Kajaria Ceramics Limited (500233) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kajaria Ceramics Limited Q3 FY '23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Arun Baid. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. On behalf of ICICI Securities, I welcome you all to the Q3 FY '23 [ Post Investor ] Con Call of Kajaria Ceramics. From the management side, we have Mr. Ashok Kajaria, CMD; Mr. Chetan Kajaria, JMD; Mr. Rishi Kajaria, JMD; and Mr. Sanjeev Agarwal, CFO. Now I hand over the call to Mr. Ashok Kajaria for his opening remarks, post which the floor will open for question and answers. Over to you, sir.

Thank you, Arun. Good evening, everyone. It gives me great pleasure to welcome you to the quarter 3 F '23 and 9 months FY '23 Earnings Conference Call of Kajaria Ceramics Limited. Joining me on this conference call are my sons Chetan and Rishi; our CFO, Sanjeev; and Pallavi Bhalla from Investor Relations. The third quarter of the year presented a unique scenario as all the major festivals such as Diwali, Durga Puja and Chhath Puja all fell in October 22. The extended holidays during this month had a significant effect on our sales. However, we observed a resurgence in demand during November and December '22. Recent dealer expansions in untapped markets, such as semi-urban areas, should also result in better growth in the future. Our margin recovery has been slow. We expect further improvements from quarter 4 onwards. We have started using alternate fuel from December 22 onwards, which will reach to its maximum capacity by mid-February '23. This will take total consumption of alternate fuel up to 35%, resulting in good saving in power and fuel cost. We are also doing monetization to our Gailpur plant by refreshing 2 old kilns, which were put up 25 years back in 1988 to the new [indiscernible] kiln. This will not only enable to produce bigger sized tiles, but also result in saving in fuel consumption as the new kilns are more energy efficient. Overall, the company grew by 12% in volume terms and at 22% in revenue terms during the first 9 months of the year ending December '22. We are dedicated to our growth strategy, which includes expanding market share and increasing in the number of dealers across India, particularly in unrepresented territories. We are confident that our strong foundation and commitment to excellence will continue to drive its success in the upcoming quarters, both in terms of sales and profitability. Export momentum has improved in Morbi after being impacted for a few months, and we anticipate that export will touch INR 15,000 crores to INR 16,000 crores in this financial year, '22-'23 against last year of INR 12,700 crores. Now for this quarter's performance of Kajaria; in quarter 3 F '23, consolidated revenue from operations increased by 2% year-to-year to INR 1,091 crores from INR 1,068 crores in quarter 3 F '22. The dismal increase in revenue is mainly because of discounts offered in response to subdued demand scenario. Revenue from the Bathware segment declined by 3% in quarter 3 F '23 to INR 79 crores from INR 82 crores in quarter 3 F '22. Revenue from the Plywood segment declined in quarter 3 of '23 to INR 19 crores from INR 25 crores in quarter 3 F '22. EBITDA margin for this quarter stood at 12.20% as compared to 17.21% in the corresponding quarter of the previous year. Sharp decline in margin was mainly because of disruptions in natural gas supply, followed by unprecedented decrease in cost of gas. Consolidated PAT in quarter 3 is INR 74.32 crores. As on December 31, '22, our working capital days have also increased by 4 days to 66 days as compared to 62 days as on September 30, '22, mainly because of increase in inventory levels. With this, I take this opportunity of thanking you for joining us today. Over to you for Q&A, please.

[Operator Instructions] We take the first question from the line of Mr. Rahul Agarwal from InCred Capital.

Sir, 3 questions. Firstly, on demand. Sir, I need some help to understand this. Obviously, it looks a tough environment outside. But how is January? What do you expect in fourth quarter and next year in terms of volume growth? How would you look at the lay of the land right now? That's the first question.

Okay. You please go ahead with all the 3 questions. I'll try to answer all the 3 questions.

Okay. Second was on the gas price, it would help us with the average gas price for third quarter and fourth quarter expectations because my sense was it was supposed to be down 10% Q-o-Q in the 3Q, INR 256 SCM from INR 62. I don't think that happens. So if you could just explain us what is the direction like? And third was, if any update will be provided on the Nepal thing, because we are expecting that's largely coal setup and margins would be upwards of 20% at EBITDA level, and that will start somewhere next year, March for fiscal '25. So these were the 3 questions, sir.

Okay. As far as the volumes are concerned, July, August, September, October were very, very tough. November, December things skid up. Again, January has been, again, very tough, but I hope that February onwards should be better. And this in future, we are looking at about 13% to 15% volume growth for the year '23, '24. As far as the gas prices are concerned, quarter 2 F '23 was INR 56 average. Quarter 3 FY '20 -- quarter 3 was about INR 53. And going forward, quarter 4 should be in the region of about 47%, 48% because we are using alternate fuel now. We are using biogas as a fuel. In tile plant, we have 2 things. One is kiln and one is a [indiscernible]. Kiln is fired by gas or LPG or propane, [indiscernible] can be fired either by coal. In NCR, we cannot use coal. But now the permission has been given to use bio-fuel. So we are using bio-fuel as far as this is concerned from the month of December. You'll be happy to know when we started in the December it was about 11%, 12%. In January, it went up to about 24%. And February, it would be close to about 30%. As far as the Nepal is concerned, Nepal, I was there last week, this week on Monday, Nepal will have yet to kick start the project. As you might be aware, elections were held recently. We are waiting for a final outcome of how the government will function and then we'll start everything by sometime around March 15.

So Nepal plant starts at what time, sir?

Nepal plant, it will start by March 15. March, Nepal plant should be commissioned by March 24. In all fairness, it should be ready by March 24.

And the expectation is right that it is coal-fired and EBITDA margin should be upwards of 20% there?

EBITDA margin, I can't say right now, but definitely will be very positive, and the plant will be coal fired and also we'll use this biofuel for [indiscernible].

Got it, sir. And one last clarification, you said third quarter gas price was INR 53 or INR 56.

The third quarter, the gas price was INR 53, for second quarter was INR 56, and fourth quarter should be around INR 47, INR 48. I'm not talking about gas price. I'm talking about the fuel price. Now we talk about the fuel price.

We'll take the next question from the line of Mr. Achal from JM Financial.

My first question was with respect to the discount. You made a comment that there is increased discount. Would you be able to quantify that? And how do you see the situation now given the fuel costs seeing a decline even for the others, especially Morbi players. So how do you see the price evolution actually in the coming quarters? Do you see the discounts or price reductions or you think the benefit of the fuel cost can be retained by us?

See, normally, what happens when the prices of fuel comes down or costs come down, you don't reduce the prices. What you do, you basically pass on some discount to the dealers to sell more. And that is what we did in quarter 3, and that is what we, again, will do in quarter 4 because with the gas price coming in, 2 things will happen. We don't talk about raising any prices people keep on asking us the price increase is off limit. And to sell more because ultimately, we have to solve bigger volumes, we offer some discount to the dealers so that they can sell more.

Right. Would you be able to quantify, sir, what was the extent of discount at an aggregate number?

Because it depends on product to product depending on what you want to push, whether ceramic requires a different discount in core pricing this thing vitrified, polish vitrified is another, vitrified is another. So quantifying will not be possible. But definitely, as the need be, we will take care of it.

Understood. But is it fair to say that it was there evident in case of GBP or you think it was more of PBT ceramics?

All the 3 products because ultimately, [indiscernible] everything we have to sell. So everything has to be pushed. Everything is -- some pricing adjustment has to be there because when the prices the best has also come down as you are aware. You have to find the right solution to make sure that the volumes come. That you do the right thing so that you can sell more volume. Ultimately at the end of the day, volumes are reported, no?

Perfect. Understood, sir. And given the fuel mix, what you are saying, what is your cost difference between earlier gas and now what we are looking at in terms of the alternate fuel? You've said a blended price, I know, but just if we were to understand the price difference between the alternate fuel and gas price, how would that be as of now?

Alternate fuel should be priced. The cost impact should be around INR 30 per SCM and gas prices currently are about INR 57 to INR 58 per SCM.

Okay. Understood. And any indication with respect to margins. You have said the fuel cost will have some benefit. And hence, but any color in terms of these margins, would we go back to 15%, 16% or you think it is some time away?

No, fourth quarter, we are looking at a positive margin of 14% plus.

Right. And how about FY '24, any -- with that 13% -- 13% to 15% volume growth?

Yes, that's what we are talking about. That's what we are talking about volume growth. Let the margin scenario come after the fourth quarter. Let us first perform in the fourth quarter, then we will talk about the margin for the year ahead.

Got it, sir. And just one more question, sir. I mean if we were to look at 13% to 15% growth on a going-forward basis, the capacity additions will also play out in the same fashion. In that case, what is the CapEx number one can work with on an annual basis for next 2, 3 years?

Next year, I can talk about. You see last year, but this -- this financial year, the CapEx has been roughly about INR 90 crores. It has been less about CapEx. Next year, as we are doing many things, the CapEx should be close to about INR 300 crores plus.

We take our next question from the line of Mahek Talati from YellowJersey Investment Advisors.

Sir my question was regarding the demand scenario. So you said that the demand is -- demand was tough in Jan. So how are we expecting -- from which segments are we expecting good demand in market North, South, East or West?

This is Rishi Kajaria. So demand overall is tough. The ground reality is still very tough. But because we got some spike in our cost, we will try to get some more extra market share and we try to sell more. But overall, the entire India, the demand situation has not increased a lot. And that is what you see in all the building material industry overall.

Okay. And what is your current capacity utilization?

We're almost at about 90%, 93%.

Sorry. Can you?

90% to 93%, 93%.

Okay. And any expected CapEx for increasing capacity? Because I see in expansions, we don't have much capacity with regard to the tile. So any expected capacity expansion in that segment going forward?

Not really. We already have a lot of capacity in hand. I think with this and a little bit of outsourcing, we should be able to meet next year.

And from FY '24, for '25 onwards?

Then we'll plan separately. I mean right now, we're talking till FY '24, which we already planned a CapEx about roughly INR 300 crores to INR 400 crores, which is -- includes your Bathware, Nepal, our maintenance, our Secunderabad modernization, our [indiscernible] modernization. So that should take care of FY '24. And beyond that, we still haven't planned. That we'll plan in the next 3, 4 months.

And how is the Bathware segment picking up, like in terms of demand? Like is it the same like tiles or are there seeing some pickup?

See, Bathware again -- see tiles are very, very strong. We're the #1 brand. So Bathware we are still not there completely. And if the market is tough, the growth is difficult. But we're putting all our best efforts and we're seeing, hopefully, things should get better. Overall in 9 months, we still have grown. This quarter was a little tough.

We take the next question from the line of Mr. Girish Choudhary from [ Avendus Spark ].

So firstly, just a bit more on the alternate fuels. You said that the usage has increased. I just wanted to understand the sustainability of the supplies of the same? And also, is it getting build across all your plants or especially 2 fuel regions?

Alternate fuel came in the picture because in NCR, you cannot use coal, right? In Morbi they are using partly coal because in the [indiscernible]. So alternate fuel is biomass, which has been allowed and being used in NCR plants [indiscernible]. Sustainability is not an issue. It is basically a [ master desk ], which is being mastered [indiscernible] which is being used. So sustainability is not a problem. And Rajasthan, as you all know, is a big producer of [indiscernible]. So sustainability is not an issue. And the cost has come down and will further come down as we go along.

Okay. So you're using this primarily in our Rajasthan plant. So not?

In Rajasthan plant and UP plant also. Secunderabad and [indiscernible].

Okay. So is there a scope to use the same in the -- your South plants and also mainly the?

South plant is also using a bio-fuel but a different bio-fuel and combination of bio-fuel, combination of LPG and combination of coal, it is allowed there.

Okay. Got it. Got it. And secondly, on the working capital, right, where we are seeing consistent increase in working capital last 2 to 3 quarters. So any reasons and do you see to reverse again as we go back to the normalized levels of 50-odd days?

It's been tough. First 3 months have been good. Last 6 months have been very tough. But definitely, it will come down by March. That much I can assure you.

Okay. But what is driving this increase?

The excess stocks? Excess stocks. [indiscernible] because of the market condition as simple as that. But definitely, the thing is looking up I think by March, it should come down.

Got it. Sir, lastly, I also see that you have decided to divest the Vennar Ceramic plant. So any reasons for the same? And also any plans to replace this capacity by adding [indiscernible]?

Hi. This is Chetan Kajaria. So the divesting our stake in Vennar is the existing promoters mainly because of 2 reasons. First, due to the National Green Tribunal Hearing, Vennar comes near the Lake Kolleru, which is in a 10-kilometer radius, and we cannot do any further expansions in Vennar, which reduces the profitability and the overall costing. Secondly, the price of gas and Morbi has come down substantially and become cheaper to outsource or more by landed versus in us. That's how we divesting us taken Vennar our existing promoters who hold 49% stake. Secondly, the gap which we will get by giving Vennar back to the promoter to make up out proceeds from Morbi.

The next question from the line of Mr. Praveen Sahay from Prabhudas Lilladher.

The first question is related to volume growth in the subsidiary, which is pretty well as compared to the own manufacturing. So it's fair to understand that the premium times volume demand were softer comparing economy or a ceramic?

You're talking about South Asia ceramic or tiles on the general level?

Overall, in a quarter, subsidiary volumes were pretty well as compared of your own manufacturing volume. So just trying to understand, it's because the own manufacturing largely is the PVT, GVT, so is that the softer demand in the premium tiles versus the?

What happened is the tiles are growing together. There is no such -- all the category tiles are growing together simultaneously. And the South growth is because of acquisition in South Asia, Ceramic, which we did 2 months ago, that also help us penetrate to southern markets.

Okay. Okay. And a second question related to subsidiary only, that's in the last 7 quarters, if I look at the realization were quite volatile. So what is the reason for that?

The subsidiaries, the realization, where do you see the volatility?

So just I had calculated on the basis of a revenue versus your volume.

It's only because -- it's all led to demand. There's no.

No, no, not dement, it's quite volatile in the last 7 quarters, if I look at the realization were quite volatile some INR 319 in the first quarter '22, and it went up to INR 385 and now coming back to INR 316. So every quarter, it's a quite volatile different, not consistent, I can say. So is there any particular reason for that?

No, no. It's basically change in the mix because subsidiary is what's happening is one of the coal fire unite we are converting into GVT which we have converted now. So now the proportion has got -- like GVT is a premium product. So obviously, your realization will move up. And as and when the production will increase, the realization will move up. The change of volatility was mainly because we changed a few items of South Asian ceramics, which we acquired 2 months ago, which was earlier there in the outsourcing portion now it moves to the JV portion. So that's where some volatility were there in the pictures, but now it is going to be -- remain sustainable, and it will increase gradually as the GVT production will increase in Kota.

Okay. That's thankful. That's great help. Second question is rated to the Vennar. The total consideration of INR 18.25 crores, have you recognized anything?

So we invested that nearly 10 years ago when we bought the 51% stake in Vennar. And we have an agreement with the promoter that will get the same money back when we divest the stake in the next one year, back to the promoters.

So it's not yet it started divestment or?

Starting from 1st, 2023 and finish by 21st March 2024.

We take the next question from the line of Mr. Ritesh Shah from Investec.

Sir, my first question is what will be the optimal mix on you indicated that we have in the bio-fuel to nearly 30% of the overall mix. So I just wanted to get a sense if the current pricing remains, what is the threshold which is possible practically on bio-fuel, LPG and the other long-term midterm contracts that we usually have?

The bio-fuel, LPG and gas, which was 100% gas at one time, 4 months back, 5 months back will be 35% bio-fuel and LPG by end of February.

Sir, how much would be LPG? So 35% is bio-fuel, LPG would be how much?

No. Total, if I take you 4 months back, it was 100% gas. We are now comparing gas versus LPG and bio-fuel. So 4 months back, it was 100% gas. End of February, it will be 65% gas and 35% due the combination of LPG and bio-fuel. Out of which, LPG will be 5% and bio-fuel will be 30%.

Okay. And sir, how much will be the remaining LPG prices for bio-fuel indicated, I think, INR 30 per SCM. I would presume that is on landed basis. How much would that?

The LPG prices are about INR 58. Gas prices are also at about INR 58, INR 57.5 and by bio-fuel will be INR 30.

That is useful. And sir, would it be possible for you to quantify the regional price trends we usually give right on gas for Northwest and South for this quarter and the prior quarter, please?

The quarter we just ended, the North prices were INR 57. South was INR 44, West was INR 48 and average was INR 53.

And sir, for the prior quarter, if it's possible?

Quarter 2, North was INR 59, South was INR 48, West was INR 53. Average was INR 56.

Perfect. And sir, last question on Morbi. Can you give a top-down view basically on the number of units which are there right now? What percentage of units are currently operational? And then say, around a year back, you were hearing a lot of news [indiscernible] around several new units, which were expected to come in. Has that already come in or it's more of a story, it hasn't actually materialized. So that would be very useful.

That you have to find out. Number one. Number 2, I can tell you what is the size of the industry right now. The size of the industry currently is INR 57,000 crores. As per the latest data published by Ceramic World Review, out of -- I'm sorry, INR 52,000 crores ending March 23, out of this INR 40,000 crores is domestic and INR 12,700 crores is export. Roughly, as per their information, there are about 600 units, which are there in [indiscernible] because when the unit close for one month that's how when the data get published and that information came out that it was roughly about 600 units.

Sure. Sir, just last follow-up. Sir, a couple of months back, you had taken a shutdown for a month. I think it was from August 1 to I think September 1, something around that.

Absolutely correct. Absolutely correct.

Correct. Sir, what we hear something similar is actually possible because the demand conditions are not that great. Is there some merit to it or how one should understand this particular variable?

This is news to us as of now. As of now this is new to us. Demand is tough as already said by Chetan and Rishi and myself. But this news of Morbi shutting down for one month is news to us. Yes, [indiscernible] has reduced the gas prices twice. So gas prices there are also around INR 48 to INR 50 depending on whether it's one-month contract or 3-month contract, which at one time was close to about INR 62. So they have also reduced the gas prices.

Perfect. Sir, last question, if I just squeeze it in. Any expectation hopes from the budget GST gas rates.

Budget cannot cut GST, as you are aware. Budget can only give more money we pocket or the middle class of India, which I think they will, but budget cannot touch GST.

The next question is from the line of Udit Gajiwala from YES SECURITIES.

Sir, just one question on the demand front. So like you said that demand is sluggish. So could you highlight is it from the metros or more to do with the Tier 2, Tier 3 cities? And where is the respite from Feb that you are expecting from should come?

Demand is overall slow all over India, whether it is Tier 1, Tier 2 or Tier 3 cities. And things going forward, let's see, hopefully, I think -- I think the demand and market should improve everywhere. We cannot single out any phase that we are looking at better demand. But because of our penetration because our South plant, we get a little better market share in the South market with our Tirupati our South Asia plant. And otherwise, the demand scenario is tough all over India.

We take the next question from the line of Mr. Nikhil Agrawal from VT Capital.

Sir, I just wanted to understand more about the bio-fuel that you mentioned. So INR 53 was the average that you said for Q3, which is a blended average of bio-fuel and natural gas?

No, no. Q3, we had no bio-fuel. Bio-fuel only started in the month of December. By February will be complete. By February, end of February, it will be completed. We will be in a place to put that by end of Feb.

Okay. So the average, that you said, INR 53 for Q3 and INR 56 for Q2 was only natural -- the gas cost.

Only gas, yes. Hold, hold, hold. One minute. For north, it was gas; for South, it was a combination of various things, fuel; and west also, it was fuel on this side. But for North, it was only gas.

Okay. Okay. As far I remember, like for Q2, the average gas cost previously you had mentioned was INR 61 in the previous call.

But at that time, what we mentioned was correct, what you're saying is right. We mentioned INR 62 at that time. We did not take the other fuel into account because we were only talking about gas. With bio-fuel coming in now we talk about fuel, we don't talk only about gas.

Okay. Got it, sir. And sir, like why all of a sudden have you started using bio-fuel? I mean, was there some approval from the government or?

No, It's a [indiscernible] by NGT. You see, earlier, before March, we had only approved of [indiscernible] and then after that, they approve for all industries because once industry is approved, they have also approved all the industries, they can use bio-fuel, number one. Number 2, as you are all aware gas costs have went up haywire in July, August, September, October onwards, because of war between Ukraine and Russia. And as I'm talking about INR 62, INR 63, the spot gas at that time had gone up to INR 120. And supply was a constraint because still there is a [indiscernible] bill on gas, just for -- Russia is giving you a lot of oil, but when it comes to gas, they still have a problem, again, as a problem.

Okay. So basically, like you -- there was no approval from the government. I mean, you could have targeted using bio-fuel before as well?

No, no, no, no. Government gave an approval after March 22. It was there for boilers much before that.

Okay. Okay. Got it. And sir, like did you require any major CapEx to switch to using bio-fuel or was it -- that was nothing major? CapEx?

I think the total CapEx for using bio-fuel for both Secunderabad should be in the region of about INR 7 crores, INR 7.5 crores.

Okay. Okay. And sir, like is it not -- we will not be converting to bio-fuel in all the other plants?

Yes. What was the question?

We won't be converting to bio-fuel in all the other plants because it's a cheap alternative.

Not required.

You see in NCR, you cannot use coal [indiscernible], you cannot use coal and then bio-fuel come in. In Morbi, we are using coal [indiscernible] combination of coal and some other materials. In South also, we are using a combination of coal and some other materials, some bio-fuel. And in NCR, you can only use bio-fuel. You cannot use coal. Secunderabad, Belapur are all part of NCR.

We take the next question from the line of Mr. Harsh Pathak from B&K Securities.

So I think there has been some downward -- a slight downward [indiscernible] in the expectations in the -- for the exports that is to INR 6,000 crores. So now are we expecting any pressure -- supply side pressures in the domestic market a potential diversion from [indiscernible] are we expecting anything on that front?

We already have said earlier, markets are under a lot of pressure. It's not a question of only downward pressure because of the export market. The demand scenario has been sluggish. Things should gradually improve because ultimately, one of the factors for sluggishness, as we all know in the entire building industry is the increase in interest rates by 2%. Repo rate has increased by 2%. That's one of the reasons why the real estate market facing this problem. So once things settle down, things will correct.

Okay. So there are no supply side pressures that we envisage at this point in time?

See you forgot, just now one of your colleagues asked me a question, which I didn't have the answer is Morbi going in for another one month shutdown. I didn't have the answer. So I said, look, I'm not aware. But that scenario, as it is tough -- getting in the domestic market and getting out do you think it is that easy.

Sure, sure, sure. And sir, my second question was there is this news on.

Ask all the questions together, please, I will be too happy to replay, but don't ask one and 2 and 3. Yes.

Sure. Just one last question. There is this news that government is contemplating this [indiscernible] dumping duty on vinyl tiles from China and Taiwan, is there a very substantial market for this? And any potential benefits to the ceramic industry as such?

No, no. I also read this article. They have already taken a decision. Finance Ministry has to clear because probably imports must be coming in the vinyl industry, but it has nothing to do with the ceramics. Ceramics will not get any benefit out of it.

The next question is from the line of Jignesh Kamani from GMO.

You mentioned that October month demand was weak because of the monsoon and multiple [indiscernible]. So how is the growth in the November, December month combined?

I already said October month because of monsoon, but because of the entire festive season right from Durga Puja to Diwali, October was literally [indiscernible] and November-December things have been much better.

So November, December volume growth was in double digit?

It was 10% plus.

And this run rate is continuing, right? And November-December run rate is continuing right now also, right?

We hope it should continue. I can only tell you right now. We hope it should continue.

We'll take the next question from the line of Lavanya from UBS.

Most of my questions are answered. Just one question. So for this bio-fuel, do we have any long-term acumens or how are we planning to source this new fuel which we are planning?

We as an industry started using it only about 3 months -- 2 months back from the suburb. But the boiler industry like textiles, they have boilers, they have been using it for the last 6, 7 years. Our friends are also using it. Supply is not an issue at all. And especially in Rajasthan, it's not an issue. We have plenty of mustard husk available.

Okay. So it will be largely spot that you will be taking as per the requirement.

Yes, yes, yes, yes.

Okay. Okay. Got it, sir. And one more question on -- did you see any pricing reduction by Morbi players during this demand sluggish environment? Like they have increased the prices during the -- when they had fuel increase -- fuel price increase now where fuel costs are reducing and demand is tough. So any price cuts from their side?

There are 2 kinds of working. One is the Morbi working. One is the organized spare works. Morbi per se will take some price cut because the fuel prices have come down. In the organized sector, what people do like [indiscernible] and Johnson, what we do normally, we give more discount to the dealer distributor -- to the dealer to sell more, which takes care of that. So that's how it works.

[Operator Instructions] We take the next question from the line of Jenish Karia from Antique Stock Broking Limited.

Sir, what would be the current debt levels and any specific reason for rising interest cost during the quarter?

One sec.

That is minus INR 188 crore. We are positive with that, negative debt to INR 188 crores as of December 31.

And sir, rise in interest cost, any specific reason for that?

Sorry, INR 188 crores.

I got that, sir. I was asking about rise in interest cost, any specific reason of interest cost has gone up from a [indiscernible] INR 3 crores to INR 8 crores?

Yes, we'll just check and come back to you again.

We'll take the next question is from the line of Mr. Saurabh Jain from HSBC.

Yes. Most of your questions have been answered. So 3 questions. Again, on the bio-fuel, you mentioned that the source of raw material is [indiscernible] first, which are presuming is more like that season crop happens in winter. So I want to understand 2 things. One is the supply available?

Your voice is not clear.

Okay. I'm sorry. Is it clear now, sir?

Yes. Now, it's clear.

So what I'm asking is given mustard is more a seasonal crop, first thing is the supply of bio-fuel assured condition throughout the year? And secondly, what is the kind of pricing volatility that could be there in just the bio-fuel element? Is it more stable than the gas cost? Or is it also has quite much of volatility? This is one. And secondly, I also.

Let me answer this first, if you don't mind. Good question. First is supply is assured throughout the year. Right now, what we are paying is the highest because the mustard crop comes only in the month of early March. So prices will further come down when the crop comes, which is there for almost 4 months, and then they storage and supply for the rest of 8 months. So what we are paying right now is the highest. And supply is not an issue at all for the whole year.

Okay. So continued supply would be there and pricing would actually be going down from what it is to be.

In March, April, May, June, the prices will come down.

And then may again go up in the coming winter before the crop comes to market.

Then will go up at the level which we are paying now.

Okay. Understood. That is useful. Secondly, your second of GVT expansion, has there been a moderation in terms of the CapEx that we plan to do? I think we were earlier adding 3 MSM now, it seems we're adding only 1.8 MSM, is that correct?

No. So I'll tell you. Basically, we are looking for more value-added and bigger tiles. So this is actually never [indiscernible], it was actually about 2 million only. And because of the larger tiles, it is -- we have made it 1.8. We plan to make much bigger tiles there, so the square meters will come down. But the value realization is much better. The margin on these products will be much, much better than the regular tiles.

Okay. Okay. Because I thought previous quarter, we were targeting 11.4 MSM and now we are targeting about taking 10.2.

Correct, correct. So now we are increasing it by 1.8 million square meters. But as I said, because we're making much bigger tiles, we're talking about a bigger strategy than even 1,200 by 2,400, which is, 1,200 by 2,800 where the realizations are even better. So we are going for more value-added and better realization tiles that's how we reduced the capacity.

But it won't impact your assumption of the revenues and actually be more margin accretive?

It will be better.

It will be better. Okay. And thirdly, can you talk a little about your -- just Dubai plants, I mean, what exactly are you planning from a strategic point of view over the next few years? That would be helpful.

So we made this joint venture with a local marble partner there who are big in marble there. And the idea is to -- for the Dubai venture to because Dubai is after the entire Gulf and Africa. So a lot of -- we're getting a lot of inquiry. A lot of people are coming from everywhere, seeing the showrooms, seeing the tiles. And the idea is to penetrate the export market. Our export is very, very less right now. It will always be very less as compared to our domestic, but still if we can increase some numbers, we will do that. And the retail margins in Dubai are very, very good. So that margin -- that retail sales of the showroom will take care of the costs. So that's the idea. The idea is to increase our export penetration. And unless we show the tiles there in a proper way, you could not get that thing in the market.

So you'll be having also sales force employed or [indiscernible].

No, we don't have any sales force employed in export markets. Our only sales force is now just starting in Dubai market.

You're going to ramp up on that front and probably incur some sort of expenses. Can we see a lift level of [indiscernible]?

No, it's a joint venture. Kajaria all in of itself is a joint venture, which will have its people who will also take retail sales. So our expenses will not be -- we are not looking at any major expenses in that -- in those.

Okay. Any targets you have in mind from this JV in terms of revenues or volumes?

We do have projects. We're working on it. But yes, definitely from where we used to be nothing in Gulf market, I'm sure there will be a substantial increase after this program.

But company level, your overall export percentage will not change very much. Is that fair?

Because our domestic is huge. Our export is very, very less.

We take the next question from the line of Mr. Pranav from Equirus Securities.

Sir, I wanted to understand whether the Indian market itself is seeing very good acceptance of the large slab tiles, and that is the reason why you and your peers are going for a lot of capacity addition in this category of tiles?

Definitely, it's a growing market, and it is growing -- that's why we're going ahead for this production of the large tile slabs. And the realizations are much better there.

Right, sir. But sir, let's say, 4, 5 years, I think even before pandemic, this market was not growing that strongly, but have you seen a shift occurring in consumer acceptance of large tiles and is there a possibility that after GVT, this segment is going to see very strong growth coming in over the next 5 to 7 years?

No, no. See, firstly, it's part of GVT. Secondly, it will always be a small percentage of the overall sale. But yes, as a market leader, we have to be there in the market, right, as a very innovative player. So these tiles will definitely give us good margins and good -- the volume will not be that much, but definitely, the margins will be there. And as we're making more and more showrooms and displaying it, we definitely get that impact. See, people are moving towards big tiles also. The demand has been -- the demand is there, but obviously, the overall demand is much less as compared to normalize. As a percentage, it will be small, but it also sea little better realization and more margins.

Okay, sir. And sir, my next question was on the plywood business. So you've now moved into plywood and laminates. So what is the strategy in this segment? And how do we want to grow, let's say, over the next 3 to 4 years?

So in 9 months, we did a 20% growth because the base is small. And we're looking at scaling it up substantially in the next 3 to 4 years and increase their turnover and go ahead from there.

Sure, sir. So as of now, we are not looking for adding any other product segments?

We already have proved and laminates and you're outsourcing for various pads in the market and evolve the strategy as we go along and see how do we want to strategize that?

We take the next question from the line of Aasim Bharde from DAM Capital Advisors.

Just one question on fuel. Can you talk about what are the constraints for you using it in your plants versus natural gas? Is it because all of them have reached pricing parity, so it doesn't make much sense to use it. I understand the bio-fuel part, but I guess that is more for a north base issue and it's more for payers. So the one as a substitute for action gases propane and LTE not being booked in as an option?

No, propane, LPG and natural gas. They are the 3 products which can be used, right? But you can -- natural gas comes from a pipeline. Propane and LPG comes from [indiscernible] you cannot use broken and LPG beyond a certain quantity. That's number one. And if you recall, this gear put plant started in 1998 until 2010, 12 years, we have worked with propane and the propane prices are almost 30%, 35% more have the gas but within our gas pipeline. So propane and LPG do not replace gas, unless it is -- the price difference is very high. And in bigger plants you can't use.

Okay. So is the pricing difference that would mean that natural that should always be preferred and the infrastructure for you just mentioned.

Natural gas is the right fuel for using. Only when the price gets become too much in smaller plants, you can think of porting up LPG blotter bullet, which it still takes 6 months to put. So it's not that it's just you put it tomorrow.

Correct, correct. Okay. But in the future, theoretically say, for example, if gas prices and maybe even propane LPG shoot up again, would bio-fuel be a much more higher proportion that you can use across your plants?

I already explained. Bio-fuel can only be used in spray drier. Oil has to be run by gas. Gas means natural gas open and PV. In our case, we are using natural gas.

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

Sorry, if I'm harping on the same thing. Sir, prior to this, we were under the long-term contract for the North plant. So is there any take or pay related penalties as we move more mix towards bio-fuel this 35% is only for the north or at the company level, you're talking about 35% will be bio-fuel?

See, first thing, the contract still is there. There is no take or pay. The themselves of gas. It's not that I have asked for lesser requirement, they have cut gas. That's number one. Number 2, since they have a gas sometime in September, we started at 4 and then this for 3 came in. Otherwise we had a lot of problem in September, October. When the gas prices were cut, the spot prices had gone up to INR 120. So please understand that we have passed through very tough times. And biofuel came in later when we won provisioned to use bio-fuel it was not allowed to be used in anything other than the boiler industry or certain specific industries. So as far as we are concerned, the combination of all these sectors will come in. And when you say about percentage, the total percentage of fuel that we are talking about is for all the plants.

So that 30% is a at the company level?

As a company level by end of that.

So that means for the north plant, it would be obviously higher.

It will be slightly.

Got it. And with reset to the industry with -- specifically for Morbi, how the export momentum in the month of January, you think January is continuing the momentum or you're sensing any weakness even in the export market for?

In November and December buses exports of INR 1,500 crores each. On get completed, but I think January, February, March, the cumulative exports will not be less than INR 5,000 crores.

Got it. And just one data point, if you could, sir, what is the cash flow from operation in the 9 months and the CapEx, for 9 months FY '23? Cash flow from operations, sir, for us?

Cash flow. CapEx is about INR 90 crores this year. That's what I can tell you and cash flows that you will just reflect.

INR 106 crores.

INR 106 crores is the cash flow from operation and CapEx number for full year '19, but 9 months how much?

INR 90 crores.

9 months would be slightly less about INR 75 crore year to about INR 90 crores.

INR 75 crores, INR 50 crores.

Yes. A full that should be INR 90 crores.

We'll take the next question from the line of Mr. Ritesh Shah from Investec.

Sir, just a quick one. Sir, any particular reason why we have not used bio-fuel for our Gujarat JV?

No, Gujarat, there is no such bio-fuel. We are using coal in the state.

But sir, when we look at the costing it is INR 30 per SCM versus, I think when we say INR 57, INR 58 for LPG.

No, no, their costing is also around that INR 30 to INR 33. Coal is similar cost. Coal is also INR 30.

The next question is from the line of Mr. Sujit Jain from ASK.

Sir, you spoke about FY '24 volume would be 13% to 15%. But given the commentary on rising interest rates and term sluggish set, etcetera, what gives you confidence there? Bathware and plywood after many years have not seen material increase in size. So if you can give your strategy there? And finally, you spoke about increasing dealer distribution number. So that number currently stand.

And as far as confidence is concerned, confidence of what are always attack. So I always see things positively. Don't worry on that spot. As far as the dealers are concerned, we have told you that in the next 3 years, we will add almost 450 to 500 dealers. You'll be happy to note in the first 9 months, we have added 125 dealers out of which 35 are exclusive Kajaria. As far as phosphate employee are concerned.

And also to add to that, give you that confidence that whatever happens in the market, Kajaria brand will always be better than we will -- our numbers will always be better in the industry. So the industry is selling is growing by growing by better than that.

And about the Bathware and plywood?

Bathware and plywood, again, we're looking at big aggressive strategies. The vote will be volume grew pretty much better.

And the dealer number now stands at what 1,825.

1,825 approximately.

Okay. And finally, the size of industry, INR 57,000 crores, this is what INR 52,000 crores.

INR 52,700 crores. Domestic, INR 12,700 crores is exports.

FY '22?

FY '23. FY '22, I'm sorry, FY '22.

We take the next question from the line of Mr. Nikhil Agarwal from VT Capital.

Sir, I just wondered the volume and value mix for your segment for Q2. The volume and value mix of permit and BVT [indiscernible] for Q2.

Volume wise ceramics, 45%, BVT 26%, BBT, 29%. Revenue mix, ceramics 0%, BVT, 27% and GVT 33% approximately. Okay.

One figure I gave you INR 106 crores was the quarter cash profit and 9-month cash profit, INR 335 crores.

We take the next question from the line of [ Yash Khemka ] from Yashwi Securities.

My questions have been answered.

Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. Arun Baid for closing comments. Thank you. Go ahead, sir.

Yes. On behalf of ICICI Securities I would thank all for attending this call and also the management for giving us a chance to lose this call. Sir, any query, comments, Ashok ji?

Thank you, Arun. I think it was a good interaction. And I think on behalf of myself, Chetan, Rishi, and my colleagues Sanjeev and Pallavi. I think it was a good introduction. A lot of good questions have been asked. And any follow-up questions can be Sanjeev and Pallavi. Many thanks. Many thanks for organizing this.

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