MCON Rasayan India Limited (MCON) Q2 FY2026 Earnings Call Transcript & Summary

Good morning, everyone. I'm the Garima Singla, and it's my pleasure to welcome you on behalf of MCON Rasayan India Limited. Thank you for joining us today for first half financial year '26 earnings conference call. This call is being hosted by Go India Advisors. Please note that today's discussion may include certain forward-looking statements. Therefore, they must be viewed in conjunction with the risks that the company faces. Today on the call, we are joined by Mr. Mahesh Bhanushali, Managing Director; and Mr. Nandan Pradhan, the Whole-Time Director. I now invite Mahesh, sir, to present the company's business outlook and performance, after which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you. Thank you, Garima. Good afternoon, everyone. I am Mahesh Bhanushali, Managing Director. And I'm pleased to share our performance highlights for H1 financial year '26 and the progress made across our strategic priorities. We delivered a 32% year-on-year revenue growth with net sales rising to INR 284 million. This was driven by strong demand across our core product categories, supported by deeper retail penetration, improved capacity utilization and continued momentum in tile adhesives and construction chemicals. Despite extended monsoons and project delays, our gross profit remained in line with historical trends, reflecting prudent cost control and steady demand. Total expenditure increased due to raw material and logistics pressure, resulting in EBITDA of INR 33 million and a margin of 11.7%, while margins were lower year-on-year. EBITDA improved 39% subsequentially with a 354 basis point margin expansion driven by operational efficiencies. Interest costs reduced by 25.8% year-on-year, further strengthening our financial position. PAT stood at INR 12 million, broadly stable compared to last year, demonstrating the resilience of our business model. We continue to benefit from our widening distribution footprint, now comprising 122-plus distributors, 7 FOCO model partnerships and a presence across 42-plus cities in 8 states. The lean period was mainly utilized effectively for network consolidation with 3 new franchise units going live during the half year. With construction activity improving post September, we anticipate a strong H2 financial year '26, supported by a robust distribution network, focused R&D initiatives and disciplined execution. We remain fully committed to achieving our INR 70-plus crores revenue run rate for financial year '26 and the momentum in H1 reinforces our confidence in meeting the objective. We are executing firmly on our strategic priorities, strengthening institutional sales by deepening engagement with large developers, civil contractors and government bodies, advancing visibility and market positioning through multichannel branding and a sharper identity anchored by our industry mascot Mr. M, accelerating geographic expansion through our FOCO model for rapid scalable market penetration and enhancing margin quality by increasing high value-added product, optimizing logistics via decentralized hubs and manufacturing closer to key demand centers. These initiatives collectively reinforces our competitive edge and support sustainable profitable growth. At MCON Rasayan, we remain focused on responsible efficient and long-term value-driven growth with a strong operating foundation and expanding market presence, we are confident of delivering a solid performance in the coming quarters. Thank you for your continued support and be with us. We will now open floor for queries. Thank you Garima.

I can see someone in the question queue already. So we'll take the first question from Mr. Rishi Kothari.

I have a couple of questions to ask. First being, I mean, right now, Maharashtra contribution is around 50% of the revenue, right? So do we want to reduce that contribution because that becomes a concentrated risk for us? And if at all, that is the case, what's the time line for that? And how much less will be going from 50%?

This is Nandan Pradhan here. So see, Maharashtra being -- because we are based out of Maharashtra, that is Mumbai. And secondly, we started our operations from Mumbai and also the biggest potential market as of now, if I see in the metros is Mumbai as well as Pune. So due to that, of course, the Maharashtra state contribution will keep on growing parallelly to the business growth, so as such, there are no conscious effort that we want to reduce the contribution of Maharashtra. But yes, we are also focusing on other states so that the risks are distributed, well distributed, but because our factory, the mother plant is in Vapi, so that also helps us for focusing more on the Maharashtra as well as Gujarat belt. So it will be a parallel activity, but as of now, there is -- because, again, all our major approvals, if you see of government approvals or government business model, those are also focused on Maharashtra state. Yes, Mr. Rishi, what you ideally said is, yes, the risk might be slightly on the higher side. But still what I believe is that currently, we are well balanced as far as Maharashtra is concerned, and Maharashtra is also growing at a good pace. So we are really in good place.

My second question being, what's the revenue potential of Pune, Solapur FOCO cluster in FY '26? And how soon can the liquid line reach optimal throughput for us?

So yes, see, Pune, again, the Pune potential is growing day by day. And there Pune-Solapur belt, there are a lot of road projects that are coming in. And with our recent tie-up with MSIDC for the HAM road projects, which is almost 4,000 kilometers of roads that are coming in, in the next 3 years. So the liquid product that is the admixtures in particular, will be a big potential area from the Solapur plant and the powder products from the Pune plant. So if I talk of the franchisees from the FOCO model, then I think that within the next 1.5 years, they will reach optimum potential.

And do we have any sort of long-term contracts in admixtures or tiles? I mean, are the revenues spot based or depend upon the approvals, how exactly we operate in that segment? That's it?

There are no long-term contracts because nowadays, it's a quite dynamic situation. But yes, because we have got approved with MSIDC, plus we are also approved with a few turnkey contractors, I would not like to name them here. So yes, we are becoming part of their e-tendering system, wherein in the e-tendering system, there are annual rate contracts. So the annual rate contracts will ensure that throughout the year, we'll keep on getting a certain amount of business from those contractors. So ARC is something that we are focusing on, and we are also doing some ARCs going forward.

So in the way kind of an annuity contract basis that you are saying?

Yes. So it will be annual basis. So every year, we need to review that or we need to rather go into [indiscernible] every year.

So what's our client retention rate, just to give you till now whatever clients we have, any sort of retention rate that we have that of a 90% clients retention is something?

Correct. So currently, we are hovering around 75% to 80% as far as the client retention rate is concerned. The major going away of the clients is mainly on the competitive rate part that is where any Indian customer breaks.

And because we don't want to break our margins, that's why we don't go below...

Exactly...

Does that eventually more or less affect our growth potential, what are the targets we having set for in a purpose...

No, because new customers also keep on coming in, like how the competitors are baking our customers, similarly, we are also making competitors' customers. And we being at a very small percentage of the total pie, so we have got a bigger potential to break the other customers.

And what sort of target are we looking for next 2, 3 years in terms of top line and margins and everything?

So see, hereon, we are always expecting more than 50% growth year-on-year. And the margins we will have a nominal growth in the initial 1 or 2 years. But then going forward, it will be -- we are focusing on a double-digit PAT.

So this sort of margin expansion will come from where cost control? Or is it something operating leverage kind of a thing what exactly lasts?

Three components are going to play a major role, okay? Number one is top line because currently, we are having thin margins because our fixed costs are higher because we have already invested to do INR 200 crore plus turnover. So once we start achieving certain volumes, automatically, the margins will improve. Number two is our conscious effort to change our product mix. That is a combination of ready-mix mortar, admixtures and tile adhesives plus some value-added Epoxy products. That combination will automatically bring a better bottom line to us. And third is the FOCO model, wherein our factories or our dispatch units are moving nearer to the markets. So the transport cost, which is the major part of our margin is getting reduced, so that will help us to improve our margins.

So next question we have from the line of Mr. Deepesh.

Just wanted to know given the product mix strategy, what proportion of your revenue will shift to margins. I mean, higher-margin liquids and VAPs in FY '26? And how does that translate into EBITDA uplift?

Okay. So see, Deepesh, again, every market which has got better margins is more competitive, okay? So again, the competition, if I talk of admixture division itself, the competition is quite high. So currently, we are targeting that the shift from like last year, we did 13% in the admixture division. This year, we are planning to cross at least 20% contribution from the admixture division. So that is the kind of shift we are looking at. And again, the paint division, again, a high margin thing, but that will take a bit slow like moving to a 2-digit contribution of paint division might take another year also because again, the tile adhesive and the ready-mix mortar market is booming. It's huge, and we are very strong in that. So there, again, they are contributing very well into the top line. So this 2 combination will keep on contributing more than 50% to our top line. So that's why I was telling that the bottom line will improve gradually over next 2 to 3 years.

And that will -- what is your target for the ROE?

ROE, again, the same situation is there, like the ROEs also will take some time because once you cross the INR 100 crore mark, then automatically, it will have a good impact on the ROE.

And when do you expect to cross INR 100 crores?

Next year.

So you see the ROE coming to in a double digits?

Yes.

And if you can just give an order book bifurcation of your high-margin products and the regular margin products, if you can give that?

So as such, honestly speaking, we don't have something called order book because we are doing through a distributor model. So orders come -- keep on coming every month-on-month.

Sorry, but I just want to add that when you're working with these bigger builders, especially Mumbai-based builders, you're saying that you don't have an order book and they're going to the distributors level from this?

Yes. So all the bigger builders, of course, the tie-up is done with MCON, but the billing happens through distributors. So we can say that, yes, the potential, for example, some builder might give us LOI, a letter of intent that I want to purchase 10,000 bags in next 6 months. Based on that, we give a competitive rate, but the orders come to the distributor.

Whether order is coming to the distributor or through the distributor or directly to the company, but you must be having an expectation from these bigger builders.

Yes, expectations are there from bigger builders, from the projects, from infra companies like Shapoorji Pallonji, et cetera. So with all those people, we do the ARC based on that, but then all our LOIs, those are not orders -- those are not confirmed orders.

Even if you can [indiscernible] 6 months at least what kind of order book because now since the rains have stopped, you must be having a fair idea of how much you'll be requiring, right?

Correct. So the ratio currently is at a ratio of 70-30, like 70% are the low-margin products and 30% are the high-margin products.

If you can quantify the order book also if -- I mean, the LOI book also?

Currently, we are sitting on around INR 18 crores to INR 18.5 crores because what has happened monsoon, there were extended monsoon. We are expecting the business to start and normalize in the month of October, first week of October. But again, the monsoon continued. So people have held on to the orders, okay? And now since last 15 days, we have started getting good purchase orders or the LOIs type has started actively. So that's how it's growing. So the current status is this.

So how much time does it take from the order book you're receiving an order and the dispatch?

3 to 4 days...

Just receivables have risen sharply. And what is the collection -- current collection cycle? And what is -- what percentage of your outstanding receivable is over 180 days? And do you see any bad debts happening on that sector on that part?

So yes, receivables have risen sharply. The major reasons being we are entering into new markets. When you enter into a new market, then the customer or the distributor over there doesn't know the brand MCON that much. So he also doesn't develop the trust in first place. So the first few orders, he wants on credit. As a company, we have a policy that we don't offer open credit. So yes, we get the PDCs, but then that gets delayed from 60 to 90 days, number one. Number two is when you go to infra projects and when you are dealing with J. Kumar and Capacit'e and everyone, there also the extended period is around 90 days, the credit periods...

But since it is through the distributor model, don't you think that this distributors should be taking care, I mean, should be giving the credit and not the company?

Yes. So they are giving the credit, sir. But what happens is the market has changed like builders very normal, like if I talk of area like Pune, okay? So in Pune, the builders are paying at 120 days, 140 days, 150 days. Now the distributor takes 2 months credit. He is ready to invest for 2 months. So if it is 120 days, he will pay in 60 days. Another 60 days, he is also bearing, if it is 150 days, he will pay us within 70 to 90 days. That's how it happens. There are a few [indiscernible] distributors who are also ready to take a cash discount and pay us upfront. So it's a combination. And that's how the cash flow keeps on happening. Like we don't give maximize on the credit. At the same time, we need to give certain credits to ensure that we reach to the right customer and do volumes because wherever there is volume, the credit plays a role.

And how much you mentioned over 180 days? Sorry, I just forgot to write it?

Yes. So over 180 days, it is around 12% to 15% currently.

12% to 15% receivables. Now the FOCO...

And that is also on a reducing basis. Like compared to 31st March, we are already down by more than INR 1 crore. So already down by around 3% to 4%.

And over the FOCO units claim margin neutrality via logistic savings. Can you quantify the net savings per kg after going to the franchisee -- I mean, after taking care of the franchisee margins?

5% to 6%.

That's the net savings?

Yes.

That will directly come to the EBITDA, right?

Not directly, you can say because, again, that region will have -- when we go into expansion what that region will also have certain additional expenses, then only we can ensure that the FOCO model becomes more successful, but yes, around 2%, 2.5% can be from that particular region, so that will be additional.

How many high-margin products were launched in FY '25, first half and -- sorry, FY '25 and first half of FY '26? And what revenue run rate are they tracking currently...

Last year to this year, this year, first half, honestly speaking, we only launched 2 major products in the category because already we had -- this year, our strategy has been slightly different. We are now trying to reduce our basket and focus on few products so that -- because inventory is a big challenge, which we have -- we can feel the hit. And also we are getting questions from the investors also. So to reduce the inventory, we need to focus on fewer products. So instead of launching, we are more focusing on how to make the current products better, that is either they give better margin or they become more cost effective so that we become more competitive in the market. So that is the focus area as of now, number one. Number two, maybe all the products that we launch are all high-margin products because low-margin products we already have in the basket. So we are currently not launching any low-margin product for sure. If the product is giving a margin, then only we consider it and then give it to our R&D team and then the R&D team works on it and then we launch the product. So all the products total around 16 products we have launched in the last 18 months. So all are high-margin products. The contribution from them to the total turnover of H1 FY '26 is around 8% to 10%.

And can you quantify the margin?

Margin...

What governance controls -- my last question is what governance control exists to ensure the distributor credit discipline, especially when you're expanding to newer states with less familiarity. So what are -- do you think about that?

So it's happening in 3 stages. When we onboard the distributor, we do his entire KYC, including this office photographs and his residential address, plus we have got a third-party agency with whom we get his credit rating assess. Based on that, we fix this credit limit. Secondly, in the first few transactions, every transaction happens with a PDC, so unless the PDC is not there, we don't dispatch the order. So that is the second level that we do. Third, we have got a fully active credit control team of 4 members who keep on visiting these distributors every quarter for taking their balance confirmations and also ensuring that the business is happening in the right manner. No wrong commitments are given to the distributor, because many times in the past, we have faced this particular challenge that later distributors say that [Foreign Language] so where is that? Whereas the company has never offered that, but it's a verbal discussion. The salesman has already left and then the company ends up fighting with the distributor. So that's why every quarter, we have ensured that the balance confirmation, this communication needs to have happened, so that we are all clear and on the same page.

Just one more, if I can add. Why are you having a distributor model when you're dealing with these bigger builders? I mean what is the value addition these distributors is adding?

Number one, local call connect. So the access to the builders becomes really fast because my distributors are not only my distributor. They are already selling either cement or tiles or paint or something else. So they have already got their base of customers available with them, and they know how to deal with those builders. So it becomes easy. Number two, shared credit. So my working capital doesn't get majorly affected, okay? And number three, a stock point at that place without investment.

So in a building, let's say, in a construction project, which has about maybe 200 flats. Maybe, let's say, 1 million square feet, which is being built with builders. How much of your product actually is added? And just want to know how much is -- if there is a construction going on, how much of your product is being used?

So again, it varies from city to city. If I talk of metros it varies...

I'm talking Mumbai. I'm talking about currently on Mumbai...

Right. So the bigger builders in Mumbai, it is anything between 6% to 9%.

6% to 9% of the construction cost?

Yes. As you can see, initially, it used to be 2% to 3%. But now in every aspect because all bigger builders of Mumbai are using Mivan shuttering. There is aluminum formwork shuttering, okay? So they're right from the base, that is right from the shuttering level, the shuttering oil is used, then curing compound is used, then coatings are used. Waterproofing is also happening only through coatings, then compulsory with the Big Tiles coming in tile adhesives used Gypsum bonding agent is a must for all the Mivan shuttering. Putty is used and cements and plaster is used in selected areas. Otherwise, everywhere gypsum plaster is being used and wall putties are being used. So slowly and now with the paints also being part of construction chemicals, so that is also considered in this basket.

Next question we have from Mr. Bhavesh Chauhan.

We are not now committing to that 15% EBITDA margin guidance for FY '26, right?

You're right.

When should we see -- I mean, over the next, let's say, next 2, 3 years, should we see that 15% margin?

Yes. Hopefully, next year itself or latest by next year.

And in terms of sales guidance, we maintained right? INR 70 crores for this year?

Yes, we do maintain that.

And in terms of working capital, as you said you have lower number of products. So should we see a significant improvement because first half, again, we have seen that working capital remain stretch?

See, working capital stretch will happen for next 6 to 8 months further, because with the rapid expansion that we are planning and plus the government projects, we are very upbeat about it. And there, we are expecting huge volumes. So automatically, once you have to do like once you have to move from INR 5 crore per month to INR 10 crores per month, then the stretch is going to come on the working capital for sure. So that is going to happen, but after 6 to 8 months, we will see a positive cash flow happening and then the stretch on working capital will be reduced.

And sir, if we go to next year FY '27, we would require some funds in order to grow, maintain this kind of growth rate. So how are we planning to do that?

Yes, we will need funds. So we will always go by the balanced approach of debt plus equity. So that is something that we are looking forward.

And in terms of margin, sir, again, FY '26, any particular guidance that we would like to get?

So EBITDA will improve compared to last year. How much? I would not like to give a comment on that, but it will improve for sure.

And sir, one more thing, sir, why our margin was missed actually in this first half?

Sir, see, what happens is that we have done all the expenses, including the sales team and everything based on INR 70 crore turnover. Now fortunately or unfortunately, the situation is such that first half of any construction chemical company is 30% to 35% and second half is 65% to 70%, so 30% to 35% sales turnover vis-a-vis the expenses made for a INR 70 crore turnover. So that combination reduces the balance.

Sir, in that case, why are we not confident that there will be significant improvement in margin in second half?

No. In second half, it will be, but then the balancing will happen, sir. So end of the day, if you see end of the year, the overall margin improvement will be maybe 1.5%, 2%, not much.

So the next question we have from the line of Mr. Shyam Garg.

My first question is with respect to with the in-house utilization falling from earlier peak? Why FOCO expansion being prioritized over [indiscernible] existing capacities?

Yes. So to answer you, Shyam, see, like I said that what happens is that the powder-based products, we need to move the manufacturing plants nearer to the markets. Then only those becomes affordable and then they can give a positive contribution to the company. So for that, we have shifted our powder manufacturing to various FOCO plants, either like, for example, in Pune or in Kurukshetra or in Karnataka or in Rajasthan. So due to that, they have gone nearer to the market. So the manufacturing of our mother plant that is in Vapi has reduced. But the plant there is manufacturing and they are delivering. So the overall -- if you see the margin, that has improved due to the plant going nearer. So transport cost dropping drastically. So that is the reason that -- and now the next focus is how to utilize the balance capacity which is available in the Vapi plant. So for that, we are focusing on the Maharashtra state and on the government projects and everything so that this capacity will get utilized in the next 6 months. So then we'll have a fantastic balance of FOCO contributing better and plus our mother plant also contributing into that.

If you can quantify the improvement in margin with the utilization of FOCO plants?

So somewhere around 3% to 4% improvement is there once I consider the margin of the franchisee versus the saving I do on the transport cost, the entire combination.

Sir, my second question with respect to the bank limits are fully utilized. And what is the realistic borrowing headroom for FY '26 without equity dilution?

See, as far as the borrowing is concerned, currently, we are not planning any further borrowing from the banks on immediate level. So maybe the bank borrowing will happen end of this financial year.

What is the blended cost of our borrowing?

Blended cost, might be, if you have the number?

It's 8.5% to 8.7%?

Including the working capital that we have.

My next question is that you said a top 25 SKU drives 80% of the revenue. So what is your SKU rationalization road map to cut working capital without weakening the market selling?

Yes. So the road map is very simple, sir, we need to expand the markets. Again, to expand the markets, number one, you need time because you need people who can -- who are specialists in those particular markets or those [indiscernible] product segments. Once that happens, then -- so we will not stop the products or we have not stopped the products, you have just shifted the focus. So the basket saving is still happening, but with the limited products and slowly, we will also add the balanced products into the basket as and when we get improvement in our margins.

Sir, my next question is what is the current production capacity that we have along with the satellite manufacturing that manufacturing that we've FOCO on manufacturing that we have?

Can you rephrase or repeat that?

So what is the current capacity for production of our production, including the satellite facility that we have introduced...

Correct. So it's around 65,000 metric tons.

And what's the plan going forward? We are going to increase up to what level?

So another 2 FOCO, we are planning additionally as of now. Once that happens and once again, we stabilize the entire system, then in the next phase, we will again plan new areas, new regions, and new FOCO's.

So that would be how much in terms of capital that would be how much?

Again, each FOCO is around 7,000 to 7,500 metric tons.

So the next question we have from the line of Prashant [indiscernible].

My question is about working capital inventory is flat and our trade receivables have gone up to INR 25 crores. But the sales size is not that much. The sales size is almost flat. So why are we building so much inventory in this quarter when the quarter is actually very lean?

So Prashant sir, the inventory was already built. We did not build in this particular quarter. So it's already there, number one. Number two, as we increase our focus so there is always a shift for some higher inventory because in each FOCO we need to have finished goods, inventory stock, we need to have packing material stock. Of course, the balance raw material is on the account of the franchisee, but the packing material and the finished goods are on account of MCON, so that gets added into the inventory, number one. Number two, again, we are looking or we are planning if you just consider that we have done INR 28-odd crores and we are planning to reach to INR 70 crores plus by end of the year. So we are planning INR 42 crores, which is around INR 7 crores per month roughly. So to have INR 7 crores per month sales, we need to have that kind of inventory available in each of our mother plant as well as each of our franchises. So that entire balance is contributing. And like I told in the previous answer also that we are consciously working to reduce this inventory. We also get it that it's not a great thing to have, but it's taking its own sweet time. That's why we are focusing on fewer products and slowly trying to move out of the product that we are not focusing on. So those inventories, we can reduce wealth of products we are focusing on there. Again, we are trying to do better inventory management for which we are -- they also hired a consultant who is helping us in this entire exercise. So that is the plan that we are doing.

Probably it could be a good idea to implement the Asian paints model like at the franchise outlet. SKU has moved today if you collect that data, then you will get precise production planning that, okay, in this week, this item is running too much. So I need to prevent this and I can reduce that one. So for a company like you, it is very difficult if you have many SKUs, it's very difficult to judge, okay, what should be produced in this week and what has been stopped. What need to be stocked. That could be because nowadays, collecting analytics is not that expensive, right? You may purchase an operator and a computer. We just have to collect, how much stock has moved up today. And based on that, you can make an informed decision on optimizing the production of those particular SKUs, which are moving faster and slowdown on which are moving slowly, that could be one of the things you might consider implementing. Cables are like INR 25 crores. So are we giving too much credit period to the franchise people or it's INR 25 crores?

Yes. So sir, it's not the credit rate to the franchise people or the -- it's a combination of new markets where we have to take certain additional credit plus a few distributors who have delayed it and the actions are being taken to ensure that we bring the money back into the company, plus some big infra projects and admixture, RMC plants where the credit is on the higher side, like the credit exposure itself is on higher side, there the payments only happen 120 days, 150 days, 180 days. So this entire contribution each one of them has collectively ensured that this kind of credit and out of which only 12% to 15% is more than 180 days or rather, I would say more than 120 days. Balance all is from the current business. So that's how it's happening.

Because for this business, we have to keep quite a lot of stock. So instead of using ourselves as bank, maybe slowly, slowly, we should use the distributors and franchise people maybe giving them a little bit discount and use them as a bank. To part the trade receivables in their account instead of our accounts.

So see, gradually, we are doing it like if I tell you, last year, the raw material -- entire raw material also was on our account in the franchisee units. This year, we have shifted that into their account. So the raw material stocking right from cement, sand and other chemicals is stocked by franchisee on his own account. So that burden we have reduced. Now second phase will be the packing material that we are shifting. So that will happen in the next few months. See, everything happens when we are able to give him some good volume business, then he's ready to listen to us.

[indiscernible].

So we are consciously moving into that direction. And your advice is well taken. We'll try to implement that also, sir.

But sometimes what happens is that if you discount the invoice, then probably they are ready to pay out the invoice very quickly.

We are working on that also. We are already in time with channel financing, and we are working on that part also. So like I told you, it's a combination that's happening the effect of that will be seen in next 6 to 12 months.

Next question we have from the line of Mr. Aditya [indiscernible].

So the first question I wanted to ask first, what is the current utilization at Ambethi and Sarigam plants?

Currently, Sarigam plant, there is 0% utilization because we have consolidated everything at the Ambethi plant because to maintain 2 manufacturing plants and a separate staff for the same. And now the Ambethi plant when it is at 100% operational, so the Sarigam plant operations were not needed. But yes, that balance capacity is available so that tomorrow, if we get something really big order or maybe we get some toll manufacturing from some other brand, then we can utilize that Sarigam plant. And Ambethi plant, currently, it's around 55%, 50% to 55%. This being because with all the FOCO models becoming operational, the powder product manufacturing has shifted from Ambethi to those franchises. So due to that, the capacity utilization at Ambethi has slightly gone down.

And the next question was again about working capital. So what [indiscernible] will you bring -- to bring the working capital back to pre FY '25 levels?

So see, again, working capital, first and foremost is bringing better sales because more sales will ensure better fund flow into the company and that will ensure that the working capital crunch is slowly reduced. Number two is reducing on the available creditors and debtors in the market and getting the payments faster into the company. And third is the better inventory management. So these are the 3 major things that we are working upon in which we are also taking help of channel financing. We are also giving better discounts to distributors if they pay us upfront -- so all these action steps we are taking so that we can improve on the working capital cycles.

You mentioned that there is INR 50,000 crore total addressable market, right? So what is your TAM penetration today? And what is the 3-year target?

So currently, we are not even at 1% of the total market available. And 3 years down the line, we expect that maybe more than 1.5% to 2% should come to the company because, again, the market is huge, but the competition is rising daily. Like every big manufacturer either of cement or paint wants to enter into the construction chemical segment and are entering. So we are fighting with those people also and ensuring that we hold on to the market that we already got and also get some market from the competition.

So another question is what manufacturing flexibility do you have to switch from low-value powders to high-value liquids without retooling or a downtime?

Yes. So see, first of all, let's talk of low-value powders to high-value powders, rather low contributing powders to high contributing powders. So that is a fungible capacity. In the same manufacturing capacity, if I'm doing 39,000 metric ton, I can do a 39,000 metric ton of INR 5 a kg product. And in the same capacity, I can do a 39,000 metric ton of INR 20 a kg product. So 4x the turnover, I can just do by changing the product mix. But for that, I too need to get the order of that product, number one. Number two, liquids. Currently, in liquid also, the same situation is there that from low-value liquids, we can go to high-value liquids. In a powder plant, I cannot manufacture liquid. In a liquid plant, I cannot manufacture powder, that's for sure. And plus, I have got enough fabricated factory in my Vapi plant itself that even tomorrow, if I have to increase the capacity of my liquid, high-value liquids, then just by having a CapEx of a few lakhs, I can add a machinery and increase that capacity. So that combination is always there. Additionally, if I have to move somewhere far away, like if I get some big order of a government in a Eastern zone or in a Northeast zone or something like that or far away zone, then that is where the CapEx might be needed where I need to have a land and put an entire plant because that is far away from my current mother plant. But apart from that, currently, if I talk the shift or the fungible capacity, it's quite easy.

And the last question is what steps are being taken to broaden institutional sales post CPWD approval? And what revenue contribution do you expect in the next 2 quarters?

So number one, we have expanded our government project division so that the reach increases because for each segment, we have got a different team. So government project itself, we have got a team so that we expanded so that we can reach to more people across Maharashtra because we have got -- now we have got CPWD approval at the next phase, that is Maharashtra, Goa, and might be Gujarat also, right?

Yes. So Maharashtra, Gujarat and the Union Territories, Diu, Daman, including Gujarat.

So we are increasing our reach into the CPW department. As far as the contribution is concerned, we are expecting more than 20% contribution from the government project in the next 2 quarters.

One question from my side. Any early revival signs we are seeing in the second half of the year already?

Yes, we are seeing a lot of revival signs. Number one is that the government projects are now kicking off very fast, and we also got some good orders from the government projects. Also now that the monsoons have settled down and it's a sunny weather outside, so the orders from the distributors are flowing in really well. So that is something like in the first few days of November itself, you have seen a good order and dispatch book available with us. So those are there.

Thank you, sir. I think that sets a positive benchmark for H2. Thank you so much for the call. Any closing comments from your side before we conclude the call?

I would just like to add a few things like build on the various questions and answers that we have exchange with each other. Be assured that, yes, we are on the right track. We know what we are doing. We know what business we are into. Yes, good things take time to build up. So it's taking a bit of time. But with due respect to all of you and your suggestions, yes, we are focusing on inventory management to make it better to reduce the cost of inventory. We are focusing on credit control so that the overall outstanding is coming -- has to come down. We are focusing on high-margin products so that the EBITDA increases and the PAT increases. And we are also focusing on a better working capital management. So whatever is there, whatever your questions or thought process there, we are already on work. It's like work in progress, and it's not slow, it's fast. So don't worry. We'll ensure that we'll deliver fantastic results by end of 31st March. Thank you.

Thank you, sir. Thank you so much. On behalf of Go India Advisors, that concludes the call. Thank you, Mahesh sir, Thank you, Nandan, sir, for your time, and thank you, everyone, for joining the call.

Thank you. Thank you, everyone.

Thank you.