Kajaria Ceramics Limited (500233) Earnings Call Transcript & Summary

The VP Strategy and Investor Relations. We also have with us Mr. Kartik Kajaria, who heads the Adhesive division. We will commence this forum with the opening comments from Mr. Ashok Kajaria, after which, we will open the floor for questions and answers. Please note that certain statements made by the management may be forward-looking within the meaning of applicable laws and regulations. Actual results might differ substantially from those expressed or implied Kajaria Ceramics Limited will not be in any way responsible for any actions taken based on such statements. Now I would like to invite Mr. Ashok Kajaria to begin. Thank you.

Good evening, Namaskar. I think for a long time, you wanted that Chetan and Rishi should be here. So they are here today. And also, I have Kartik, who is the elder son of Chetan and my Grandson, who just completed the studies at UCLA America, and just joined the business from July '23. He is heading the Adhesive division. So a very warm welcome to all of you. Thank you for sparing your valuable time with us this evening. This time, the format is a little different. I'm going to share a 3-year mission of Kajaria. What Kajaria is looking at for the next 3 years. Numbers and everything for the year, which has just ended, for the quarter just ended is already with you, that can be part of the Q&A later. But I would like to share the vision of Kajaria for the next 3 years. Company at a glance: 36 years of experience, presence in building materials segments like Tiles, Bathware, Plywood and Tile Adhesives, 10 manufacturing facilities, 7 for Tiles, 2 for Sanitaryware, 1 for Bathware. 7,000-plus employees. The turnover for the year ended is INR 45.8 billion for the year '24. INR 4.2 billion is a consolidated PAT. The PAT has gone up by 23% compared to last year, in spite of a very difficult year, what we faced last year. Market cap, currently about $2.3 billion. 20% market capitalization growth over last decade. Benchmarking with best corporate governance: Experience and diversified professional board; effective risk management; transferring and detailed shareholder communication; no equity dilution since last 10 years. Capital allocation strategy, which you keep asking all the time, CapEx met through internal accruals only. 40% to 50% dividend payout policy in place since last 3 years. Invest only in products or segments which can leverage brand or existing dealer network. Invest in product/segments which generate 20% plus ROCE on a sustainable basis. Healthy balance sheet: Lean balance sheet to accommodate growth; sound working capital management; net cash balance sheet since past 6 years; rated A (sic) [ AA ] for long-term facilities and A1 (sic) [ A1+ ] for short-term facilities by ICRA. Our business segment, 89% is Tiles, 8% is Bathware and Sanitaryware, 2% is Plywood and 1% Adhesives. Over the past few years, while we have identified -- intensified our focus on Tiles and Bathware verticals, we have also extended our presence into Plywood and the Adhesives segments. Despite other than Tile segments likely to grow faster than tiles, the later would still account for 85% of the total revenue by end of March '27. Tiles, the core segment. #1 player in India, 8th largest player in the -- globally, 7 manufacturing plants, our current capacity -- annual capacity is 86.4 million square meters. We sold last year 108 million square meters. Roughly, we produced about 83.5 million square meters, the rest was outsourced, INR 40.6 billion consolidated tax revenue -- tile revenue in FY '24. 3,500 SKUs in Tiles and 18,000-plus strong dealer network. Key business moat. Inherent strength: Superior product mix; proven track record of execution; experience and retail sales team; strong manufacturing products; a robust supply chain; unprecedented focus on quality, which has been the focus of Kajaria for the last 7 years. Widespread dealer network; out of 1,800-plus, 415 are exclusive showrooms and 70% presence in the retail segment. Normally, the industry norm is 50-50. Super brand recall; premium pricing versus peers, 10% market share in the domestic tile industry. The tile industry roughly, the domestic market is about INR 42,000 crores, and exports are about ending March is about INR 19,500 crores, which means the total tile industry in India currently is about INR 61,500 crores. Volume growth enablers. Market share gains to continue from regional players. The key factor is GST. Domestic tile industry expected to grow at 6% to 7% CAGR over '24, '27. Sustenance of export growth momentum for Morbi players to limit competitive intensity in the domestic space. Volume growth enablers. Incremental volume growth to be met through a mix of capacity addition, brownfield and greenfield and contract manufacturing. Increased dealer penetration in Tier 3 and Tier 4 cities. Focus on adding exclusive showrooms. Aggression in brand spend to continue. Focus to intensify on larger format tiles with upgradation of our manufacturing units in North and South India, Sikandrabad and Kalahasti. Recent launch of luxury brand, Uni Terra tiles, Uni Terra plant to add further premiumization. Creation of Pan-India Project team to intensify focus on government projects. Right now, we have a government team only for North India. We have decided to have strengthened it, and we are in the process of doing it by end of June. IT upgradation to improve business efficiency. Recent initiatives, which will take us to the next level. Premiumization: Recently installed Continua+ line to enable us to significantly improve our positioning in large format tiles, slabs. Manufacturing: Upgraded our Sikandrabad and Kalahasti plant, which has now started manufacturing high-quality premium tiles. Introduced significantly cheaper bio-gas fuel in North India units, which has made manufacturing very, very cost effective. Branding: Our brand spends has stood at over INR 840 crores in the last decade, more than cumulative expense of 3 major listed players in the last decade. A&P spends for FY '24 stood at INR 131 crores. Major spends in F '24 included spend towards creating more exclusive dealer showrooms, airport branding, cricket and sponsoring for Women's IPL RCB team. Distribution: We have started taking concerted steps to further improve our existing distribution network, increasing our pocket share in existing dealers, while removing the nonperforming dealers. The year we ended, we have added 200 dealers, but at the same time, we have removed almost 150 dealers who are non-performing. Adding more exclusive showrooms in Tier 1, Tier 2 and Tier 3 cities and towns in particular. We currently have presence in 1,000 towns in India and aspire to expand it to 2,000 tons over the next 3 years. Currently, as for government data, there are 4,141 (sic) [ 4,041 ] towns with municipalities in India. Kajaria presently is in about 1,000. We hope to increase it to 2,000 in the next 3 to 4 years. Digitalization: We are also upgrading our IT-related infrastructure with recent introduction of SFA, which will improve employee productivity, and DMS, which will increase business efficiency of our dealers and branches. Key initiatives: Continua+ presses installed in our own manufacturing units at Sikandrabad and Kalahasti. Exclusive showrooms opened in Tier 3 cities. You are seeing one Kushal Nagar, Karnataka and one is in Hoshiarpur, Gupta Trading Company and many such showrooms. Of course, the RCB Women's team, which won the recent WPL. Focused on large format tiles and slabs, the bigger tiles which we have started manufacturing now at Kalahasti and Sikandrabad. Key initiatives airport branding. You see Kajaria everywhere in all the major and smaller airports. Bathware, a fast growing supplementary segment. Current positioning, we are there for almost 10 years, 10 years of existence. Kerovit is a brand name. Sanitaryware and faucet capacity of 1.2 million and 1.6 million pieces, respectively; 500-plus dealers, including 85 premium outlets. Premium outlet means a guy who has given us a good space of almost 1,500 to 2,000 square feet. INR 3.6 billion is Bathware revenue of '24, 7.4% EBITDA margin in F '24, 2% market share and 15% equity held by WestBridge Crossover Fund. Growth enablers: Increasing number of bathrooms in residential real estate segment; Bathware industry to continue to grow in double digits over F '24, '27; higher penetration of premium products. Recently commissioned a state-of-art Sanitaryware plant in Morbi to drive volumes and premiumization. It's absolutely state-of-the-art plant; expanding the existing distribution network; focus on aggressively adding exclusive shows; and brand spend to gain further momentum. Gres Bond by Kajaria. Tile Adhesives is taking a big space in the industry now because the bigger -- with the large format tiles coming in, especially in the floor. They are only and is -- they're only being put by adhesives that gives us additional strength. This market has grown over a period of time. And currently, it is a INR 5,000 crore market. Kajaria's positioning is, it's been 3 years of existence. Presence in Tile Adhesives, grouts and tile cleaners. Gres Bond is a brand name, currently an outsourcing model. Meanwhile, we are putting a plant at our Gailpur plant, very shortly, it will be commissioned by end of September. But of course, we have to buy regionally also because for us, it is a very important matter and INR 50 crore revenue in F '24. Market in growth enablers for Adhesives, market share gains over unorganized players to continue. Our biggest strength is the dealer network because every dealer sells adhesives, right now, they may be selling other brands such as LATICRETE, Roff, Weber but at the -- right now, we have touched only about 20%, 25% of our dealer network. Tiles Adhesive industry to continue to grow 12% to 15% CAGR over '24, '27; increasing acceptance of large format tiles and slabs, that is where the adhesives users is growing; significant scope to leverage KCL's tile network. First manufacturing plant to be set up in Gailpur, I just shared. This should be happening by September '24 -- no, FY '25, yes. Outsourcing to continue for East, West and South markets. Plywood, a diversified business segment. Now almost 7 years of existence, presence into Plywood, blackboards, shuttering ply and laminates, Kajaria is a brand name. Currently an outsourcing model, and the revenue was INR 104 crores in F '24. Plywood industry to grow at 5% CAGR over '24, '27. Market share gains over unorganized players to continue on a gradual basis. Plywood industry, however is currently grappling with rising timber prices, which is like to ease over 12 to 18 months; focused on expanding the distribution network. Three-year mission, where we will be at Kajaria. 150 million square meters of tiles, revenue of INR 5,500 crores. Other segments should be around INR 1,000 crores. EBITDA margin, we are targeting at 15% to 17%. EBITDA margin enablers. One, benefit of operating leverage; the realization across tile categories seem to have bottomed out, as we are aware, '22, '23 gas prices have gone up very much which came down in '23, '24, so some benefits have to be passed on to the dealers in the form of additional incentives. So there was lesser -- some prices have not been cut, but lesser price realization. Cost realization (sic) [ rationalization ] across the value chain, scaling up in adjacencies to be margin accretive. EBITDA margin trajectory likely to remain sustain at 15% to 17% range, baring impact of steep gas price volatility. Three-year road map: Consolidated revenue, INR 6,500 crores, 3 years CAGR 12%, Tiles INR 5,500 crore, Bathware INR 675 crores, Plywood INR 175 crores and Adhesives will be at INR 150 crores. Proposed CapEx every year will be INR 225 crores to INR 250 crores every year from '25 to '27. Thank you.

The floor is open for questioning. You can address who you want to answer. Chetan is here. Rishi is here, our CFO, Mr. Sanjeev is here and Kartik is here. So you can say that who you want to address that? Yes, please, Ma'am. Go ahead. Yes, somebody raised a hand, over there. Yes. Mic to her, please.

Good evening, sir. That was a very crisp presentation...

[Foreign Language]

Can you hear me now?

Yes.

Good evening, everyone, and that was a very crisp presentation. We haven't, in fact, the kind of upside that we were expecting to see in the tariffs to pick up in terms of -- can you hear me now?

Better.

Okay. We were expecting the Tile segment to do well in the second half, and we haven't seen the kind of numbers, while the road map looks quite nice, quite promising as well. I wanted to understand when do you think the Tile segment is actually going to pick up? Do we see this happening from second half of FY '25? Or is it like the story is yet to start maybe from the third or the fourth quarter of FY '25? And secondly, of course, to the young generation, how do you see, where is your vision in terms of tiles? And on the larger scale, we're moving towards modernization of tiles into table tops et cetera. Where do you see the Tiles business actually going forward from here.

So two, three things. What are we doing as a company? One, you asked that demand is not -- we are not able to sell that much. So as we are aware, the construction industry is now in the right front. And as they say, your tile demand comes T plus 2. So from this year onwards, we see a very good demand coming in for tiles. Number two, what have we done and what are we planning to do? At Kajaria, we have invested in technology. We have put in two Continua+ lines in North, and we are the only company which has a plants in north and south of India for Continua+ technology. So we are investing in technology. We are making excellent products, number one. Number two, we are training the people -- the dealer staff, especially in South, the showrooms are huge. They are 30,000 square feet, 40,000 square feet, they deal with multiple brands. So what we are doing is like recently, I went to Kushal Nagar, I opened that showroom in Karnataka. I also went to Vellore in Tamil Nadu. So while we are traveling around, we see potential is huge. But a lot of these dealers are working with multiple brands. So what we are doing is, one, we are working on our products, giving them good products. Secondly, training their staff, we are -- on our cost, we are getting these people to our factories, like all the south people are coming to Kalahasti factory. We are training them, telling them about the product, giving them that energy to sell, when they go back to their shop, they are so bullish on Kajaria that over all the other brands, Kajaria is anyways -- and thirdly, we are spending a lot of money on brand. So fourth, we are also -- we have recruited people, who are meeting architects and interior designers to push all our -- since as a company we're going more on value-added tiles, this is mostly sold by architects and interior designers, so we are also keeping a team who's going to promote, who's going to go and meet them. As CMD just said that we are also strengthening our government department. We just had a 10 people team in north of India. Now we have kept a senior guy, and we're going to have 30, 35 people team all over India, meeting only government projects. So with all these moves, we are very sure that going ahead, we look at a very, very good year. The key is, as we said, in India, there are 4,041 towns. As Kajaria, we are just in about 1,000 of them. The key is to make these showrooms and wherever we can to penetrate as far as deep in India, [Foreign Language] The only thing is to make showroom, showrooms, showrooms, motivate our retail partners, motivate our dealers and make showrooms. [Foreign Language] we have seen a drastic improvement in sales, drastic improvement. I do a very small example, when I went to Kushal Nagar, the guy did 5.5, INR 4.5 crores, INR 5 crores, he says, "Sir, I will double it to INR 10 crores this year." So my only point is that the potential is huge as we keep on making showrooms, we are definitely there to achieve the growth. Yes, last 2 years have been tough, the volume growth has not been there, but we see the future very, very good.

Sir, but then due to elections, do you think your demand is affected. I mean we've lost 2 quarters, which is FY '24. Do you think you're going to lose another 2 quarters of FY '25 as well because of elections. We haven't seen much pickup in construction as well as cement as well. So where do you see tiles, sir?

The year which went by has been one of the toughest years on the demand front. Now you ask why? [Foreign Language] See, real estate was very bad for the last 7 years. [Foreign Language] they sold their inventory, which was every day, [Foreign Language] They sold their inventory. Last year, they started the construction, [indiscernible]. This is a year where they will finish, the finishing part where paint, tile, sanitary are all will be used. And we are confident enough bearing aside 1 or 2 months, which is election months, we all understand. That June onwards things are very positive and we have already said that for the year also, that will be a low double-digit volume growth and 15% to 17% of EBITDA. So I think we are very confident. And fortunately, we have shared our 3-year vision plan. So this we have never talked before, this is the first time we are sharing this, in a forum like this. And we are very confident that we are there and will be there. You should also address who you want to answer. My job will easier.

So this is the question for Ashokji. The question is, how has the industry volume growth in F '24 and whether we have gained some market share? How our positioning in the market.

Industry volume growth for the domestic market was almost 0. We at Kajaria have only grown by about 6%, 6.5% in volume terms. So I don't think that's a big gain of market share. I won't call it. But of course, exports have grown up drastically from the industry. And as we all know, it has gone up by almost 30% -- 25% to 30%. So that's the current scenario. And as I said, industrial should grow at 6% to 8% in volume terms over the period of next 3 years, and Kajaria's growth will be better than that. That we are targeting for a volume growth of low double digit, which is anywhere between 11%, 12%, 13%.

And second question on the gas price correction. So in F '25, how much cost saving we can quantify from that account?

Which account?

Gas price.

There's no change in gas. F '24 has been a very normal year for gas. The gas prices almost are the same as what it was in F '24. Quarter-to-quarter, it's almost the same.

No, no, I'm asking for the next year F '25, you said in your presentation that...

No, I said the F '24 -- F '23, the gas prices went through the roof, as we are all aware. F '24, the gas prices came down. Quarter-to-quarter, there is no change in the gas prices for F '25 also as we see it now.

And then what is the total cost, the amount of spend on the advertisement branding for F '24.

F '24, we spent INR 131 crores. I already said that.

This is [ Sudhakar from Kauri Capital ], and we are also into export and imports. Quality and Kajaria are 2 sides of the same coin that's how you have progress in the last 40 years that shown in your financials. And I think, we need to give him a big round of applause, please. Sir, export, you mentioned INR 42,000 crores -- sorry, total turnover -- total industry is INR 42,000 crores and export is INR 19,000 crores. Now what is the growth you feel in export market and which country? Is it Africa, it is South America, North America, where is your presence is dominant in export. That's number one. Number two is that what about you are expanding from 4,000 city to 1,000 cities of India. What is your take on Northeast? Is there any Northeast 7 sister states, Assam we got one of the biggest state of India. Number three is that the urban and rural divide because low-cost housing is going to be dominant in the coming next 20 years. The demand for, I mean, the cost-saving factor is going to be very, very interesting. So how do you look this issue in the low-cost housing area. Number three and the last not the least...

Too many questions we can't remember...

One more because you removed 150, I mean, not very good dealers, and we added 200. That means, actually, you added only 50 of them. So the effect is almost a low. So do you think in this 400 new township, you're going to be doing a real good dealership network.

So replying to your question on, exports should grow by a minimum 15% to 20% this year also. The biggest export markets in the world for India is, first is, U.S., followed by Russia, U.K. and Europe. Your second question about the Northeastern states. We are focused there. And it is one of our target areas to how to increase volume growth there. We have a strong sales team based in Bengal and Kolkata and team-based there. Definitely will focus on that part also. Your third question about the urban demand and the rural demand. Our focus is to penetrate more as we all said in the earlier presentation, also make more and more showrooms. The real growth is going to come in Tier 3 and Tier 4 cities going forward. And the company's focus is on making very good showrooms in those cities to tap the growing demand in these rural towns in Tier 3 and Tier 4 cities. The last question related to your low-cost housing, Kajaria is the premium brand. We cannot drop our prices too much because we were to maintain our margins also. But we are doing projects on a case-to-case basis. Where the margins are decent and the payment securities is of utmost importance to us also. So all things being in focus, we have to take a very balanced approach in that regard for your fourth question.

Hello. I'm [ Sumitesh ]. Just one question with regard to demand. See, we -- as per presentation what we suggested T plus 2 can be a revival for the tile industry and ancillary home industry. Plus from 1,000 towns, we are going to 2,000 towns, right? And right now, we are doing -- I mean, we have a limited capacity. So how do you plan to increase the capacity? And secondly, would we be able to meet the entire incremental demand if it comes through outsourcing what we are currently doing also.

There is no limited capacity, there's unlimited capacity. I mean, whenever we want, we can always scale up through outsourcing, that is always an option and our plants are very well equipped. So as long as demand is there, we are completely equipped to fulfill all the demands. So capacity is not an issue. Does that answer your question?

Sir. Thanks a lot for the very brief presentation firstly. Just two questions from me. You mentioned about your growth targets and you've given your revenue targets, you've given your volume targets, when we do some math on volume figure comes out to be around 12-odd percent versus your revenue CAGR at 10%. Just trying to understand what kind of product mix are you expecting to change? Is there any products which are expected to come at lower end because of which we'll be able to ramp up volumes and where they could be in a slight dip in realizations. That's my first question.

The current volume mix in our basket in ceramics is 43%. PBT is 26% and GVT is 31%. What we're looking at is ceramics and PBT can grow a 10% volume growth, GVT will grow more 15% to 16%. So all the divisions will grow in the next coming 3 years to attain the numbers which was shown in the presentation.

So ideally speaking, GVT, if I'm not wrong, is a better product in terms of pricing and in terms of realization, ideally that should have led to -- if it's saw 12% volume growth, that should have led to at least a 13% or 14% revenue growth. So that is some math I'm just trying to understand. So is it the pricing strategy, which is going to be more aggressive? Is it competitive intensity, which we are planning to address something there?

So right now, we're just looking at fulfilling the demand of the market. So whatever it is, however, it will shape up, we'll change our strategy accordingly. Right now, our only focus is volume, volume, volume. So right now, we're not making any product mix change. We have promote all the three verticals you have to sell, whether it's ceramic, PBT, GVT, all are selling, all have to sell as the market takes the demand, we'll do it. But we are also working on, yes, value-added products, which takes a little bit more time to get established as they are -- as we're making showrooms, as the displayed the showrooms, yes, the margins will be a little bit better.

Understood. So when you're talking about what is large slab, basically, that's one product which I understand.

Correct. But the market size is very, very less for it. I mean we are working on it. We are trying to promote it as much as we can, but still the market -- the overall -- in the portfolio, it's very, very less. It's a very small percentage.

Understood, sir. My second question is related to CapEx. When you mentioned INR 250 crores of CapEx an year. Are we looking to add at least about 5 MSM capacity each year, that's the plan? Or if you could elaborate on your CapEx plans?

So these are now you have almost 7 Tile plants and 2 Sanitaryware and one faucet plant. So these are all regular CapEx. Any other -- whenever you going to add some production. There'll be different CapEx. This is all the CapEx to maintain the plants. Regular CapEx.

So my very first question would be the coalition of Fair Trade in Ceramic Tiles, that has filed a petition within U.S. International Trade Commission to initiate an investigation to seek antidumping on tiles which have been shipped from India. Do you see any upside potential risk that Morbi players will start ultimately dumping their production volume in India?

So the U.S. market is only 7% of India's export turnover. If the duty comes out, we only lose 3.5% because exports will still happen by our players. So it will not get a big difference in the entire export scenario going forward.

Okay. And my last question would be how exactly do you see this overall market panning out in next 2 to 3 years, like, more often what exactly customers are preferring the design? Or are they preferring a big tiles? How exactly is in Tier 1, Tier 2 and Tier 3 cities.

See, what does the customer want? A customer wants a good product, a good brand, right? The designs are more or less the same. What tile Kajaria is making, X, Y, Z is making a similar kind of tile. The only way what as a company, what we can do is, good products at good cost, good prices, again, as a customer, a customer who's in Jalgaon or any other small city, what does it look for? He makes his house once or twice in his lifetime. When he goes -- when he wants to build a house, he will go to his -- he will go around in the market. Kajaria, yes, is the #1 brand in the country. Because we as a company spend a lot of money, and that's one of our biggest [ motives ]. Secondly, by giving that experience of the showroom, so when a customer gets a good brand, a good customer experience with our showroom, a good product. We personally feel why will you go to somebody else. That's what we can do. As a company, this is what we can do, right? Giving good products, good experience as a customer, a good brand, good well-trained staff to attend the customer. If a customer is getting all those factors, we personally feel of whatever experience we have in the industry and whatever we have -- when we speak to our dealers, we had a big dealer meet right now in Thailand about 4 days back, and so we take all this feedback from dealers. And say, "Sir, for sure, it is -- Kajaria is the #1 tile brand in the country." [Foreign Language] And as we are giving the right experience to our customer, we feel that he will not do anywhere else.

Yes. So over the past 10 years, we've seen two major events which has happened, two major market sizes, which have formed where Kajaria is not really been able to got a lot of market share. So when I'm speaking out exports from India which is like, you did like a INR 20,000 crores odd market, the adoption of tile adhesives which are around the INR 5,000 crores market. So that's almost half the market size of your current domestic market, which you are in. And we've not been able to be take advantage of it yet. So what are we doing now to ensure that whenever the next big shift or big market size gets created, we'd be the prime beneficiary obviously.

See, exports will always be a very low realization business, and we don't intend to do more than 2% to 3% exports because globally, we have not invested that much money in branding. You fight against the whole world. In India, as we said, we spent INR 800 crores in the last 10 years to build a brand premium. So exports is a very, very competitive market. Where you don't get the realization. Morbi does that because they have to sell their production at the plant because they don't have a brand premium in the domestic market. Coming to a second question. We just entered adhesive 3 years ago. Now we started taking it very seriously. Our first plant is coming up in Rajasthan by September. That will give us a boost once we have our own manufacturing facility. And as we keep on going further, we'll take more steps to see how we can consolidate the position in this new segment, which we just recently entered.

This young man is handling the Adhesive division.

Kartik. So add on move to this -- about the Adhesive.

So in FY '24, we grew at 42% from INR 35 crores to INR 50 crores. And this year, we're targeting a 70% growth to INR 85 crores. So we are being very aggressive in the segment, and we're targeting to capture as many dealers from our network as we can to sell our products.

Since Kartik is here and talking about the -- Am I audible?

Yes.

So Kartik, you're talking about the growth near term. How should we think about the margins of this category, let's say, 3 years down the line?

So currently, we have EBITDA margins of around 20% and I expect that we can maintain somewhere around 18% to 20% going forward as well.

And should we expect any kind of CapEx in this? Because right now, it's an outsourcing model?

Yes, we will have some CapEx, but it's not very expensive to set up adhesive plants. And we are going to set up small, small units across the country because it's a freight-intensive segment.

If I can ask Rishi or Chetan on your Sanitaryware. So as our growth plan is quite aggressive, like, you're talking about 24% kind of CAGR growth, right? And T plus 2 should be applicable here as well, right, as same amount of time.

So Sanitaryware we have done a lot of things, 30th March, we just opened a new plant in Gujarat the CapEx, which was approved by the Board. So it is one of the most -- very, very high-tech brand, producing very, very good value-added products. We're having a big launch in July, where we're taking almost 300 dealers all over India to the plant to book orders and to show them the plant. So with Sanitaryware, our faucet range is anyway is very good. Again, the model is the same. Again, here, we are again making showroom, showroom, showrooms. [Foreign Language] Again, the penetration is the same. Sanitaryware finally, it's a big industry. Again, when we're talking to dealers, we have talked to this dealer. He says, "I'm going to open a showroom next month in Kanpur." He opens a 25,000 square feet showroom, 7,000 square feet is Jaquar and Artize, where he's given us 8,000 square feet of ties as well. He's been dealing with Jaquar for a while. So what I'm trying to say is that, again, we have the same concept, [Foreign Language] Wherever we can penetrate make showrooms that ways the volume will grow. So we are again with this new plant, our product basket will be complete -- will be properly complete. We have all kinds of products, all ranges. And we're going to spend on brand and again, make showrooms with dealers.

So Rishi, size wise, we have been reached a reasonable size. And should we think about how company thinking about the margin versus the growth? So in terms of the margin in the next 3 years? Or where you think you can stable at what level and what time.

I think what we are really missing out is in the volume right now. So right now, we did INR 380 crores top line last year. And the vision is in the next 3 years to -- the vision is to double it. We are going very aggressive and the vision is to touch INR 700 crores to INR 750 crores of top line. If that happens, the margin will automatically come. Margin is not a problem. It's a good margin product. The only thing is that our volumes are not there, our expenses are more as the volumes increase, the value increases, the margin automatically come. It is -- it will be more than -- it will be in the similar lines of tiles, not less for sure.

Do you think in the next 3 years, you can reach, let's say, low double-digit kind of a margin in the category? In next 3 years, can we reach, let's say, low double digit to mid-teens kind of margin in the...

100%. For sure. Better than that. Better than that. Because even the plant which we have put, we're going to make much more value-added products where the margins are much better. So as the plant sale picks up, automatically the margins will start getting better.

So sir, two questions. In your PowerPoint, you said realizations across tile categories seem to have bottomed out. I think in the last quarter, you said realizations are lower because of increased promotions done by you.

May I request people to introduce themselves and then put up the question. It will be better.

So my name is [ Vinamra ] from JM Financial.

We can't see you [ Vinamra ] there any...

So my only question was, does the bottoming out of realization? Does it mean less promotions? Or is this due to larger tile sizes in the portfolio?

No. Bottom have -- let's say, have now -- to come down further. And it will only maintaining at the same level it will not go down more. That's what the bottom of realization sentence means basically.

Okay. So next question is, so premium and especially elite consumption, it's really doing well. Premium tiles are a great segment. But marbles are the ultimate form of premium flooring, how are you convincing customers between the choice of tiles versus marbles?

Again, the key is making good showrooms and experience centers. Tiles have a lot of advantage of marbles in terms of the cost, the laying time and the consistency. So as you penetrate deeper with the larger format tiles in the slabs, which are equivalent to marble automatically, the tiles will start replacing marble which is already happening in a lot of cities when we talk to dealers across the country.

Just to add to that for your information, a lot of projects are now taking tiles, who used to take marble, a lot of them are converting into tiles. So marble industry is not growing, but tile industry, yes, it is.

This is Sohil Kaura here from ICICI Securities. I just wanted your revenue and volume mix for FY '24 in terms of the ceramic, PBT and GVT.

Yes. So the volume mix category-wise, ceramics was 43%. PBT was 26%. GVT was 31%. In terms of revenue mix, ceramics was 38%. PBT was 26% and GVT was 36%.

This is Anmol. I have a question that what are the key IT initiatives that we are going to take in the next 3 years as we saw in the presentation as well.

You asked the key IT initiatives, right? Yes. The first, we're introducing the sales force automation concept, which will improve the efficiency of our own sales team. We have 155 sales force across the country. So they will be able to routing better, meeting dealers better, they can open a lot of function in the app to manage the whole system. Then we also introduce the dealer management system, which will help the efficiency of our dealers by placing orders directly to the factory, which goes through the sales coordination team right now. They can see the -- online, their accounts online. It will be very easy and efficient for them going forward once the whole system is introduced across the country.

So in your present -- [ Ramesh Bhojwani from Mehta and Vakil ]. In your presentation, there was a mention in reference to digitalization. I think the time and the age has come for digitalization of at least marketing and communication. You referred in your presentation to digitalization...

So that was the part of the IT initiatives. But we're also spending money on digital marketing towards our brand, that's already happening right now. every year, the budget is increasing for digital market, the Kajaria brand, that's also been taken care of. In various social media like YouTube and Instagram and Facebook and Twitter everywhere, that's already happening.

Yes. That's a wonderful thing. And the second thought was there is a serious push towards a affordable and low-cost housing, are we contemplating to have a production line or a dedicated plant towards this segment catering of our guide.

First, let me tell you, some gentlemen also put this towards low-cost housing. Low-cost housing in India has failed. I hope some of you are aware of that. It has not worked the way it should have worked. Because aspirations of people have gone up, they are not looking for low-cost housing. Am I right? Please correct me if I'm wrong. So there's no question of putting a separate client and low-cost housing, per se, has failed. As already said by Rishi, Kajaria is a premium brand. So the question of low cost doesn't come.

Affordable housing is one segment which....

Affordable housing and low-cost housing are two different things.

Abhishek Shah from Valcore Capital. Sir, I had two basic questions. One was on the demand side, you mentioned real estate demand comes T plus 2 for us. So last 3, 4 years, when I look at resale numbers of major real estate developers in India, they've not gone up by 10%, 15% it's been 3x or 4x. And when I see our expectation or our projection of tile growth for us it's just 11%. So my question to you is, are we being conservative in this -- because if I look at that numbers we could be looking for a very serious upcycle for us. That's the first question. Second is...

You people asking the questions even without listening to what we are saying, right? Everybody asked [Foreign Language] I keep on answering this [Foreign Language] right? But if you keep on asking the same question, it will be answer what can we do more than that tell me?

I'm just trying to understand 3 years out, maybe [Foreign Language]

Our journey has just started. And that's why we have shared a 3-year vision with you.

Yes, yes, we might be a little conservative in our approach. Let us perform and then talk about it rather than just talking about and not performing.

Right, fair enough. Got it. Second, also somewhere on similar lines, but on the EBITDA margin. Historically, we've done much higher margins also. I understand once growth comes, we could be looking at that. Adhesive is expected to do 20% margin, 18% to 20%. Our Sanitaryware business also, we are seeing margins could go up sharply from where they are. So then why the 15%, 17% range, again, is that conservative? Because historically, we've done much higher and the other segments where margins are relatively lower will scale up significantly.

I think the main contributor will be the volume. Because we are going to get some operating leverage also, but that will be mainly for the -- because last 4, 5 years, we have grown in mid-single digits. So now our focus is to grow in a good -- at 10%, 12%, 13%. So when the volume will go, the expenses will not go in tandem with that. So definitely, that will give us operating usage and selling prices have bottomed out and we see good growth coming and everything will be better going forward. The expenses are not going to go in tandem with the volume.

Good evening, sir. My name is Mudit Agarwal from Motilal Oswal Financial Services. Sir, my first question is related to the biofuel. What was the mix in FY '24 full year. And we're expecting a further benefit on the biofuel side in the total power and fuel cost.

Biofuel, overall is about 22%, roughly about 22%, our North plant is close to about 30%. And oil prices are more or less on the same line what it was in FY '24 quarter-to-quarter. First quarter will almost be the same like before. And unless any drastic thing happens for the gas front, more or less it will be same like, whatever happened in FY '24.

Okay. And sir, second question was on the mix for the institution as well as retail. Like we are now focusing on the adding more to the government projects. So is there any material shift from institutional, I mean B2C?

See, currently, our sales are 70% retail to dealer against the industry norm of 50-50. That's why Kajaria's margins are better. Out of 30% that we sell, we call it institutional sales. Institutional sales are about 3, 4 kinds. One is government projects, where there is a lot of money being spent by government on infrastructure like education, health care, airports, defense, now railway stations, so these are the areas where the government is working on that. That's roughly about 12% in Kajaria as of now. It can further go up with the strengthening of the government project by at least 3%, 4% in the coming next 2, 3 years. Another 7%, 8%, you can say, is for the large builders that we talk about, which are listed builders or you can say, [ large ] builders. And 10% is in mid-level builders, across India. So that's the basic ratio.

So just to add to that, we are putting our effort in every channel, whether it's a showroom retail channel or the project channel, so that we are looking at where we can get business from India.

This is Keshav Lahoti from HDFC Securities. Just a follow-up on last question. In FY '24, how has been the demand if you can divide in retail and institutional side? And further, you can give some sense how is your private order book right now? And what is the outlook on [ Insti ] side?

You just mentioned it is 70-30, 70% is our retail orders and 30% is our distribution orders. That's the basic funda. And as we said, we are penetrating from both the angles. From the retail angle also we're getting very aggressive, institutional angle also we're getting aggressive, so that we can get more market share, increase our volumes.

Okay. And how is the margin profile on institutional side?

It is lesser than retail.

Any broader ballpark number?

It will always be 3, 4 basis points lesser than retail. 4%, 5% lesser than retail.

One last question from my side. We can see the discounting might have increased in Q4 to push volumes. So will this incentive continue in Q1 also?

Not only Q4, the time last year, as you are aware the gas prices kept coming down. When I say gas prices, I mean the fuel part, the combination of gas and the other biofuel and everything. So as a result, we had to pass on the incentive to the dealers to sell more because the market was such. So basically, it happened throughout the year. Now the prices, as I have already said, they're bottomed out because there's nothing further to go beyond that. So this year, you will see the realization also getting better than what it was in F '24 in all the three divisions.

Okay. Got it. The question was more on that side because earlier fuel prices were cooling off, so higher incentive were given. But in Q4, fuel prices were stable, still we can see NSR have taken a [indiscernible], which has led to a lower margin.

Last year, as I said, the market was subdued. Don't even -- you have to understand that part also. If the market was subdued, what do you do? You try to sell more with better discounts to the dealers, prices in the industry doesn't come down normally. But it's a more incentive to the dealer to sell more. So that's what it is.

And Nitin Gandhi, from Inoquest Advisors. Just trying to understand what's likely to be overall capital allocation strategy for bath, ply and adhesive because you are aiming, say, 20% revenue coming by in 3 years to that level. So what's going to be like out of 250 -- [ 225 to 250 ], also how is it going to be allocated and what's likely to be the gross growth by '27 for these three business or capital employed for that matter. And what's the overall strategy that what kind of percentage revenue you would look forward from non-tile business, say, 5, 10 years down the line?

So the other non-tile businesses are growing faster than the tile because the base is low. And our -- we are a title company and we would remain majorly a tile company. Going forward, let's say, after 3-year or 5-year our sales from tile would not be less than 85% to 87%, maybe 84%. So they may grow faster. But the tile because of the high base will always have a very, very major portion. And the capital allocation will primarily be for tile and for normal CapEx. In other Adhesive or Bathware, it is going to be very small. Like in Adhesive we have -- we are putting away a plant in just for INR 15 crores. So for Adhesive, the CapEx will not be more than INR 20 crores, INR 30 crores depending upon the growth if we're getting good growth, maybe the CapEx may be more, but we are not going to do a very big CapEx or diversify into any business. So the total focus will be tile and the products which our dealers are selling because we will leverage the branded dealer distribution network.

And regarding Nepal, if you can share some thoughts, what's likely to be potential revenue coming from there? And how is it considered in [ INR 1,000 Crores ].

Basically, we're putting up a 5 million square meter plant in Nepal. It will be a mix of ceramic and GVT. The CapEx is INR 181 crores. It's a 50-50 joint venture within Kajaria and Ramesh Corporation out there. The total market size is roughly INR 2,000 crores. So we're expecting a 10% share of the total market has 40 million square meters, we're expecting a roughly 10% market share once we sell full capacity, due to incessant rains in the last couple of months, the project was delayed. Looking at production is starting roughly around July '24, basically.

So it's likely to be low [indiscernible]...

Margins are better. Turnover [Foreign Language] margins will be better. And once we double the capacity in the 1 or 2 years, it will even get better. [Foreign Language] duty is very, very expensive when you sell from India. So we'll get a lot of margin -- much better margin than we produce in Nepal. That is the reason of putting our plant there.

The duty is 50% to 55% out of the customs duty.

And to double the capacity, what will be the additional CapEx required?

Much lesser. We are putting INR 180 crores right now, it will be about INR 70 crores, INR 80 crores.

I think I missed asking you what is going to be the CSR model, if there's any -- is it IPL, which you mentioned, is there any connection with the new CSR project.

No connection. The IPL is a brand spending. It's part of the advertising budget and CSR [ is more of a ] Corporate Social Responsibility.

And what is that CSR projects which you have in the country.

A lot of projects are happening. The most recent is training of masons, which is initiated. Then a lot of our factories are doing their own CSR in their surrounding districts and neighborhoods, like cancer treatment things, building sanitation facilities. So it's all there on the website lot of activities are happening in the CSR regard.

Building of schools, building of toilets in schools. So what we also do is in and around our factories we -- because that can be monitored very well by our factory team. So in and around of our factories, we spend a lot of money on CSR, to develop the local places. So it just give a good...

Anything on AI, artificial intelligence, to be -- to your workers or -- no, to your dealer?

[Foreign Language]

No, see, Kajaria, looks, Maybe, I mean, 50 years ahead. That's how I am -- my question.

Sir, we look 50-year ahead, but we go with the time, right? We have to do what is right, right now. Anyone else?

My name is [indiscernible], and I had a question to ask what are -- it's a macro question. I'm trying to understand what are the trends that you see in the building material industry, particularly in tiles, has the customer behavior changed in terms of -- like you were talking about, it's a premium brand and you're taking those initiatives. So I just wanted to understand from a macro perspective, when it comes to building material because we are also looking at adhesives and all the other categories as well. Is there any change in the consumer trend? And is there anything that has remained same because there is a tendency -- the macro tendency, I can understand of building home ones and all that. But is there something that has remained the same? And is there something that has changed? If you could throw some light on that?

So one change if you noticed that after COVID, people have gotten spending more on their houses that has come more into their focus because that is where they spend a lot of their time. Now they want to splurge more and have higher brand aspirations also. So this is gradually translating into buying more known brands and spending more money in renovating the house and going for bigger size tiles also because that is where the maximum of their time is spent in the house. That's one change we've noticed after COVID.

If there are no questions, thank you very much. But we can informally discuss over drinks and dinner outside, after this. Thank you. And please join us drinks and dinner. Thank you.