The Supreme Industries Limited (SUPREMEIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Supreme Industries Q4 FY '24 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde from DAM Capital Advisors. Thank you, and over to you, sir.

Thank you, Rio, and thank you, everyone, for dialing in to Supreme Industries Q4 and FY '24 Results Call. Representing the management, we have Mr. M.P. Taparia, Managing Director; Mr. P.C. Somani, Chief Financial Officer; and Mr. R.J. Saboo, Company Secretary. I hand it over to the team for the initial comments on the results. Thank you.

Thank you very much. I am M.P. Taparia, Managing Director of the Supreme Industries Limited. I, along with my colleagues, Shri, P.C. Somani, Chief Financial Officer; and Shri. R.J. Saboo, Vice President, Corporate Affair and Company Secretary, welcome all the participants who are participating in the discussion of the audited stand-alone and consolidated financial results for the quarter and year ended 31st March, 2024. . The stand-alone results and the consolidated results are already with you. I'll give brief on company's product operating performance and other highlights. The company sold 195,369 tonnes of plastic goods and achieved net product turnover of INR 2,979 crores during the fourth quarter of the current year against sales of 147,414 tonnes of plastic goods and achieved net product turnover of INR 2,566 crores in the corresponding quarter of previous year, achieving volume and product value growth of about 16% and 37%, respectively. The company sold 639,701 tonnes of plastic goods and achieved net product turnover of INR 10,022 crores during the year under review against sale of 506,501 tonnes and net product turnover of INR 9,066 crores in the previous year, achieving volume and product value growth of about 26% and 11% respectively. The consolidated operating profit and profit after tax for the fourth quarter of the current year amounted to INR 531 crores and INR 355 crores compared to INR 559 crores and INR 359 crores, respectively for the corresponding quarter of the previous year. The consolidated operating profit and profit after tax during the year under review amounted to INR 1,654 crores and INR 1,070 crore compared to INR 1,353 crore and INR 865 crores, respectively for the previous year, recording an increase of 22% and 24%, respectively. The business scenario of all the product segment of the company for the year ended 31st March 2024 compared to the previous year has been as under: Plastic Piping system business grew 34% in volume and 15% in value terms. Packaging Product segment grew by 8% in volume and 7% in value terms. Industrial Products segment business grew 5% by volume and degrew by 3% in value term. Consumer Product segment business remains flat in volume and degrew by 1% in value term. The overall turnover of value-added product increased to INR 3,737 crores as compared to INR 3,329 crores in the previous year, achieving growth of 13%. The company has total cash of INR 1,178 crores in the books as on 31st March 2024 as against cash surplus of INR 738 crores as on 31st March 2023. The company plans CapEx of around INR 1,500 crores during the year, including a carry forward commitment of INR 496 crores at the beginning of the year. The CapEx plan for brownfield expansion of capacities included new range of product across all segments. The CapEx plan also includes setting a plant at Kanpur in Uttar Pradesh, Patna in Bihar, Vijayawada in Andhra Pradesh, and near JNPT Port in Maharashtra. Entire CapEx shall be funded from internal accrual. Business outlook. The Indian economy has achieved highest growth in the previous year compared to all advanced economies of the world. Monsoon for the coming year is expected to be higher than normal, which augurs well to contain the inflation. The governments are taking several initiatives to put manufacturing, the country's GDP thus may grow higher than previous years. Central and state governments are taking several initiatives toward creating improved infrastructure to provide houses for all and supplying gas to household by piping system, which will further boost the demand for complete product. In India and several surrounding countries, expansion of plastic raw material producing capacity is under execution. In the forecasted slow growth of world economy this year, combined with increased availability of plastics will maintain the price level at affordable price level. In the current year, that is 2024-'25, Plastic Piping system business will thus grow by 25% in volume and, overall, the company expects to achieve 20% volume growth in the fiscal year 2024-'25. To meet the growth in demand for piping products, the company has initiated steps not only to brownfield expansion at existing manufacturing site but also initiated action to put a new plant near Patna in Bihar, and Vijayawada in Andhra Pradesh. The company currently has 36 plastic piping system in the division and plans to add another 5 new system to the acoustic polypropylene pipe system in collaboration with POLOPLAST GMBH, Austria. Polyethylene gas piping system, PERT piping system, polyethylene single-wall corrugated pipe, and rainwater harvesting system during the current year. Bath fittings and sanitary ware business has been now well established. Design center at Pune is working extensively for various new SKUs. In this division, SKUs will go up from 421 number as of 31st March 2024 to over 1,000 numbers by end of the current year. The company is putting up PVC profile manufacturing unit with 5,000 tonnes annual capacity at newly acquired site at Kanpur Dehat along with window-making at the same site and also at Kharagpur. That business of cross-laminated film and product had a nominal growth of 1% in volume terms during the year under review. That below-normal and erratic rains in several parts of the country last year, adversely impacted the demand for tarpaulin resulting in degrowth in this product category. All the equipments for manufacturing cross plastics are in the final stage of installation and the trial production is likely to commence in second quarter 2024. The company's furniture business did not show any growth in value term and had a negligible growth in volume term in line with the trend witnessed by the overall plastic furniture industry. The company's consistent business policy, intensive marketing efforts coupled with superior quality and premium product range and it plans for increased coverage to ensure growth in the fiscal year 2024-'25. Industrial Components division did not grow due to sluggish demand for appliances, white goods sector, where the company has significant presence. The auto sector continued to look promising. The company expects medium- and long-term scenario to remain bullish, supported by various reforms of government and uplift in the overall economy. The Material Handling division grew 11% by volume and 3% in value for the year. Division expanded its range of dustbin models. Injection and roto moulded pallets are getting good growth in the business. Company having been a trusted associated supplier to major top beverage companies benefited with increased demand and the same is likely to continue. The year under review remained subdued for Composite Cylinder division as purchases from its major customer, Indian Oil Corporation, has not happened as projected earlier. Discussion with other oil marketing companies is also continuing as they are exploring to introduce composite cylinders in their portfolio. The company continued exports to its valued customer and continued to explore newer export markets. And Performance Film division, persisted efforts in new industrial food application helped the division in creating value-added product to its portfolio. The division issued positive feedback from its key export markets. And Protective Packaging Division has been successful while working closely with customers, end user, and developing new application for varied industry keeping the needs in mind. New product development, adopting new technology in manufacturing and focusing on export business is leading positive results both in terms of growth and profitability. To meet the growth in demand of both these products, company has initiated steps to put a new plant near JNPT port. The site near JNPT port will facilitate export of Protective and Performance Packaging product at economical cost to its international customers and will cater to increased requirement in domestic market also. This is a brief and overall summary for the quarter and year ended as referenced. Thank you for your patience. Now I and my colleagues, Shri, P.C. Somani and Shri R.J. Saboo are available to reply various queries made by all of you. Thank you very much.

[Operator Instructions] The first question is from the line of Parv Jain from Niveshaay Investment Advisory.

Congratulations on good set of numbers. Sir, my first question remains on the industry front. So like we have been seeing from the past -- last 1 year, the industry has been a little subdued due to overcapacity and other supply-related constraints. But I mean, this Q4, we have really seen some good margin improvements. And going forward also, you're guiding that the demand remains resilient. So how do we see the industry in this coming year? Are the overcapacity constraints resolved, and the gross margins are continuing to improve, how do we see that, sir? .

What -- industry means what? Overcapacity for what?

Sir, the plastic industry as a whole. Overcapacity in terms of the number of players who have set up plastic PVC, PERT-related plants.

Yes, let me talk about numbers of players. In the plastic industry, there are always more number of players. But even with more number of players, we have grown by 26% in volume overall. So what we will comment, please tell me. And we are planning 20% volume growth this year also.

Right. Sir, the volumes remain really good. But on the margins front, like we have seen for the last 3 quarters, the gross margins had declined to some extent. But this quarter, we see the gross margins have improved. So going forward, can we expect similar kind of margins or what is your outlook on this?

We are forecasting this year also 15.5%.

The next question is from the line of Aditi Loharuka from CD Research Private Limited (sic) [ CD Equiresearch Pvt. Ltd.].

Sir, my question is, do you think that focusing just on the plastic piping systems business will help the company achieve greater cost optimization and higher market share?

Sorry, say it again.

Do you think that focusing just on the plastic piping systems business will help the company achieve greater cost optimization and higher market share?

I believe that our market share has gone up last year.

Yes, sir, but the plastic piping segment has contributed around 70% in the -- of your revenue. So how do you see that?

So we are investing more money in the segment where the growth opportunities are there. In plastic, I think we feel there are immense opportunities available for next 5 to 5 years plus. So more and more investment is being made to this segment, so obviously, it will contribute in a similar way.

And besides the cost optimization, which you are referring to, it will continue because more and more CapEx is being planned in plastic piping segment and the economies of scale of operations will obviously be in place because of the more operations.

The next question is from Shubham Aggarwal from Axis Capital.

Congrats on a good set of numbers, sir. Sir, just a few questions from my side. Just wanted to know what's your capacity as of FY '24 end in each of the segments? And how will it look like given the capacity expansion in FY '25 and in FY '26 end? That's the first question.

Our installed capacities, the nameplate capacity as on 31st March '24, all put together is of 950,000 metric tonnes, which consists of 739,000 of plastic piping, 90,000 metric tonnes of industrial product, 93,000 of packaging products and 29,000 of consumer products. The way we are planning our CapEx and likely to be in place by end of FY '25, the capacities are likely to be in the range of 10,50,000. About 1 lakh tonnes capacity will get increased with the CapEx, which will come into production during the current year. The majority of the CapEx will be in plastic piping. So we are expecting the present capacity of 740,000 of plastic piping will go up to 835,000 metric tonnes.

Okay, sir. FY '26 also, do you have a number? Or is it yet to be planned, the CapEx for FY '26?

Yet to be planned, yet to be planned. It's too early.

Okay. And sir, this includes the JNPT CapEx that you're planning or not because I'm not sure if the CapEx number already includes that?

JNPT is for protective packaging where the volumes have not come because it's a very lightweight material. So volume comes majorly from the plastic piping. Protective packaging product does not generate the volume.

I mean new plant what we are going to put up in JNPT may not go in production also in this year. It requires some time. This is the investment we'll be making, which will be in operation fully in '25, '26.

Okay, sir. Sir, the CapEx that you've told the total CapEx for FY '25, the commitment. So -- okay, so that doesn't include JNPT, got it. JNPT is yet to be planned for this...

Our commitments are around INR 500 crores beginning of the year.

Okay. INR 500 crores is included?

[indiscernible] CapEx already committed, which could not fructify in the year '23-'24, which we expect to fructify in the current year.

Okay, sir. So that answers my CapEx question. I'll just move to the second question now, which is, if you can give us a broad sense that how much did Nal Se Jal contributed in FY '24? Is it -- are we expecting some kind of a decline in that? And secondly, I think you mentioned that you expect that deficit to be covered by plastic pipe supply to oil and gas segment. So sir, if you can also give us a sense that how big is the oil and gas segment requirement for plastic pipe is going to be? And what is it going to be used for? Is it going to be used for gas distribution, is it?

Gas distribution, we have to still start this year.

Yes. But going forward, yes, that is going to be big business.

Yes, it is going to be a business, but after all we are now letting out the product to qualify officially in India also. Today, we are qualified only in the Western Zone. So we hope that we will start getting business now with our product qualified to be supplied from Gadegaon, getting in Western Zone. The freight becomes too high. So for that we are putting our capacity at Eastern Zone also at Kharagpur. It will be operational by November, October this year. That is biggest plan and also biggest plan in the industry and what we are planning to make.

And sir, I just wanted to understand how big is this opportunity, the oil and gas segment opportunity.

I guess may be 200,000 tonnes annual overall in the country.

And is there any big player already or it's like a new segment that's emerging?

There are already -- there are new players.

Okay, sir. Got it, sir. Got the second thing. And just the last one. Sir, plastic pipes, you're expecting a 25% volume growth in FY '25. Can you just guide what are the broad -- which are the key things that are driving this strong growth in plastic pipes?

By adding more systems, adding more SKUs in existing strategic system and putting more capacities in several locations and expanding capacity in our existing plant. So many factors are being done. Many markets where we are not present, we are establishing new distributors, increasing our number of retailers working with the company. Our own marketing effort made in several areas, still we don't have representative, which we are going on appointing every month. So business is going great. For our company, business is going great.

Got it, sir. Sir, just a related question that the 5 new plastic piping systems that you're adding right now, is it expected to increase your addressable market significantly from where you are currently?

This will definitely increase the market. Today, we are doing [indiscernible] they will definitely add to our business. Significantly, how can they do it? They are coming in this year only. Significantly, they will do over the period.

Sir, my question was the 5 new systems, are they expected to increase your addressable market significantly, like will it increase by 20% or 30%?

No, percentage, I can't share, but that's why we are investing. After all, we will get return on the investment.

Next question is from Dhananjai Bagrodia from ASK Investment.

Congratulations on the fantastic set of results again. I just wanted to ask you in for plastic pipes now, a lot of growth has been coming from Jal-se-Nal. Do we see what has happened in the last 5 years in terms of volumes play out in the next 5 years? Or are we reaching the end of this Jal-se-Nal program?

We believe Jal will be over in next 2 years.

Okay. So then what would be the next leg after that?

Gas system.

Sorry?

Gas pipe system. Gas pipes.

Okay. Gas pipes and...

Gas pipes and plastic system. We make so many system, dear friend.

Okay. But would that also be showing similar volumes as what we've seen in the last 5 years?

Okay. So there may be bigger volume, also I can't say today.

Okay. So that's even a bigger opportunity, but right now, we don't know yet.

Okay. There are opportunities. There are opportunities in our business.

The next question is from Venkatesh Balasubramaniam from Axis Capital.

Is it possible to quantify if there was any inventory loss or gain in the fourth quarter and similarly for the full year of FY '24?

For full year, there was a loss of around INR 50 crore rupees. The stock, which was valued as on 31st March 2023 has been valued at INR 51 crores lower on 31st March 2024. So obviously, there is no gain. The inventory has been valued at INR 51 crores lower than what it was on 31st March 2023.

Okay. Okay. Understood. Now again, going back to this Nal Se Jal, I think someone else also asked before me. How much did Nal Se Jal contribute to your revenues in financial year '24?

Quite substantial. We had in polyethylene pipe business, we sold more than 50,000 tonnes last year, which was 90% growth from previous year. So around 25,000 tonnes extra we sold due to Nal Se Jal scheme.

Okay. So is it like almost INR 1,000 crores of revenues have come from Nal Se Jal, INR 1,000 crores to INR 1,200 crores?

25,000 tonnes cannot make INR 1,000 crores. It can make maybe INR 400 crores. .

How much? Can you please repeat? INR 400 crores?

It can be INR 400 crores. 400, 4-0-0.

Okay. Now do you expect this to come of next year or it can remain at similar levels for the next couple of years?

Definitely, still so many states, so many houses are still to be connected.

Okay. Okay. Lastly, you are growing at a fantastic pace, 25%. I mean, your growth is industry leading. I don't think anyone else is growing at your pace. What is the pace at which the industry would have grown in plastic pipes this year? And who are the companies who might be losing market share?

Industry growing, maybe -- I don't know.

We definitely have grown quite well.

Is it from this -- from what you are doing in '24, I don't think the industry is growing at this kind of pace, correct?

Across the piping system, 13% I think. Industry has grown by 13% -- industry has grown by volume, 13.79%. 13.79% by volume, the industry in the country grown in plastic pipe system, and our company grew by 33%.

Next question is from Ritesh Shah from Investec.

Sir, I'll just continue on the prior question. Sir, you indicated 50,000 tonnes of volumes from Nal Se Jal for this year, which is roughly 10%. So should we assume...

As of 25,000 tonnes last year. Last year, we sold 0.5 million tonnes, so it comes to 5%.

It was 25,000 tonnes, not 50,000 tonnes.

Overall, 5% were turned over. Last year, we sold 0.5 million tonnes of plastic pipe systems. So 25,000 tonnes of 0.5 million tonnes is 5%.

Correct. And sir, how should we look at this number for next fiscal? Will we do better than this? Like do we already have order book because in one of the earlier calls, you had indicated that we had order book of INR 480 crores, which would be over the next 12 months. So sir, I just wanted to update on that number on what the order book position we have right now and how much visibility do we have for next year.

I'm not clear what you asked, what question you are asking. I'm not clear what you are want to know.

Yes. Sir, you had in one of the earlier calls, you had indicated that we have a INR 480 crores order book with visibility on supplying on Nal Se Jal.

Jal Nigam -- so Maharashtra Jal Nigam, the period up to 2025. So they go on placing orders based on the implied demand they get from the Zilla Parishad. So now whenever the demand comes, we will go and supply to them.

Sir, is it possible for you to quantify what is the current order book position? I could not comprehend what you said.

So Maharashtra Jal Nigam, there is no order pending today.

Okay. And sir, from the eastern states?

Throughout the country we are supplying, dear friend.

Okay. Sir, will we have an aggregate number? .

Aggregate numbers, the orders are executed monthly. There is no -- They are coming for the year. We are going to get the order monthly from the contractor and we're going to supply monthly. We have got 8 locations we make polythene pipe, 8 locations in the country.

Okay. Okay. Okay, sir. Sir, my second question is, can you please explain us what does PERT piping system mean? And you also indicated polyethylene gas piping system. What are the end applications and specifically on PERT piping system, what is the market that we are looking to cater and why are we getting into this?

PERT system is required for hot water cleaning. We are supplying polypropylene systems for hot water. We are supplying CPVC system for hot water. We are supplying PEX pipe system for hot water. We have fourth system for supplying -- carrying hot water, PERT, which is a new material, polyethylene of raised temperature, PERT system. So every system has got its advantages. Based on the recommendations of plumbing consultant, we are able to supply any type of system required to carry hot water, company equipped supply. That is one system we are going to make. Secondly, we are going to make polypropylene acoustic pipe system. Presently, we are making PVC acoustic piping system, where the decibel level of the water coming at 4 liters per second maybe 22. Here, it may go down to below 15 decibel. So if we further -- if we -- noise dampening system, which is more demanded now for many villas and many large -- many high-rise buildings. So we are coming with this system and we are very optimistic of getting a good growth in that business. And the third is polyethylene gas piping system. There are various system we are launching for which we've identified markets, and we see good potential in growth in this business. As a system supplier in the country, we want to offer every system required by the economy.

Next question from Sonali Salgaonkar from Jefferies.

Congratulations on a great set of numbers. Sir, I have only one question. What is your outlook on PVC prices? I understand it's very difficult to predict. But just from your side, how do you think PVC prices will pan out in the next year? And also, is there any update on the Red Sea conflict and the higher logistical costs?

So to forecast a price for the full year is very difficult. Yes, we said in our opening remark, the world economy is going in a slow mode. So we do not see possibility of prices to go up. PVC is a building material and building industry is in doldrum in China. The big factories, the local makers have initiated with the Government of India to put anti-dumping duty on PVC from certain countries. Now this is a long-drawn process. We can't forecast when the anti-dumping duty, if any, is going to be imposed, we have no idea. If suppose, no anti-dumping duty is imposed, then price will even out at this level. If anti-dumping duty are imposed, suppose on a worst case by November, December, then thereafter prices may go up also.

I understand. And any updates on the disruption from the Red Sea, sir?

Disruption?

Red Sea.

Red Sea, no issue. Only the consignment is 20 days later from U.S.A. There are no issues. The freight might have gone up by $10, but we have not seen any increase in our acquisition cost because of that. We are not disrupted.

The next question is from Praveen Sahay from Prabhudas Lilladher.

Many congratulations on a good set of numbers. First question is related to your CapEx of INR 1,500-odd crores. Can you give some time line? How much is for this FY '25 and how much '26 CapEx planned for?

The full CapEx, you see, out of INR 1,500 crores, close to INR 500 crore CapEx has already been committed last year, which will get certified during the course of the current year. In the new CapEx, which we'll be committing this year, 60% to 70% of the CapEx will be certified because the brownfield expansions will not take that much time. Time takes the only in case of greenfield when we are looking for Bihar, Andhra Pradesh or JNPT and Kanpur Dehat, where we have to build the buildings, infrastructure. So the CapEx is committed, but production will come only in the next financial year, '25, '26.

Okay. So that's what -- now my question is how much -- actually, 60%, 70% of INR 1,500 crores is committed for '25, right, sir?

Correct.

Okay. Second question is, sir...

As our MD answered, our installed capacities will go up by about 1 lakh tonnes per annum by end of FY '25.

Right, sir, right. Yes. So now the next question is, sir, related to the -- can you give some color on the last year contribution in your piping segment from real estate and Infra and agri?

No, we can't have any separation on how much real estate, how much infra, how much agriculture. It is not possible, please.

Not even with the like HDPE pipe growth or contribution?

Since we can't give a proper -- we cannot be 100% sure if this has gone into agriculture and not gone into housing. It can go in housing also. Same polyethylene pipe are used in borewell also, polyethylene pipe are used in the field also. We cannot say correctly how much has gone into infras. We cannot say precisely.

Next question is from Manish Mahawar from Antique Stockbroking.

Congratulations for a good set of numbers, sir. Only one question, sir, in terms of industry growth, you have given piping volume grew by 13.79%. What was our market share in the FY '24?

Sorry?

What would be our market share? Or possibly, can you give a piping volume of our industry for FY '24?

Maybe around 12%.

And sir, how -- what's your expectation for the next year in terms of industry growth?

Next year, our growth is 25%. Next year industry growth, I think we have to get figure from the producer of raw material, but should be definitely 12% to our mind.

12%, and we'll grow at 25%, you said. Okay. Understood, sir.

12% to 25%.

Next question is from Sneha Talreja from Nuvama.

Sir, congratulations on a great set of numbers and congratulations on great outlook, too. Just a couple of questions from my end. What is your outlook on the OPVC segment? How much is the tonnage that we are adding there? And what kind of growth that we can see? And is this a segment only working towards the government projects, some sense here would be helpful.

OPVC, there is no capacity with us. We have only 1 plant, we cannot produce more than 2,500 tonnes a year and no plant is going to come this year to start because the supplies of the equipment are too much delayed. So market can grow based on the supply of equipments. There is one very established supplier, he is from Spain, and he has got huge order book. So we have nothing to share, not more capacity we can supply. We can only say we will supply 2,200 tonnes this year. This is the only capacity we got today.

Understood, sir. Sir, secondly, on the export opportunity, you mentioned that there are export opportunities in your other division, like packaging and all. What do you have to say about export opportunity in the plastic pipe space? Is it something that you're seeing? Or is it something that could be increasing going there?

Yes, in plastic piping, we are working more internationally towards more in export market. But today, more opportunities are there in protective packaging division and performance packaging division in export. They are not much freight-intensive. Plastic pipe is very freight-intensive item. When we export plastic pipe, we are shipping [ air ].

Next question is from Keshav Lahoti from HDFC Securities.

So what I understand in FY '24, Jal Se Jeevan Mission contributed INR 400 crores revenue and 25,000 was the volume. What was the similar number in FY '23?

FY '23 started. I don't have it immediately with me. It was quite a low number. I don't have a number. I said this is additionally growth in the business. There was a number, but this 25,000 tonnes we shared is additional.

Okay. So 25,000 is additional sales over FY '23. What was the total sales?

Total sales of this HDPE pipe was around 45,000 tonnes. We will get 25,000 tonnes additional. We are supplying to so many other applications. We make HDPE pipe for sprinkler system. We make HDPE pipe for various irrigation activity, for borewell also. So our HDPE pipe and we supply double-valve corrugated polyethylene pipe also, which goes into housing. So we make varieties of HDPE pipe system.

Got it. Got it. And how is the margin in the segment? Is it ideally subpar versus other segment?

Very small margin. We get satisfaction only that we are giving quality product to the country.

Understood. Something like 5% to 6% is a fair assumption?

I don't say. I say small margin.

Okay. Got it. No issues. And on the expansion plan, as you have said, you will add almost 1 lakh capacity on pipe side. So where this capacity will be added? And what would be the size of the capacity? And is it possible to give bifurcation quarter-wise?

We don't know when the machine will be received. Every quarter we can go and tell you how much capacity we put there in every quarter. Every quarter we tell you after end of the quarter, how much capacity we could add out to 100,000 tonnes.

Okay. Understood. So what we can see your fixed expense that is employee and other expenses all are increased by more than 20% year-on-year. We can't see any operating leverage gains. So why is the reason for sharp increase?

Sorry to interrupt, but the line for the management has dropped. Please stay connected while we reconnect the management. Thank you for patiently holding your lines. The line for the management is reconnected. Over to you, sir.

We are available.

I'll repeat my question. So the question is, we can see your other expenses have increased by 31% year-on-year. Employees have also increased by 24%. So in spite of doing such high volume, the operating leverage gain part is missing. So why is there a sharp increase?

Most of the expenses are driven by the volume, your employee cost or the labor cost. Your power cost is driven by volume. Your freight cost is driven by volume. So the fixed costs are not increasing that way. And if you look at overall, the other expenses, we are looking excluding where our employee cost does not include labor charges, what we paid to the contract workers. It is only part of the other expenses, which again is driven by volume only. So when we have a 23% volume growth, naturally there is minimum wages and the number of manpower increased, both will get factored.

Okay. Got it. One last question from my side. How has been the CPVC prices in Q4?

The CPVC prices.

CPVC prices are under pressure only.

So what would that number of correction would be?

They are not able to grow price too much. It may go dropped by INR 4, INR 5 a kilo, but they are under pressure because there's too much capacity shift. You see market is not there much in plumbing segment. Last year, it grown may be around 13% of CPVC by volume, too many players had come. Capacity of CPVC is rising, but they can't sell below their costs. So they are maybe reducing their production, that is their problem. We have no problem to get CPVC resin nowadays.

Like what we have seen CPVC prices has been declining month after month. So is it at its bottom? Or do you think there is more further scope left for correction? And is it possible to quantify the...

CPVC.

CPVC, I'm not a producer of CPVC, I can't say.

So I mean the CPVC pipes.

CPVC pipe, we have grown the price accordingly. You can't increase the demand. If you're only going into plumbing application. So we are keeping very small margin only, and material availability is adequate nowadays.

Next question is from Mihir Damania from Ambit Asset Management.

My first question is, of the INR 1,500 crores committed CapEx, how much have you allocated to the piping system?

To piping system? CapEx, out of INR 1,500 crores, minimum of INR 1,000 crores, you can say.

Around INR 1,000 crores. Okay. And my second question is, amongst your key end-user segments, basically, agri, infra and real estate, which segment do you think will grow the fastest in FY '25?

The housing will go on growing. Agriculture also may grow [indiscernible]. Infra actually depends on the state government budgets. We can't forecast for them.

Do you believe real estate will grow the fastest in FY '25?

You will see booming very well. Yes, growing very nicely.

Next question is from [ Vipul Kumar Shah from Sumangal Investment ].

Sir, what percentage of our volume in piping segment comes from oil and gas? And where do you see it in next 2, 3 years, sir?

Which sector?

Oil and gas?

Oil and gas.

No. Gas, as I told you, it will be around 200,000 tonnes business annually. We are still not a player. If we are getting approval in various locations then we can talk more intelligently. Overall, market in India is 200,000 tonnes.

And our share is?

Our share is zero. We just came in this business this year.

Okay. So do we expect to see a sizable market share gain there?

I don't see. I don't know meaning of sizable, but definitely, we will get market share. We supply quality product. Full system, we will supply. We are going to supply pipe. We are supplying fitting. Not really from one location, we are supplying from three locations. So we will be economical by freight element also and we'll be offering full range.

[Operator Instructions] The next question is from Nikhil Agrawal from VT Capital.

Sir, just wanted to know like if you could quantify our regional presence in terms of the piping volumes that have come in, if you could quantify the mix.

Regional, we don't review. We don't publish regional data, regional presence in piping.

We are present throughout the country.

Okay. Okay. And sir, one more question. I just wanted to understand with more CPVC capacities coming in this year, do you expect prices to be under pressure for the remaining part of the year as well?

I think they dropped their price substantially. I can't share about them. Whether they want to further drop, I have no idea. At higher level if the prices are being dropped, accordingly we will drop the price of CPVC system quite substantially. Now whether they will drop further, I can't say for the economy. People have the tendency to grow the capacity.

Okay. And just a clarification, your market share, you said is at 12%?

That market size of CPVC, last year it was of 13%.

Total. We are talking of total plastic piping market.

Market size of 13%.

In the Piping segment, what is your market share currently?

Market share...

Indian market, total market we are about close to 12% to 13%.

Next question is from Utkarsh Nopany from BOB Capital.

Sir, my question is regarding the pipe segment. So sir, if we see our pipe plant operated at a decade-high level, at 75% in FY '24 versus like we have operated at around 65% to 68% over the past 1 decade period. And now sir, you are guiding that we are targeting to grow our pipe volume by 25% in FY '25, whereas our pipe capacity is only expected to grow by 13% in FY '25. So sir, just wanted to understand whether we are likely to face any capacity constraint to reach our targeted volume growth of 25% in FY '25?

Capacity-wise, more than 100,000 tonnes this year. And after all, we sold this year 500,000 tonnes, 25% means 25,000. So we don't see any constraint there. If we have constraint, we will go and be putting more machines. We've got so many locations now to make piping system. There is no problem. There is no supply constraints. No supply constraint, no raw material constraint, no power constraint, nothing.

Okay. And sir, second question is on the margin side. If I see, there has been a steep increase in our pipe sales volume by 30% on a quarter-on-quarter basis, and the resin prices were also quite stable in the current March quarter versus it was a quite unfavorable in previous December quarter. But then also our pipe segment margin has slightly gone down on a Q-on-Q basis. Sir, can you please explain the reason for that?

In comparison to last year, there will be inventory gain, say, between INR 70 crores to INR 80 crores each. If you compare last year, then the margin has come down. Otherwise, we are quite happy with the margin.

[Operator Instructions] We take the next question from [ Aditya ] from Securities Investment Management.

Sir, this strong volume growth which we are seeing in the pipes division. So has there been any particular geographies which have outperformed or the volume growth has been broad-based across geographies?

Throughout the country. We are present throughout the country. We have seen volume growth throughout the country.

But are there any particular geographies which have grown faster, faster than other geographies?

For us, all the market has grown nicely.

Okay, sir. And sir, my last question was, our growth in the piping industry has been twice the rate of what industry has grown. So have you taken any price cuts to accelerate the volumes?

We are introducing more system -- more product in the existing system. We are looking at more locations, more capacity. So the customer has been very kind on us.

Next question is from Vineet Shanker from JM Financial.

Just wanted to ask, what is the volume growth guidance for the segment excluding the pipes?

Can you repeat your question, please?

Yes. Just give me the volume of guidance for segment excluding pipes, plastic pipe division excluding...

Excluding pipe, you want the volume. See when we are saying 20% growth for the company, it means we are talking of about 125,000 metric tonnes for the company as a whole. And majority is coming from piping. So other than piping, it will be a single digit, about 10% growth you can say.

It's eventually the faster growing...

Pardon?

Besides piping, which will be the fastest-growing segment?

No, not getting your voice.

Please be near to the phone.

Yes, sir. So besides piping, which will be the fastest growing segment like among remaining 3?

You see ultimately, furniture, we don't expect any growth. So it is the packaging and industrial. The material handling product and the packaging product.

Next question is from Praveen Sahay from Prabhudas Lilladher.

Yes, sir, just one clarification. Can you give the capacity for the consumer product segment?

29,000 metric tonnes.

And what -- how much is the increase the way forward here?

No, way forward, we are not planning any increase in capacity because we already have a sufficient capacity where we invest only in the new design of the molds, furniture molds or the almirah molds.

We would anticipate volume growth in this business.

Besides the focus, on the furniture side, is more of the value-added furniture, premium products. The margins on capital employed are better actually in furniture also.

Because why I had asked, you had a plan for 100,000 for entire capacity out of that I think 86,000 for the pipe, rest also you have...

Performance Packaging film, we will be investing money. Piping division, we will be investing money.

Okay, not in the industrial and the consumer. Okay.

Next question is from Shubham Thorat from Perpetual Capital Advisors.

I just wanted to understand the pricing environment around our product portfolio.

Raw material price is going to remain at the same level, range bound 50,000 plus or 50,000 minus. So we will maintain the same way pricing as per any upside on the raw material price.

Next question is from [ Akash ] from UTI Mutual Fund.

Yes. Am I audible?

Audible.

Yes, sir, just wanted to ask, in Packaging segment, we have seen EBIT margin improving from 7%, 8% last year to 13% previous quarter and 18% this quarter. Sir, going forward, how -- what is the sustainable level of margins that we see in Packaging segment?

When we make any average, we hope to maintain or improve the average margin what we have attained last year. So we are including so many projects, range also, and we are going more and more in export markets.

Sure, sir. So if we try to quantify, would it be close to similar to current quarter's margin, close to 18%?

I said annual margin.

Okay. Okay. So annual margin would be -- and sir, we have seen realization growth in this segment specifically packaging segment. So you believe that the current -- I mean, the current quarter's realization would continue or we are expecting even higher realization growth.

When we are saying annual, then we stay with one sentence what we told you. We are going into more and more export potential. Our export business goes up because we are exporting some very specific product, and we see good growth opportunity. We'll go on remaining in more and more export side. That's why we are putting plants close to the port so that we can supply to our customers at economical cost.

Next question is from Venkatesh Balasubramaniam from Axis Capital.

Now during the course of the year at different points you've shared, for example, first quarter, you had an inventory loss of INR 40 crores. Second quarter, there was no inventory loss. Third quarter, you had INR 15-crore inventory loss. Based on the full year inventory loss of INR 50 crores, it looks like you've had a small inventory gain in the fourth quarter. Now based on whatever numbers you have shared, if I actually calculate the EBITDA per kg across the quarter, it looks like there is a gradual fall which is happening. In the sense that FY '23, this number was INR 27 per kg. This has gone to INR 24 or INR 25 in the first half of this year. Fourth quarter, this is at around INR 22.8. So it looks like there is a constant fall in the EBITDA per kg. Now if you adjust for the inventory gain and inventory losses, now what exactly is this? Is this a conscious strategy on your part that you're okay with a slightly less EBITDA per kg, but you want a higher volume growth and you want to gain market share? Is this a conscious choice on our part?

EBITDA per kg much depends on the product what we shared in the quarter. When you sell only more and more pipe only, be it PVC pipe or polythene pipe, EBITDA will come down. Overall, last year, we are happy that we had INR 21 kilo and INR 50 crores was the loss in inventory. Say if I had no loss on the inventory I could have earned INR 22 per kilo last year -- per tonne last year, INR 22 kilo. So if you calculate it, we have earned nearly INR 1,050 crores and if I add further INR 50 crores, then it becomes INR 22 per kilo. We are supplying only value-added item. We are supplying pipe also, so to make it usable to the customer, and pipes are low EBITDA business.

Okay. Now just to -- just following up on the same thing. Normally, first quarter is the quarter for the agri pipes. Now agri pipes normally makes the lowest margins. But surprisingly, in the current year, your EBITDA per kg is higher in the first quarter, adjusted for the inventory loss, you made almost INR 24, whereas the third, fourth quarter, it is lower. And the reason we're asking you is when we are...

We are not talking about the price as of today. It is from April...

He is talking FY '23.

Today, I can't talk about what happened in March, April, June, Q2, Q3, I can't talk today.

No, the reason being that when we are doing -- talking to dealers in the market, they are telling that Supreme Industries has been cutting prices and growing volumes. This is something which we are hearing. Now any kind of light you can throw on the same?

If dealers are taking, I have no idea. We have no plan to go on cutting prices. We want to have the money that justifies the investment. If I am investing money, it must get me a return.

We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.

Thank you very much for all the [ analytic ] questions. Me and Shri. Somani and Shri Saboo, we are very thankful for very intelligent questions raised by all our investor partners. We thank them very much.

Thank you, everyone.

Please close the meeting.

Thank you very much. On behalf of DAM Capital Advisors Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.