Kriti Industries (India) Limited (KRITI.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kriti Industries Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Ostwal from Arihant Capital Markets. Thank you, and over to you, sir.

Hello, and good afternoon to everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining into the quarter 1 FY '26 Earnings Conference Call of Kriti Industries India Limited. Today, from the management, we have Mr. Shiv Singh Mehta sir, Chairman and Managing Director of the company; Mr. Rajesh Sisodia sir, CFO of the company. So without any further delay, I will now hand over the call to Mr. Shiv Singh Mehta sir, for his opening remarks. Over to you.

Good afternoon, everyone, and welcome to the earnings conference call of Kriti Industries India Limited for the first quarter of the financial year 2026. Early onset of monsoon and unprecedented rains as early as the beginning of month of May impacted business prospects. This impacted sales of both Agri and Building Products segments. In quarter 1, financial year 2026, total sales volume were 23,714 metric tonnes as against 24,468 metric tons in the quarter 1 of financial year '25. On segmental front, in Agri segment, we barely achieved last year quantities, while in Building Products segment, company registered a degrowth of 29% in volume as compared to quarter 1 of financial year '25. With these details, I'll hand over the call to our CFO, Mr. Rajesh Sisodia, to give you the financial highlights.

Thank you very much, sir. Good afternoon, everyone. Let me take you through the financial performance of your company on a consolidated basis for the quarter ended 30th June 2025. The Q1 FY '26 revenue is around INR 224 crores, which segmentally reflects INR 187 crores in Agri, INR 22 crores in Building Products and INR 15 crores in Institutional Business. The disproportionate low turnover is due to low prices by 13% as compared to last year. EBITDA of the company reported during this quarter is about INR 15 crores, which has been 6.7%. Thank you, and I would like to open the floor for questions.

[Operator Instructions] The first question is from the line of [ Anita Raj ] from Money Matters.

I just have some questions. Like you mentioned plan for regional manufacturing facility to serve different agriculture market. Can you share the time line, investment requirements and target locations for this facility?

Can you repeat the question? I could not get you.

Sir, you mentioned plan for regional manufacturing facility to serve different agriculture market. So can you share the time line and investment record and target location for the facility, that regional facility you have mentioned?

We are incurring capital expenditure for the expansion of capacities and adding new lines for manufacturing, which we are doing already. We have invested during our last year and the quarter 1, and we'll continue to do so going forward in the times to come. We are quite careful about analysis and seeing what kind of market scenario emerges as current scenario in the world market has many headwinds, and we would like that we are able to be on right side of the curve. So we are careful in our expenditure. We are clear about the quantum and where we have to invest. So all details are in the work in process.

Okay. Okay, sir. And sir, like with the antidumping duty on PVC still under judicial review and your current mix of 72% in domestic and 28% in import, how are you managing procurement risk?

Can you repeat again? Your voice is not clear. Can you repeat, please?

Yes, sir. This is regarding raw material you're sourcing, like you have with the antidumping duty on PVC still under judicial review and your current mix of 72% domestic and 28% of imports, how are you managing procurement risk? What's your optimal sourcing mode?

See, presently, the international scenario is quite unpredictable. So any forecasting will have to be on a closed period basis, how things has evolved. Like ADD is hanging in balance for over a year and still it has not been implemented by Government of India. And similarly, the restrictions imposed by international community on various countries is quite uncertain. We would not like to predict any long-term situation as of today. But yes, hopefully, in the next couple of months, things should streamline and clarity should emerge.

Okay. Okay, sir. And on the CapEx side, like you have raised INR 55 crores. Can you deploy all the -- can you bifurcate all the CapEx?

We are already incurring CapEx as per plan, and we are on course of our plan. We have already invested even in first quarter money. And going forward, the investments will continue.

[Operator Instructions] The next question is from the line of [ Praneeth ], an individual investor.

So in terms of agri, I understand the weakness is there. But last time, we mentioned that we're expanding into other segments. Has there been any mitigation as a result of our expansion geographically beyond the 3 primary states of Maharashtra, Rajasthan, MP? And like how is that particular venture progressing at this point of time? Or is that venture not has been as successful as you thought because of the slowdown in the market?

You see our major focus other than agri is building material, where we are continuously making our efforts to expand our markets and our product range. So as far as product range is concerned, we have really augmented reasonably to the requirements of the market in last couple -- 2 or 3 quarters. And going forward, our now major focus is to extend and expand our market reach. So the works are in process and some markets are maturing and some markets take time to mature. So we will be focusing on building material as we have been -- as we have stated earlier.

Understood. In terms of CPVC, that particular segment has remained relatively strong in the market despite the headwinds in the agri space, is it because of pricing? Have been -- we are able to gain more volumes in CPVC? Or has it remained stable for the last -- in this quarter?

Our volumes in CPVC are growing. But for a month where there is a major impact due to rains where we are -- markets were impacted because some of our dealers still are from agri background. And when their attention shifted due to the change in market conditions, we could see a challenge in a month. But otherwise, overall month-to-month, we are growing, and we are in the right direction.

So right now, what is the gross margin like in different segments? I understand the lowest will be agri side of it, and the highest will be CPVC. But can you give a perspective on how each segment is contributing to the overall gross margin and how it is going to go into future contribute to the EBITDA also because we expect growing in the Building segment, right? But I understand the margin might expand. But if you can give a perspective on with what type of contribution the margin will have a change?

See, in our case, our margins will improve once our volumes grow to a larger numbers because the initial fixed cost towards developing a market is consistently at certain levels, which have to be distributed on a larger base. So going forward, we certainly see margins to improve in building materials, and we should average it around industry.

So at what volumes will we be able to mature in the existing markets we are at? Like what percentage do we need to grow in these new markets, where we can get to a point where much expansion happens?

You see there's a critical volume. So it's not a question of percentage alone. So there are certain volumes, which are critical numbers once achieved. You can say once we grow our business for building material beyond INR 200 crores, INR 220 crores per year, that's about INR 20 crores, INR 20 crores per month. Our fixed costs will come down considerably.

Understood. So -- got it. So in terms of procurement, I understand the PVC prices have been falling. Have we been procuring mostly from the domestic side? Or have we been importing? Because I think domestic prices are slightly premium to the imported ones. So how have we been doing sourcing in terms of the resin at this point of time?

We are importing as well as domestic sourcing. But our imports in terms of overall percentages have come down in a falling market because the logistics supply chain time in import is much longer than the domestic supply chain dynamics.

Understood. So basically, despite the price premium at the point of sale, the logistic cost will be enough to not make it viable to choose imports, right? Is that what you said?

That will mitigate certain risks as well as you have to see the benefit. So risk reward ratio has to be observed and a judicious judgment has to be taken.

Understood. So it's mostly imports at some point of time. See, it's mostly domestic at this point of time, right?

Yes.

The next question is from the line of Parth Patel, an individual investor.

Am I audible?

Yes, you are.

So sir, my first question is that you mentioned targeting 10% EBITDA margins going forward. But Q1 FY '26 margins at 6.74% are still below the FY '24 levels of 6.87%. Can you provide a monthly time line for achieving your 10% target and specific initiatives beyond raw material price stabilization?

First quarter was certainly challenging, as I had even said in my opening remarks, because of unprecedented rains right at the beginning of May, which is generally a peak time for sales. But going forward, we feel from quarter 3, things should improve. But this time is the time when the harvest is over, rain period, I mean, monsoon is over and the market should be fairly comfortable as there is an overall growth, which is anticipated, both agri and building materials.

Okay sir. And sir, secondly, the capacity utilization is at 49%, what is the strategy to optimize fixed cost absorption? Are you considering any temporary capacity rationalization or asset monetization to improve return ratios?