Kajaria Ceramics Limited (500233) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Results Conference Call of Kajaria Ceramics Limited, hosted by Equirus Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pranav Mehta from Equirus Securities. Thank you, and over to you, Mr. Pranav.

On behalf of Equirus Securities, I welcome you all to the 1Q '25 Post-Result Con-Call with the management of Kajaria Ceramics. From the management side, we have Mr. Ashok Kajaria, Chairman and Managing Director; Mr. Chetan Kajaria, Joint Managing Director; Mr. Rishi Kajaria, Joint Managing Director; and Mr. Sanjeev Agarwal, CFO; Mr. Kartik Kajaria, Head, Adhesive Division; and Mr. Nehal Shah, DVP, Strategy and IR. Now I hand over the call to Ashok sir for his opening remarks, post which we'll open up the floor to question and answer. Over to you, so sir.

Thank you, Pranav. Good evening, everyone. It gives me great pleasure to welcome you to the quarter 1 F '25 earnings conference call of Kajaria Ceramics. As already said by Pranav, joining me on this conference call are my sons, Chetan and Rishi; my grandson, Kartik; our CFO, Mr. Sanjeev Agarwal; and Nehal Shah, DVP, Strategy. Despite the softness in domestic demand, being an election lead quarter, our tile volumes in quarter 1 F '25 grew by 7.8% year-to-year to 26.98 million square meters. Going forward, we continue to maintain a positive demand outlet for tile industry. As far as our company is concerned, we are confident of achieving low double-digit growth, volume growth for the current financial year, driven by our extensive and relentless branding and distribution efforts. Our consolidated revenue for the quarter stood at INR 1,014 crores, indicating a 5% increase compared to the corresponding period last year. The EBITDA margin for the quarter was 15.01%. Our recently acquired Keronite unit with a capacity of manufacturing 6 million square meters of GVT in Morbi, commenced production in quarter 1 F '25. We expect this unit to achieve optimum capacity utilization by quarter 4 F '25. The progress of Nepal project is on, and we anticipate commissioning of 5.1 million square meters of GVT and ceramic capacity by September '24. On the export front, India's tile exports experienced an impressive 26% growth in F '24, crossing INR 20,000 crores; INR 2,175 crores to be very precise for the first time. In the first 2 months of F '25, Morbi exports, however, remained flattish at INR 3,350 crores. It is worthwhile to mention that despite the recent initiation of ADD by U.S. and Indian tile imports, the Morbi exports to U.S.A. in April and May put together, have still grown by 16% to INR 335 crores versus INR 289 crores achieved in the same period last year. With exports momentum likely to sustain and runoff of strong real estate demand likely to drive improvement in offtake for tiles in F '25. We expect the price industry to fare much better than it did in F '24. Now for this quarter, segment-wise financial performance. Tile segment grew by 3% year-to-year, reaching INR 990 crores compared to INR 957 crores in quarter 1 F '24. Bathware segment registered 8% year-to-year growth in revenue, reaching INR 91 crores compared to INR 84 crores in quarter 1 F' 24. The plywood revenue increased by 25% in quarter 1 F' 25 to INR 18 crores as compared to INR 14 crores in quarter 1 F '24. Revenue from Adhesive grew by 59% to INR 15 crores in quarter 1 F '25 as compared to INR 9.6 crores in quarter 1 F '24. PAT for the quarter de-grew by 16% to INR 90 crores in quarter 1 F '25 as compared to INR 108 crores in quarter 1 F '24. As of 30th of June '24, the working capital days increased by 1 day to 59 days from 58 days as of 31st of March '24. With this, I take the opportunity of thanking you for joining us today. Over to Pranav for Q&A, please. Thank you.

[Operator Instructions] The first question is from the line of Mr. Rahul Agarwal from Ikigai Asset Manager.

Just wanted to start with the budget essentially. Any takeaways for our industry and any changes would you see over the next 12 months?

Budget has been positive on 2, 3 fronts. One, a lot of business will come from Bihar. A lot of business will come from Andhra. And also the Finance Minister has announced a INR 10 lakh crore budget for urban housing for the next 5 years for 1 crore citizens. So I think -- because when it's urban housing, that means the demand of tiles will further grow.

I'll jump to questions on the company. Sir, you guided for a low double-digit volume growth, fiscal '25. Any views on the revenue growth because first quarter, obviously, we have seen pricing compression. Do you see revenue growth to be lower than volume growth this year?

It will be slightly lower. The revenue growth should be around 8%, 9% compared to 11%, 12% of volume growth. And just to tell you that the prices are more or less stabilized. If you see the numbers of quarter 4 last year, that means F '24 quarter 4 and F '25 quarter 1, there is no pricing change -- no pricing change realization. It's the -- difference is 0.5%. So prices are more or less stabilized.

Perfect, sir. And any comments on the gas pricing, sir. How was it in the first quarter for North, South, West? And what is the expectation?

Gas price is more or less the same what it was in quarter 4 and quarter 3 of last year. There is no change per se.

INR 39 on an average for the company?

INR 37, first quarter '25. Yes.

For North, it is INR 37. For south it is INR 36. For West, it is INR 36, and overall, it's INR 37.

Yes, it's not gas. It's a combination of all fuel.

Right. Any comments on gas pricing, sir?

Gas prices are more or less same, no change internationally as of now.

And last question, we hear propane seems like it's a bit cheaper versus gas at Morbi. Are we seeing any price disadvantage or there is no material change?

No, no, more or less, they are same. INR 1, INR 2 difference doesn't make quite difference because that's how they are pricing each other.

The next question is from the line of Jyoti Gupta from Nirmal Bang.

I believe good set of numbers. What surprised me was the volume growth. As per my depict, this quarter had not been great, yet an 8% growth. I believe second quarter would be a little dull because of the monsoon. So do you think we'll be able to make -- we'll be somewhere around mid-teens in terms of volume growth. Second is as per my understanding, the gas consumption of 75 [indiscernible] has not come down. Is there any change in this quarter where the gas consumption has come down? If not, then do we expect the production to be at same level, and therefore, the third quarter and fourth quarter should see a pickup in demand?

See, volume growth for the quarter, which is now should be close to about 11%, 12%. That's #1.

This quarter. Quarter 2, you're saying 11%, 12%?

Yes.

Nice, okay.

Yes. And secondly, the question on gas, which you asked, there is not much change in the price of gas.

Okay. And third, sir, on the container side. I understand that the material, which is used for exports cannot be actually sold in the Indian market, typically because of the you have expectations in terms of -- but do you think a shortage of container will, in any way, impact the domestic market now that you are seeing pickup in demand and hopefully, it's going to sustain in the next 3 quarters, 11%, 12%, second quarter is a very good number. So I hope...

No, no. Yes. Just to interrupt, this question keeps on coming, whether export material can come to the domestic market, which I've already answered it in the manner that a dealer -- suppose I am a dealer. I'm keeping a material of Kajaria or Somany or someone else. I cannot keep on changing. [Foreign Language] If I have displayed certain -- if I'm a dealer of X and I've displayed that material, somebody comes to me, offer a 10% to 15% less, even than I cannot say because I cannot display it will not sell. So basically, export material cannot go to the domestic market and some of the people who are making for exports, they are basically making it for export market.

The next question is from the line of Shaleen Kumar from UBS.

Sir, I must say a good set of volume growth. That's a positive surprise for all of us. Sir, I noticed one thing that despite weaker realization, our gross margin has been improved. And now you are looking forward for a better growth volume in 2Q. So assumingly the realization stays here or improve from here. So is there a scope for margin to improve from here as well -- gross margin? Can we think about that?

So we are looking at a 15% to 16% EBITDA margin, as we have said previously also, and we are maintaining that right now. There was a priority to sell volumes in the market going ahead while keeping our projected margins.

And Shaleen, as far as gross margins are concerned, I think it's at 38.5% this time, which is 100 bps higher than Y-o-Y quarter. So I think you're alluding to this, right?

Yes, yes.

So with respect to raw material cost, I think the raw material costs are significantly lower compared to Y-o-Y and that keeps changing because of our sourcing mix keeps changing. So one should not delve much into this quarter. But as far as gross margin is concerned, I think it should be in this range, plus/minus 1%.

Okay. Even if, let's say, some realization improvement happens. We should get some benefit out of it, right? Is it fair assumption?

Yes. That will further add to the gross margin.

The second thing, your manufacturing number was higher than the sales number. So when you allocate the cost, is there some part of the cost which is already coming in this quarter from those manufactured tiles or you proportionate it? I mean, for example, I could see that your power and fuel cost was up 10%, right? So how should I think about that?

So the [indiscernible] the growth, what we see here is largely because of increase in production, which has gone up by 13% during the quarter.

So then, this effectively means then we have taken this part of the cost in this 1Q, right?

Correct. Because there is a stock today.

Right. So correspondingly, then it will not be same for the next quarter because we already have a stock with us?

Yes. But if in the next quarter, the stock again remains, the incremental stock comes into play, then again, we'll have the same situation. So again, it varies depending on where the stock is.

So basically, I was looking at the revenues where we could have a -- there's a case for a margin improvement. And I -- and the [indiscernible] I think coming back to the same point on the cost. On the employee headcount, can you understand how much is the increment phase and how much is the additional headcount phase? Because there is again a big jump over there. So -- and sustainability of that?

Actually, Shaleen, what has happened that last year same quarter, there was a mistake we did not take the increment in the border. So there is some difference because of that. And some -- the Secunderabad plant we started, we capitalized this early in the last quarter. So this time that additional INR 3.5 crores [indiscernible] from the Secunderabad and around INR 2 crore from the other ceramic global and all. So this will be for [Technical Difficulty] for all the products roughly.

Yes. So sir, basically, our costs are hitting us because we're kind of starting new plants and the benefit of them in terms of revenue will come with the lot, right? That's the way I should think?

That's correct.

Yes. Yes.

And hence, the depreciation is also a little higher?

But the revenue will also -- so in this quarter, the quarter has been penalized because of the sale deed and the corresponding revenue has not come in this quarter.

Correct, correct. So basically -- yes, understood, understood. No sir, great show. I think momentum has come back. We look forward to see Kajaria delivering double-digit volume growth.

[Operator Instructions] The next question is from the line of Praveen Sahay from PL Capital.

So the first question is related to the product mix, PVT/GVT ceramic. Is there any material change versus the last Q1 FY '24 through this quarter?

It's more or less the same. No major change. The only change what has happened is GVT mix has gone up a bit, while the other 2 segments, the mix is been a bit down.

Okay. Okay. Got it. Secondly, on the Nepal JV, why there is a delay in the commissioning from June to now September?

There were very heavy rains in Nepal. So because of that, we delayed the expansion, but now everything is in order. August, we plan to light up the kiln. And by September, the production will start.

And last question related to the non-tile segment. So there is a good decline in the EBIT margin in this quarter. So why is it so and when we will see improvement in this segment?

In the bathware segment, the first quarter margins were low because we just started the new plant of Kerovit Global on March 30, but sanitaryware plant takes 5 to 6 months to commence production properly. So first quarter was pretty poor on the production. From this quarter, the production will pick up. And from the next 6 months, October to March, it will give you good results. So this is the reason why even second quarter will be a little muted in terms of bathware because of the loss of the new plant. But that will all be -- from October, that will all be compensated.

And in terms of plywood, the first quarter was -- the loss was higher due to increase in timber prices in the market for which you've taken a price increase on 22nd July of 3%, but in terms of adhesive, the profit was much higher versus quarter 1 last year.

The next question is from the line of Dhananjai Bagrodia from ASK Investment Managers.

Congratulations on a good set of results. I just wanted to ask broadly for your breakup of revenue between like metros and tier 1 and rural, do you have a broad-based breakup?

Basically, we can give you a rough idea. North is 35% of our sales. South is roughly 13%. East and West are 17%. As you go to metros, like we can say Delhi is 3%. I can use a statewise breakup if you want, but that's a rough number of our zones.

So what was that -- just roughly, just because we never understand. See since North and South both are 13%, 13% each...

35% and 30%.

35% and 30%. Just to understand, like, would you have a broad base in terms of metro and Tier 1 because that's now -- we are speaking about how rural...

See metro is close to about 15% overall. Tier 1 would be about 31%, 32%. Tier 2 will be about 31%, 32%. Tier 3 will be about 14%, 15%. And Tier 5 will be the rest. Tier 4 and below will be the rest.

So basically remaining will be 10%.

About -- tier 4 and below should be about 7%, 8%.

Okay. So see, sir, last 3 years, we have not had strong volume growth per se because metro was the one which was leading in housing. Now the government again focusing back on Tier 2 and Tier 3 in terms of improving their market share, rather than we will be the biggest beneficiary of that, right?

That is where the action is. For the last 2, 3 years, that is where the action is.

In Tier 2, Tier 3?

Tier 1, Tier 2, Tier 3, that's where the action is.

So then sir, why didn't we have strong volume growth as the action was out there predominantly.

That's why I started now this quarter, the volume growth has started with 8%, and overall, annually, we look at about 11%, 12%. So there's a lot of growth will come from these areas.

So that's what sir. Tier 2, tier 3 has just started picking up, is that right?

No. They are there for the last 1 year, 1.5 years, not that. See, overall, the demand in India was not there, right? Overall, the industry, as we discussed even last year, the industry was flattish, where we grew by 6%, 7%. This year, we are foreseeing the industry to be at 5%, 6%, we'll outpace the industry by level 6%. So will be plus the industry.

And just to have an idea, how would exports be then? Like, would there be any impact now?

Overall industry grew from INR 16,000 crores to INR 20,000 crores. At Kajaria, we don't export much. We are -- our main focus on domestic market. So our export has also been flattish.

No, no. I understand. See, the industry -- how would industry's growth be in exports? Because see, if exports become weak, then they'll start dumping in India. But as long as exports grows in a way where they don't need to dump in India, then we are through?

Firstly, let me just clear a concept. They don't dump in India if the exports were there. They closed their factories. Dumping in India is not easy. [indiscernible], switch-out button that you can just supply to people and then suddenly shut the supply, right? So they don't dump in India. If the exports don't work, they shut down the plants.

Okay. Understood. But -- okay, sure sir. Fantastic set of results and best of luck for everything.

The next question is from the line of Utkarsh Nopany from BOB Capital.

Sir, my first question is on the tile capacity utilization. So like in the presentation, we have mentioned that we are going to dispose off 2 ceramic time lines at Gailpur plant from July onwards. And if we adjust for this capacity, then we operated at around 96% rate in the June quarter. So my question to you is like, if we are quite optimistic about the demand scenario, then what is holding us back to come up with a large expansion program in the domestic market as we are already operating at a pretty high rate and we also have a strong balance sheet position.

That's what we're going to do because that's the need of the hour, and that's what we do every year.

Sir, then it is going to be announced and how much time it could take to commission?

One minute. If you have to grow at 11% to 12%, 15%, every year we have to put up capacity or do some outsourcing. So it's a question of a right balance which we are looking at. And once we dispose these 2 lines, which were very old 26-year old, we will put up a new capacity there, but that capacity putting up takes 6 to 7 months before we can put up that capacity.

Okay. And sir, connecting question to this is like our outsourced tiles volume share has gone up from, say, 18% in FY '19 to around 25% at present. So where do you see the share to settle down over the next 2 to 3 years? And if you can also provide some clarification whether there is any difference in the product quality and margin profile of our own JV and outsourced tiles volume or all are same?

It all depends on which market you are catering to. If you're are catering to North and East, we would like to have our own capacity. If you're catering to West and South, we will partly use for West [Foreign Language] West is outsourcing, and South will expand our capacity. We have 2 plants where, Southeast Asia and Kalahasti.

See margins are always better in our own manufacturing plants as compared to Morbi. Margins will always be better.

So sir, of course, tiles volume share in this [indiscernible].

[indiscernible] and outsourcing going forward. We cannot give you the numbers right now [indiscernible] 3-year projection, but it is a mix of both manufacturing and outsourcing.

And sir, my last question is on the Nepal operation. So whether we are going to consolidate Nepal operations going forward? Or it would be shown separately as share of profit from JV going ahead. And can you please provide some sense regarding how the ramp-up of the plant is expected to happen in second half of FY '25, FY '26 and FY '27?

So it will be shown as share of profit of associates, which is below the line.

Okay. And how the plant ramp up is expected to happen?

Let it start first. Let it start first and then we'll reveal. Can't say what will happen tomorrow.

The next question is from the line of Keshav Lahoti from HDFC Securities.

Congratulations on good set of volume number. Just wanted to understand on volume front, how has been it like whether June has been quite healthy versus possibly April and May? How should we see the monthly trend? And how is July going?

April was not good. May was better. June is slightly better, and that's why we see that the trend moving better from here.

Understood. Got it. Sir there has been some rise hike by Gujarat Gas in July month. So will it have any impact on margin? How should we see? How should we see that?

The price hike was just INR 2 per SCM and the impact is not there that much.

Understood. Got it. And one thing you said the average fuel price was INR 37 for this quarter. So last quarter, you mentioned it as INR 39. Was it flat or marginally down this quarter?

Last quarter, the whole was INR 39, average INR 39 and this quarter is INR 37. Yes.

Understood. Got it. It is quite clear now. Just one last question. How much is your Nepal sales right now in volume terms in FY '24 or maybe for this quarter?

It's not a very major number. See, right now, we are -- since we're exporting from India, Nepal sales will -- it's not a very major number. We're selling at about 70,000, 80,000 square meters a month. When the plant comes, we have to sell about 4 lakh square meters per month. So the real game will start when the plant comes into -- once the plant comes into production.

[indiscernible] duty also is very high in the range 50% to 55%. So it will be much more competitive, and we can get more volumes. That's the whole purpose of the plant.

Got it. So it can add a new layer of growth to the company in the Nepal market. Understood.

[Operator Instructions] The next question is from the line of from [ Vinamra Hirawat ] from JM Financial Services.

Sir I heard you say, Morbi can't easily dump in India. So regarding the U.S. tariffs, we shouldn't estimate any change in volumes or realization guidance in tiles if the U.S. expected tariffs of 400% to 800% go through?

See, first of all, where this number has come from about the additional duty? As far as the additional duty is concerned, even it comes, it will not be more than 10% to 25%. That's number one. Number two, India is very competitive per se. Number 3, just to give you some statistics, in the month of June, Russia has overtaken America as #1 market, USA is #2. So a lot of markets are opening up because India is a very competitive player in the international market. So don't think that alone America will do anything great. It's the whole world which has opened up to India, and there are 178 companies which India is exporting tiles to.

Okay. Okay. Nice to hear that. My next question is on GVT, PBT and ceramic. As I understand, GVT is growing the fastest and commands price premium. What is the expected volume growth for the next couple of years in GVT? And do you expect GVT and a better -- more premium product mix to drive higher realizations going forward than what they were this quarter?

See, all the 3 -- all the 3 verticals have to grow to get the consolidated number of 11% to 12%. GVT might grow a little faster than ceramic and PBT, but they all will be growing. And yes, as a value -- as the product mix changes, as we sell more of the value-added hybrid tiles, your margins will be little better. But that will be offset by the volumes. Our first [indiscernible] priority will be to deliver our volumes.

Got it. I just had one more question on your bath. If I heard you correctly, I think we grew at 8% in bathware. Are we seeing higher volume growth here in line with tiles in the second half and in FY '26?

Yes, we definitely will, definitely will. It will be a good double-digit growth for sure, end of the year, and we'll see the numbers increasing from here.

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

A couple of questions. One is if you could provide us an update on implementation of sales for automation and DMS, how far are we? That's one. Second is, are we already opting for channel financing? If yes, to what extent of sales does it get covered? And if you have any plans over here?

So in terms of sales force, automation it has already become live. It has been sent to all our sales team -- force in the last month and we also started tracking the movement of the people. In terms of DMS, we just launched -- did initial launch of the top 50 dealers across the country last week, and we're going to go live in the first week of August, where they can see the stocks online, place orders online. So first week of August, it's going to go live to 900 dealers across the country. On channel financing, 50% dealers are already under 4%, 3% and 170 dealers have already come under channel financing. And we hope to have at least another 300 dealers in channel financing by next 2 to 3 months.

Sir, how do you see the velocity of sales actually change for us as we implement sales for automation and DMS going forward. How is it likely to benefit us sir, if you could just educate?

See, it is not [indiscernible] velocity of sales. It's about improving the quality of the times the dealer spend and our people spend in the market. Today, we can track how many architects they're wasting, how many dealers they're wasting, are they wasting time on the same dealer, how many times in a month? It came to the quality and efficiency of the team as of the dealer community basically. Let's say, a dealer goes [indiscernible] 4x of placing an order. He can now just punch it online, which goes to the plant directly. It's all about improving efficiency and the speed and the quality of time management, basically.

Okay. And then channel financing, as we rope in more dealers, is it likely to impact sales? Or can it be an incremental lever?

It will help in improving sales.

It is helping those dealers to grow faster.

Because their orders get stopped if the payment stops, right? Once we get into channel financing, then the orders are not getting stuck. They are clearing their orders and -- the orders are being cleared and they are paying the financials.

Right. That's helpful. And sir, is sales for automation and dealer management system is something unique to Kajaria? Or is it something the industry practice? Like are we the first movers for ceramic industry?

[indiscernible] already doing it. There are a lot of industries, in the building industry who is doing it.

Sir, specific to ceramic. So are other Morbi players or other companies in the...

Ceramic, we are not aware, but we learned it from meeting new people that lot of building material people in industry are doing it; Havells, Asian Paints. So we adopted for it. Kajaria being #1, we had to go for it and we did it.

Sure. That's helpful. Sir, second question is on government orders. I think this was one particular focus area to increase volumes. I think you had indicated setting up a dedicated team during the Analyst Day. Are there any numbers over here? What's the scale of improvement or what can we expect over here?

You will see a positive trend in government orders from this year more. Right now, the thing was only in North. Now, we have all India focus team.

Okay. Sir, any number on percentage of...

We are treating it as a separate division to help us in -- increasing our government orders.

Sir, will it be possible for you to quantify what percentage of our total volumes is government orders right now? To what extent we will be comfortable with, say, year down [indiscernible]?

The whole idea is to get more of the government share. It will all result in our overall volumes. We'll quantify it at the end of this financial year.

Okay. And sir, just last question. Can you detail the fuel mix basically for North to what I understand we had biofuel, we had RLNG. And biofuel was nearly like 30% biofuel, bio-energy. Same thing basically for Gujarat and South, if you could please provide some color?

No. In North, biofuel is about 30% plus. In Morbi, there is no sustainable biofuel. We are using coal for [indiscernible] there. And for South plant, we are using a partly mix of biofuel and coal.

Sir, last question, what will be the differential on biofuel versus Gujarat Gas?

Pardon me?

Sir, what will be the pricing for biofuel? Basically when we say, INR 36, INR 37, biofuel is at what cost? Is it like very, very competitive?

[indiscernible] INR 22 to INR 23 per HCM.

The next question is from the line of Shubham Agarwal from Axis Capital.

First question, can you share the revenue or volume mix of PBT, GVT and ceramic tiles in Q1 '25 and '24?

So the volume mix with ceramics is 43%, PBT is 23% and GVT is 34%. And the revenue mix is ceramics is 38%, GVT is 37% and PBT is 25%.

This is for Q1, '25, right?

Correct.

And can you say for '24 as well?

In '24, it is 44% ceramics, 31% GVT, 25% PBT for volume mix. And revenue is 38% ceramics, 36% GVT and 26% PBT. More or less the same basically.

Right. So sir, actually, the reason for asking this was that I noticed that the gross margin has expanded Y-o-Y, and this has happened despite there being a realization decline and you having a largely similar revenue mix from in-house manufacturing. So what has actually driven -- helped you increase the gross margin significantly? Generally these are the other things that help you increase gross margin?

Yes, sir. So as we just commented on it, raw material costs were lower. But again, you can't actually compare that with year-on-year because the outsourcing mix everything keeps changing. The gas prices were favorable, but because of the increase in production, that is not seen there in the gross margin, but that also helped improve our gross margin. And on the EBITDA margin side, the employee cost is one cost, which has led to shaving off the gross margin advantage, which is not coming to EBITDA margin.

Right. Okay. And so the outsourcing mix is also very similar. That's what I was thinking because everything is very similar Y-o-Y, still there's margin expansion. I'll circle back on this, no worries. I'll take the second question that I had in mind. This is regarding the gas cost. Now I actually calculate gas cost per MSM of production. Now gas cost per MSM of production has actually increased Q-o-Q for you by about 9% despite there being -- because you mentioned that the gas cost -- average gas cost per SCM declined from INR 39 to INR 37 marginally. But power and fuel cost...

[indiscernible].

Power and fuel cost per MSM of own production has actually increased 9% Q-o-Q. Just trying to understand, am I seeing it right? Or how should I see it?

So on Q-o-Q, the gas prices are staying. So overall, the gas price was INR 37. And now it is INR 37 -- fuel price, which is combination of all fuels. All in all, the fuel prices have come down from INR 39, INR 37 on an average.

Okay. Okay. And if you could highlight what's giving us the confidence that what -- if you can highlight or give us some more color on what's giving you the confidence of the 12% odd volume growth over the rest of the year as well. Maybe I believe that some of it would be coming from diversification into a new revenue segment, let's say, one, Nepal, and the second being -- second being the government orders that you're now picking up if you weren't picking up earlier. Is that the right way to think like the new distribution channels that are opening up or the new geographies that are opening up is helping you...

But it's going on in all the areas, whether it is projects, whether it is government projects, whether it's our retail. So everywhere, we are putting all our efforts. So we are looking at a combination from all this -- the combination of everything we look at a 11% to 12% volume growth as long as the industry also grows at about 5% to 6%.

Which you are reasonably sure that you're seeing those -- that growth having come back sustainably?

We are optimistic and positive about it. And the first quarter with 8% volume growth at least, we know that things are in the right direction.

Okay. Got it. I'll just clarify 2 numbers now. One, I missed your channel financing share, like what percentage of your revenue is channel financed at the moment?

We have given you some data. Rest, you can get later.

No, I actually missed it, if you can repeat it, sir. That will be helpful. You mentioned in the same call, right?

[indiscernible] recording later. Yes. You listen to this conference recording later.

Okay, okay. Understand. Okay, got it. And your share from government orders, you mentioned will increase to 45% by the end of year. Did I hear that right?

I think we didn't say all that. You please listen, you'll have all the answers. You missed out few portions.

The next question is from the line of Udit Gajiwala from Yes Securities. Udit, you may go ahead. As there is no response from the current participant, we may move to the next participant. The next question is from the line of Sneha from Nuvama.

Congratulations on good volumes. Just a couple of questions from my end. If you have done around 8% growth, what would be a rough estimate for the industry? How would have industry fared in the same current quarter?

Industry should have also grown by 3% -- 3% to 4%, I would say. But things are looking positive on the ground. That much I can tell you. The numbers -- more numbers will clear later because first quarter, as we all know, was election quarter, June was very hot. Looking at everything, I think what we have done is okay and industry should have done slightly better, but I think things will be more clear at the end of the second quarter.

Okay. So you mean the growth has come back for the entire industry and not only Kajaria.

Exactly. Exactly.

Understood, sir. Then what about exports? Would exports also have grown because what we understand is exports has taken slight hit because of antidumping duty talk from U.S.

No, no. Antidumping is a very small thing. People are not understanding that part. The serious problem is the freight rates because of the Hamas-Israel problem, which has gone up sky high. They have slightly come down from what they were at the peak, but still it is very, very high. So that's the thing which is causing exports to slightly come down. The moment this problem gets resolved or some solution is found, exports will pick up again. The freight rates have gone up very, very high. So it's not America. America is a small issue.

Understood. So the real issue is the freight rate. Once that comes down, we will again start seeing growth coming back?

Exactly, exactly.

The next question is from the line of Rishab Bothra from Anand Rathi.

2, 3 questions. To take from the last question, what is our lead business in terms of transportation? We have 3 factories, 2 in Gujarat and 1 in Rajasthan, and another 2 in the...

8 factories. We have 8 factories right now, not for tiles.

But 8 is in different states. So I was mentioning of Rajasthan and Gujarat.

No, no. Eight is tile factories, not in different states, 8 are tile factories.

So what is the lead business I wanted to understand?

Lead business from where?

I mean from the Eastern factory. One located in South and one in the East?

What is the question exactly? What are you asking?

[Foreign Language].

[Foreign Language]. You are putting a very confused question.

No. Maximum distance transportation from any of the locations. [Foreign Language].

[Foreign Language]. See the question is [Foreign Language].

My question is how can we reduce that, whether a new plant is to be set up in that particular state or otherwise?

No. You leave it to us. You can't take for those calls. We have 8 factories. Please get your data right. We have 8 factories, 2 in south, 3 in west and 3 in north. Those 8 factories are properly distributed to all over India.

And second question is, we have 90% of the revenue coming from ties and 10% from the remaining segments. So what is our growth plans for those statements?

It's a basically a tile company. Next 5 years also, you will see revenue should be between 85% to 86% of tiles and rest should be from other verticals like what we have today.

But we want to grow those segments as well. We don't want to hive it off?

Yes, of course, of course.

The next question is from the line of Amit Purohit from Elara Capital.

Sir, just on the growth, we've been growing ahead of the industry. And you would attribute it to what? Would you attribute to a distribution expansion or existing markets also doing well. How do we think about that? And I mean, you highlighted that the smaller towns are doing better, but just wanted to get your...

So I mentioned, we are basically working on all fronts. We are strengthening all our plants, whether it is a retail channel, whether it is projects, whether it's government projects. Everywhere the action is on to make sure that we do our desired volumes. I'll give you an example, like in the retail plant, we just opened up -- a dealer of ours opened a 20,000 square feet showroom in Hyderabad, right? So everywhere the things have to be there. Everywhere -- then only the volumes will come, right? So we are -- our resources are there in all the fronts whether it is distribution, whether it is projects, in terms of branding to get the market share, to increase the volumes.

Sure. And sir, how do you think about over the next 2 to 3 years as the volumes come back? I mean we have seen a very high kind of margins earlier as well in the range of FY '16-'17, we were somewhere around 19% kind of EBITDA margin. How does one think about given the context that there are many players which have entered and this category does see competition coming and realization do get impacted. So can we think about over the next 2 to 3 years, somewhere when the volumes recovered to mid-teens or so, would a margin outlook of 17% to 18% is a possibility? Or you would probably look at high teens kind of volume growth and keeping the margin same? What do you think you would...

We have already given a 3-year vision at our annual meet in the month of May where Kajaria would be after 3 years, number one. Number two, we have already given an EBITDA guidance of 15% to 17% for this particular year. And as we go forward, we will see how things shape up.

Sure, sure. But I mean do you think there is a possibility as the demand improves, the margin outlook would...

See, we have to work on a combination of both volumes and margins as we want to do better than the industry. So we have to do our volume growth as well and the margin will result into it. But as we discuss 15% to 17% looks quite [ doable ]. And we also have to do our volume growth.

The next question is from the line of Saurabh Jain from HSBC.

My question is relating to your Nepal plant. Now that the plant is expected to getting commissioned in September. Can you make some comments around how would your distribution strategy would be, like what kind of number of dealers are you looking to add? And some more color also on your marketing initiatives for that local market. That will be very helpful.

So just to give you a background, our capacity will be 5 million square meters of ceramics and GVT. The total market of Nepal is roughly INR 2,500 crores. We're looking at a 10% to 12% market share once we get fully operational. In terms of dealer distribution, we are already exporting to Nepal as Rishi said, between 70,000 to 80,000 square meters per month. So we have a decent distribution network, but we've now [indiscernible] team in Nepal and we are trying to increase our dealer network much more, do the branding, increase more dealers and do some local advertising also to get the Kajaria brand more registered out there. So as we keep on moving along, we keep on sending our local network out there. That's our strategy.

So even now do you have your exclusives? Do you have partners in Nepal or is it sold more to multibrands?

No. We already have a galaxy of dealers in Nepal who are exclusive Kajaria dealers, and we're looking to increase that number to much more.

Can you share those numbers? What is today? And what are your expectations in terms of number of dealers, please?

So we already had a dealer base when we started -- when we talked about our plant in Nepal. Currently, we have about 50, 60 dealers, which will increase to about 100 dealers in the next 3 months.

Okay. 50 to 60, you're almost like doubling in the next 3 months?

Yes. The moment the plant comes, everything changes, right? Because your price will be much lower as to what you're giving right now. So we'll increase our dealer base, and we'll strengthen our branding. We are very sure that we'll get our numbers.

And 5.1 MSM, correct me if I'm wrong, almost 1 MSM would be like cannibalization. Is that the right understanding? Because what is this putting from India, that will be done away with? And incrementally, net-net about 4 MSM net addition will be there. Is it the right understanding?

We have to quadruple or make up sales 5x of what we're doing right now. But that should all happen because of the price advantage. What we are selling right now is with all the duties and everything. And then we reduce the price so the dealer will be [indiscernible] much, much better.

Yes. Okay. And also, can you also elaborate a bit what kind of marketing initiatives you are going to take in that market? What kind of interest you are revoking? And if there are any plans to rope in local Nepalis, be a celebrity? An insight will be useful.

So nothing on the card right now for a local Nepali celebrity. As we mentioned, once the plant comes in, price will become more competitive, we can give the dealer smaller lots, the rotation cycle will increase, the distribution base will expand, that's how we sell our capacity.

So it's very similar to India. Nepal is very similar to India. Our strategies whatever is working here, we'll use the similar strategies there.

Okay. Understood. And if one question, if I may ask. You are aspiring to do about 150 MSM of tile sales by end of FY '27, which is like a 12% kind of an annual growth. Can you also tell us what kind of dealership expansion ambitions do you have to achieve this kind of volume growth trajectory? What could be the number of dealers you would want to have in the next 3 years for the total company level, yes, of course?

So it will be a combination of both. We are right now at about 1,800 dealers as of March 31, 2024. So every year, I think with this, we will add about 10% which is about 200 dealers every year.

Okay. So almost like 600, 700 kind of a number in the next 3 years?

Also in our things, a lot of our existing dealers also open more showrooms and increase volumes. So it will be a combination of both.

Okay. So the number of showrooms...

And we have [indiscernible] exclusive dealers only sell Kajaria. The main thrust will be to open more exclusive stores also of Kajaria.

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

My question pertains to this shut up in the freight index, container freight index. What is your thoughts on this becoming -- exports from Morbi becoming less attractive and that impacting again the supply in the domestic markets?

So nothing like that will happen. In this first quarter, even -- despite the freight increase and the freight transit time, the Morbi exports have been flattish. So whatever we did last quarter, we did the same -- last quarter FY '23-'24, we did the same in '24-'25 and we want to soften as we go along, this predates and all. So things will get better, they'll come back.

Okay. Because we are seeing reports which forecast where the freight index may further shoot up and that is why this concern that -- and most of the freight rate, which has gone up, may not have reflected in the freight cost in Q1?

If it shoots up it is not happening only for India, it shoots up all over the world. As I said earlier, India is the most competitive player along with China in the international market. If exports have to take case, which it has to, India will be a very large player along with China in the export market.

Okay. Okay. And any idea what sort of volume growth we did in month of June, any ballpark? Was it double-digit volume growth?

June was double digit volume growth. As we continue to share April was tough, lower; May was better; and June was even better.

And that is why, looking at this quarter, the volume numbers will remain in double digits?

Yes, that's what I have already said.

Due to time constraint, we will take that as last question. I would now like to hand the conference over to the management for closing comments.

Thank you very much for having this conference on, on behalf of Kajaria and my also personal behalf, thank you all for doing it, and thank you all the participants who have spared their time to be part of this conference. Thank you very much.

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