Kriti Industries (India) Limited (526423) Earnings Call Transcript & Summary

You see last investor call also, I had said, earning calls that is easy to increase number of distributors, but it's more important that you make them productive. So, instead of just going for numbers, we are first maturing our distributorship. That's where our focus is. Because all distributors don't perform optimally and fully. So, you have to help them, you have to work with them to become effective. So, there are clear focus from the company that first, we will strengthen our distributorship where we are rather than spreading [ tooth in ].

So, maybe you can give some color state-wise, sir, where our distributors are doing well in Building Products. And there, we need to do some improvement, some change in our strategy.

We do always kind of analysis internally, regularly, these kind of reviews are made and we work to identify where we have to put in extra effort or where we have to upgrade ourselves and it's a journey.

And sir, just to close this question, what kind of CapEx we can expect in Building Products this year so that we are ready with capacity for expected volume?

We are already looking at some kind of INR 10 crores, INR 15 crores of CapEx because this is necessary to continuously improve our supply as per the market requirements.

And then what kind of capacity would that give?

So, as I was talking to the earlier call, there will be additional investment, which will help us to achieve about 8,000, 8,500 tonnes if required in building materials this year.

Yes, yes. This year, sir, it's clear, 8,000, 9,000. I am talking about next year, sir, FY '25.

Next year, let us see by October-November, which is kind of market growth we see. These products require more focus in terms of specific sizes and accordingly, we'll plan for the next year. So by normally, we roll out our next year plan by end of November. So, this is where we would be able to freeze our plans more clearly.

Sir, then another question is, I talk to certain of your distributors in Maharashtra and consistently, I got a feedback that the brand is not that well known. So, do you -- I think in several calls, you have said that you are doing what you said, ZBB, Zero Below Budget marketing. But are we ready now with about budget some money to do branding and marketing activities?

No, we are already doing marketing and branding activity, but it is more on the BTL side than ATL side. And you see in the new areas you go, if you have not created your distribution network ready and you start with the ATL, it doesn't need any kind of results. So first, we have to focus on strengthening our distribution network in new areas before we think about ATL. So, we are doing BTL and regularly doing it, and it is helping us set our volume in all the areas and territories are improving as per our plan.

Sir, my final question is, can you just give me the short-term and long-term debt number as of Q1?

Numbers?

Yes. Short-term and long-term debt, sir?

So, I had said that for this year, we are looking at a total growth of about 10% to 12% for sure, which in the top line number. And we certainly feel that going forward, once our brand matures, our distribution is strengthened further, we'll see an improvement in rate of growth.

No, no, sir, I am asking about long-term borrowings and short-term borrowings.

Borrowings? Presently, we have a total borrowing on our books is about INR 21 crores, INR 22 crores long term and short-term borrowing keeps varying as for the season and because we have peaks and troughs in agriculture season. So like today, the volume will significantly go down because we are entering into monsoon. So, it keeps varying. But long-term borrowing is at about INR 21 crores, INR 22 crores.

The borrowing has increased in last 3 years from INR 80 crore to INR 120 crore short-term plus long-term combined. What kind of number can we see, sir, by March '24?

You see what happens towards March, if we build up a lot of inventory for the ensuing season, which begins in April, our current assets go up, but during the year, it gets liquidated. So, the borrowings come down, say, today, they'll come down steeply from what it was at the end of March. So overall, towards March and it all depends what kind of inventory volume we see looking to the price of raw material or market anticipation. So that all depends at that period. But this will be within the same range what you have seen in the last year. I don't see a significant jump in terms of total borrowings at that point in time.

Thank you very much, sir. [Operator Instructions] We'll take the next question from the line of Mr. Rahul Jain from Credence Wealth.

Sir, with regards to the industrial volumes and that is supposed to be a lower-margin business for us. In last 3 quarters, consistently, the volumes have gone up from an average about 1,400, 1,500 per quarter, it went up to almost 3,600 for December, then 5,000 for March and current quarter, it is around 5,000. So, going -- and we have been generally reluctant to be very aggressive on this segment because of the credit side. So going ahead, do we now see the volumes currently at around 5,000 be stable at that level for this particular segment?

Going forward for next 2 or 3 quarters, this quarter may show a little dip. But going forward in quarter 3 and quarter 4, we hope to maintain around same numbers, that is 4,000 to 5,000 in between. The reason is that today, there is a good demand, but we are not trying to increase our volume here and we are careful and selective in terms of customers whom we will supply. Because as you have said and as I have been maintaining that this is an area where normally, we have seen that payment cycle depends on government payments to the EPC contractors. But for this current year, which is before election, every EPC contractor is quite bullish in terms of volumes they get and payment cycle is maintained well. So, we will limit ourselves within our defined limits of total exposure to this segment.

And sir, is it possible to share what percentage of volumes we have done from the 3 states put together? MP, Maharashtra and Rajasthan?

I'll ask Rajesh to send these details to you, if you can just let me know. So, we'll work out and give, because we have all this data available with us.

And sir, with regards to the overall value growth this year, in this quarter when we have already done INR 280 crores and even if I assume just a 10% growth on the previous 3 -- the balance 3 quarter sales as compared to last year. Then -- so, can we target at least 10% growth on the balance 3 quarters year-on-year growth?

We all have that plan and wishes, but we need your good wishes as well.

[Foreign Language] That is always there.

[Foreign Language] strive to achieve that.

Because then for the overall year, our value growth or the sales revenue growth at current prices and as we speak today, it should be at least around 20%, even if I assume just a 10% growth for the balance. Is that correct way of looking at it?

That's a fair way because the raw material prices what they were last year to this year, volume-wise, the growth should be around this.

And sir, with regards to just to add to the previous participant to what we were trying, I think given that overall volumes in this quarter have been around 25,000, 26,000 and assuming that the volume growth continues coming from Building Products and agri both, at what point of time do you feel you would like to now set up a new plant somewhere in the south because for the last 3, 4 years, we have been, except say for 12, 15 months of bad times when the industry went through tough times and we had a fire. But we have been trying to seed the new markets from somewhere around 2019 year. So -- and currently, last 3 quarters, we have done exceptionally well. So, in order to get the next level of growth, how do we get it in terms of the new states? Because probably, the current 3 states of Maharashtra, MP and Rajasthan, we must have gained already quite a sizable market share from where the growth cannot be easier.

What you are saying exactly this is what is of our mind. We are studying this subject. And I think by end of this financial year, we may be taking a call on this particular aspect of going to new region and territory.

And we continue to see volume growth in Building Products as we speak?

Yes, we are seeing the growth month-on-month. I mean quarter-to-quarter, certainly, yes, but even month-on-month, we are seeing a growth there.

Thank you, sir. [Operator Instructions] We'll take the next question from the line of Mr. Rupesh Tatiya from Intelsense Capital.

My question is what kind of contribution we have from Jal se Nal scheme? How do we cater to that demand and what kind of contribution we have in Q1?

Today, we don't have much of sales to Jal se Nal because it's a registration process and then you have to start supplying to them, which we are in process and I think it will begin now.

And that supply will be through distributors, sir?

Certainly. In areas, wherever distributors are there, normally, they would be able to supply because they require regular supply, which is on their construction planning base. So, distributors normally supply to them.

And currently, there is, I mean, negligible sales, of no sales from Jal se Nal?

Correct.

Sorry?

No, presently, we don't have direct much supplies to them. But yes, they are now starting this process of registration approval, everything is getting through and that's how these supplies are starting there.

Thank you very much, sir. [Operator Instructions] We take a follow-up question from the line of Mr. Rahul Jain from Credence Wealth.

Sir, you talked about Building Products volume growth and also on the industrial side. So, looking at agri, how do we see the scale-up of volume growth going ahead for the current year? We have done record volumes in quarter 1 and I do understand quarter 2 is always a soft quarter. But if we look at the current trend, the prices being stable and as you mentioned in your initial remarks also, at lower prices, the demand is certainly higher. So, how do we see the balance of the year in terms of volume growth for agri segment on a year-to-year basis?

Rahul, you would have noticed in the month of July, we had fairly good widespread rains across. I mean more than what was projected or thought about. So generally, the crop conditions so far is fairly good. The sowing is good, the initial germination is good, so -- and the prices at which the raw material or polymers are today, they are also quite favorable. So, if there is a agriculture growth, there is a fair price, there is pent-up demand, we see every reason to be optimistic in terms of growth numbers for the year.

So, if I can ask a direct question. Sir, last year, the balance 3 quarters of quarter 2, quarter 3, quarter 4, we did a volume of about 45,000 tonnes, last year. And for the full year, the tonnage was -- sorry, I'll come to the agri part, I'm so sorry. In agri, we did a volume of about 33,000 for the 3 quarters; quarter 2, quarter 3, quarter 4. And for the full year, it was 44,000 roughly. Current quarter, we have already done about 18,800. So, in the balance 3 quarters, how do you see the volumes? Can they be somewhere around what, a 10% growth over the previous year's 3 quarters? How do we look at it? Given the situation and given your penetration in the newer state, what kind of volume growth are we building in now for the agri segment?

Rahul, I think you have been very good at statistics. So, I must say that I will learn from you how to calculate. But certainly, what it looks like is more optimistic numbers than what we had said.

This is based on data [Foreign Language]. I have not done anything else.

So, I am quite sure my numbers and your numbers makes me think that the opportunity is more than what I had suggested.

Any particular state which you feel after these 3 states where you see much better traction today compared to what it was say a year ago?

What I have seen the market down south, at least 2, 3 states are quite, I mean, quite large markets. Not only that, we have seen in UP also is working out to be a state where volume growth can be expected in better numbers going forward.

And wish you all the best.

Thank you.

Thank you very much, sir. [Operator Instructions] We take our follow-up question from the line of Mr. Rupesh Tatiya from Intelsense Capital.

One final question, sir, is I think the anti-dumping duty on Chinese or other PVC resin expired in India last year. And I mean, do you -- I'm sure the industry is listening to bring back the anti-dumping duty. Probably they are working with the Ministry of Commerce or Finance, whatever. So, do you have a view of where things are? And do you expect the duty will come back this year?

Can you repeat your question? I think it's not very clearly audible.

Sorry, you can hear me, sir? This is better?

Yes. Repeat.

Yes, yes, yes. So, I think the anti-dumping duty on PVC resins, I think, expired last year on Chinese PVC resins, especially. And most of the PVC resin players in India are reporting margin compression. So, I'm sure the Indian PVC resin industry is petitioning Ministry of Commerce or Ministry of Finance that anti-dumping duties and we should bring back the anti-dumping duty on PVC resins. So, my question to you is, I mean, do you have a view of where the PVC resin industry is in terms of anti-dumping duty? Do you think the anti-dumping duty will come back in FY '24?

You see anti-dumping duty adds injury to the local industry. And as this stands today, the world over prices of materials being supplied to different countries is all the same price level. So, there is no direct injury to Indian industry. So, I don't anticipate any anti-dumping duty coming in form of imports of polymers into India. Yes, there are certain discussions about the poor quality PVC, which was below [ 4 mm ]. Maybe there is some duty or restriction on that, which is a very inferior raw material, which was coming in some volumes in -- from some markets. So otherwise, for a regular Suspension Grade, I don't foresee any kind of duty coming in.

Thank you, sir. [Operator Instructions] As there are no questions, I would now like to hand the conference over to Mr. Shiv Singh Mehta from Kriti Industries for closing comments.

I would like to thank all the participants for their active participation and support they have been giving to us all these years and we look forward to your encouragement, which is very important. Thank you so much.

Thank you, sir. On behalf of Kriti Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.