Kriti Industries (India) Limited ($526423)

Ladies and gentlemen, good day, and welcome to the Q4 FY '26 Conference Call of Kriti Industries Limited. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand over the conference to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Kriti Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the fourth quarter and full year ended of the financial year 2026. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Shiv Singh Mehta, Chairman and Managing Director; and Mr. Rajesh Sisodia, Chief Financial Officer. Without any delay, I request Mr. Shiv Singh Mehta to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Purvangi. Good afternoon, everyone. It's a pleasure to welcome you to the earnings conference call for the fourth quarter and financial year 2026. During the period, our total sales volume stood at 13,577 metric tonnes, reflecting a growth in this quarter. Aggregating to Agriculture segment, 10,288 metric tonnes, registering a 12% growth over Q4 of last year. Building Products, 2,683 metric tonnes, 7% growth over Q4 of last year. Industrial segment at 606 metric tonnes sales, a steep decline of 65%. For company, first 9 months were challenging. Therefore, overall annual figures appear as under: Agriculture segment, 47,638 metric tonnes, 11% decline; Building Products, 7,685 metric tonnes, 16% decline; Industrial segment, 3,307 metric tonnes, 29% decline. Overall, 58,630 metric tonnes, 13% decline. Company was able to recover in Q4 to end the year with a profit. At EBITDA level, earnings for the year was INR 35 crores as against INR 28 crores in the previous year. Thank you. I'll now hand over the call to our CFO, Mr. Rajesh Sisodia, to take you through the financial highlights.

Thank you very much, sir. Good afternoon, everyone. Let me now take you through the consolidated financial performance for the period under review. For the quarter under review, the company reported revenue of INR 142 crores, reflecting a growth of 3% on Y-o-Y basis. EBITDA stood at INR 18 crores compared to INR 20 lakhs in the same period last year, with EBITDA margin improving significantly to 12.91% from 0.15%, an expansion of 1,276 basis points on a year-on-year basis. The company reported a net profit of around INR 4 crores as against a loss of INR 4 crores in the corresponding period last year. Moving to the full year performance of FY 2026. The revenue of the company stood at INR 587 crores, reflecting a decline of 19% on Y-o-Y basis. EBITDA for the year was INR 35 crores, up 23% on Y-o-Y basis, with EBITDA margin improving to 5.94% from 3.93%, an expansion of 201 basis points on Y-o-Y basis. The company reported profit of INR 1 crores compared to a loss of INR 4 crores in the previous year. Thank you. With this, I would like to open the floor for questions-and-answer session.

[Operator Instructions] Your first question comes from the line of [ Danish Javari ] from Boring AMC.

So I wanted to ask what is the management's focus right now, like considering the PVC prices are falling? So right now, we saw inventory gain. Will we see an inventory gain going ahead in Q1? That is my first question. Second question is on the demand side. How are we seeing the demand shape up? And when can we see a meaningful volume growth for the company?

You see, there were certain inventory gains, yes. And going forward, in Q1 also, as things are very volatile today, it's difficult to predict. But still, we may see some advantage on inventory side. But the question about the quarter will depend on how the market turns up because there were certain upheavals because of the wars in South -- Iran, Iraq area, which has resulted into a lot of volatility in petrochemical prices, and that has affected market and how far that will continue is still uncertain.

Okay. And can you give us some detail on the demand side? Like, how do you see demand shape up? And how is the underlying demand for our products, Building Material and Agriculture?

Demand for Agriculture and Building Products were impacted immediately after the war broke out because of the sudden very high increase in the raw material and finished good prices. But now they have settled. So demand is again back to almost average normal.

Okay. Great. So any kind of a guidance that you would want to give, like, for volume growth for the FY '27?

Yes, we certainly look forward to a positive growth, and it should be in excess to the industry average because we had a bad year last year. So for us, it is a comfort -- low base on which we have to grow this year. So we expect a healthy growth over last year. And that is because of a lower base, because we had shrunk last year, so we have every reason and a lot of headroom to grow up.

Sure. And any CapEx guidance, like any CapEx that you are doing? Or are we putting it on hold for now?

No, we are putting CapEx on hold because we have already invested for all the developments, and we will observe first 2 quarters, as I told you last time, before we decide for the further CapEx plans.

Your next question comes from the line of [ Praneeth Varma Saiti ], an individual investor.

I'd like to apologize if I'm asking the questions from previous participants. Sir, I was wondering in terms of the company's plans, I understand the CapEx is on hold right now, but the thing is, as we see in the market right now, all the big players, most of the organized players are putting up capacities across the country, in the South and the North and the East and the West. But we have a plant in the center. I agree that we are putting depot in all of that. But how do we manage -- how are we planning on staying competitive beyond, let's say, our central location because everyone is putting up capacity and everyone is being aggressive in terms of pricing also in terms of passing on the logistics cost and all of it? So what's the company's plan in terms of staying competitive and growing the manufacturing base? Because I understand the efficiencies are there with having plant, but won't it be easier to access different markets by expanding beyond one plant?

You have a very valid question. You see we are very clear that there is a limitation to grow beyond a regional territory if you have a located plant at one location. That is true for Agriculture. But in building material, the ability to afford a distant logistics is still feasible. We are still working out as we had told you last time, till we consolidate our -- because we had a bad year, so we will consolidate our position. And fortunately, for us, this territory where we are, we are a leading premium brand, and that gives us an advantage. So any further major expansions will be certainly thought through, and new capacity expansion or diversification of locations will depend how we take up next 2 quarters of our business.

Understood, sir. And in terms of our dealers, I think we have around 400 at this point of time. So I was wondering in terms of how many of them are Agri versus, let's say, the Building Products? And what is the strategy in terms of growing them? Because 400 in the grand scheme of things is not that much. So I was wondering what's the -- how much -- how many -- like, what are the kind of resources the company has put behind growing the dealer network? In terms of the team, did we add new people recently? Could you just give some idea on that?

So we are expanding our dealer base. But we are already fairly well entrenched in the major areas where we don't see much scope of expanding further. So those new dealers are getting added into the regional -- regions which are closer to our existing territories. And in Building Materials space, yes, for sure, we are expanding everywhere where we can.

But sir, what is the kind of team we established to grow this? In terms of numbers, could you give some?

Numbers in the sales team? We have a fairly well-established network and team members. And that's where we are quite comfortable. We are not looking at major expansion on this sales team, but for a lower end of team where you have the ground -- I mean, foot soldiers, which we keep adding as and when the demand in the areas get activated.

Understood, sir. And in terms of the 400 dealers, how are they spread across from each state? Like, I understand Madhya Pradesh would be probably the largest, but how many of them are from each state? Could you give an idea?

We have well entrenched dealership in MP, Rajasthan and Maharashtra, and we are expanding in newer territories as well.

No, I was just curious because I wanted to understand what kind of...

Exact numbers, I would not have here, but you can get in touch with our CFO, and he'll give you numbers state-wise if required.

Got it, sir. And so going forward, so our focus will be on Building Products, that's a fair understanding, right, as well capacities, and we're not having any more capacity expansion at this point of time?

Immediately, no.

Yes. Got it, sir. And in terms of Building Products, sir, what is the strategy with CPVC and UPVC? I understand if you want to get into -- right now, those are the most trending products at this point of time, so what does the company think about expanding those kind of capacities for CPVC and UPVC?

CPVC, we are expanding. UPVC is not on our agenda at this moment.

Okay. So in terms of Building Products, how many -- what percentage would be CPVC versus normal UPVC and other things?

You see, we have a full range of CPVC. And obviously, CPVC is area where we are focusing more for expansion and growth in terms of building up volumes because comparatively, if you see, CPVC offers better margins.

Correct. So I was just curious in terms of the concentration on how -- what we are planning on doing in the future because CPVC has been growing at a fast pace compared to the other segment, right? I was wondering like how is the growth in terms of CPVC segment for the company itself?

No, we are -- all our dealers who are in building materials space would be selling both UPVC and CPVC because both products go together as a family of products for any building, whatever you have, you have all the products requirements, so it's a family. So proportions are almost like settled in terms of what you require in a building.

Got it, sir. Sir, one last question regarding our depots, I understand. Do we have any plans of further expanding the number of depots we have, or we are satisfied with the coverage we have at this point of time?

No, we are growing our market, and we are trying to expand our portfolio also, but it's a gradual strategically decided process in which we are moving.

The next question comes from the line of [ Ashok Shah ], an individual investor.

Am I audible?

Yes, yes, you are audible.

I have just a few questions. So I want to know who are your main competitors in this space that you are in, Madhya Pradesh or in Central India, major competition?

So all the national players are present here with their -- many of them have plant here, many of them have depot here. So everyone is around here.

Okay. The next question is, could you give a margin difference, particularly in your Building and Agri products, exact margin that we get?

You see Building Products offer a better margin than Agriculture. Normally, Agriculture would have about 8% to 9% margin or 10%, it depends on time of the year, while Building Products offers from 14% to 18%.

Okay. And last question, in our earlier annual report, we said we are going to reach INR 1,000 crores revenue. Is that still achievable?

We are working to improve our figures because last year was a very difficult year for us because there was heavy rains as we have been telling you in the other areas of operation, which has impacted our markets very badly. So we are, I mean, revitalizing the whole thing. Fortunately, going forward, if rain gods are right and everything is right, we should be able to aim substantial increase over last year. And we will definitely target towards our guidance. That is what we had said earlier.

Yes. And one last question on our sourcing from for PVC resin. Now with such a big increase in the prices, do we have any strategy? Or where do we source our PVC resins from?

We import and we buy locally as well. So it's a combination of local as well as import.

[Operator Instructions] Your next question comes from the line of [ Kavach ], an individual investor.

So my question is that, for Q4, our cost of materials consumed stood at INR 170 crores against a revenue of INR 142 crores, which implies a negative gross margin before any inventory adjustments. So with the INR 72 crore inventory build driving profitability, can you explain whether this is strategic stocking or any unsold finished goods?

See, normally, you will see every year in March, all the manufacturers build up inventory because the main season starts from April, and you are always ready for the coming season at the end of March because April, May, June is a major quarter for Agriculture sales.

Okay, sir. And my next question is that, for FY '26, our ROCE is close to 7%. So what ROCE can we expect at the targeted INR 1,000 crore revenue and 10% margin by FY '28?

We are targeting and we are doing our best that we achieve these numbers.

Okay, sir. And my last question is about the import mix. So has it changed? And what is the cost impact if any antidumping duty is implemented?

No, there is no antidumping duty rather because of this challenge of war, Government of India has withdrawn import duty on PVC and all other polymers till the period of -- end of June up to 1st July.

[Operator Instructions] Your next question comes from the line of [ Jaiveer Patel ], an individual investor.

So my question is that, other expenses for the year declined 33% year-on-year. So can you break down the key cost drivers for that? And what -- can you clarify what -- why is this reduction happening? And is this reduction sustainable in the future?

Can you repeat the question? Which expenses have gone down? I couldn't hear you clearly.

Am I audible, sir, now? Can you hear me clearly?

Yes.

Yes, sir. So my question was that, we can see our other expenses have declined. So I just wanted to know what was the rationale behind this decrease and whether this is sustainable going forward in the future?

Other expenses? See, other expenses include mostly freight and other related expenses. The exact breakup, I will not have it here, but there has to be reason which geographies and what kind of freight we have incurred. So our CFO will get back to you with details. You please get in touch with him.

Sure, sir. That is fine. Sir, my next question was on the Building Products segment. As the company has mentioned repeatedly that they are going to focus on that segment in particular. I just wanted to get a picture on how much it is contributing right now to the revenue. Has it crossed that INR 100 crore mark? And what is the revenue contribution that we're expecting going in the future from the Building Products segment?

Coming -- the current year, we are focusing more on Building Products revenue growth. As I was telling to some earlier question that they offers better margins and [ sustain/sustained ] volume throughout the year. So you would see that we'll see a quantum jump in this year. We are targeting a fairly substantial increase. Last year, our actual revenues from Building Products reduced, as I was telling in my opening remarks itself as compared to last year because of a lot of rationalization we must have done during this year. So going forward, next year, we will certainly exceed numbers, and we'll try to achieve almost substantial growth on this segment. That will be the major growth driver for the company.

Sure, sir. And sir, one last question on the PVC cost. So what is the -- can you give an idea on the weighted cost that we have in the current inventory in terms of our PVC cost?

We have -- as per the market prices, we are comfortable. As I would say, we may see some inventory gain for the quarter 1.

[Operator Instructions] Your next question comes from the line of [ Akshay ], an individual investor.

My question was regarding your market share in the key states like Rajasthan, Maharashtra, MP. Can you provide some guidance on that?

Maharashtra, MP and Rajasthan, if you ask me, MP would have a fairly large market share. We are the leading brand and majority market share. Rajasthan also, we have a significant market share. But Maharashtra, we are still developing. We are under a development stage. So we'll have a comparatively much lower market share, maybe sub 10% at the moment.

Okay. And my second question was regarding the segment-wise volume and the revenue guidance for FY '27. Can you throw some light on that?

As I said that last year was a year of decline for our sales volume because of the major rains in our area of operation. Now we see if rain gods are right, everything should be, we should see a substantial growth in a lower base we had last year.

Okay. And also, the utilization rate for Q4 of FY '26, what was it?

The plant utilization was fairly good, fairly comfortable in Q4.

Okay. Any number, specific or like in percentage terms?

I don't have a ready hand in terms of exact numbers, but fairly, we are almost above average utilization for our company. We have done better than last year, if you have seen the numbers in terms of both volume and performance in the Q4.

Okay. And also on the time line for a second manufacturing plant, so hasn't been decided yet?

No. As I had said earlier in your question, we'll wait for first 2 quarters to make up our mind when and how, where.

[Operator Instructions] The next question comes from the line of [ Ayush Oswal ] from Counter Cyclical PMS.

Hello?

Yes, please.

Just wanted to ask, has the competitive intensity of the whole industry increased post this recovery that has happened?

No. Can you again repeat the question, please?

I wanted to ask that the competitive intensity in the overall industry has increased? Because the prices have recovered, and the companies are posting good numbers, like you just did.

Competition is quite aggressive, and industry was always in a competitive scenario because we have sufficient number of manufacturers. But yes, certainly, the branded segment has a better acceptability. So organized sector is improving as compared to unorganized sector. Have I been able to answer your question?

[ Ayush ] sir, does that answer your questions?

Yes, yes. I also have [Technical Difficulty]

[ Ayush ] sir, sorry to interrupt, but your line is not very clear. It's breaking up in between.

[Technical Difficulty]

Sir, we could not hear you at all.

I have one more question. I wanted to ask about the trade receivables. They've declined to INR 28 crores from INR 48 crores. So is this due to improved collections? And how do you look at it from an FY '27 perspective?

You see, our outstanding are mostly towards institution. And you must have seen in the Q4, we have reduced our institutional sales as per our projections given to you. So this is why the outstandings have declined.

[Technical Difficulty]

I don't think -- he's not audible at all.

[ Ayush ] sir, we are not able to hear you. Does that answer your question?

[Technical Difficulty]

Sir, your line is not very clear. May I request you to get into a better reception area?

Yes. Thank you.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you for participating in this earnings conference call. I hope we have been able to answer your questions to your satisfaction. If you have any further questions or would like to know more about us or the company, please reach out to our IR managers at Valorem Advisors. Thank you.

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