Mayur Uniquoters Limited (522249) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Mayur Uniquoters Limited Q4 FY '20 Earnings Conference Call hosted by Monarch Networth Capital Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anubhav Rawat from Monarch Networth Capital. Thank you. And over to you, sir.

Thank you, Nirav. Good afternoon, everyone. On behalf of Monarch Networth Capital, I welcome you all to quarter 4 FY '20 earnings conference call of Mayur Uniquoters. I hope everyone is safe and sound. We are pleased to host the senior management team of the company today, and we have with us Mr. Suresh Kumar Poddar, Chairman and Managing Director of the company; and Mr. Vinod Kumar Sharma, CFO of the company. We will start the call with the initial comments about the results and the outlook of the company, and then we will open the floor for questions and answers. Now I hand over this call to Mr. Suresh Kumar Poddar. Over to you, sir.

Thank you very much all of you. We welcome you in the fourth quarter analysis. Although everybody is running in a very uncertain time at the moment because of COVID and definitely, economy is also affected with that, but we are hopeful that everything will be all right. It may be a matter of another 1 or 2 quarters. After that, everything should be all right. It all depends on God how COVID moves. But so far as economy is concerned, now every month it is picking it up. So there is nothing to worry. This up and down comes in the life. You cannot go up, up, up. You cannot go down, down, down. So when there is up, there is down. When there is down, there is up. And I think this will be settled down. Now I hand over you to Mr. Vinod Sharma to give you the speech about what has happened and what is going to be happened. Please, over to Vinod.

Thank you, sir. Yes. Good afternoon, dear investors and analysts. Ladies and gentlemen, it is a great pleasure to be here to share with you the performance of Mayur. Thanks for giving your precious time to join Mayur Uniquoters Limited Q4 FY '20 Conference Call. Mayur Uniquoters Limited, being a market leader in the synthetic leather industry and an organized player, has been able to leverage the emerging opportunities and delivered exemplary performance in 2 past years, both in national and international business markets. After big slowdown and sluggish demand in automotive market, a small rise in demand of automotive industry in last quarter of FY '20 has improved our Q4 performance also and our sales revenue increased by 12.70% as compared to previous year's quarter and 11.89% over the last quarter. We were also expecting good sales volume, thereafter, due to increasing demand in automotive market. But as you know, that starting from 22nd March 2020, we all are facing a truly unparalleled situation due to COVID-19 pandemic's spread. The COVID pandemic is unprecedented and impacting significantly all business across globe, and we are not left untouched with the severely bad impact on Mayur Uniquoters' business also, especially in current financial year. The company is also taking all necessary steps to regain its commercial operations back to normalcy sooner, of course, with cost control measures and reduced overhead costs as well as during this challenging time. As your company has been with a very good track record of being an investor-friendly company as it is committed to drive value creation for all the shareholders, now I'm glad to tell you that the Board of Directors of your company have declared final dividend of INR 1, that is 20% for Q4 and aggregating INR 4 in this FY '20. Now I would like to start with financial highlights for Q4 FY '20 under review. We will reply your queries after our review on the financial results. Your company has achieved a revenue from operations on a stand-alone basis, amounting to INR 139.44 crores, which is increased by 11.89 as compared to last quarter. And net profit after tax amounting to INR 26.58 crores, which is increased by 46.17% from last quarter. Also, the revenue from operations on consolidated basis is [ INR 131.11 crores ] which is 5.41% decrease as compared to last quarter. And PAT amounting to INR 24.83 crores, that is increased by 6.60% over the last quarter. Further, the endeavor of Mayur is to be a preferred supplier for the leading OEM, especially in U.S. and European regions, and we are glad to update that your company is already approved by Mercedes-Benz for supply to their South Africa plant and product supply is expected to start for their new models from Q1 of our FY '21-'22. This is basically a 3 months delay because of this COVID problem. And moreover, our product approval from BMW is also under progress and expecting approval soon. Now I update you on our PU Plant. At the plant, most of the project construction activities are completed now with the commissioning of wet and dry lines of PU Plant. Then trial runs and also started commercial production from the PU Plant. The small supply orders and dispatches also started from the plant in March '20 month. However, operation of the company impacted due to shutdown of all the plants and offices following the nationwide lockdowns by the government of India. The company has resumed operations in phased manner as per the directives from the government of India. The company has evaluated impact of this pandemic on its business operations and financial position. And based on its review of current indicators for future economic conditions, there is no significant impact on financial statements as at 31st March 2020. However, impact of assessment of COVID-19 is continuing process, given the uncertainties associated with its nature and duration. Accordingly, the impact may be different from that estimated at the time of approval of our financial statements. The company will continue to monitor any material changes in future economic conditions because of this pandemic. While pursuing our business interest, Mayur Uniquoters has also been endeavoring to fulfill our responsibilities towards the societies. Under our corporate social responsibilities program, the company has adopted many happy schools for education of children. Your company has worked on education, especially for the girls and underprivileged child education; various health care initiatives, especially child skill development; water for all; sanitation at the school area; distribution of books, bags, clothes and blankets; and most importantly, family planning and family welfare schemes. The government of Rajasthan has recognized these initiatives on various platforms. I'm thankful to all investors for their valuable time to those who became the part of this conference call. With this positive note, I would like to conclude and request you all to open the phone for questions. Before that, I request all to -- because of this time constraint, we are restricting this call to 1 hour. So try to close all the questions by 3 p.m. sharp. And take note -- and please -- a repetition of questions, please avoid that. And considering competition, we will not discuss volume data. Please avoid volume-related questions. Thank you.

[Operator Instructions] The first question is from the line of Niteen Dharmawat from Aurum Capital.

Yes, first of all, [ can you hear me already ]? Hello? Yes, am I audible?

Yes.

Yes.

Yes. Yes.

Yes. I wanted to know how the cash flow situation right now, considering the lockdown that has happened starting from mid of March, how is the cash flow situation right now. And second question is, how is our international business, especially from the automobile sector is going on? And what are the challenges that we see?

Yes. The cash flow will be explained by Mr. Vinod. And so far, you have asked for automotive business. Now it is -- it has started wearing off. So April, it was 100% lockdown. In May, we did little bit business, you can say 15%. But in June, it is further increasing. And what the expectation and future requirement has been given to us and told to us, I think July will be much better. I think in July, we must have at least 35% to 40% of the automotive business, which was hardly, if you count May and June, it may not be even 20%. So now companies are gearing up. The stock clearing is going on. Dealers' stocks are also reducing. And companies' stocks are also reducing. And the demand has also picked up a little bit. Although it will take long time, but the thing has started moving, at least. And what they predict, if that is so, then I think by third quarter the things should be normal, but I don't think so. But all the OEMs are giving us the future requirement is like 100% from third quarter. The same thing in OEM export in U.S.A. also. Even they have said that from August our sale will be 100%. But I don't believe it because until -- unless we see it we cannot say anything. But every quarter, things will improve and it is improving. April was totally 0. May is improving. June had improved. And the way things are moving, I think July will be much better than June.

As regarding cash flow, it's generally reasonably so good, and we have been able to recover our outstanding. Against INR 138 crores, we have already recovered INR 75 crores, plus collections. And there's no such issue in cash flow as on date.

Got it, sir. And how's the situation -- can you tell me about the competition from the Chinese company? So did you -- do you see that in the domestic market? That's my final question.

Your voice is not clear. Can you repeat the question?

Yes. My question was about the Chinese competition in India market. So how is that currently? And what do you see -- foresee because of the various things which are happening in the environment?

You see, the Chinese competition is only on PU leather cloth, not in PVC. Too much PVC is coming in from China. Only PU leather cloth is coming. And that's also government has increased the import duty by 10%. Previously, it was 10%, plus 10% surcharge. Now it is 20% plus surcharge. So previously, it was 12%, now it is 22% -- 11%, now it is 22%. So already, they have increased the duty. So let us see, it should help our PU leather cloth plant. But the problem in India is under-invoicing. Too much under-invoicing, too much capacity utilization. But now since customer is also becoming very strict, I think there should be a difference. But it will take time because there was no sale from last 2 years -- 2 months. And now it has started picking up a little bit, that is also in South. And North India is still Agra, Kanpur and Delhi. Agra has opened just 2 weeks back because of this COVID. So I think by the time their stocks are clear, then they think of bringing the material it will not be -- not before end of the second quarter because they have a huge stock. So I think things should start becoming normal from third quarter. And so far as our PU leather cloth plant is concerned, now we are doing the sampling a little bit of the orders that have started coming also. Now the thing is that people have got overstock. So whatever order we are getting which are different than Chinese material in the look or in the quality, those kind of products we are selling -- we have started selling. And active sampling is going on. And I think from third quarter, you will see the result of PU leather cloth. So China, I'm not worried about China at all so far our leather cloth is concerned. Now of course, there is one hitch was going on because all the footwear manufacturer want to export and they want import duty to be reduced. So we have already approached from our side and from the association side to tell them that you cannot reduce the import duty because India is self-sufficient to give you the material. So only 1 hurdle that what we are seeing, but I don't think so because already government is very much against China. Each and every shipment that -- are detained and they are doing physical check and all that. So I think from China, we should have no problem. Maybe for 1 quarter or 1.5 quarter, but after that, it will be clear. I mean we have a good chance of PU leather cloth, what I'm trying to say. And PVC, as it is, it was not affected.

Next question is from the line of [ Mana Saraswat ], individual investor.

Can you please provide domestic OEM client-wise breakup of revenue? And how much would Maruti be contributing to annual revenue?

Plant-wise? What do you mean by plant-wise?

No, I meant domestic OEM client-wise breakup of revenue.

Plant-wise means company-wise?

Client, client, client-wise.

Client-wise. Client-wise.

So client-wise to customer-wise. It's not possible now to tell you. How can I say? There are at least 30, 40 clients. How can I say anything? Now you send me the letter, I will try to respond -- from correspondence.

Provide information. Yes.

Not possible. There's so many customers. Now you can say mainly, we are working with Maruti; MG Motors; Hyundai, we started; Mahindra; Tata; this 2-wheeler Japanese company DSE; and I think we have started Bajaj also; and Honda, we are already doing; Hero MotoCorp also we are trying. So almost all the car manufacturer or 2-wheeler manufacturer, barring 2 or 3, we are working with most of them. Maybe little less quantity or somewhere little more quantity. Now Honda 2-wheeler, we are doing, you can say, 80%. So at the moment, only Hero MotoCorp is not in our customer list, which we -- for that also, we are in a very forward space and maybe in next 3, 4 months, maybe we may able to get the business. So far 4-wheeler is concerned, I think almost every company we are supplying.

Next question is from the line of Pritesh Chheda from Lucky Investment Managers.

Sir, can you just give us a ballpark volume, annual volume decline that you would have seen in FY '20?

One minute.

So I don't want the breakup, just the total volume decline of volume numbers.

10%.

It is about 10%.

10%, yes.

Okay. And specifically about quarter 4, sure the margins that we see, is it a function of a lower PVC prices which have substantially flowed in or...

The main thing was that our OEM export business was very good in this quarter compared to last year quarter. And the value -- because we have added more items, the per meter value was much more. Previously, it was close to INR 500 and in this quarter, it was INR 550, close to. So that also helped us. And so far as automotive is concerned, export OEM has good margin, better than any other segment.

So it's not to do with the PVC price?

No, no, no. PVC price, that has started reducing now only from last 2, 3 months. And that also -- in India, there is no reduction in PVC price. And so far as our OEM exports is concerned, there are this special kind of PVC which is not reduced too much, maybe 5%, 7% here and there. Because of segment, which segment we have done the business. So OEM business is better and that OEM, we have done good.

We haven't...

Sorry?

Is it a one-off order in that quarter? Or there is a regular supply order post this which you have got in the OEM export?

So OEM export, there is a good order. But because of COVID, everywhere there is a problem. April was totally closed in America. They have started from, you can say, last week of June. From June, they have started buying, little, little. Now they are also improving. Last week was just double to before last week. I mean after opening, whatever was the quantity in first week, the second week was double. Now they say by July second week or third week, they should be in pre-COVID condition. But I don't think so. What they are saying, you see, they always want that suppliers should be ready with the material. So if the suddenly requirement comes, they cannot say that we don't have the material. But their prediction is this. That's why July -- after July second week, it will come back to 100%. Let's see, let's hope so.

This is to do with your existing client which you usually name in the call?

I'm talking about the existing client only.

The -- on the export view?

Yes, yes, whoever we are exporting OEMs. I'm talking about them, talking about their inquiry. Those who are not our in list, already we are after them to get approval. That is separate thing. We are not talking about that. It is only from our existing customers.

And lastly, if you could give us the footwear to auto mix in your total volumes? How much is footwear as a percentage of the -- or volume footwear?

Footwear, if you ask the volume...

Or value.

It has increased maybe you can say 5%. 5% increase this fourth quarter versus previous fourth quarter. It has increased by 5%.

In the share or volume growth?

No, volume. Individual volume. Not in share.

Okay. And auto?

Auto has increased, definitely. Auto was last year 55.98% and now it is 61%. Footwear was...

You must have that...

20 -- footwear -- where is the footwear? Footwear was 4% increase in volume.

No. Okay. Now I'm confused, sir. You gave...

No, no. Automotive was 55% of the total sales in last year fourth quarter. Now in this year fourth quarter, it is 61%. The footwear was -- has increased by 4%, which was -- [indiscernible] growth is 4%.

I actually was looking at an annual basis, this mix. So auto would be 60% of your volume?

Just a minute. So in the whole year, if you talk, last year, it was 50%. This year, it is 55%. Last year, footwear was 36%. This year, it is 30%. Rest is others.

Okay. And just last one, the PU side, when you run the plant, what will be the fixed cost? And what will be the depreciation number?

It is very difficult at the hand to tell you what is the fixed cost and what is the depreciation. I can tell you, please write to me separately, and I'll tell you about it.

Next participant is Depesh Kashyap from Equirus Securities.

Sir, my first question is now that the PU Plant is commercial, can you highlight the difference in the Chinese landed cost versus your manufactured cost? You talked about the increase in duties, but now how much is the actual difference in the pricing?

Actually, the difference is there. But because in India, you know it very well, these traders are doing a lot of under-invoicing, wrong declaration, all these things are going on from long time. So the difference will always be there, but there is a big difference that now whatever Chinese material is coming, that is bought by the distributors, and they are retailing or giving to the small shopkeepers. No big organized footwear manufacturers are buying from these guys. So now with our coming, now the people have started making samples from our material, these manufacturers started -- big manufacturers, I'm talking, who were not keeping any stocks. The PU type of footwear they used to import from China. There also the import duty has been increased drastically. So now we are talking to all of our big customers who are importing from China. They say, now we are stopping importing footwear from China. Now whatever chappal and sandals or shoes were imported that were made out of PU. So now their demand for PU will definitely start. It will take time. We are very hopeful.

Sir, roughly, the pricing difference would be greater than 10%? Or less than 10%?

If you go with their basic price and if you go from our basic price, the price difference is between 15% to 20%. So if the duty is clean and taken it as it is, then there is no problem in the prices. But the manufacturers always say it is more price -- suppose if you are distributor, you have got certain thing, INR 100. If you go to the footwear manufacturer, you will sell him in INR 110. So my difference of INR 10 is already there. Then the duty difference. Suppose duty is 20% now. If they manipulate it, may be 10%. So of course, there is no doubt that our cost is higher than theirs. There is 2 reasons that PU chemical is imported from China or other places. So far as fabric is concerned, we have started manufacturing ourself. We are capable enough to make our own fabric. Now the only problem is PU resin. That also, in our drawing board that within 1 year or 1.5 years' time, Mayur will start manufacturing PU chemical also. There are 2 things, PU chemical and fabric. Fabric, we have already started. Now the only thing is PU chemical. And that also we have started diverting from China to other countries, like we have started importing from Turkey. Their prices are okay, a little more than China, but their quality is good. So we are working very seriously on PU Plant.

Understood, sir. Sir, my second question is, sir, you talked about the difficulties in the month of April and May. Can you just highlight how -- what are the cost-cutting measures you have taken? And do you think you will be able to breakeven at EBITDA level in Q1?

You see, if you ask me about the cost cutting, my CFO is sitting with me. He has a mental problem that every time he tells me that you call me and ask for the reduction in this price and that price. We are reducing even the cost of stationery INR 1,000 you can reduce. We have reduced the salary of our executives. We have reduced -- I mean all the legal matters, we have reduced more than 20% to 25%. We are doing our best to reduce the cost because at the moment so long you are not coming up with the sales, which is not in your hand, you cannot take out money from somebody's pocket. But it is -- whatever is in my hand, we are trying to do it. And I'm very glad to say that all my people from top to bottom, they are all supporting company. They are all with the company. They are doing their best. So whatever cost cutting we can do, we are doing because when the sales are so down, everybody is busy only in cost cutting. We are doing a lot of automation to reduce the labor cost. So -- but I am saying it is rather good. You will see the difference from '22-'23. I can't say about '21-'22. '20-'21 will be bad, everybody knows. But '21-'22, maybe as per before COVID. But from '22-'23, you will see where India will reach. That is my guess because of these Chinese problems. And everybody has started understanding that we have to [Foreign Language] everybody is trying to do that. So -- and sentiment is also in India, you have seen everywhere that no more Chinese material. So if our government is very active, if we manufacturers are active and want to produce the material in a good competitive prices and good quality, there is no reason that we can do wonders.

Right. Sir, my last question is, sir, like, I still see a INR 39 crore number in your balance sheet in the construction in progress. So I just wanted to understand what was that. And what is the CapEx that you plan to do in FY '21?

This is basically against pending civil works and some commissioning of machinery at our PU Plant.

Okay. So PU Plant has not commercialized fully? Is that so? Or still company is going?

It's commercialized. Some equipments are still to be commissioned, say, [ building ] of towers and other building parts or admin block, canteens...

But that is not stopping our production.

But it is not stopping our production and our operations.

Okay. And sir, the CapEx plan for this year, FY '21?

[Foreign Language]

[Foreign Language]

Maybe there is one coating line we have ordered which we stopped because of this...

COVID.

COVID problem. Maybe after 6 months, we will call for that machine. As of now, we are going for PU laminating machines also because some automotive customer is asking PU-coated material. PU means, I'm talking about PU foam, because with the 6, 7 foam, they are putting on the back of the PVC. So they want -- usually, they used to get it done outside. Now they want from us, 2 companies, Ford and MG, they are buying with foam lamination. Now my problem is that we have to send material to Delhi then bring it back, then check it and send it. So we are putting up that plant, and I think in next 6 to 8 months, we should start working.

Sir, should be around INR 40 crores or more than that, sir?

Nearly, you can consider around INR 45 crores.

Not in this...

No [Foreign Language].

[Foreign Language]

INR 45 crores to INR 50 crores, you can take, including this additional...

Out of that also the money is already spent and now this year, I think we had to spend for foam plant. We had to spend some money on [ wide-knit ] fabric plant and the dyeing plant. So all this together -- but that will not be completed within this year. It will carry over to next year also. And this is another INR 50 crores to INR 60 crores.

Okay. Okay. Lastly, Vinod sir, if you can just give me the -- you gave the full year volume decline is around 11%. That basically implies around 12% volume growth in this quarter on the stand-alone number. So how much was export growth? And how much was domestic? If you can just give me that, sir?

The export growth.

Export growth.

For this quarter?

No. Q4. For Q4, no?

Yes, sir, Q4.

Export growth in value...

Only growth.

Growth in value was 19%.

19% in export and...

Export OEM, we are talking.

Altogether was 13%, both in -- 13.82 -- 14% in export total.

14% export?

Yes.

But this is mainly to our subsidiary, right? So on the console number, it was only 2% growth...

One minute, one minute.

Just a minute.

You are talking about automotive export OEM, right?

Yes, sir. Yes, sir.

So in that, we have a growth in value 19%. And in quantity, it is about 12.5% or 12.6%.

Q4.

Q4, I'm talking between Q4 to Q4.

Understood, sir. Sir, I'm just asking, is this stand-alone growth? So this growth was basically done to a...

One minute.

Yes, please correct the figures.

Sorry, sorry, sorry. Growth in value is 76%.

76%?

OEM export. In value, it is 58%.

And domestic...

Domestic OEM, you're asking?

Yes, sir, total domestic. So rest everything will be domestic. Yes, if you can tell me that.

Domestic OEM, I'm talking about auto OEM. The value growth was 6% and quantity growth was minus 2% or minus 3% because now we are getting orders for value-added products because nowadays you have seen in Mahindra, Tata, MG Motor, all those guys are buying -- cars are expensive cars, they are coming out with, in which they are trying to use that American type of OEM.

Sir, just one clarification, sir. You said 76% auto OEM export growth, then 6% domestic auto OEM export growth, but total growth was only 12%. So where was the decline, sir? In the footwear and the replacement market?

Yes, replacement market was declined by 6% and export general also 6% to 7%. Footwear, there was a growth by 4% and others 3%. Total growth was 13.11%. And if you calculate total automotive, growth was 23%, because the value is very high. The export OEM value is INR 550. Per what we are supplying to auto OEMs, it is just less than half, maybe INR 220 to INR 225 and then the replacement market is not more than INR 140. So all that if you calculate, then the growth is 23%, value growth.

Next question is from the line of [ G. Vivek ] from Goldman Sachs Investments.

First of all, sir, congratulations on commissioning of the Gwalior plant. I still remember, sir, how much trouble you used to take for getting it commissioned in Jaipur. And how big is the pressure from the company? And does our company move to the next order with the commissioning of this plant, sir? What's the status on -- when can we start fully?

You're talking about the new commissioned plant?

Yes, sir, Gwalior plant. Because earlier, we used to speak to Mr. Poddar, a few years back, Jaipur was a big struggle, that same PU Plant you had struggled with.

Yes, yes, the struggle was because of the water, it was there. For PU you need much more water, which was not available here. I was running here and there for more than 1.5 to 2 years. Then we move around all over India like Uttarakhand, Haryana, Punjab, out all those places. And then I found that [ MP ] was the best place because that time our [Foreign Language]

[Foreign Language] Shivraj Singh Chouhan.

[Foreign Language] Shivraj Chouhan was there. And I met him and then he has given a lot of facility to me then and there. Much discount in VAT and land and water and electricity. There was big difference in the capital cost compared here to there and running cost also, because electricity is INR 1.25 per the unit is cheapest there compared to Rajasthan. And our electricity consumption is very high. INR 30, lakhs, INR 40 lakh we are consuming here early. That's why I went to Gwalior.

How big is the trigger for us? You are the first manufacturer of PU Plant in India or are there some other companies from Sundaram Group or [ GH ] Engineering, et cetera, also making this PU?

No, no. In leather cloth, there are 4 manufacturers, including us. Other than us, there are 3 more manufacturers, but they are making very, very small quantity. It's not called for. Maybe all 3 of them including, maybe making not more than 250,000 meters.

And the question -- and congratulations I wanted to give you was on your constant effort to increase more exports to Mercedes and BMW. I hope -- I think so the progress made there also. And how big is this trigger for us? And what is the outlook for the exports and the opportunity size?

There is huge opportunity. The opportunity [Foreign Language]. Now the biggest problem in our country that we don't look beyond a certain wall, that is the problem. How we are in this position? Because we have started exporting to U.S.A. And automotive industry there and here, there was a big difference. I was surprised some of the cars which are made, this high premium cars, they are buying from Germany. They used to buy from Germany. Now they have converted to us. Actually, the profit is good. Per meter value is also very high. So how we brought it in this Mercedes? I'm working from last 7 years. It's not that you can get it done tomorrow. So you have to make lot of effort. You should have a R&D -- proper R&D. You should have a proper machinery. So everything has to be there to reach to those situations. Now from India, nobody is there. From China even, those who are 100% Chinese company, they are also not supplying. They are also, those who are Canadian partner or European partner or American partners with that Chinese companies are making leather cloth suitable for these high-end cars. We didn't have any collaboration. We are doing our own self. So until -- unless your R&D is strong and your marketing is strong, you cannot do anything. This is the biggest problem in our country, that's why we cannot add the value. Now you see, we are selling INR 550 per meter. And here, average, if you see that it is INR 230 or INR 225. That is because of also some new cars have come whose prices with lamination are even INR 600 to INR 700. But that quantity is not big at the moment. So this is the difference. And why we had went to Germany? Why? Because their prices are a little more than even Americans, but their quality, their system, their product are very, very technical. So for that, you have to spend money. You have to invest first, then you get the result. I know I struggled for more than 6, 7 years for this American business. And this European business also, we are struggling for the last 6 months -- 6 years. Automotive industry, the one disadvantage is it takes time and the advantage is once you are registered with them, you will not get out immediately until -- unless there is a problem from your side, right?

Yes, sir. The last question was you have spent your entire life. You have seen things going public in early '90s, and now you have made the company India's #1. You have put in a lot of hard work benefiting lakhs of shareholders also. A few words about the succession planning and the second generation there, sir, if you don't mind.

It's a very tricky question. In second generation, my son-in-law is there and my daughter-in-law also has joined. And now we are trying to professionalize the company because when company becomes bigger, then you cannot do everything on your own. Like we have appointed good CFO. We have hunted a very good HR person. Now we have R&D persons from America and from England, from Portuguese. And then now I'm looking for COO from outside for this automotive industry because in our industry, from a manufacturing point of view and from R&D point of view, in India, we cannot get a person what we want. So I have no option than to bring in outside people -- out of India people, and that is also from West because they are expert in automotive. So who is working in automotive? Mainly in Europe or in America or in South Korea. That's all. So you have to bring -- people now are bringing from Taiwan, who has got plus 25 years' experience in making any kind of PU leather cloth. I have already given him the appointment. As soon as these flights start coming, he will be coming here. And I'm going to pay from my noses. But once that guy comes, we will be able to make any kind of PU material like what we are doing in PVC today. So if you have to make a good product, value-added product, you need a right R&D person. So I'm trying in PU also like that because here, whoever is manufacturing, we are manufacturing very cheap product. I'm not interested in those cheap products. In those cheap products I manufacturer, I can sell every year, my growth will be more than 60%, 70%. But if my bottom line is not improving, then what is the use? So I'm looking for only value-added products, not a cheap product. And for that, you have to invest. We are very close to talking to a Korean company with collaboration for supplying to automotive industry, PU. They are already approved. They want to come here and join us, give us a technical know-how. We are in very advanced stage. Let's see what happens. We'll come to know within next 1 or 2 months' time. Now we are concentrating on PU because leather is becoming very expensive. So everybody wants to go for PU because PU, look-wise and sales-wise and in quality-wise, it is very close to leather, but it's very expensive. And there are hardly 1 or 2 people who are making in the world. We are very close to Ford Motor for PU. 75%, 80% of our material is approved still because nobody is making. Maybe we will be the first people in Ford to supply this PU material. Because to make money, you have to do something different. That's all what I can say in short.

And sir, PU for utilization...

Sorry to interrupt you. May we request you to come back in the question queue for a follow-up question? [Operator Instructions] Next question is from the line of Ankit Gor from Systematix.

Congratulations for the decent numbers, sir. So first question with regards to present situation, in which the crude is relatively in our favor, even currency is in our favor. The situation is absolutely good for us in terms of doing more of exports. And as you rightly said that the visibility from export clients is also better. So do you foresee -- obviously, demand for the time being putting aside, how do you see this to crude and INR favorable should pan out for export segment, sir?

See, of course, if crude is down, then all the chemicals -- most of the chemicals which we use is out of crude. So if the crude price is less, automatically there will be a less pressure. But one thing, keep this in mind, whatever is the raw material price, of course, that affects. But real effect is demand and supply. Sometimes we are seeing the crude price is very low, but still our chemical prices are increasing because -- why? Because demand is gone. When demand is less, then even if the prices of crude is high, the price is low. So of course, the basic raw material price make the effect, but it's a demand and supply. The prices are mostly related with demand and supply.

Usually -- I asked that question because we don't usually pass on the increased prices to our export OEMs, right? And we also take that price hike in a lower cycle?

See, one thing, you keep it in mind, as I told you, demand and supply. If the suppliers are more and they are ready to supply in the less price, you have to also supply. If the suppliers are -- you want to charge more price, they will pay you the more price. So it all depends on time to time. There cannot be anything fixed. Correct?

Yes, you're right, sir. Sir, my question, second question is with regards to PVC business of ours. First is if you can give some commentary in terms of visibility with our -- footwear visibility with our customers, our key customers. And secondly, we have seen increased working capital, of which, given this, obviously [ data ] days has increased, receivable days have increased. So how do you see that panning out? And do you see any [ bad debt ] happening in our footwear business? Specifically, our automotive replacement segment, sir?

Oh, you are talking about the increase in the footwear business?

No, sir. I was actually -- I'm talking about first, how overall scenario -- demand scenario looks like in footwear segment and...

I'll tell you. First, segment demand is always there. Now the question is, India is a not developed country. Now here you have more poor people than medium class people than high-class people. So the maximum sale is in the lower class. So therefore, these lower class people use more cheap material, right?

Yes.

So, so far, footwear is concerned, this depends on what kind of a product you are making. So today, if you talked about previously, there is a big competition in PVC, right? That's why I have gone in PU that if I can manufacture something different than what is being manufactured -- you know in China, China is producing 10x more footwear than India with their own consumption and exports. And other than leather and synthetic, they are making 80% footwear with the PU and hardly 20% with the PVC. Whereas in India, we are making 95% of the footwear by PVC and 5% from PU. Then why that PU cannot happen here? It will happen, and I will make it happen because it all depends of what kind of varieties, what kind of technical product you are able to give them so that customer can differentiate between PVC and PU. So the PVC manufacturers are increasing every day. So the competition is increasing. That's why I went to PU for footwear. And for automotive industry, you need a technical product, which we are doing. And now I'm going one step more with PU in automotive.

The next question is from the line of...

Hello, this is Anubhav.

Sir, one moment. Sir, go ahead.

Yes. So I mean you can ask the management if you want to take the last question or you can close it then.

Last question, thereafter you can close it.

Sure, sir. The last question is from the line of Awanish Chandra from East India Securities.

Sir, congratulation on a great slate of performance, sir. Sir, a small thing just to follow on, on the crude prices. Earlier, crude prices were falling but PVC chemical prices were not falling because we had the issue from the supply side few companies, a few plants in Korea shutdown. So how is that supply now streamlined as far as PVC chemical raw material is concerned?

No, no, there is not much difference in the crude price in our business because with the crude price, the PVC resin price is affected only, which is maybe suppose if my -- in INR 100, my raw material is, say, INR 65, out of that INR 65 maybe INR 20... [Technical Difficulty]

Ladies and gentlemen, please stay connected while we rejoin the management back to the call. Participants, thank you for your patience. We have the line from the management connected back to the call.

Hello? Hello?

Yes, sir, you're connected back to the call. You may go ahead with the answer.

Yes. Hello?

Yes, sir. You're audible, go ahead.

Yes. [Foreign Language]

You see, now there is only one PVC manufacturer for our leather cloth in India who has not reduced the prices much compared to -- from outside. Now our biggest drawback was that one company was very famous, LG Chemical from Korea, who were making PVC resin. And from Korea, there is no import duty or -- sorry, no anti-dumping duty from Korea. But that -- since that plant has been closed, now you have to buy from local or from some European or some Mexican plant. So yes, of course, the prices has gone down a little bit and we have covered a lot of material also. But again, now it has started increasing. Hello?

Hello?

Yes, sir. We can hear you.

Now your question is answered?

Yes, [ as you ] said, there is not much impact of crude fall on our chemical prices. That's has -- that's my understanding.

Yes.

Okay, sir. And one last question, sir. Please give some commentary on intensifying competition in the South market where we used to have very intense competition from local players. So how is the situation revived? Or situation is same as before?

Yes. In the North...

South market for footwear.

South market is [Foreign Language] but North market has not picked up so much because Agra was in trouble, Kanpur was in trouble. We have just started 2 weeks back. Now in [ Delhi ], those who are footwear companies, they are also not fully geared up because of the labor problem as well as the risk -- COVID problem because markets has not opened as it should have been opened. So South is in much better position. And as it is, we are selling 85% to 90% of our footwear material to South only because of 2: the quality and payments. So we were mainly confined to these places only. Now with PU, we will have a lot of business in North India also with the organized sectors.

Ladies and gentlemen, due to time constraint, that was the last question for today. I will now hand the conference over to the management for closing comments.

[Foreign Language]

Okay. I think it's over. Thank you. Thank you for the session.

Thank you very much. On behalf of Mayur Uniquoters and Monarch Networth Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.