Visaka Industries Limited (509055) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome you all to the 1Q FY '22 Results Conference Call of Visaka Industries Limited. We have with us from the management, Mr. Vamsi Krishna, Joint Managing Director; Mr. Shafiulla, Chief Financial Officer; and Mr. Vinay Bathija, Head, Investor Relations. I would now like to hand over the call to Mr. Krishna for his opening remarks. Over to you, sir.

Thank you. A very good morning to everybody. Thank you all for joining and participating in our earnings call for Q1 FY '22. We hope that all the participants and their families are doing safe and fine in this unfortunate COVID era. Taking the second wave into consideration and the prevailing ground situation during the Q1, our current quarter performance has been commendable. There was strict lockdowns in most of the countries. But despite that, our teams worked really hard. And as a team, we remain resilient in our building materials segment. Overall, if you see, we did get a good growth compared to the last quarter in the previous year. The building products businesses contributed well this quarter as compared to the corresponding. The export segments of Vnext are doing well. We expect to end up with healthy growth in the business throughout the year. The fourth plant is on its way to be operational, and we have had a month-or-so delay due to the COVID lockdown. And the same should start by December 2021. We are also expanding the AC sheets roofing segment capacity by 1 lakh metric tons at our Raebareli, Lucknow plant. In fact, we are the first to announce an expansion since the last 10 years in this industry, given that there has been quite a stagnation. The market for asbestos products is intact due to its affordability and utility to the lower-income group, especially in the rural side. The second wave was much milder in the rural pocket. The demand for the product is sustained due to increase in the rural incomes. The higher steel prices have added advantage to booster [ the sale ]. The commodity cycle as suggested by 2 research firms will be in for [ considerable ] feet. If you take a look at the next story since the last 10 years, selling about 1,000 square feet a month to now about 1 crores square feet per month, almost 10 million square feet is what we have built. We've built a new brand called Vnext, which has been very well accepted in the market. That business should grow close to INR 250 crores to INR 300 crores very soon in the coming years with good, healthy margins. In fact, it is becoming a product of choice for almost all new products that we see today with Microsoft, Amazon, the Marriott or even Tata, L&T, and even the Dubai project, most of the Dubai Malls and other parts of the world, we are seeing very good traction for that. In terms of affordable homes, we have been actively involved with the UN to deploy some projects across the globe. And in terms of our network growth, we are right now operating almost 50% of the gypsum broad network are in dealing with our product as well, and about 20% of the plywood network also is in our selling [indiscernible]. So right now, we are selling in more than almost 2,500 outlets throughout the country. And this business, we see will be growing at around 25% overall. The synthetic yarn division experienced continuous pressure as both the main markets for these products in [ Evendi ] in Mumbai and Bhilwara in Rajasthan have been closed for majority of the first quarter. And the segment did not contribute as much as we would have liked it to. But as we know, the product potential, and we see the traction coming back in the domestic market, especially in the international segment in markets like Europe. To add to that, in Texas, we are doing almost about 250 tonnes of sustainable yarn product that is a completely new venture that we've looked at. And just to give you an idea, it takes almost 14, 15 boxes that go into one preship post recycling. So that is really the contribution that we can look at. We are trying to build value-added products in the same segment to the textile division. All have some sort of an interesting niche market play rather than a mask marketplace, which has been the core strength of our synthetic division. Coming to the ATUM's items for [ largo? ] I must say that it has been a very good interesting journey for us since prelaunch. It has improved revenues compared to the previous quarter, previous year as well and picked up momentum in segments like hospitals, pharmaceuticals and data center. ATUM has established itself as a trusted product with its deployment across various segments in various parts of the country. In fact, I'm very happy to announce that we've even got our South African patent post the last time we did pick. So now we have patents in India and in South Africa and patent pending in the United States, Europe and China. We are very optimistic about this product, considering the commitment of major national governments going towards renewable energy, especially after the G7 Summit. Just to give you more insight in terms of what is going on in ATUM, it is the first-of-its-kind product in the world. Such a product didn't exist until ATUM was born. The true utility of a long-lasting roof that generates clean and green power. It is an answer to all the pain points that are existing with the current rooftop solars as we know. We have very strong clients that we've developed over the last 2 years with major players in the data center [indiscernible] adopting ATUM, and also, we've done some projects with the railway. And we are getting repeat orders from many of our customers, which is always a good statement for a new product when it's launched. So the scope is huge in terms of sustainability, but sustainability doesn't sell. What we need to look at is the utility. So I'm happy to share that, based on utility, the product is taking off very well, sustainability part of you, it will be an additional add-on has awareness towards sustainability to increase. So the product attributes are very strong, and we see a good-strong long-term growth in the same. And coming to the new initiative as is very evident that sustainability has been one of the core values of our organization. Our products and initiatives revolve around this [indiscernible] proposition. Our goal is to achieve a sustainable and environment-friendly future for all people. Our new initiatives such as ATUM Charge and ATUM Life, which we've just announced a couple of months ago. To give you more info about this ATUM Charge, it's a self-sustaining solar-powered charging station, which will be set up across India and other parts of the world as we know it to support the use of green power backing the electric revolution. Because ATUM is a solar roof, every charging station needs some sort of an infrastructure and a roof and what better than generating maximum output in a given area, which is exactly what ATUM does. So ATUM Solar Roof, which is clean and green power, will be the perfect fit to drive the entire green revolution in terms of adoption, wherein we can move to 100% of solar where, today, people are unfortunately using thermal power, which is through the EV to charge green mobility. ATUM Charge is also looking at partnering with other interesting charging stations, wherein the product will be adding value to their solutions. ATUM Life is another interesting venture that we've launched. We are right now underway constructing the first one. It is basically a chain of experience centers where we'll be offering all eco-friendly sustainable and green products under one roof. We plan to launch about 10 ATUM Life posts, 1 in each metro, wherein people get an opportunity to understand and learn about what products we do and not just the -- not just limiting to our products. We will be associating with other sustainable products and bringing them together on one platform. So ATUM Life will promote all sustainable products, making sustainable living accessible and easy to adopt. Coming to the financial performance. The total revenue of the current quarter is INR 350 crores compared to INR 286 crores of the previous year same quarter, which is an increase of almost 22%. PAT for the quarter was INR 40 crores as compared to INR 34 crores, showing an increase of about 20%. The building products segment, the Q1 revenue was about INR 319 crores as compared to INR 271 crores in Q1 of last year, showing an increase of about 18%, while on a sequential basis, it grew by 6.5%. Segment EBIT margins for the quarter were around 19.5%, a rise of 452 bps sequentially. However, the same declined [indiscernible] bps on a corresponding basis. The yarn Q1 business turned in a revenue of about INR 29.6 crores as compared to INR 13 crores in the previous year same quarter, showing an increase -- good increase of around 100%. However, we are looking at a much better situation for textiles as the year from. The EBIT margins for this segment stood at about 11.5%. Our working capital cycles, the days have come down to 72 for the quarter from 76 days same period last year. This is due to the improvement in collections from customers and lower inventory period. The interest cost has come down from INR 3.9 crores in June last year to INR 3.3 crores this quarter. The net debt as on 30th June '21 is INR 52 crores, and against INR 80 crores on June 2020. Revenues were about INR 28 crores compared to the previous year. During the year, we are expecting both up for a vote at [indiscernible] and the roofing at [ Driverly ] to start coming -- start commercial production by December this year. The entire CapEx requirement for these units will be met through internal effort. While the main contributor in this quarter has been the cement roofing business, the Vnext and the textiles have also contributed well. We expect these 2 businesses, along with ATUM, to contribute significantly in the quarters to come, the building products to maintain margins during the current year, and the textile business by exploring new regions as we go. While the economy improves, we would wish to grow at a pace better than the economy. We wish to see you with and given better set of numbers going forward, given the strong foundation that we have looked at. We believe in building strong foundation, strong teams with a strong base that would help us create a good future for the products we undertake. With that, thank you, everybody. That was my opening note. Now I think we're open for questions.

[Operator Instructions] First question is from the line of Shanti Patel from Shanti Patel Investment Advisors.

My question is, what is the utilization capacity in respect of various products that we are manufacturing? Number 2, what is our market share in respect of those products? And thirdly, what is -- what do you expect the return on capital and return on equity as on 31st March, 2022? That is '21-'22 year.

In terms of...

Are you getting my voice?

Yes, yes, yes. I'm just answering . So in terms of AC sheet, our market share is around 20% right now. And the capacity utilization for throughout the plant would be anywhere about 85% plus in the given situation. In terms of the Vnext, we have a market share of almost about 35%. We are the largest player in that division in terms of drywall segment and cement boards. And the capacity utilization for that as well is 85% to 90%, helped the new plant expansion that we have proposed. And with regard to ATUM, it's a fairly new product, and in the roofing segment, it'll be too negligible to look at in terms of market share. But since the new products there for overall growth of the product is what we're looking at. And this year, I feel we should be anywhere between 40% to 50% in terms of the capacity utilization given the situation of COVID disease and other tings. And with regard to the ROI, I think I will ask Mr. Shafi to comment on that.

Yes, sir, I will answer. RoCE last year was around 20.31%. This year also for the total year, it will be like that only. But for sure, it is more -- a little more because of the annualization factor. But ultimately, we will end up by more than 20% RoCE and ROE also around 18%, it will be there for this year.

The next question is from the line of [indiscernible] from Quest Investment Advisors.

Congratulations on a good set of numbers. Sir, first question is in your building products segment, could you just help us understand -- I understand there are 3 product categories in this segment. So just can you just help us understand which segment has grown at what rate?

Yes, absolutely. So the roofing segment, this quarter, we're seeing a growth rate of about 7% to 8%. And in terms of the building materials, we will be seeing a growth rate of about 12% to 15% in the first quarter. Because of the lockdown situation, I think it will be not fair to look at the last year's good growth to this year because last year was completely shut for boards. And this year, it was not the case for the country, we had only a couple of states which had completely locked up. So I think next quarter onwards would be a good estimate, but we are looking at a growth rate of almost 25% and -- in both, and about 10% in AC overall.

Okay. So sir, I just wanted to get your sense on -- from what I understand, the first quarter is supposed to be the best quarter for the AC Sheets business. Now you just said you guys grew at about 7% to 8%. So I mean, is it -- so what I'm trying to understand is, going forward, then, are you expecting the growth rates to in fact, come down even further?

No. I said we will be looking at a 10% growth from last year to this year for AC Sheets.

Okay, okay. And in terms of -- so the business cycle, where are we? From what I understand in every 3 years, there are 2 years which are good for this AC Sheets business. And with the commodity prices, steel prices going up, do you think that there could be a change in the business dynamics in the sense that we might see next 3, 4 or maybe next 1 or 2 years, having a good run for the AC Sheets business?

Yes, absolutely. So actually, if you see the past data, the industry has not grown at all in the last 10 years. In fact, the post-COVID situation last year got us a very good growth because of the shortage in the market that was created in Q1 last year, following which most of the Tier 2 markets where people, a lot of labor has gone back into their Tier 2s and the rural boost was very strong. In view of that, we are predicting that we will be growing 10% compared to last year as well. I hope that answers your question.

All right. And in terms of margins, do you think we've hit peak margins, or there is still hope for improvement in margins? And in terms of pricing, do you think we've been able to make any sense of price hikes?

So in terms of margins, I must say, last year was one of the good years in terms of margins because we had a lot of advantages other than just the market wherein we took a lot of internal changes in terms of how best we can optimize our output and performance. So that was one good reason that contributed to margins apart from the general market demand as well. This year, due to the increase in raw materials, we are seeing that we should maintain the margins for now. I don't think they will increase further because the market is at play normal again. So I don't think we should be looking at further increase, but definitely maintain what we have achieved. That is actually what the outlook is for now.

And sir, just last question from my part. You spoke about the expansion in your capacity so that 1 lakh metric ton is in the AC Sheets that you're going to do?

Yes, 1 lakh in the AC Sheets, roofing sheets and about 70,000 to 80,000 in the boards. So the roofing sheet expansion is happening in Lucknow, and the board's expansion is happening in Coimbatore.

The next question is from the line of Subham Agarwal from Aequitas India.

Sir, firstly, my question was regarding the asbestos business. So in presentation, you talked about geographical expansion and also on the 1 lakh tonne expansion of capacity. So if we see the market leader has taken a completely different view of not allocating any further capital in this business, however, we have taken a different route along with one more player in this industry. So what's our justification of allocating more capital to this business?

So first of all, I think if you really look at our numbers, we're having good growth rates, and the highest contribution out of any business still to-date is coming from this business. And in terms of market supply, as you know, we are predominantly a south-based plant having the most capacities in the South states, and the growth that we see today is going to come majorly from the rural part of the country. And by rural, I mean, we're expecting good growth rates in the Northeastern segment in places like Jharkhand, Bihar, where our capacities are not as much as other players in those areas. So to capture the market, which we are right now not catering to, that is a move that we have taken. And we're confident that this expansion will be a very good fit in the overall scheme of things in terms of adding our -- increasing our market and the volume that we do. So that is the reason that we have taken [indiscernible]

And what's the total capital that we are allocating for 1 lakh tonne?

So both plants put together will be about INR 150 crores, about INR 80 crores in the boards plant and about INR 70 crores -- INR 60 crores, INR 70 crores in the roofing plants. It's a brownfield expansion. It's not a greenfield project. In fact, we have already started the work in the same facility as our previous plant. So there'll be a lot of other advantages that we're looking at in terms of operations with this expansion.

Right. And sir, on the current market situation in asbestos also, is the demand similar to last year? Because last year, I think the demand was shifted a bit in second quarter. But are we seeing similar kind of demand? And how is that realization panning out? Is there a softening of prices?

So I think one important thing that needs to be highlighted is that if you take a look at the industry 4 to 5 years ago, all of us we were in a very panicked situation because of the entry of steel sheets. There was a huge competition from steel sheets where the price difference was hardly 5% [indiscernible]. And that's where we saw major shifts happen from a rural roofing of cement to steel. Over the last 5 years, people have learned that utility point of view in the rural residential market, metal sheets are not the right fit in terms of product utility. What I mean by that is when -- you can't live in a metal box. In terms of a roof, the heat transfer is very high when you look at a metal roof compared to a cement sheet. When it rains, the sound that metal sheet generates is very high. It's practically impossible to stand or live under a metal roof when it's continuously raining. And the overall full effect of cement proof compared to a metal sheet. There's a lot of advantages to an end consumer. So that 4-year, 5-year cycle where people have seen this -- the utility fit of the product, though there was a lot of attraction for the blue-colored sheets which shifted away from cement roofing. Today, people are realizing the utility point of view for a residential application, which is our most trend today in the rural markets. That is coming back into the market. That's point number one. Point number 2, with regard to the life of the product, if you really see, once you set up a cement roof, it's face. There's no issue in terms of rusting. There's no issue -- other issues in terms of what metal it goes to. So there is another learning that has happened in the market where people have seen a cycle of 3 to 4 years where residential retail market is realizing that this is the right fit of the product, and we are seeing the demand and growth in the same faction. So these are 2 main points. And the third main point is the price difference as we know it. Today, steel sheets are going through the roof. The prices are exorbitant, in fact, a difference between a roofing sheet of cement versus steel is anywhere between 20% to 30%. So that is really what we are seeing as a good opportunity wherein the business will do well given the rural demand.

Well, sir, fair enough. And we are all aligned to this story. Sir, secondly, on the yarn division. So if I can see the production number in first quarter was pretty healthy. I think the utilization level was more than 90%. And so are we anticipating pent-up demand in Q2 and going forward? Or how is it?

No, so actually, this is actually a decision that we've taken where, in terms of new product categories, right? So we don't want to start the market or even though Q1 was not the case where we have to cut down or take any cuts because of no market. What we are planning is to do different trials with new products. In view of that, we didn't want to slow down anything. We have taken a decision [indiscernible] when we're confident that the next 6 months to 8 months, all of that will be in a good shape, the decision that we have taken in terms of new product development, it will all fit [ together ].

All right. And on the boards and panel division. So you said what is our current capacity utilization? Last quarter average was 74, correct?

Yes. So like I said last quarter, there are random pockets in the country being in lockdown, so I'll just give you an example. Though we've done reasonably well in the asbestos roofing division, the pharmacy plant, which is in Tamil Nadu, was completely shut for the majority of Q1 simply because there were high COVID cases in that area -- in that district. So no matter what we did, there was a very strict government law enforced that there is no factory going to run in that district, whereas in our neighboring districts with our competitors, there are no such issue, and they were allowed to [indiscernible]. This type of thing happened even in the boards wherein few markets were completely sealed off and where a few markets were open. So we got a net-net reasonable pushout in terms of both the roofing and board. Going forward, we see a good demand uplift that happen in any case. That is what has happened.

Okay. So we are expecting to, again, go back to Q4 level of revenue run rate from this quarter on.

Yes, absolutely. For both the products, roofing and boards, I think we should be doing reasonably well versus -- demand is back. As the market is open, the demand is back. We don't see any issue.

Perfect. And sir, lastly, on the new initiatives, so you talked about resolution or some charge in ATUM Life. So broadly, I would like to understand what is our key milestone over the next 2 to 3 years? And what kind of capital are we planning to put in such division?

Yes. So just to give you an idea, I would like to highlight a point that whatever new initiatives we have taken, I think it is pertinent to mention that you will see that all of the new initiatives are pushing our traditional businesses that we've gone into. What I mean by that is in terms of Vnext solutions where we are taking direct orders from corporates, let's say, Mahindra LifeSpaces or Tata or L&T are doing expansions. We want to be associated with them directly rather than giving just a single board. And that is where the value will be in the future as well, where we have direct connects with the top brands across the country. Sorry, any expansion, any construction that they would like to do, they should just feel like all the Vnext guys and get it done. So that is really the aim and goal that we're trying to achieve with Vnext solutions. We have also developed a very simple and easy-to-use app wherein you can order a commercial space, a factory, or even your residential space with a touch of a button through the app. And all you need to do is interact with the Vnext guy. We will take care of all the service part in terms of the back end, and we will be a 1-point contract. So that is real value add that we will be looking at in terms of Vnext solutions. And I must say, we're getting reasonably good acceptance in the market. We've started with a few projects in Q1, and we have a good plan for the year going forward. With regard to the charging stations, in fact, I'm sure all of you have seen in the news that a lot of start-ups and new companies announcing charging station. The problem with that is that, if they are dependent on EV power and if they're dependent on nonrenewable resources of power, the entire exercise of going green is due time. So that is where ATUM comes in as a beautiful fit. Any charging station would require a roof, and that roof, if it generates power, what better in terms of clean and green power. So -- and ATUM generates close to 20% to 40% more power compared to of any solution available in the market today. And that is really what we are trying to get. ATUM charge as a business will be very. The model that we are working on. We'll be very happy to share details in passing as the existing project that we are working on. But overall, what you see as a business model and also as a point of concept where people can see how ATUM performs in terms of creating a completely sustainable cycle. So that is with regard to ATUM charge. So going forward, if you see at ATUM charging stations across, you will know that, okay, this is actually what ATUM can do, and we're also using Vnext to create the entire infrastructure. So they also become a display point not just running it as a business on its core, which we are planning, but they also become a good display center points for us across the country. ATUM Life, on the other hand, is another effort that we are trying to do wherein most people ask what kind of applications that can be done with Vnext? What can we do with ATUM. So there are different type of customers where we keep interacting with and we felt that ATUM Life would be something to cater to the future in terms of the future is -- or has to be sustainable. If we are not adopting sustainability in the future. They may not be a future in terms of what we are seeing with regard to the pollution that we have with regard to the CO2 issues. So ATUM life, it will be like an enabler will help people adopt sustainable products. And if you take a look at Vnext, which is hardly 36 kgs of carbon emissions compared to 1 ton of carbon emissions in terms of concrete, almost 800 kgs in terms of plywood and 2 tons in terms of steel. So we will be pushing such eco-friendly options. We will be pushing Vnext solutions through ATUM Life. So this will become like a point of experience in terms of what all products we can explore and deploy in the market. So all in all, what we are trying to do is create interesting business models wherein we can push our back-end products of ATUM, Vnext sustainable clothing and so on and so forth. So that is really the intent with which we are working on. I gave you a brief idea of what we are looking at.

No. Fair enough, sir. And any capital allocation that we have in mind for your stores?

So to start with for all 3 businesses, we are looking at about INR 50 crores to start with and then able to see how the deployment initiatives, how aggressive we go in terms of deployment. So to start with that, we [indiscernible].

Okay. And sir, lastly, on the raw material side, so how are the current key raw materials like cement, fiber and pulp prices trending for us? And do we see any margin pressure going ahead?

So actually, that was what happened in Q1. We did see an increase in the cost across our various raw materials, and that has been factored in terms of the increases that we see already. Going forward, I think we should be finalized. I don't -- we are not expecting that there will be further increases in any of the things for now.

The next question is from the line of Kush Gangar from Care PMS.

If you can share what was the reason for Y-o-Y margins decline in fiber cement, please? Was it primarily due to rising raw material costs because some portion of operating leverage would also have played a part.

Yes. Yes. I think I already answered that question. Could you please [indiscernible]

Okay. And did we take any price hike during the quarter?

We did get about price hike overall in the first quarter, 5 to 8 [indiscernible] per annum.

Okay, okay. And if you can share some details of the channel inventory? I heard from someone that the current inventory is quite low due to strong demand witnessed during the quarter. So is it lower versus normal season? Or if you can share some color?

I'm not sure. Can you please repeat?

The stocks with dealers, are they lower versus normal season or -- I heard from someone that the stocks currently are quite low due to strong demand.

Yes, yes. I mean I think compared to last year, see, last year would be not a good comparison, unfortunately, because last year, it was in complete shutdown, and the offtake that we saw was [indiscernible] as well as the lockdowns were lifted. We are not seeing such a great situation this year in terms of the pent-up demand because the demand is normal. As the lockdowns were in Q pocket. But overall, I think definitely, there is a product reduction of stock overall. We're actually trying to push as much as we can to meet the market demand. So actually, we're eagerly waiting for the fourth plant also. In view of all this, we wish we had launched, commenced production way earlier than December. Yes.

Okay. So then the demand is quite strong. So do we expect that plan to reach 100% utilization when, in 6 months' time, 7 month's time...

I think, yes, the fourth plant, I think it is just -- we're just waiting every day for the plant to start production. I think within 6 months, that plant should be achieving full capacity for sure.

Sir. Okay. And considering rising steel prices, which is a competing product, so how do we price the product? So do we price this on our raw materials, or do we also have an element where steel price go up by 10%. We will increase our price by 5%. So how does the pricing play?

So actually, a very interesting question. So first off, as you know, it's completely dependent on market conditions in terms of how much we can push. But given the category that we are in and the market that we cater to, we are a poor man's product. I don't think we should forget that even if the increase between steel sheets has increased by 25%, 30%. We will try our best to ensure that we get the best pricing in terms of market demand. But keeping in view that it is a poor man's product. Ultimately, it is going to affect the demand if the prices go up to. So we will have to find an equilibrium as always.

Okay. And considering all the factors you mentioned with regards to the growth -- reason for growth in fiber cement sheet. Do we expect a sustainable period of growth, say, for the next 3, 5 years? Earlier what happened in the industry would grow for 1, 2 years, then they would not grow. So for the next 3, 5 years, do you expect a high single-digit type of growth in this industry?

In the roofing sheets?

Yes, roofing?

Yes, absolutely, yes. That is what we are looking at. Definitely. I think this year, 10% and definitely, we will be looking at a good period in terms of efficiency. In terms of Vnext also, we are looking at a good outlook. We are quite bullish about how that product has taken off. And the last 10 years I think is coming into picture now wherein random site visits that we do, we see our products being deployed and used. So definitely, we would be -- we are backing that and quite bullish about it. Yes.

The next question is from the line of Nimish Desai from Kitara Capital.

You mentioned that sheets are -- there's a difference between 20% steel sheets, but could you share some what is that ASP this quarter, or it's been last year for our sheets?

I didn't hear you the last part. I didn't hear you.

Could you throw some light on what are the average selling price of the sheets for maybe this quarter or maybe last full year?

So what we are seeing is in terms of the average, I think it will be tough to give you because the overall market will be there, but I'll give you a rough estimate. Like I said, we will be around 20% price gap between the steel sheets and [indiscernible]. I think the steel is trading around INR 500 per annum is what we are seeing today.

Okay. And do you also see competition coming from fiber roofing?

Fiber roofing, or you mean fiber sheets?

Fiber sheets, yes.

No, no, no. So the markets that we cater to, I think the guys who are shifting from cash group up to upgrade, so fiber sheets will not be our competitor. Actually, our main competition will be mainly with steel sheets. It was mainly with the galvanized steel sheets, the gray color steel sheets, which was disrupted because of the steel sheet pricing capability that they've had 4, 5 years ago that we are not seeing any more because of -- like I explained the utility point of view from the customer side. And also the steel sheet supplier side of the pricing has drastically increased. So that is where we stand.

Okay. And on our Vnext products, so I understand that we are substituting a lot of competition that is your plywood and [ BF ] But could you share that what is our price differentiation in terms of what gap we enjoyed regarding those products?

Unfortunately, we're selling at 50% of the cost of branded plywood today. So the scope is huge in terms of how best we can get the product established and get better pricing for sure.

And versus MDF, what is MDF?

So I'll give you an example. If Vnext boards are around INR 50, MDF will be around INR 60, INR 65, and plywood will be around INR 100. That is pretty much what we are looking at. And we are attacking the plywood side in every corner in terms of the drywall is concerned. We are attacking the gypsum board guys where they need impact-resistant boards because gypsum can't rate impact. And we are getting quite strong in the termite aspect in terms of the plywood again, in terms of fire. So all these advantages, people are noticing. And with the COVID migration that has happened, the labor migration that has happened, people are also paying attention to the labor costs that are going up in terms of labor requirements compared to traditional constructions, V-boards are much faster, much less people in manpower required to finish the job. So these are the advantages that are coming out in the open today in the trade to the consumer where people are appreciating the utility of the product. So that is the change that is happening right now.

[Operator Instructions] The next question is from the line of Shanti Patel from Shanti Patel Investment Advisors.

Sir, you replied to my first question, but I'm a little reserved in the sense that, in the current year, that is '21-'22, our production will go up, our sales will go up. Our margins will be maintained. Taking in to consider this and all this profit after tax has to go up. And if that goes up, our return on equity has to go up. So can you throw some light on that?

Hello.

Yes, yes.

So debt, we are, see, right now, we have got surplus on [indiscernible]. For all our capital requirements, we will not be losing any borrowings from outsides. So our equities, the equity will go up. The equity will not go up, but profit will go up. But around that...

So you say the equity is not going up, profit will go up so return on capital, return on equity has to go up as compared to the previous year.

May drive a little bit.

Am I right?

Yes, it can be 2%, 3% [indiscernible]

It has to be.

It will be. It will be for some. So 2%, 3%.

Approximately, how much it will go up?

See to calculate 110 crores now see, the equity means, again, you need to have a lot forgive in the reserves also. So INR 100 crores, if you take INR 110 crores. Our equity is almost 650 now. It will become 750 or something 110 by 750.

Yes, we would actually calculate it and get back to you on a note on this [indiscernible] and I are working on it rather than taking this on a call, right.