Apollo Pipes Ltd
NSE:APOLLOPIPE
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Apollo Pipes Ltd
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Ladies and gentlemen, good day, and welcome to Apollo Pipes Limited Q4 FY '22 Earnings Conference Call hosted by Yes Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Udit Gajiwala from Yes Securities. Thank you, and over to you, sir.
Yes. Thanks, Nirav. Good evening. And on behalf of Yes Securities Limited, I welcome you all on the Q4 FY '22 Earnings Call of Apollo Pipes Limited.
From management side, we have with us Mr. Sameer Gupta, Managing Director; Mr. Ajay Kumar Jain, Chief Financial Officer; and Mr. Anubhav Gupta, Group Chief Strategy Officer. We shall start the call with brief opening remarks from the management side and then open the call for the questions.
Over to you, Mr. Gupta.
Thank you. Good afternoon, everyone, and thank you for joining us on our Q4 and FY '22 earnings call to discuss the operating and financial performance. I hope you all had the opportunity to go through our results presentation, which provides details of our operational and financial performance for the fourth quarter and full year ended 31st March 2022.
To begin with, I'm pleased to unveil the performance, which has been outstanding compared to the CAGR of the industry in this segment. We have reported strong performance during the quarter with our sales volume growing by 26% Y-o-Y to 16,409 metric tons per annum. Healthy contribution from the HDPE, cPVC pipes and value-added product segments were the major drivers for the growth complemented by expanding product portfolio, increasing reach in newer geographies and incremental brownfield capacities. Over the next few quarters, we anticipate this sales performance trend to strengthen led by an improving demand environment, expansion in addressable markets and a sustained uptick in utilization levels.
Moving on to the operational front. The company did an annual CapEx of INR 42 crores towards announcement of capacities, debottlenecking and adding balancing equipments majorly in cPVC, HDPE pipes and fittings. The management continue to keep strong focus on value-added products on the building product side, which continue to gain traction. The impact of improved capacity in earlier quarter has a visible growth in sales of roto molded products. Going forward, we remain confident that this product, along with our other value-added offerings, like fittings, solvents cements, bath fittings, adhesives, taps, faucets, will enhance our reach and strengthen sales. Additionally, we are aiming towards optimally utilizing our capacity over the next coming years, which will also help augment the sales volume going ahead. On branding media campaign, Tiger Shroff, as a brand ambassador, continue to garner good response. And recently, we launched our TV commercial which will further strengthen our brand position in the market.
To conclude, I would like to state that we are continuously working towards enhancing our presence across existing and new potential geographies. As we further improve our operation capacity utilization of our Raipur plant, we are confident to open up the untapped market and high potential markets of Central and Eastern India, with the positive strength in industrial growth in the current year, '22/'23. Going forward, we expect to deliver a robust performance in the quarters to come and further gain momentum on the back of Make In India journey for improved profitability, strategic expansion in key geographical areas, better brand acceptance and recall.
Now I would like to invite Mr. Ajay Jain to run you through the key financial highlights of the quarter and period ending 31st March '22.
Good afternoon, everyone. I will briefly cover the financial performance during the quarter and full year ended 31st March 2022. The company delivered solid operational and financial performance during the quarter, driven by an uptick in demand and consumption in key domestic markets. Revenue from operations for the quarter stood at INR 247.5 crores as against INR 174.2 crores in Q4 FY '21 higher by 42%. And FY '22 revenue growth was even better at 51% Y-o-Y with revenues of INR 784.1 crores against INR 518.1 crores last year.
Sales volume for the quarter stood at 16,409 metric tons reporting a growth of 26% as against 12,987 metric tons. And FY '22 sales volume stood at 53,849 metric tons as against 47,333 metric tons, up by 14%. On the profitability front, EBITDA for the quarter improved by 5% Y-o-Y to INR 28.4 crores versus INR 27 crores in Q4 FY '21. EBITDA margin, which stood at 11.5% in Q4 FY '22, was lower by 406 bps Y-o-Y. EBITDA for FY '22 stood at INR 93.4 crores as against INR 74.3 crores, growing by 26% Y-o-Y with EBITDA margin at 11.9% for FY '22 versus 14.3% during corresponding period last year, lower by 242 bps Y-o-Y. Going forward, we anticipate EBITDA margin trends to sustain.
During the quarter, higher depreciation and financial costs impacted net profit. Depreciation costs stood at INR 7.1 crores in Q4 FY '22 as against INR 5.8 crores in FY '21, growing by 23%. Financial cost was higher by 95% during Q4. Net profit for the quarter stood at INR 15.6 crores declined by 6% Y-o-Y when compared to INR 16.6 crores in Q4 FY '21. Net profit for FY '22 grew by 12%, which stood at INR 49.8 crores as against INR 44.5 crores in FY '21.
Net margin during the year, a period stood at 6.3% as compared to 8.6% in FY '21 lower by 224 bps. On the balance sheet front, our net cash position stood healthy around INR 3.3 crores in FY '22. With healthy cash flow generation and improving capacity utilization levels, we are in the planning mode for our next phase of CapEx, which will be focused towards value-added products, witnessing strong demand trends. CapEx will be largely funded from internal cash flows.
On the working capital front, additional raw material requirements at newly commissioned capacities has moderately impacted inventory levels, though our endeavor remains on maintaining our overall working capital cycle at stable levels.
With this, I would now request the moderator to open the forum for any questions or suggestions that you may have. Thank you.
[Operator Instructions]
The first question is from the line of Ankit from Bamboo Capital.
So thanks for the opportunity and congratulations for a decent set of numbers, given the volatility seen in PVC prices and good growth in the volumes that we are seeing. If you can give us a broad breakup of the split of revenues in agri and building segments, so what has been the breakup of sales from agri segment and building segments for Q4 FY '22 and FY '22 full year? And the outlook for both the segments for next year as of -- as you are seeing currently?
This is Anubhav Gupta. So between the agri and building materials, if you see the mix, broadly, we closed FY '22 at 50-50, right, which was 40-60 in the beginning, and we improved it to 50-50 through all the quarters. And with cPVC and bathroom fittings and water tanks growing at a much faster pace versus the overall growth of the company. We see this mix will move towards 60-40 and 65-35 eventually. And plus also the push we will get from the media campaign, which we started, so that also will help us build our brand in the building material category at the accelerated pace. So we believe that we are on track to get to 65-35 kind of sales mix towards building material.
Outlook for both the segments. Building materials, we have been doing pretty well for past some time now. But agri last 2 years have been tough on the comps. So given the increase in prices of agri products, do you think the agri demand might also revive next year? And how has been the demand for the month of April and starting first week of May? If you can talk about on agri, particularly.
So see, it was a conscious call that we focused more on the building material in the last 2 years, okay? The portfolio, which we built, the distribution network, which we expanded, this was targeted towards -- higher sales, towards building material products, right? Agri as a conscious call because the margins were low and, of course, because of increasing PVC prices, the overall demand was slightly low versus what demand we were seeing in the building material products. So we were pretty slow on every site and also the collection receivables which are always a bit on the tricky side when you were doing government projects.
So I guess, I mean, as an overall broader strategy, I mean, we do believe that our brand has still a lot of scope to grow aggressively in the building material category. We have just started our ad campaign which is giving us very good pull for our products from our distributors, our channel partners. And all the new products which we have added in the last 2 to 3 years, whether it is cPVC, whether it is fittings, whether it is water tanks, whether it is bathroom fittings, I mean this will drive our building material sales in a significant way over the next 2 years.
And Agri, we have the capacity, right? Today, we have capacity of 125,000 tons, and we did around 53,000 tons in FY '22. So we still have a lot of capacity for agri pipes. If demand is good, we can always push our volume, but not at the cost of margin, number one; and number two is the extended working capital cycle.
Sure. But Q1 is the biggest season for agri. So how has been the demand on agri side during April?
Yes. So April has started on a good note because seasonally, it is the strongest quarter for agri. So we are on track to achieve our targets in the agri business, based on the Q1 seasonality. The trends have been good. I think for benefit of everyone, what I can tell you is that we are looking for 30% revenue CAGR for the next 3 years, right, right from FY '23 through FY '25. And obviously, the more incremental sales will come from the building material side. And if agri sector does well for us, we could grow beyond 30% also.
Sir. And then secondly, on the margin side, last 2, 3 quarters, we have seen that our margins have come in the range of around 11, 12, 12.5 percentage. And during the same time, we have also seen significant volatility on the PVC side. So if you have to look at it in a stable PVC price and normal, what kind of sustainable margins can we see in the company?
So if you see over last 4 years, which we are proud to say that we have increased our market share from 1% to 2.5% today, okay? We used to be at EBITDA per ton of INR 9,500, right? If you look at FY '18 numbers, we used to be at INR 9,500 per ton, at EBITDA level. FY '22, we closed at INR 17,500 per ton, okay? And even last year, FY '21, we were at around INR 15,000 per ton at EBITDA level. So you will see that we have significantly improved our EBITDA per ton, which I think should be the right metric in the industry to evaluate the margins because margins look deceptive because of the increase in the net selling price, which is due to the increase in the PVC resin prices, right? And it is all pass-through, right?
So what I would urge our investors, shareholders and analysts on The Street is that you should evaluate us at least or other, our peers also, on the EBITDA per ton level because it will give you the clear picture rather than on 11%, 12%. But that being said, I mean, overall, we still maintain that when we say 30% revenue CAGR over the next 3 years, so whatever number you would come at, we should be around 13%, 14% at EBITDA level. And at EBITDA per ton level, we should be at INR 20,000 per ton. So we are pretty much satisfied with our EBITDA per ton performance.
And the 30% revenue growth that you guys are targeting, will this be largely driven by volume or product mix also moving towards more cPVC and value added products?
It will be both because a lot of products we just added in the last 2 years, which have yet to scale up and all the incremental capacities, which will come in the company, that will be only towards value-added products. So our overall NSR because of the product mix improvement and the volume growth should move in tandem.
And what kind of volume growth are you looking over the next 3 years in some...?
Yes, I think it -- I mean it is -- I mean, if I break it up into my current portfolio and the new capacity, which will come up. So I guess, I mean, 15% to 20% minimum volume growth we are looking at and 10% should be the value growth, right? Irrespective of the increase in the resin prices. So our current business model does not factor in any sharp increase in the PVC resin prices.
And what will drive this 10% -- 10% to 12% -- 10% to 15% kind of realization improvement?
Because the products which are growing faster in the overall portfolio, they are anyways better realizable products, and they have better margins also. So like, for example, cPVC which is growing at a very high rate for us, bathroom fittings, water tanks, all these categories are growing above 70%, 80% for us.
And just last question on the cPVC resin availability. So we have been hearing that the last year has been tough in terms of procuring cPVC resin or resins, so how is the situation currently? And how are the players in this situation where the supply of cPVC is facing challenge?
Ankit, regarding the supplies of cPVC resin, it is -- right now, we have got contracts, long-term contracts some of the players, and we are very much in comfortable position in terms of supply of the product. We are getting regular supplies from our suppliers, and there is no such constraint at our end. Of course, there is some -- even challenges are there in the industry to procure. But as far as Apollo is concerned, we are very much comfortable -- very much in incomparable zone.
[Operator Instructions]
The next question is from line of Anika Mithun from Invest Research.
Am I audible?
Yes, go ahead, please.
Okay. Sir, my first question is, what's the portion of these fittings and cPVCs particularly in our revenue mix for financial year '22?
So if you see our fittings, the proportion will be around 15%.
Okay. And what about the -- this cPVC.
cPVC, again, will be of the same range.
15%, you are saying.
Yes.
Right. Okay. And sir, can you tell the demand outlook for the next year for that product, particularly the building side products.
Yes. So we are pretty much confident of healthy growth because like I said, that we are targeting 30% revenue growth, which will be constituting of 15% to 20% volume growth and rest value growth. So there are like 2, 3 factors, which I'd like to highlight. One is that our southern and western plants and even the new Raipur plant, which we started last year, so they are ramping up quite well. We are expanding into newer markets. We are adding new distributors, new channel points and even our retailer base is expanding.
Secondly, all the new products which we have added in the last 2 years, so their capacities are ramping up. For CPVC, for bathroom fittings, we may have to increase capacities because whatever we set up thinking our initial targets, we achieved those targets much in advance. So we may have to expand capacities there.
Third, like I said, our brand campaign, which started -- starting on a very good note. We're getting good response from our channel partners. There are -- there is good motivation level in our sales team and in our channel partners backed by this ad campaign which we started. So overall -- and housing demand, I mean, if you look at the other building material sectors, whatever companies have come up with the results so far and whatever commentary they have given, I think people are talking about like high single digit or low double-digit growth at industry level at every building material product category. So I think if we are able to achieve 10% growth in PVC space at the industry level, for us to grow at 30%, it shouldn't be a challenge, which we have demonstrated in the last 4 years already. So we believe that this growth momentum should sustain going forward.
And sir, my next question is what are the developments by our company towards this technology side for our product basket in future? Like, in the recent past also, we are doing innovative products. Is there anything going on towards this innovative side for future also?
So see, I mean, some of the addition keeps on happening. Okay, some ideas are already in our mind. But I guess for next 1 to 2 years, you will see -- what we will like to see is that the proportion -- the contribution from bath fittings from water tanks and from cPVC category, these should the ramp up significantly, and these products will contribute maximum to our incremental sales. Beyond that, our focus is to keep on adding new SKUs within these product categories, okay? And yes, very soon, I mean, we may come up with something more value-added products also, but let us talk about when there is right time about it.
Okay. Sir, actually, you mentioned that your EBITDA per ton will be somewhere around INR 20,000 in future. So is it -- you are talking about next year or next to next year, 2 to 3 years? Or this is the guidance on this day?
Yes. So I think when we are saying that 30% volume CAGR over the next 3 years and from 17,500 to 20,000 per ton, that's a 3-year journey we're talking about.
Okay. Okay. Means INR 20,000 EBITDA per ton is for the next 3 years, you are saying?
Yes, that's right. That's on a conservative approach. We are guiding this number to investors. And if demand is stronger than expected, if the brand pool, what we are expecting becomes better so we could do better than this. But this is, I mean, a minimum that we should achieve over the next 3 years.
The next question is from the line of Kaushal Shah from Dhanki Securities.
So I had a follow-up question to the previous participant. If I look at our historical -- we have kind of doubled our volumes in the last 5 years. And now we are talking about doubling our volumes more or less in the next 3 years. So just wanted to get some more color on that? Which are the segments that we are targeting? And also maybe some thoughts on the CapEx over the next 2 to 3 years, which may be required. I mean, we maybe being doing around 95,000 or maybe 100,000 tons of volume but what kind of CapEx will be needed to ramp up the capacity? So some thoughts on that.
So just one clarification that we have doubled our revenue, not the volume, right? And the guidance to more than double is also revenue in the next 3 years, not the volume, right? So 30% revenue CAGR we are talking about, right? So the drivers -- the key drivers for this aggressive growth are various, okay? So one is the product expansion what we have done in the last 2 years, right? So those products will ramp up. We see good demand for those products. We have already started marketing those products. The acceptance has been good from our clients, from our customers. And now as the production is ramping up, there is good volume that we are getting from these newer products, which we launched in the last 2 years.
Second, the distribution -- at the distribution side, the work our sales team has done is quite commendable, right? Today, we have 600, 700 direct channel partners and we are supplying our products to at least 25,000 retailers, okay? So the net addition, what we see over the next 2, 3 years is, again, 10%. Obviously, the gross addition will be higher, but then we also rationalize our existing partners. So the net addition will be 10% year-on-year over the next 3 years.
Then over the last 2, 3 years, below-the-line branding what we have done, right, whether it is towards in-shop branding, at the plumber side, what the influencers there, right, so that has given us a very good platform to now launch our above-the-line brand campaign. So we started in November through social media. We were waiting for that campaign to show us some ROI, right? After seeing that for the last 3, 4 months, only then we took a call now is the time to launch it on TV commercial, which is started on 2nd May, right? So the response we got on social media was quite commendable, right? And that gave us confidence that, yes, now we should move towards the TV campaign also, which is much expensive. So we were trying to test waters and the results were positive. And then we moved ahead and launched TV commercial. It's been only a week till today. But again, I mean, the response, whatever -- the sound, what we are hearing is very encouraging.
Then the capacity, which is lying with us at 125,000 tons, I mean, if you look at the overall utilization rate, it is still 45%. But assuming that one can achieve 75%, 80% capacity utilization levels in PVC pipe [indiscernible], et cetera, still, there is like good 50%, 60% volume jump, which would happen from the existing facilities, right? So that ramp up will start showing numbers in FY '23 onwards.
To the previous participant, we mentioned that our PVC supply has been at a very comfortable situation. Whatever happening at a global level due to the supply chain disruption, but we have ensured that our plants are always well stocked with the PVC resin so that we never see shortage of PVC resin to run our plants.
Then we are getting good leverage from the overall group branding, which is APL Apollo. So over there, also, the growth has been quite high. And we definitely get the leverage in the building material category when we talk about either steel tubes or PVC pipes. And we have been very, very categorically cautious on our quality standards. So today, our products are in line with the -- I mean, top 5 players, if you look at the quality standards, right? So all the repeat customers, either from the trade channel or from whatever little OEM business we do, the feedback on our quality has also been very good. And whatever new plants we have started, we have ramped up, we have ensured that we are achieving higher quality standards every time. And we have also -- lastly, I mean, before we move to the CapEx, the last point I would like highlight is the improvement in the serviceability to our clients what we have done over the last 1 to 2 years.
We have expanded our sales team in a big way who are servicing our distributors and we have improved our supply chain logistics also significantly. We have got new people, new talent in the operations also. So we are ensuring that the order fulfillment ratio has improved, the servicing to the customer -- secondary sales also, we are -- we have started doing a bit through our sales team. So all these factors have helped us to achieve whatever we have achieved in the last 2, 3 years, and we are confident that this will continue over the next few years.
Now coming to the CapEx. Like I said, today, we are at 45% utilization. So a lot of scope to improve levels, utilization levels from here. But if you see our last 3, 4 years of growth phase, we have always spent INR 40 crores, INR 50 crores of CapEx every year. We were at -- we were a INR 30 crore, INR 40 crore EBITDA company, now we are a INR 95 crore EBITDA company. So we are in a much comfortable situation to spend INR 40 crores, INR 50 crores on an annual basis, given that our operating cash flow to EBITDA is 60%, 65%. We will continue to spend this much of money to increase our capacity to do value addition capacity expansion and also try to innovate new products. So yes, I mean, going forward, INR 40 crores, INR 50 crores kind of EBITDA -- INR 40 crores, INR 50 crores kind of CapEx budget you can assume.
Just one follow-up to that. You spoke about 30% CAGR in revenues, that would mean roughly maybe INR 1,500 crore type of number or maybe even more than that...
Sir, sorry to interrupt you. Can I request you to speak louder, please?
Yes. So am I audible now?
Yes.
So I was saying that at this 30% CAGR, we will be roughly doubling our numbers in the next 3 years. That will also mean a decent requirement for working capital. So any thoughts on that where would we want to take the working capital days. Is there a chance that we could shrink the current numbers in the working capital?
Yes, definitely. I mean, if you see last year, we were at 55 days FY '21. FY '22, we closed at slightly higher, 60 days, but that is only because of a slight increase in the inventory levels. If you look at the collections and the creditors payables, I mean, they are pretty much in line. Inventory during end of financial year when we saw global supply chain getting disrupted due to Ukraine Russia war, so we were slightly cautious to stop some of the raw materials and not only PVC but the other chemicals, additives and other kind of raw material as well. So that's why it is looking slightly high on the higher side. But yes, I mean, if you see -- I mean, our target is to take our working capital cycle below 50 days, right? Once things improve globally and at the supply chain level, we target to finish our net WC at 50 days in FY '23 and then 45 days in FY '24.
Next question is from the line of Aman Agrawal from Equirus Securities.
Congratulations for good set of numbers. Sir, firstly, on the Chhattisgarh CapEx which was commissioned a few months ago, so how the traction we are witnessing for the central region from there? And actually, are we also catering the instant market from that front?
Yes. So Aman, I mean that CapEx was done keeping in mind 2 things. One was to penetrate in the agri belt of Central India, which was MP and Chhattisgarh and then to start selling in our Eastern markets towards building material side, right? So the total CapEx was completed in month of March, April last year. So it's been almost like 11, 12 months of operations we have seen. And we had targeted to ramp up this plant in the next 2 years. So the first 12 months performance has been as per expectations, right? And the results are encouraging. We have been able to add good distributors as well there, right? And with the help of our above-the-line campaign, media campaign, we are hopeful that even the year 2 operations should yield results as per the expected lines.
Sure, sir. Sure. And sir, secondly on CapEx that you have mentioned that we'll be going in for CapEx for value-added products. So would it be predominantly in the northern region? Or you'll be catering into multiple plants or what's the strategy over there for the upcoming year?
So the maximum expansion you may see in our north facility for the value-added products. But because value-added product, the logistics, the freight doesn't come into play significantly. So we will build the capacity at one place, but then it will feed the whole India, right? So one is there. And second that being said, we'll also add capacity in our southern plant in Bangalore for the value-added products. But yes, majority of capacity will come in North, but that will feed -- that plant will feed the whole of India.
Okay. Okay. And sir, for the CapEx related to pipes, will -- we won't be seeing any CapEx related to pipes for a few years -- I mean, for at least a couple of years until we ramp up the capacity utilization. You already mentioned that we are sitting at 45% and one can go up to 70%, 75% factoring in seasonality. So apart from the value-added products, would you be seeing the capacity addition for price anytime soon?
Yes. So I can assume that 80%, 90% of our money will go towards nonpipe capacity addition.
Sure. Sir, lastly, on PVC resin procurement, how is the issue going on right now for imports versus leasing it for PVC and cPVC. cPVC, I guess, would largely to be imported, but for PVC?
Yes, regarding the raw materials, yes, we are still on the same line, we are procuring almost 70% resin from imports and 30% from Indian sources. And of course, imports is always cheaper as compared to the local sources. So we are trying to maintain the same. Earlier, we were trying to increase the local buying. But we have changed the scenario. We are still on the same line of procuring from outside India.
[Operator Instructions] The next question is from the line of Bhargav Buddhadev from Kotak Asset Management.
Congrats on good performance. My first question is, will it is possible to highlight what could be the overlap in terms of distribution between your bath fitting business and our pipe business?
So the channel is same, Bhargav, almost same.
Okay. So it is almost same. Understood. Secondly, in the last 2 years, the credit payable days have been coming down. So I mean, it was earlier 60, 65 days, it has reduced about 30, 35 days. Now that the raw material situation is likely to improve going forward, do we expect trade payable days to again go back to historical levels? Or this is where it should be maintained normally?
So see, I mean, we have lowered our cycle, credit payables, from 34% to 26%, right? So I guess 26% to 30% should be the new normal going forward now that we are getting better terms as our scale is increasing, whether it is exports or domestic. And going forward, we are confident that it should remain between 25 to 30 days.
Okay. Lastly, in terms of working capital cycle, is the cycle significantly different between your south and non-south markets? I mean is there a way to sort of optimize the working capital cycle in south and hence improve your overall working capital days?
I mean, obviously, not being our stronger market, whether the terms we have with our distributors in the northern market. And second, since our mother plant is in north, so the inventory stocking, et cetera, also become more efficient in our north plant. So if you compare north versus south, yes, I mean, north should be slightly better. But I guess that should remain unless we make south as big as our north, which will take time.
And also, the brand pool, what we have in north, the market share, what we have in north, the domination what we have in north to have the same criteria in south, I mean, again, which would take time. So yes, I mean, overall, whatever numbers we are telling you they are on an overall basis. But yes, I mean, north is slightly better than south.
Sorry, one last question. You mentioned very aggressive revenue growth over the next 3 years. And I would presume that would be primarily from your building material side. So any color in terms of how has been the channel addition in terms of non-agri distributor? Has it been increasing significantly as compared to your agri distributor?
Yes. So if you see -- I mean, our net addition, what we're targeting is 10% on a base of 600 distributors today and 25,000 retailers today, right? Going forward, again, majority of this will be towards building material side. And given the products what we have, I mean, the question which you asked the bathroom fittings, the channel, right, for the water tanks for bath fittings for cPVC, for fitting solutions. So these are our revenue drivers, Bhargav, for next few years. And the channel for all these products are same, which is -- which has been our strategy there to create a platform, such a strong platform, of distribution and marketing, right, and then to keep on adding newer products and route it for the same channel to increase our sales and get the higher wallet share from our customers, right?
So I think that strategy has played out well, and we do expect that it will continue to do so. And agree, like I said, I mean, we have the capacity, right? We have the platform. We have the network also. Whenever we feel comfortable to push our sales down that channel, we will do. And whenever we think that margins are under pressure or the collection days are under pressure, we may go slow there. So this 30% revenue growth is based on, I would say, mild growth in the Agri and good growth in the building material side.
[Operator Instructions]
The next question is from the line of [ Uday Chauhan from Rising Prices. ]
Yes. Is it audible?
Yes, sir.
So congratulations on the good set of numbers. So I have like a couple of questions. Like, management has mentioned about the growth journey of 30% CAGR for the next 3 years. But like what kind of ROCE targets we are looking to end up at the 3-year journey? Currently, we are sitting at around 16% as of FY '22?
Right. So see, I mean, if you see the ROCE, at reported -- on a reported basis, it appears at 16.5%. But if you look at our business ROCE, okay, which is -- I mean, core business ROCE, if you just add debt and equity, so our ROCE jumps to 20%, right? I mean, again, the other way to look is, today, our gross book is around INR 350 crores and our working capital is INR 150 crores. So the total capital employed is around -- below INR 500 crores. And on this, we have generated almost INR 100 crore EBITDA and if you deduct INR 15 crore, INR 20 crore depreciation, that's the ROCE, right? But then we are already -- we have already increased our capacity in a significant way, right?
Today, we are at 45%, 50% utilization level. That's why this appears low. And when we are saying that we may add INR 40 crores, INR 50 crores of new capacity every year, and that will be towards value-added products, so the EBITDA margin -- the EBITDA per ton, which we are mentioning that also will go up. So I guess -- I mean, our plan is, by FY '25, when we have -- when we would have achieved 30% CAGR in revenue and EBITDA of INR 20,000 per ton, we should be at least having 30% ROCE minimum.
And in our business model, our business model is showing that kind of ROCE. It is just that optically, it doesn't appear, but the business is strong enough to generate 30% ROCE. And over the next 1, 2, 3 years, we will see gradual jump, which will give more confidence to the investors and analysts that yes, we are capable of generating 30% ROCE at consistent levels.
And the second question is on the marketing expense. So now we have like -- so on the -- like, we watched a very good response on the social media campaigning. Now we moved to the TV channel. So what kind of marketing expense we can see on the recurring basis as percentage of revenue? Any targets which we have kept to become more like a national kind of capturing national eyeballs on continuous basis?
So yes, I mean, if you see, we started this campaign in FY '22, hiring of the brand ambassador and then making the advertisement and then running it on social media. So that all happened in FY '22. And the ad spends were around 1.5% of the revenue, right? Before that, it used to be around 1%. This year, FY '23, we have launched a TV campaign. Maybe we'll have 2 campaigns in these 12 months. So again, we are thinking of not going beyond 2% of the revenue, right?
So again, we have been like very, very efficient in using the ad budget, right, from 1% in FY '21 to 2% in FY '23 as a percentage of revenue. And within these 2 years, I mean, appointing a brand ambassador of A scale Bollywood celebrity than going social media, then going on TV campaign and then all the outdoor hoarding media, whatever we are doing, so I guess this does demonstrate the use of budgets in an efficient manner. And of course, the increase in revenue has helped as well, right? I mean, doing at INR 500 crores, 1% and doing at INR 1,200 crores at 2%. So increase in revenue has also helped us to keep this number at a very minimal level. So I guess, I mean, whatever we do, it shouldn't move beyond 2% as a percentage of revenue in FY '23. So that's why we are confident of healthy margin improvement.
And the last thing on the sales team side, we have highlighted there strongly on new person were hired, and we have been extending the distribution and dealer network. So we are currently around 450-odd dealer network. So how much we are looking to add going ahead in the next 3 years to achieve the revenue growth of 30% on each year?
So if you look at our sales force, I mean, we used to be like 100 kind of sales force till last year and then -- last year as in FY '21. And then in FY '22, we increased this number to 150, right? And the revenue growth targets that we have, I think, with 200 sales -- a team of 200 salespeople, we should have enough people on ground to give us this kind of growth targets.
And on the dealer addition side how much we are planning to add incrementally or on a year-over-year basis or any long-term target from 450 to...?
Yes. So we are at 600 today, the direct channel partners, not at 450. We're at 600 and 25 retailers, right? So the net addition will be 10% year-on-year.
Next question is from line from Jigar Shah from Baroda BNP Paribas.
What would be our nonpipe revenue for the year FY '22? And what would be the target going forward?
So I think nonpipe, you will want to include the fittings and tanks, right?
Yes.
Yes. So I think put together, that should be around 18%, 19%, Jigar.
18%, 19%. So fittings would be around 15%, right?
Yes, that's right 15% fitting and 4%, 5% of the products, yes.
And this 15% to 20% volume guidance is including fitting or nonfittings?
No. So I mean we're talking at company level, right? So I mean -- see, I mean, if you have to break it up into sales volume and value, that's how it will become 20% volume and 10% value, right? But if we see quick ramp up in our value-added products, so probably the volume growth could be less, but the value growth would be higher, right? So I think that we'll see how our products are behaving in which category and which market. But yes, I mean, as a thumb rule, you can take 20% volume growth and 10% value growth. I mean this doesn't ...
I'm wondering because your volume growth and value growth is quite high, so I just wanted to know what is the nonpipe revenue so that how would you achieve 30% revenue?
See the last year figure. Actually, we have very much aggressive on the value-added products, and we have received very good response from these products and the volume growth in these products is almost 50% to 60%. So that's why you are seeing a value growth much higher as compared to the volume growth.
So value-added products would be how much, Sameer?
Value-added products including pipes should be roughly around 50% to 55%. If we exclude the pipes, it is again back to 20% to 25% of the total revenue.
So Jigar, it's same, no, that -- I mean, the building material products, which are value-added products, so that is 50%, right? And agri is like nonvalue-added. So more or less, the maths remain same.
So HDPE won't be value-added, right? HDPE would still have lower margin?
Because the margins are very much normal in that. Of course, the revenue is because of the Jal Jeevan Mission. We have received good response from this product. But the -- but I think that you cannot count it as value-added. It is much more an institutional product, government supply product.
And just to give more clarification, Jigar, I mean the value-added products are the fittings, right, cPVC, bath fittings and tanks, right? So fittings, we have seen 40%, 50% growth, right, in terms of revenue. Bath fittings, of course, they started last year, so growth has been very high. Tanks also have grown at very high pace because of obviously the low base. And similarly, cPVC, that also is growing at almost 89% for us, right? And these are the areas where we want to expand capacities now, right? So that's why we are focusing more on the overall revenue growth rather than giving you a volume growth target. And like I said, if the ramp up is better than expected at revenue level, we could be higher than 30% also.
Understood. And my second question would be on your margin impact during the year. If you are marketing spends and brand campaigning is there, so will there be any impact on that?
Yes, not really because, I mean -- even see last year also, if you see our brand spend increased from -- below 1% to 1.5%, but our EBITDA per ton improved from INR 15,000 to INR 17,000, right? And this is without any inventory gains. I mean, I'm saying this on record. This EBITDA per ton does not contain any inventory gain or loss, okay? So again, we have demonstrated that improving our ad spend -- increasing our ad expense shouldn't impact our EBITDA on an absolute basis or per ton basis. And going forward also, we are factoring in 50 bps increasing in the ad spend at 2% of revenue. We're confident that the FY '23 EBITDA per ton should be higher than FY '22.
[Operator Instructions]
The next question is from the line of Aditi Kasbekar, an individual investor.
Am I audible?
Yes, ma'am, you are.
Actually, my question was just to clear a little bit of confusion around what is the value-added part of the business. And how do you split it between fittings, tanks and cPVC pipes? So I'm sorry, this is being a little repetitive. But the way I understand it is 15% is fitting, 4%, 5% is tanks and another 15% is cPVC pipe. Is it?
And plus -- yes, broadly, you're right. And plus in uPVC pipes that divided into agri and building materials. So building material is value-added.
Okay. And how does that then relate to our EBITDA per ton? Because typically, I mean, from the looks of it, at least, the value-added component is high enough. So does that still mean, I mean, INR 17,000 per ton of a little low in that case, isn't it? I mean, am I missing something? I just wanted to sort of clarify my doubts here.
Yes. So EBITDA per ton varies from -- I mean, INR 11,000, INR 12,000 ton to INR 25,000 per ton.
That's correct. That's correct. So then what we are effectively saying is that as the share of our fittings and tanks goes up, we will have a better EBITDA per ton, is it? Because what you're effectively saying is that entire pipes you're putting under one category and is driving between building and agri. Is it?
Yes. So pipes is in 2 categories, which is agri and building materials, right? HDPE is all agricultural, then fittings, bath fittings, tanks, they are all building material.
Next question is from the line of Varun Jain from Edelweiss Financial Service.
I just wanted to ask -- first of all, am I audible?
Yes, go ahead.
Just wanted to ask the CapEx number, which you have guided. In this, what is the proportion of maintenance CapEx? And what is the growth CapEx? And what will be this proportion going forward also?
Maintenance will be 20%, 25% and 75% will be growth CapEx.
[Operator Instructions]
The next question is from line of Manish Mahawar from Antique Stockbroking.
Just first question is in terms of the geographical mix,, can you share the north, east, west, south mix -- revenue mix in FY '22?
So Manish, north will be 60%, 70% and rest will be divided among the equal zones, okay.
And can it possible to share basically how the growth in -- basically, in west -- can you be specific in terms of our -- north I know they are larger, right? So wanted to understand the overall growth if you look at -- so can you break it up how the north has grown and the rest of the geographies has grown in the FY '22?
So if you see, I mean, we have grown at 50%, right, at company level. So north will be like 20%, 30% -- 30%, 35% north and the other states -- because south, we got the plant 18 months ago. So in east, we started the production 12 months ago. And Ahmedabad also, the West zone also, started contributing in a big way in the last 12 months. So I guess, I mean, all the 3 zones, which are relatively new. So they are growing much faster, right, like maybe 100%, some of the markets. And north with higher base should be 30%, 35%.
Okay. And in terms of a dealer or retailer, right, is the ratio will remain same as a revenue?
That's right.
Okay. And in terms of -- particularly for this quarter, other expenditure is quite high. So what was the -- is there any one-off or any other items which is lying to the other expenditure and stealing the quarter?
Can you please repeat?
If you look at the fourth quarter other expenditure, right, it is quite high, it's around INR 25-odd crores versus last year, almost INR 12 crores, INR 13 crores. But is there any one-off item or any incremental item lying into the number?
So there are 2 things. One is the ad spend and second is because of the increase in the freight and other expenses.
Okay. And last question, in terms of basically overall volumes, if you look for the year, right, because we are now -- we have grown broadly on 14%, 15%. Can you highlight what is the agri business growth and the non-agri growth in terms of volume?
So Agri would have been like below 5%, right? And whatever growth you are seeing is from building material.
Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.
Yes. Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any clarifications or would like to know more about the company, please feel free to contact our team. Thank you once again for taking the time to join us on this call.
Thank you very much. On behalf of Yes Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.