around. So our prices will also may slightly go up, but not very much. So first time it is happening that this kind of a gas price difference is there. And if it is so, we'll definitely be benefited by this because our north plants are very efficient, and this gas price benefit will definitely pass some up on -- in the terms of cost to the -- our dealers.

Sir, a small follow-up on the first question. So obviously, in terms of your own expectation of how Sanitaryware and Bathware and faucets are done for Kajaria. Overall, this year, obviously, the growth looks higher. But are you okay in terms of the competition increasing? Obviously, then again, market share increases, right? The market obviously is pretty consolidated in Sanitaryware and [indiscernible], obviously, have a larger share in this market. So any thoughts there?

See, the issue will be right -- let Rishi reply.

So I think it's a good opportunity. In fact, it actually is coming up, it will just improve the condition in the market that we are in the right segment. And as you said, we're still very young, and we have a lot of potential to grow, which we will, which we will. So we should not be worried at all. In fact, it gives us more confidence that people like [indiscernible] also coming that means there's a huge potential in market from Sanitaryware and faucets. So we will keep on doing our job. You've seen the growth that you have done. And in 2 years, we are looking at crossing INR 500 crores plus. So we are going to grow very well. We are doing a lot of things to make sure that the growth happens.

The next question is from the line of Sonali Salgaonkar from Jefferies India.

Congratulations to the team. So my first question is regarding the exports by Morbi. So could you give us an update as to where the situation in the export stands? Because in the internal challenge has suggested that they have taken production cuts for about the month. So have they started their exports back?

Good evening, Sonali. The first question is, whether the exports -- regarding exports. As we all know, freight rates have gone up drastically from all over -- for all areas from India. Morbi, exact thing happened. They were exporting July, August about INR 1,100 crores to INR 1,200 crores per month. The freight rates have gone up drastically. The exports have started coming down. In the month of September, they were doing only about INR 600 crores, INR 700 crores, INR 800 crores of exports. Exports are not coming back to normal, and that's one reason why they shut down their plants. If you are aware, they shut down the [indiscernible] plants from 5th of August for 1 month. Double charge plants and GVT plants come 15th of August for one month and [indiscernible] plants from 1st of September to 30 of September, so one month. There was -- they were doing a lot of exports. All of the sudden, this happened and the freight rates have become high. So they have suffered definitely, and that's one reason why the market set up for them. Some of the plants have to close for certain reason that could not be exposed and getting into domestic market, which people feel it is very easy, it's not easy because with GST and the gas prices, which it is today in Morbi and in North, the difference is narrowed down to a great extent.

I understand. Sir, but in your opinion, there is no risk that they will route this excess supply in the domestic market?

No way at all. Otherwise, Kajaria, Somany, all these organized players will not be doing so well.

Got it, sir. Sir, my second question is regarding the demand. Now the housing up cycle as we all know is catching up quite fast, but would you be able to give us a picture as to how it's all been doing versus seasonal? And where in the maximum traction is coming from?

The smaller towns, the demand is very, very positive. In urban areas, the demand is positive, but right now, the big builders have payment issues. Let me be very honest. [indiscernible] have payment issues, which should be sorted out in the next 6 to 9 months because we have started getting money from banks. Projects have started selling. Money has started coming. But whatever trouble they had, they will still take 6 to 9 months to get out, but in smaller towns, this kind of problem is not there because people are making 1 or 2 houses as a builder. So this problem is not there. The rotation of the money is very, very fast. Prices have also gone up in the Tier 2, Tier 1 towns by at least 15% to 30%. That's what I get the feedback from our builder friends and our dealer friends that this has happening.

Got it, sir. Sir, and just a small clarification. You said the guidance is 15% volume growth and 20% revenue growth for the second half of the fiscal or for FY '22 as a whole?

For second half of the fiscal.

Got it, sir. That's it from my side.

Our staff is very high as these days. So as of today, I can only talk about second half.

The next question is from the line of Achal Lohade from JM Financial.

Sir, help us with the gas cost, you did talk about the gas price currently. But if you can ramp up to the second quarter gas price for your North and [indiscernible].

Right now, it's too early to say. As I said a few minutes back, there is a possibility that Morbi costs will go up another INR 15 before the end of the month. That's an indication. GSPC has given to all the local manufacturers. As of today to talk about what will happen, I cannot say. But I can only say one thing. As far as Kajaria is concerned, for the northern plant, we are taking close to 70% of the gas as long and mid term. That is RLNG and [indiscernible]. Rest is 30% was so far this spot prices. Spot prices are through the roof. So what is the right time to do this, what is the right line will pay will go as the price mix. So it's very difficult to tell you today. But only one thing I can tell you, Morbi prices are much higher than what we are paying in North. Whatever price increase happens in gas with a lev of 15 days it will be pass on to fair. That will happen.

Okay. Sir, I also wanted to check the second quarter, the quarter gone by, what was the gas cost in terms of rupees for [indiscernible]?

Gas cost in second quarter was close to INR 38 for Northern plants. That is Sikandrabad and Gailpur. And as far as Morbi was concerned, the second quarter, the gas price was about INR 36 in 24 of August. And after that, it went up to INR 40. And 5th of October, it went up to -- which will come in quarter 3, it went up to INR 50.

And what about South, sir?

South, till 30th of September, was INR 40. Sorry, close to INR 40, INR 45. And in October, it has gone up to INR 60.

Understood. Understood. The second question I had, you said [indiscernible] volume growth and 20% bottom line growth for the second half. Sir, it does imply the margins we are looking at clocking 19%, 20% margins for the second half. Is that understanding wise and you think all these costs will be passed on? Or there is also cost reductions which is happening?

See, totally on [indiscernible] stand. When the prices go up there for other raw materials [indiscernible] lead time of always will be 30 days before we can do anything, number one. Number two, whatever we do, everything cannot be passed on. We close to pass on about 80%, 85% cost -- whatever costs goes up. So coming to margins, I think it will be in the second quarter, our margin was 18.5%, okay? It will be close to 18%. I can tell you that because as I said earlier, whatever -- there is now a big price difference between Morbi and northern plants because we buy here from them and they're also at GSPC. With this, whatever happens, tomorrow if the prices go up, they pass on. And we have no problem in passing that benefit in 15 to 30 days to take this year and implement and all that. So it will be passed on. So I think this should be close to 18% plus. And whatever the situation in that time, we don't know what will happen.

Understood. Sir, can I ask just one clarification, sir, in the other expenses. Can you help us in terms of anything [indiscernible] for the quarter? for same quarter last year.

Any specific question, I'll be too happy to answer. Please ask me any specific questions.

A&P for the quarter.

Advertisement cost, last year, we spent close to INR 46 crore. This year, we have budgeted for about INR 70 crores. And I think in the second quarter, we have spent about INR 16 crore plus, INR 17 crore, yes. And going forward, it will be like that only.

The next question is from the line of Ritesh Shah from Investec.

Sir, 2 questions. First, sir, if we look at exports. I think as a part of the call, you indicated that the gas prices in Europe have shot up very sharply. And sir, you also indicated that container freight is also a problem. If I look at the global size seaborne trade, still is a major player over there. Now I'm not sure what is the cost increase over there. If the cost increase is substantially over there, how does Morbi react or how does one look at exports factors, both the cost finding with respect to container freight, plus the power and fuel cost impact because of the gas prices in Europe versus the Gujrat.

See, Europe, but as I said earlier, the cost has gone up by EUR 1.5 per square meter. In the last 2 months, the gas prices have gone through the roof, and there are other costs which has gone up. As far as India costs are concerned, even EUR 1.5 is INR 120 per square meter. When you talk about India, even it increase INR 20, INR 25 per square meter, there is hue and cry because that's what the impact is. So definitely, Morbi will get more competitive. I have no doubt about it, but the biggest catch is the export freight. Export freight, what has happened in this part of the world, that is India and China, similar thing has not happened in Europe for your information. In Europe, the freight rates have gone up by hardly 20%, 25%. We are just doing an expansion, as you are aware. Some of the machines are -- a lot of machines are coming from Italy. There, the freight increase is hardly 20% to 25%. In China, whatever is coming, the freight rate, which is one year back at $1,200 per container, has gone up to $7,000 per container. So it is more of a problem this side, than less of a trouble in Europe. So how it will fair up internationally, I'm not able to say right now, but definitely, with the cost going up every year, Morbi will definitely be competitive. In cost per -- shipping freight, I can't answer that right now.

Sure, sir. That's useful. Sir, my second question is, there is no doubt that we will pass on the gas price increase going forward. But is there a risk of down trading, at the start of COVID we saw a phenomena where in basically larger size tiles we're selling less. And we're selling -- basically industry-wide, smaller sized price tiles were being sold more. So is that a scenario that can come in...

That was for a very short period because in earlier -- first COVID, smaller towns opened faster, the bigger towns opened later. That was only for a period of about 1.5 months. In second quarter, there is no such impact because everything got affected. Everything would open up together. So there is no difference. There is no problem there.

Okay. So despite the increase in prices, this is not something that we could be worried about.

[Foreign Language]

The next question is from the line of [indiscernible] Edelweiss Securities.

Am I audible?

Yes.

Firstly, congratulations to the whole team. Sir, my actual question is mainly related to margin trend. Sir, in the past, we've never ever seen such kind of gas prices. So despite that our sales margin is usually 19%, 20%. What I want to understand is, we are still getting positive of 18-plus margins with this kind of gas scenario. So is this a product mix that is giving us the confidence? Or is it Morbi actually focusing a lot in export? So please highlight that, and how confident we are in terms of margins for the next 2 to 3 years will be very different, we do understand your guidance for the next 6 months.

Let me talk about the first 6 months. What will happen after 2, 3 years, I can't say today. I will talk in the end of the second quarter, third quarter or fourth quarter. While we are positive, not because of product mix. Product is more or less remains the same. Earlier, as I said, these are trend and [indiscernible]. Morbi prices were close to what we are paying now. First time in the last at least 5, 7 years that I can recall, the price difference has become very high, INR 38 and INR 50. They have to increase the prices corresponding to the increase in the gas prices. Which we have started doing earlier. We used to hold up -- we will do it, not do it, nobody knows. But today, we have no chance. It's a question of survival. We are at INR 38. We have that leverage. And as a result, whatever they pass on, I have an advantage and pass on also. So as far as getting, the margins are protected, I said, it will be 15 days to 30 days of any price hike to be passed on. It could be gas. It could be even in transportation. It could be other factors also. Like if you remember, in March, the price of paper went through the roof. We have to take our cost increase by close to about INR 3 crores per month because of the packing cost only. So gradually, it gets passed on, doesn't pass on overnight, but it will always pass on. It has all been passed on. That's why we are able to maintain these margins. And last point is, first time in a long time, we are producing at 100% in the capacity, which you have to pay. Because whenever you shut down a plant, there's a big cost. Last 3 months, July, August, September, the production will be 100%. I think Sanjeev would like to add something.

As the Chairman has said in his earlier remarks that we had taken a price increase of 4% in October. So -- and that has been brought well in the market. And there is not matching cost acceleration in the quarter. So that really give us some very -- some complex to maintain the cost, maybe some improvement in the margin going forward.

Sure. Got that, sir. And sir, my last question with respect to the Sanitaryware division now. Sir, we definitely understood that you are aiming at INR 280 crores to INR 290-odd crores for this particular year, in this entire division. But that will also be led by a lot -- by 15% to 20%, I think realization at least. What's your outlook here, is there any strategic change in focus which is now more going towards Sanitaryware? If you can, sir, provide us with some insights on how the imports have actually been impacted because we have been listening that other companies, there have been a lot of problems with the import. So can you, sir, highlight that. That will be really, really helpful.

See, when you talk about imports, as you know, tiles are not being imported in India for the last 5, 7 years. Not a single box of tiles comes. As far as bath fittings are concerned, nothing is being imported in India. Sanitaryware, some high value-added items have been imported and continue to be imported. But at this -- today, because of the increase in freight rates, which I just shared with you. China, last year at this time, the freight rate was close to about $1,500 to $2,000 per container. Today, it is $7,000 to $8,000 per container. The imports are becoming unwell. So imports have gradually come down. Domestic production will go up. And also what we will do, some of the import good items will produce domestic because the price definitely be much, much, much. So ultimately, everything will be -- you can say, imports would have come down by half, it will be taken over by the [indiscernible].

The next question is from the line of Pulkit Patni from Goldman Sachs.

Sir, I have 2 questions. My first question is about exports. Now on the one side, you mentioned that exports from Morbi has been impacted by higher freight rates. And it naturally would happen if the value of the product that goes in your container is not very high, freight tends to be a bigger part of the overall equation. Now to that extent, tomorrow, let's assume that India would also gain market share from China because of the whole freight rate equation. So how sustainable is this whole export from India, given the fact that tomorrow, if the freight rate globally starts normalizing again, maybe the exports out of China again starts increasing. So I just want to know that this target that we want to increase our exports, the very fact that freight rate itself is something that can move the needle, is it something that we can rely on for the medium to long term? That would be my first question.

Let me answer that question.

So basically, FY '21 also, India exported INR 12,000 crores worth of tiles. The main reason was, USA putting antidumping duties on China also and anti-China campaigns across other parts of the world. But even if the freight rates normalize, exports will come back to the normal level of INR 1,000 crore a month from Morbi. So this will not impact the domestic market, which is on its own growth path basically. So the freight rates normalize, export will still go up as it was pre-COVID also. So that will not impact the domestic market.

Sure. I understand that. Go ahead. Go ahead, please.

I'm saying, for Morbi, right now, the gas costs have increased with slight change and the freight has increased substantially. That's why they are being uncompetitive. It's a matter of size that it comes back to normal, the export will come back to normal. We are still very competitive for India. Morbi have done huge exports in the last couple of months -- last months overall.

Sure. No, so what I meant was basically that as long as the antidumping duty on China remain, we are competitive. If that goes away, then does this equation change or even then we are competitive.

No, it's still not huge. We used to be very competitive. India is always very competitive as compared to China, and even the product that India has today -- yes...

There is no relation of anti-dumping as far as China is concerned. India is the second most competitive producer in the world. It is also the second largest producer in the world. As we all know, due to pandemic, China's preference has come down. A lot of countries have put anti-dumping duty on China, and anti-dumping duty is still on China. It is not for 6 months or 1 year, it is there for 3 to 5 years. So that problem China will always face and India is at biggest advantage. The only disadvantage is, it happened of late is the increased freight. Competitive-wise, India is very, very competitive, very, very competitive.

So fair point. Sir, so we can assume that about 5% of our revenue in the medium term could come out of exports. So that's clear. Sir, my second question is on the dumping...

The current revenue out of exports is hardly 2% to 3%. We are starting our Dubai operations to look at the export opportunity. As we rightly said, just now, it could be maybe in a year ahead that is '22, '23, it could be 5%, yes.

Got it, sir. That's clear. Sir, now on the domestic market, while I understand passing on prices should not be that big a problem, particular typically to retail customer. My concern is, when it comes to the kind of inflation we are seeing on steel, cement, mainly tiles, do you think for the institutional buyer, which is about 30% of your total sales, there could be some down trading just because I think this kind of price increases are [indiscernible].

Are you not aware that prices of steel has gone up by 50% to 70% in the last 1 year. Plastics have gone up by 50% to 70%. Rubber has grown by 50% to 70%. [indiscernible] 70%. When is the question of down trading. What kind of question is this? How can down trading [indiscernible] without the [indiscernible], the prices have gone up by 50% to 70%. So where is a question of down trading in all this. We are talking about 50% to 70%, I'm talking about 5%, 7%, you are saying that there is a down trading. What kind of question is that?

And just to answer your question, in October, we've already increased prices with our institutional buyers, and they've accepted it with that term that November, the price will further increase. So we have already started increasing prices with our institutional customers. So there's no down trading, and they are -- if they don't accept, they have no choice because they're not going to get material from anywhere else. Prices everywhere is increasing. So they have got no choice but to pay.

Fair point. That's what I wanted to understand, how easy is it to pass on prices, so...

It's not about being easy, it is about there is no choice. If the cost increases, it's usual buyer also has to put tiles in its project. And if he's not going to get anywhere in the market because everywhere the cost increase. So he has no choice, but to give the increased costs to all the supply.

The next question is from the line of Nikhil Agrawal from VP Capital.

So sir, I wanted to understand since you mentioned the gas prices, [indiscernible] under operating expenses is that gone down quarterly? And even on the margin side, your power costs are coming down when you compare situation. So for -- can you highlight on that, do you have to guess on how active the company is that you purchase that from?

Yes, that's right, actually. If you see sequentially, we -- the power and fuel cost has come down, but Y-o-Y, it has gone up. The main reason is because of a little change in the mix in the power on the fuel cost side. So if you see our overall cost have not even gone up sequentially also.

Okay. So you have any contract with -- sir, mentioned that even Morbi purchase gas from [indiscernible]. So do you have like this contract that you buy that on spot prices?

We have a contract, but that contract is based on crude and the bigger portion, as the Chairman has stated earlier, a major portion of gas is coming through that long term and [indiscernible]. So that is why our gas cost is cheaper than Morbi, and going to remain the same in this kind of price scenario related in the industry. We are currently and for the next few quarters would be cheaper than Morbi.

Okay. And sir, just one more last question. You said that your gas prices for [indiscernible] INR 50 in Morbi in October, right?

Please, come again.

You mentioned that your gas prices in Morbi is INR 50 for [indiscernible].

Not for me, for everybody. For everybody.

Okay. So you said that the price situation [indiscernible] is a lot. Sir, I wanted to know what is the price at Morbi [indiscernible] right now.

[indiscernible]. They are all resources. They are paying full GST. They are interests. And the gas price for everybody was same as far as GSPC is concerned. There is no difference between A, B, C, D, E, F.

Just to add to your first question. When you asked there was a decrease in gas costs sequentially because the first month was closed in the first quarter. So because of that, there was a higher impact on the cost, and that's why [indiscernible] is coming higher in quarter 1 as compared to quarter 2.

The next question is from the line of [indiscernible] Wealth Management.

Sir, my question is that in terms of the production from Morbi, what percent goes towards domestic and what percent of export?

See, currently, at a given point of time, currently I can't say. Let's say, they were exporting close to about 35% of their production as exports and that was coming in a domestic market. So these exports got expensive because of the shipping fee. They closed down their plants, to avoid, I said, some plants were closed for 1 month. The will charge and GVT was closed for 1 month, given indefinite period of time. And [indiscernible] for 1 month from 1st September to 30th September. So that is how they adjusted their capacity because they could not market it domestically [indiscernible]. So when you talk about number, close to 35% production should go to exports, should have gone to exports earlier. Right now, it's less because of a different situation.

Sir, what will be the production bifurcation percentage-wise between Morbi and South?

For me, for us?

Yes, sir.

For us, not so much.

Sir, Morbi is around 18%.

Morbi is around 18%. That's only [indiscernible] as far as production is concerned, but we also outsource both [indiscernible] ceramics. South is close to about what?

10%.

10%. South is 10% -- yes. And Morbi is about -- and we are doing a lot of outsourcing of ceramic pipes and [indiscernible].

Okay. So that means it's not -- you'll benefit or not from the lower gas rates. And sir, final question is, what is the CapEx plan for the next year and the next fiscal?

We have already said in our earlier thing that we are going to 3 CapExes. The total cost is about INR 275 crores. We're expanding the capacity as [indiscernible]. We have funded the capacity at Kalahasti South, and we are expanding the capacity in Jaxx. It's all part of the report which we have given. So it's INR 275 crore expansion. And all the extensions are coming in this financial year.

The next question is from the line of Achal Lohade from JM Financial.

Just wanted to clarify, in the earlier [indiscernible], you said 70% of our gas is long term in real term and 30% is spot. Just wanted to clarify, is it fair to assume that your North plants are on long-term, South is on spot and the rest is on the continuous basis. Is that understanding right?

No, no, no. Wait, wait, wait. What I said was, the North plants, Sikandrabad and Gailpur, 70% is long term and medium term and 30% is spot. As far as Morbi is concerned, everybody buys only from GSPC. So that's the spot, whatever the price is. And it depends on when they hike the prices. They hike their prices on 24th of August and 1st of October. As far as the South plant is concerned, it is on spot like [indiscernible]. So the prices went up, the rate prices, it was INR 45 in the month of September and 1st of October, we kept to INR 60, depending on what the situation we had to face. And it is a small capacity. It's a value-added capacity of [indiscernible] and the capacity is about 3.7 million square meter -- 5 million square meter, which is about 7% to 8% or 8% of our capacity. [indiscernible] Very cheap gas. Yes, which is, again, a small capacity of about 5%, 6%.

Right. Right, sir. When you said INR 38 currently. Was that [indiscernible]? Or are you talking about the long term for the north plant, sir?

[indiscernible]. Cost of gas to be.

The blended cost, including the cost.

Yes.

Okay. Okay. The second, just a follow-up question on that. Sir, if you look at the manufacturing location and the gas. So like you have outsourcing of 20-odd percent, we have [indiscernible]. So is it fair to say like 50%, 60% of the volumes, we want to see a cost inflation, but the North plant will be far more competitive in terms of the gas cost?

All these have already been discussed. All the information has been shared, why do you keep on asking the same thing again and again. It's already been discussed.

The next question is from the line of Rajesh Ravi from HDFC Securities.

My question pertains to, we are in mixing volatile period energy cost sorting through the roof. However, even in this September quarter, the volume growth has been quite robust. So any sense how is the demand expected to play out over the next few quarters? What is your understanding? And as you are [indiscernible] the domestic market, what sort of full year growth you are looking at?

I think it's a very interesting question you asked by using the word volatile. I think this is a scenario currently. Believe me, every day when we come to the office, this is a situation volatile. That's number one. But fortunately, to answer to your second question, the demand scenario is very positive. The Tier 1, Tier 2, Tier 3 cities have bounced back. A lot of construction is happening in those cities. You will be amazed the kind of construction which is happening. Two, the prices have also gone up by 15% to 30% in the smaller towns. This is what we get a feedback mostly from our dealers because we are there. And the normal construction in you can see metro is also on because people want bigger -- people want to move to bigger premises and because of the spending where people get, they have smaller places, they want to move to bigger premises. So going forward, demand is boosted. And I'm sure what we shared with you that we are looking at close to 15% volume growth and 20% revenue growth is there, and we're expecting half of the year.

Okay. So second half, 15% volume and 20% revenue growth. So because you're looking at strong volume growth and that is where your bullishness in terms of that order cost is going up, that can largely be passed on. Is my understanding correct, sir?

Your understanding is absolutely correct, which has already been passed on. See, people are not talking about. There was a hike in July. There was a hike in October, close to 4% because summer is -- our costs are going up and [indiscernible] as Chetan said earlier, if the costs are going up, we no alternative but to pass on. Everybody in the industry has passed on these costs, and so we are [indiscernible]. We are all at a level playing field.

Correct. So because demand overall is good, and this is helping the industry to pass through the cost, and that is what you need to look at it that we will be growing. And for the industry, what sort of growth you guided? Your volume growth at 15%, but for the industry?

Market industry in the domestic market should grow at about 7%, 8%, 9%. Why? Because exports have suffered and for some time, it will suffer. So they have to sell domestically. So domestically, also the growth should be about close to about 7% to 9%. That's what we are estimating. That's our focus.

The next question is from the line of Sandeep from [indiscernible].

I just wanted to congratulate you on the great performance. [indiscernible].

Sandeep, your voice is breaking so we cannot hear you properly.

Yes.

Can you repeat your question, please?

[indiscernible] congratulate you on your great performance.

[indiscernible] to hear you again.

And good to hear on the call, sir. And now people have invested [indiscernible].

[Foreign Language] Your voice is not clear.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Manish Mahawar for closing comments.

Thanks, Vidiya. On behalf of Antique Stockbroking, I would like to thank the management of Kajaria Ceramics to provide us an opportunity to host the call. Ashok, would you like to make a closing comment, sir?

I thank you for organizing this, and some of the people, there is very positive questions. I'm glad to hear that. And as a Kajaria team, so we're here. We'll be too glad to answer any questions post this conference from -- raised by anybody. So a special thanks to everybody who joined. And any time anybody has any question, our team will be too happy to answer that. Thanks. Thanks.

Thank you.

Thank you. On behalf of Antique Stockbroking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.