Astral Ltd
NSE:ASTRAL
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 713.3118
2 417.75
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Astral Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Astral Limited Q1 FY '23 Earnings Conference Call hosted by Ambit Capital Private limited.
[Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Mr. Dhruv Jain from Ambit Capital. Thank you, and over to you, Mr. Jain.
Thank you. Hello, everyone. Welcome to Astral Limited 1Q FY '23 Earnings Call. From the company side today, we have with us Mr. Sandeep Engineer, MD and Chairman; Mr. Hiranand Savlani, CFO of the company; and Mr. Kairav Engineer, VP, Business Development. Thank you, and over to you, sir, for your opening remarks.
Thank you, and thank you, everyone, for joining the earnings call of Q1 FY '23. As you are all aware, the market situation was very volatile and particularly the polymer pricing situation is -- was very challenging and was rapidly dropping, which was expected the way it has gone up, and it is on a correction mode. Same was in the case of the demand, whenever there is a falling price of polymer, a dealer and a distributor want to keep low inventories. If they get a sense of price going up, the inventory and the stock will go up and the demand accordingly it'll be going up in the market.
Due to the month-on-month demand scenario is getting very difficult and very unrealistic to predict. But under such situation, we have -- we inform all of you the Astral team has done a great job. We have a good performance of both these segments. That is plumbing and adhesive and paint.
Some pressure was on the margin, and that was mainly because of the inventory loss, which Hiranand bhai will explain in detail during his initial remarks. Now let me go through the progress of expansion activities and where exactly we are in the new business. Expansion work at East is almost complete, and we have already started rolling out the product central water tank, SWR and PVC pipes. We are under the process of approvals of ISI for the rest of the products. And as soon as we get this approval in the near future, other product lines would also start production and would be rolled out in the market from the East client.
Our adhesive state of our plant at Dahej is in full swing. The work of Adhesives state-of-art plant in Dahej is in full swing, and we are expecting to complete the sale in Q3. And we'll be doing trial production in Q4, and in that early next fiscal we'll be in complete production. One project is progressing well, we have already rolled out a few products in the market and few are still under trial. Most are getting modified, and we are expecting to complete the sale in the Q3.
In the faucet and ceramic ware business. Especially in the faucet, we have just and recently acquired a ready-to-use asset at Jamnagar, for which -- from where we were getting the supply of our faucet on outsourced basis. The production at that facility under Astral brand has already started. And now, Astral can finally say that our faucets are and will be manufactured in-house from the plant at Jamnagar and very few product lines will be outsourced in the faucet business.
Our first display gallery showroom of Faucets & Sanitaryware is already started in Ahmedabad, where we have displayed the complete range of products of the newly-developed designs of faucets. You are all welcome to visit the same at your convenience.
Company has already started the process of appointing distributors and dealers for Faucet & Sanitaryware. We are expecting the sales to pick up from Q3 onwards. During Q2, we will -- we are expecting some sales as we are still in the process of completing the complete range and putting the appropriate inventories at our warehouse.
Paint has just -- we have just completed the legal documentation and transfer the funds in the paint business. We are in the process of filing the application for the matter of operating business of Gem Paints with NCLT. We recently completed a plant visit of the paint factory by many fund managers and analysts at Bangalore. We hope you must have liked the state-of-art newly built up plant, which can do 4x turnover without doing any further CapEx.
Gem Paints has also delivered good numbers in Q1. We are integrating the business with Astral, and in the next couple of quarters, we will come up with a plan of opening Gem Paints products in many states of India. Our U.K. operations are giving good growth, and are unable to fulfill the demand of some of its products. We are working on some CapEx allocation at the plant, and shortly, we will work out the same and communicate to you. Post the expansion, we are expecting a very good growth in the business in the U.K. and U.S. operations.
Overall, excess volatility due to the polymer and the chemical prices, we see a good progress in our existing business as well as the new businesses which we are in. We are confident that we will be giving -- we will be doing good in the coming times and equally improving upon the other performances.
I now hand over to Mr. Hiranand Savlani to take you through the financials, and then we'll open the floor for question and answers.
Thank you, everyone, for joining this earnings call of Q1.
As Sandeep has rightly said that this quarter was full of challenges. In spite of difficult circumstances, we have delivered one of the best growth during the quarter on a consolidated basis. As we have repeatedly communicated that we always believe in consistency of performance, and we have continued the same during this quarter also.
The numbers are in front of you, and you can see that in both plumbing as well as adhesives, we have delivered 73% and 35%, respectively, in top line and EBITDA growth was 40% in pipe and 43% in adhesives. I would not counted in this number the paint business. Pipe has delivered a 48% volume growth, but sizable volume growth was mainly because of the low base of last year Q1.
The margins were under pressure in pipe division mainly due to inventory loss. It is difficult to arrive the exact loss figure, but we can approximately say it should be somewhere around INR 25 crore kind of loss. Also a few expenses like employee cost and the launch cost of our new products such as Faucet & Sanitaryware. And the big party in Goa for the launch of this product has been completed in the Q1, so that has also given us some pressure on the EBITDA margin.
At the PAT level, some pressure was mainly because of the ForEx loss of INR 11.7 crores in the Q1. And also, close to about INR 7 crores of extra amortization of expenditure, which is falling under the depreciation because of the -- you can say consolidation of paint business. So these were the 2 -- one of the things, INR 11.7 crores was ForEx loss and INR 7 crores was depreciation, extra amortization.
The ForEx loss was mainly because we are completely dependent on -- 100% dependent, you can say, on the CPVC for import. And CPVC volumes were continuously going up, so we were sitting on a reasonably good inventory also. And normally, we get some credit terms 90 days from our suppliers, so because of that, we have to incur the losses into the ForEx side, and the rupee was highly volatile during Q1.
Margin in adhesive business were also under pressure due to high chemical price, but we can say it has improved sizably in Q4 -- compared to Q4, I can say. The last year Q4, EBITDA margin was 11% in adhesives and cement business, and this quarter is 13.6%, so close about 260 bps improvement into the adhesives business. But still, it is lower than our expected range of 15%.
In adhesive, chemical prices have started falling from June onward, but still we are having some inventory, which is -- are of the high cost, so this pressure will be still there in Q2 also. Similarly, in Pipe also, PVC raw material prices have fallen sharply not only in Q1, but it has continued in the Q2 also. However, our key raw material CPVC prices are stable, so that will give us the support in terms of margin and the realization. But definitely, some pressure will be there because of the sharp fall in the PVC price.
From this quarter onwards, we have now defined 2 business verticals. One is the plumbing, which will cover pipe, paint, faucet, sanitaryware. And second vertical will be paint and adhesive, which will cover our Gem Paints, Resinova, and our U.K. subsidiary, Seal IT. Now onward, we will be giving result under these 2 verticals.
We have started consolidation of paint business from this quarter Q1 onward, as Astral has already taken a control on the Gem's Board.
From our press release graphs, you can very well see the performance of our company on a CAGR basis, because that's very important for any company to assess the performance. Of the last 4 years, if you can see the CAGR growth, you can come to know how -- a better way we are growing, the company, compared to that even pre-COVID levels also.
Q2 will be challenging. Mainly, I said that because of the pressure on the price. And secondly, because of continuous falling, the price of raw material for dealer and distributor communities are sitting with a very lean inventory. So we are waiting that once the prices will settle down, I think the demand should start picking up because these are the very, very good available price for the market. Even today, also the PVC price has fallen a couple of rupees.
As on 30th June, company is sitting with INR 542 crores of cash. Out of this INR 542 crores, I think INR 200 crores related to the Gems, which is under the arrangement with the company. We have parked in the OCD, so that's why it is falling under the cash and bank balance. But otherwise, if we have to remove this, you can say the INR 194 crores, so then INR 350 crores kind of cash is there with the company.
To sum up this, I think a few of the one-off items, which I already said, that is a ForEx loss of INR 11.7 crores, write-off of amortization of INR 7 crore, new product launch and the employee cost increase in the sanitaryware and the faucet to the tune of INR 5 crores and the inventory losses of INR 35 crores. These are the -- so all put together, will be close to about INR 48 crore kind of one-off, the costs that were there in this quarter.
With this, I want to conclude my initial remarks, and we are opening up the floor for the Q&A session. Thank you very much.
Thank you very much. We'll now begin the question-and-answer session. [Operator Instructions]
The first question is from the line of Venkatesh from Axis Capital.
Yes. The first question is more like a data question. Given your press release...
Venkatesh, I'd request you to speak louder, please? The line for the participant cut. We move to the next participant. Next question is from the line of Rajesh Kumar Ravi from HDFC Securities.
Congrats on a good set of numbers in this environment. First, some housekeeping numbers. What is your pipes capacity at end of Q1?
The pipe capacity is 2,74,822 for last year. And this quarter is close to about 8,000 -- 2,82,338 metric tons.
2,82,000?
338.
338. This is end of Q1?
End of Q1.
Okay. And where will this capacity be by end of this financial year?
We -- it's not clear yet. So still some capacity will be added in the East also, which will be close to about -- you can say another 10,000 metric ton will be there.
Okay. And for the paint business, could you share the Q4, what sort of revenue they generated? And I understand this was not part of your data, just for a like-to-like understanding? And what is the EBITDA contribution from the paint business?
So like paint business last year, Q4, I don't have an exact number, but I think it was close to about INR 50 crores top line and close to about 14.5% kind of EBITDA. But exact number, you can call me separately. I can give you. I don't have it handy for the last year. But this year, I think we've already given in the press release.
Sure, yes. And what is the margin in Q1 for the paint business?
It is 15%.
15%. Okay. And sir, what sort of inventory losses did you incur? Because the margin fall has been quite heartening in terms of you have maintained your margins very well. So in the -- despite regional prices taking a sharp dip. So what sort of inventory losses you have seen in Q1? And what is your expectations in Q2?
So it's very difficult to exactly work out, but we have worked out tentatively, which is close to about INR 35 crore kind of level.
Okay, in Q1.
Q2 will also be there. So now, we have to see how it is going to work out because CPVC, still it is stable. But PVC it's further dropping. Today also, it is couple of rupees drop is done by the Reliance. So we have to see how it is going to settle down. Everyone was expecting that it is going to be bottom out, but still it is going down. So I think it is very difficult for us to predict what will be the inventory losses for Q2. But definitely, it will be there. We cannot say that it will not be there.
So coming to the next question, see, given that CPVC, PVC trend set is now again widening. Do you see any risk on the CPVC demand, which -- given the sharp differential?
I don't think anywhere in the past also, there is a much change into that because of the pricing. Maybe a little bit here and there will be there, but it's not, because application is different. CPVC is mainly into the hot water application. It may not be a big picture. We don't know yet.
And if you could give broad -- what -- on resin basis, what would be your revenue mix currently like in Q1 broadly, or FY '22 full year, resin business mix?
Resin mix?
PVC, CPVC breakup, revenue breakup.
We can't share this breakup.
Broadly, like 60%, 40% or 40% would be CPVC?
We don't share this breakup.
[Operator Instructions] The next question is from the line of Praveen Sahay from Edelweiss Wealth Management.
Congratulations for a good set of numbers in challenging times. The first question is related to volume. As you also said that the 4-year CAGR or even 3 years CAGR. If I look at the volume, has a very good growth as compared of degrowth for the year. So is it because of you don't have an agri contribution, or because of something else also? Can you elaborate more on that?
I think mainly because of the mix -- CPVC mix has improved. So because of that, the margin is better. But otherwise, Agri, as such, you know that we are having very low pressure compared to the other players in the market. So our more focus is on the CPVC side of the business and the plumbing side of the PVC business.
So volume growth is largely because of a plumbing -- 5 days to the last year? We don't have...
We are predominantly a plumbing company. We are predominantly a plumbing company. So naturally, the growth from the plumbing side will be more only.
Okay. The next question is related to your expenses prices. So if -- already you have said that the next quarter also, we will see some kind of inventory losses. But the other elements like the launch costs, employee costs, which has increased and impacted our numbers, that will continue as well. So we will see the similar kind of a margin in the coming quarters as well?
So you rightly said that I have already quantified also this number in my initial remark. But some pressure will be there because you know, any new product launch, initially, they take your investment or you can say cost. So right now, Sanitaryware and Faucet, revenue was 0 in last quarter and this quarter, there also will be a very small contribution, but costs will be there.
So maybe Q3 onwards, we are expecting that the revenue flow will start, and maybe it will start picking up in maybe 18 months or maybe 24 months down the line. So until that time, some pressure will be there. But one thing is good that once you reach at a certain level, then it will sharply move. So we hope to see how much time it is taking. Whether it is taking 15 months, 18 months or 2 years, we don't know as of today. But we are expecting good response because the way we are seeing in our launch party and subsequently after launch of our display gallery, the product range and all this thing the dealer community has seen, distributor community, they are appreciating, so the expectations are very high.
But again, I'm repeating that still, product is not there in the market, that it's too early to comment on that. So let's wait for some more time. But yes, definitely, some pressure will come on the margin because of these new products also.
At least, we are working out in our budgets that we take care of the costs, which are coming on this division and the overhead. And in 1 or 2 quarters, at least, we -- at least breakeven. So there is no other allocation of extra cost on the other divisions, one.
Second, we are not in a model of 100% outsourcing. The costly part of the business is the process, and Astral is going ahead with its own faucet production facility. So that makes a great difference in margins. Products designed, delivery of a good product to the market and as well as improve on many, many aspects of service to the industry.
Next question is from the line of Venkatesh from Axis Capital.
Sorry, I got disconnected earlier. And I'm sorry if I'm repeating your question, but is it possible to share the EBITDA of paints in the current quarter?
I think we already given a number of 15%. I think you missed that.
Yes. And you also gave the number for the fourth quarter of last year, the EBITDA. How much was that, sir?
Around 14.5%, but we don't have an exact quarterly number because that company was not maintaining the quarterly record. But tentatively, I'm telling you it was 14.5% kind of level. So more or less, you can estimate the EBITDA development.
Okay. So last year, fourth quarter, the margin was almost 28%, you mean?
28%, what?
Because you said last year fourth quarter, I think you did INR 50 crores of revenues. So INR 14.5 crores is almost like 28%.
14.5%. So 14.5% is close to about INR 7 crores, kind of revenue.
14.5%, okay. Okay. Understood, understood. Now one slightly -- I don't know how you want to answer this question. This is a question which most of the investors in your company have been asking us time and time again over the last 2 to 3 months.
Which is basically, if you actually look at pre-COVID, pre-COVID, that EBITDA per kg that you were making on paints was close to INR 28 per kg. Now, over the last 2 years, this EBITDA per kg went up to almost INR 38 in FY '21. It went up to INR 42 per kg in FY '22. Now this has come down in the current quarter close to INR 36 per kg. But as you said, there is like around INR 25 crores of inventory losses. So if I adjust for that, it is, again, INR 43 per kg. But let's assume, hypothetically, you have one more quarter of losses, inventory losses. But beyond that, PVC prices actually stabilized.
Now, beyond that, do you think you can maintain these INR 40 plus kg in the pipes on the price side? Or is it like we can -- actually over the medium term? Let's say, 2 to 3 years, revert back to the INR 30 per kg? And if we don't revert, why exactly has this increase happened? So is there any structural reason why this increase has happened?
I think there are multiple reasons behind that. One is the decentralization of the plant, that's why our EBITDA has improved. Secondly, the product mix has changed because we are focusing more on the CPVC side, so that has also contributed. Third thing, we are continuously adding the value-added products like valves and other things are also there in the system, so that is also helping. So I think multiple reasons are there because of direct EBITDA per kg has gone up.
But it is very, very difficult to say how the situation will be there going forward. Because in this typical environment, which Sandeep bhai also say in his initial remarks, that is a very, very highly volatile atmosphere in there. In that atmosphere, it is very difficult to predict anything for next month, forget about one year down the line or 6 months down the line. So in that environment, I think it is too early for us to say that where ultimately it is going to stabilize.
But definitely, it will not go back to the earlier days. It will be better only. But how much better will be there, I think that time will only answer to all these things. But I think there are multiple reasons where we are improving ourselves, and that is why EBITDA per kg you are seeing, it has improved a lot.
All our new launches, especially the Sylo and HDPEPro plus -- all have started giving good growth and pickups, so there are multiple reasons that Mr. Savlani said. And at the same time, lot of other activities which have been done at the market level are also in a positive growths.
Okay. Now there is this other thing. Every quarter, you share a sales number which is in terms of the volumes, which, in the current quarter, around 36,578 metric tons. Now earlier, this used to be only pipe volumes. But now incrementally, like, for example, in this quarter, does this also include the volumes for water tanks and valves?
Yes. Because valve, we don't have a much volume, it is more of value. It doesn't contribute the volume much. And yes, water tank is there. There also, volume will be very low, value will be very high. So that -- very negligible will be there. But it is too -- definitely, it is included in everything there.
Next question is from the line of Sonali from Jefferies India.
So my first question is regarding -- could you help us understand what is the PVC trend? What has it been since first of July, and how much is the collection broadly?
I think trend is not great. It is continuously falling, and I said in my initial remarks also that today also, Reliance had dropped a couple of rupees. So it is very, very difficult to predict what will be there. There are still room for the -- a little bit further drop also, so we cannot rule out that possibilities also.
But somewhere, I think it will try to settle down, but still some bottom is there, so very, very difficult. Whether it will settle down around INR 85, whether it will settle down at INR 90 or INR 80. But it looks very difficult that it will go back to the previous rate of INR 70, INR 75. But it is very, very difficult to predict because internationally, every day, some news is coming.
So based on that, 3x is there in the system. But at the same time, we have to also see that our currency is also depreciated, so that is also there. So very, very difficult, Sonali, to predict that trend. So we have to keep fingers crossed that it settled down somewhere.
Because ultimately, if it is not going to settle down, it's going to hurt the demand because dealer and distributor community normally will shy away when there is a continuous fall in price, and same thing with the builders also. So somewhere it will settle down, whether it is like INR 80, INR 85, INR 75, it's okay. But it should settle down, then only the demand will pick up very fast. Because now, the rates are very attractive, so it makes sense to grow volume very fast. But because of this reason only, still, still the demand scenario is still not that great, I can say.
Right. Sir, what was the price on first of July and what it is right now?
I don't have a handy number. Sonali, you can call me post this con call, I can check my number and we'll come back to you.
And what is the trend in CPVC, has it also been on the correcting trend?
Not much. CPVC still a stable polymer, and supply is the constraint. And secondly, anti-dumping duty is also there. So because of that, it may go down, we cannot rule out that possibility also, a little bit, but very limited room is there because that has not gone up also. So because of the anti-dumping duty, that protection is there. No anti-dumping duty, it is -- even if it is internationally go down, India will not be having the effect on that side. So that is how that product is protected.
Right. Sir, my second question is regarding the distribution and the ad spend. Now we have added many more categories, so how do you envisage your distribution, in the sense, do you foresee some overlap with the present distribution? Or would you have to rule out new dealerships altogether for your emerging categories? And also, the ad spend currently versus what do you target, factoring that these new products will be scaled up materially over the next 3, 4 years?
So ad spend right now are stable in the same range what we were spending. We have been spending since the past few years. And we are not really planning to do much ad spend on the newer categories before we set up our distribution channels and before the product moves to the market. So once everything is set and once we have a certain scale of business in the newer categories, we will think about doing some brand building activities for the same.
But overall, whatever the spend is, it will remain within what we have been spending, so no incremental spend. Maybe we might reduce the spend on an existing category and allocate to a newer category. But on a whole, I don't think we'll be spending extra on the newer categories.
And as far as the network goes, it's in the process in the sanitaryware business. A lot of our general partners are selling these products, so we will try to utilize our current network. And wherever we don't have our current distributor selling this product or if he is not interested, we will set up a new network also. So the sanitaryware and faucet business is going to be a combination of the existing network. And in certain faucets, we will be adding new dealers and distributors as well.
And as far as the paints business goes, we will be following the same concept. Wherever our adhesive distributors and dealers are selling paints and there -- they want to sell Astral paints, we will be opening those up. And wherever we don't have reach, we will be appointing newer dealers.
I understand. Sir, my last question from my side, the CapEx guidance for FY '23 and '24, if you have? And also, sorry, I joined the call a bit late, so if Hiranand, sir, could repeat the one-offs for me?
So I think CapEx we are targeting this year should be around INR 200 crores max. And one-off, I already said, but I can repeat again. On this ForEx loss was INR 11.7 crores. This amortization, because of the Gem Paints to take the tax advantage, it's INR 7 crores, which is falling under the depreciation head. Our new product launch and the employee cost for the Sanitaryware & Faucets was close to about INR 5 crores. And inventory loss was approximately INR 25 crores, which is not an exact number, but it is an approximate number. It was close to about INR 25 crores.
Next question is from the line of Ankur Sharma from HDFC Life.
A few questions from my side. One on the volumes. On a 3-year CAGR basis, when I compare it to the last -- the normal quarter being Q1 '20, it's a 5% CAGR on volumes. Which obviously is on the lower side, given the way we've grown. And as you've said, this would primarily be because of the dealer destocking amidst the filing -- sorry, a falling price environment for PVC, which probably may continue into Q2 as well.
But from a longer-term perspective, slightly -- maybe in the second half of this fiscal, how do you see volumes kind of shaping up? Do we continue to grow at that 15% plus kind of volume CAGR once PVC prices kind of stabilized? And if you could also touch upon end market demand, especially on plumbing?
I think you rightly pointed out the volume was low in last 3, 4 years, CAGR if pick up. But at the same time, you have to see the industry. Industry was negative. So industry was negative, and we are growing at a 5% CAGR. You tell me, hardly any company is seeing a positive volume growth. So we have to also equally see how the industry is performing. Because of COVID and all this reason, the industry was in a negative growth. Under that circumstances, I think we would deliver one of the good growth, I can say.
So that was the main reason. Industry was not performing. But yes, you rightly pointed out that the PVC prices also played a very important role during this. Because it went up from INR 70, INR 75 to as high as INR 162. And now, it has come down to close to about INR 90. So if that kind of steep price will be there, then definitely, demand will come under pressure. And that was exactly happened in last 1, 1.5 years.
But now I think, as I said in the initial remarks also, that PVC price will settled down somewhere maybe shortly, maybe in another 2, 3 months. It will settle down somewhere, maybe INR 80, INR 85 or maybe INR 90, I don't know exactly. But once it will settle down and there are higher probability, then the volume should start picking up very fast. And that's why I have repeatedly said in my earlier communications also that if you see, the construction activity was very slow in India, because of that, the ready unit sale has happened very fast. So ready inventory has substantially come down. So because of that, there are high probability that the new construction activity has to pick up.
But because the -- every -- across all the categories of building materials, the cost escalation was so high. Forget about pipe, even the other categories. So it was very, very difficult for a developer also to absorb this kind of cost. So because of that, that activities were slow. So they were selling the ready unit, but they were not focusing too much on the new construction. But now I think across the board, every building material prices have started falling down, and that's true with Astral. So there are high probability that the demand should come back. I don't know it will take one quarter more or 2 quarters more, very difficult. But if you pick up the next 3, 4 years, we are very bullish on the building material side.
And sir, so one is the talk on the industry. But if you could talk about Astral specifically, what are we doing to outgrow the industry? So obviously, the expansion in the East is one thing which we are aware about. So in terms of geographical presence, that will help us improve our share in that region. But if you could also highlight some of the key initiatives being taken to kind of outdo the industry on the piping side?
So we are doing a lot of things. We are focusing on increasing our network wherever we don't have any presence, so we are finding pockets wherever we are weak. We are adding distributors and we are adding dealers. We are also opening more regional warehouses and depots so that we can grow the market in that particular region. We are focusing on brand-related activities wherever needed, and we are constantly adding manufacturing locations and adding newer products in our portfolio to continue this growth rate.
Next question is from the line of Sneha Talreja from Edelweiss Securities.
Congratulations on a good set of numbers. Just 2 questions from my end. Firstly related to your ForEx losses, since you said that it's related to CPVC imports, why is it not encountered in the raw material side of it? And why the...
So Sneha, that is mainly because of the accounting policy, because we can't change the accounting policy of the country. So because of that, we have to account. And some other companies have also accounted, I'm sure you must be tracking other companies also. This is mainly because of the accounting policy.
Otherwise, it is good that I can net up against the other income side. But because of the accounting policy, auditors are following, and we have to strictly follow the accounting policies.
Sure. And since you mentioned a lot of one-off expenses related to your ad spend, to your, I mean, launch expenses, we were still not be able to see your other expenses as a percentage of sales to be lower, either on a Q-o-Q or Y-o-Y basis? Any reason for that?
It is not sizable because it is only INR 5 crore. It's not that much higher, which is reflected in the percentage terms, so it is only INR 5 crore. And some of them is in the -- this employee cost also. If you see the employee cost also on a quarter-on-quarter, maybe if you see them, the absolute level numbers are going up.
We got the employees business part of it. I just wanted to clarify the other expenses part of it.
So if you remove that employee side, then the new launch and all was close to about INR 3.5 crores. So INR 3.5 crores is not -- somewhere visible at the top line of INR 700 crores.
And sir, lastly, if I just look at your adhesive and paint segment revenue combined. And if I exclude adhesive part of it, we've seen a Q-o-Q drop in terms of your revenues. Is this a seasonality in the business, which is causing this drop? It's around INR 270-odd crores, it -- INR 9-odd crores now, versus around INR 300-odd crores in the previous quarter.
No, I'm still not getting your question. You are recurring the Q?
Q1 of the adhesives compared to Q4. I think adhesive's only stand-alone business has gone down on a Q-o-Q basis. Is it the seasonality of that business, which is leading to the fall in revenue on a Q-o-Q basis?
Yes. Seasonality will, definitely will be there, but I don't think it will be fall. I have to check this Q4 number, I don't have it handy. How much did you said Q4 number?
Your Q4 number was around INR 300-odd crores. And this quarter also includes INR 334 crores, which also includes INR 55 crores of your paint.
I don't think it was INR 300 crores.
Okay, I'll check the number again then.
Call me post con call, we will discuss the number. So Q4 -- let me check and come back to you.
Sure, sure.
But yes, definitely, some seasonality will also be there in the adhesives side of the business also.
Next question is from the line of Ritesh Shah from Investec India.
A couple of questions. First for Sandeep bhai. Sandeep bhai, you indicated in the initial remarks of acquiring a facility in Jamnagar. Can you highlight the scope of this, how much will you spend, what percentage of manufacturing will it take care of? What percentage of revenues can actually come out from this particular facility? That's the first question.
Basically, the spend is -- would be around INR 22 crores to INR 23 crores. And not a big one, but we also spending a few crores to upgrade it as per the safety norms and many of other things, which is already on the way. It was around INR 4 crores to INR 5 crores in first or in the phase. So maybe a complete out here, INR 28 crores to INR 30 crores will be there.
But the range as we -- and as we, at present, are getting done from people as our outsourced model, almost 60% to 80% between. At present, first phase, 60% and later after the upgradation, around 80% would be coming from that in-house. And sales, to predict after all these and work out, we will take you -- we'll let you know the exact numbers, how much sales these plants can deliver after one full quarter of our operating the plant.
Because Astral getting into the plant, a lot of systems and a lot of safety norms are coming. But I'm sure the way we will reshape the plant and upgrade it, it will give a substantial production for our faucet for that.
Just to add what Sandeep bhai said. Normally, if you see these kind of facilities, we will give you 5x kind of top line, so we have to see what products will be there because we are new in this category. So we don't have exactly the number, but normally, we have seen that it will be close to about 5x kind of turnover.
So probably INR 150 crores to run it out right now?
That's INR 150 crores, yes, you can say this...
But to be another -- to add one more point, if you see the whole Astral model of pipes, adhesives and paints, and similarly now, faucet and ceramic ware, Astral would go for its own production facilities and in-house production, which gives great advantage in many ways to deliver a right product, quality product. And at the same time, in-house makes a lot of difference on the pricing, costing and our ability and servicing...
Sure. My second question is again on that, sir. Sir, how should one look at a pan-India launch? Or are we going region by region? And what sort of synergies are mapping, do we have with our existing network? Or are we tapping altogether in the same network?
So Ritesh bhai, we are planning to launch it in a phased manner because this is a product that has a lot of moving parts, and the quality is a key concern for us because we don't want to launch in a haste and face any problems in the long run. So setting up a state-by-state plan. And we have to set up service networks in whichever geographies we are opening. And based on the availability of material spares as well as the service network, we will open in different geographies in a phased manner. But I think by this year-end, by 31st March, we would be opening in most of the territories across India.
And as far as the existing network goes, yes, there are a lot of actual dealers and distributors who have shown interest in stocking and selling our product. We are currently launching in Gujarat in the first phase, and we have gotten a very good response from our own network. Other than that, we have also added dealers and distributors who are selling other brands in sanitaryware and faucet who have also shown interest in working with Astral.
So it's a mixed model. It's a combination of Astral parties as well as new parties.
That's helpful. One question for Sandeep bhai, and then 2 for Hiranand bhai. Sandeep bhai, any update on valve? This was keenly awaited, the proposal and are there any vendor you are doing?
And Hiranand-ji, question for you, when you commented on Gems, you said -- you used the word tax advantage. So just wanted to understand what kind of benefit will we get out of here? And secondly, I think for benefactor, why have we factored the ForEx loss below EBITDA line? If you could just briefly explain that, it will be useful.
So coming to the valve. Valve will take some time because the technology and everything is outsourced and COVID did cause a little problem. Today, the range which we are going to put in the market is going up to a good size, exact -- actually, we'll let you know as the date is launched. But today, we have almost completed the launch of the valve. September, 50% was the rate we are going to put. And some of the molds, all the molds are here, but some of the molds needs some corrections, minor correction, so we have the mold suppliers from abroad working on it in Ahmedabad.
And next, I think, couple of months as the whole range which we are going to put for both industrial use, plumbing use and CPVC and PVC will be completed for the Phase 1 of the production of valve will be completed, which we have communicated to the market. Again Phase 2 and 3, we are going to add another categories of valve. There are many categories, the ball valve, the butterfly valve, and certain other valve which are also used for the industrial application. These are great valve and some other form of valve.
So this valve project will be giving good margins, good results by the end of this fiscal. At the same time, the addition of the range of valve would continue, which will give us a good market in India. Not only in India, but lot of export market would be capture that.
Now, Hiranand will answer the rest.
So Ritesh, your first question was ForEx. I already replied in my earlier question, the similar question, that this ForEx loss is mainly because of import. And that is for the accounting norms, we have to account in below the EBITDA. It is not that we all choose like that. This is a consistent policy we have followed since last 10 years. You can pick up any quarter's number, you will find that this number will be there.
This quarter, only difference is that this is a little higher number, mainly because of the higher fluctuation in the currency. So it is not that today's number is high, that's why we are showing here. It is the policy we have followed from the day 1 we got listed. You can pick up the last, I think, almost now we have completed 14 years. Okay? So in the last 14, 15 years, you can see every quarter, we are publishing this number.
Coming to your second question of tax advantage. And I think when you acquire any company, there is an asset and then there is an amount you pay. Whatever the difference is there, that is divided into the multiple thing. And that, you can do the amortization, and that will help you to take some advantage into the tax. So that is why we amortize that, that is close to about INR 7 crores in this quarter.
Just a continuation, how much more do we have over here, which will give us benefit on effective on cash tax rate?
So like every quarter, INR 7 crores. So INR 28 crores yearly.
INR 28 crores. But it's like for this year only?
So we have a 5-year policy. 7 years. We have a 7-year policy, so 7 years.
Okay. And what would this mean -- sorry, last question, what would this mean on the effective tax rate at the consol level? I think we have been at around 22%, 23%. Is that a fair number or that number can actually...
Well, similar will be -- because ultimately, INR 28 crores on our EBITDA of last year's INR 650 crores or INR 700 crores. It's not going to be much. So ultimately, it will be a similar kind of rate, 22%, 23% only.
[Operator Instructions] Next question is from the line of Rajesh Kumar Ravi from HDFC Securities.
Sir, just one question. Now when you start reporting the Gem numbers and the Gem numbers, they will be -- amalgamated in the stand-alone entity, right? The Gem Paints business?
It will be amalgamated in consolidated, not on standalone.
Okay. So standalone will still continue to report as the plumbing numbers?
Correct. Correct.
Okay. And the sanitaryware and all bathware and sanitaryware, how will they be accounted? It's standalone or in consol?
That would be the part of a standalone.
Part of the standalone. Okay. and second, could you give some segment-wise revenue guidance for the next 2 years, primarily on the tanks, valves and the bathware businesses for next 2 years, '23, '24?
So I think we have already given this guidance in our annual presentation. We have clearly said that we are targeting to double our top line in the next 5 years. So that guidance we have already given.
I think quarterly or 1 year guidance will be very, very difficult for us because so many new product launches are happening. So many products we are working in the adhesive side. Similarly, we are working on the pipe also, few new products are expected. I think it is very, very difficult to predict on a quarterly or yearly number. But I think in long-term guidance, we've already given that we are targeting to double our top line in the next 5 years as a consol basis.
So in terms of the tanks and the valves, what sort of revenue numbers you are looking at?
I think it will be too early to say what will be the number. But I think we have given the long guidance. I think you should stick to that rather than sticking to 1 quarter or 1 year number.
I think one more -- thing I missed in my initial remarks that was the working capital side. I think more or less, we have maintained our receivable days and inventory days in this quarter also. So whatever the days were there in March, I think more or less paying a receivable days and the inventory base are there.
Next question is from the line of Salil Desai from Marcellus Investments.
Hiranand bhai, I want to go back to this inventory loss and just clarify, if I understand it right. This year, just quantifying that the cost of raw material versus what you sold it at, there is some loss there. There's no active provisioning of any loss, right, from an accounting point of view?
No, there is no active provisioning. It is a magically actual loss.
Right. So about, let's say 150...
That's why I communicated in my earlier remarks also that Q2 will be also some pressure. That's why I said that Q2 will also be a pressure, because everything will not be sold out. So some inventory will be still there in the system.
Sure. And that inventory number will reflect in the change from March to June, which you said? Similar number of days?
Yes. Number of days will be same, on a consol basis. On a case-to-case basis, will be low. Like in pipe and all, it has reduced reasonably low level, like, I think up 4 days in the inventory side and 3 days in -- 2 or 3 days into the receivable side. But others like paint and all, it's a little higher working capital cycle. So there, the little days have gone up. So pipe has come down, other has gone up.
So overall, I said that on a consol basis, the receivable and the inventory days are common. Whatever compare in Q4.
And my second question is for Sandeep bhai. When the faucet business, you have originally were thinking that you would do outsource manufacturing, you didn't want to kind of go from all in and just figure out how things work, and you do somewhere down the line a couple of years. You will do -- take a decision in manufacturing. So now that thinking seems to change, where we think that in-house manufacturing seems better, can you sort of say what all let to the change in this way of thinking, behind from a...
Basically the thinking -- let me tell you that, that was 100% this model, but 2 things happened. As we saw the complexity of the product line and the quality aspects of the product line, especially the finished and the -- it's a moving part. Ceramic ware is not a moving part of something.
So looking to that and we got the right opportunity to get something at the right price. So that 2 things were there, but the main thing was an opportunity to get something within Gujarat, one. Second, at the right value and at the same time a good state-of-art facility. Due to whatever reason, the promoter has got. That is the reason why we went ahead. And the capital outlook compared to Astral sales, hardly anything that matter is great for the business that can be generated from this amount which we expect. So that was the rationale behind it.
And still, when you get into something new, you keep learning. And when you learn, you understand the nitty-gritty of the business and certain decisions can be taken on these aspects, and that was that why we went ahead with this faucet on our own. And actually, it is actually a good thing, and everyone could feel that this is a more commitment for us to be in this business. It is a great commitment. When you are on a model of -- of course, your seriousness of the commitment of many aspects go down. But here, we are completely committed to the business as well as the growth of things.
Next question is from Sujit Jain from ASK Investment Managers.
Yes, Sandeep bhai and Hiranand bhai, and compliments on a good performance on volumes despite the challenges that have been there in the sector.
My question is on paints business, when I removed that from the adhesives revenue, then the revenue is INR 282 crores versus INR 196 crores, which is 44%. Which if I look at realized numbers, et cetera, because it again looks low. And when I knock off the INR 8 crores OP of paints from the EBIT, so roughly INR 23 crores, INR 24 crores of EBIT will come from adhesives. Which again, in terms of margins is something like 8%, 8.5%, roughly. Which, again, is kind of on the lower side, even Q-o-Q. So if you can explain what exactly happened in the adhesive business?
No, no. I don't know how you calculated 8%, 8.5%.
So this quarter, there is no paint business. That's why I'm saying Y-o-Y when I compare or even Q2.
From this quarter's number, I knock off the revenue of paints business, and I knock off the EBIT from the adhesives EBIT.
So you are calculating the EBIT. And I said that because of this amortization, the gap might be there. But otherwise, if you see the EBITDA level, I think last year, Q1 was 13.5%, 13.8% precisely, okay? And that is there in our press release also. And this quarter, it is also close to about 15%. But if you remove this paint, EBIT is working out to be 13.6%.
Right. Yes, that helps this amortization. But on the top line, is it a little muted INR 282 crores vesus...
That is mainly because U.K. operation has delivered a very muted growth of 4%, 5% on the previous quarter because there was some constraint. So because of that, only 4%, 5% growth for that. But otherwise, if you pick up the Resinova, there was an 18% growth.
And now, faucet becomes a part of plumbing, right?
Yes, yes.
Right? And eventually, standalone you'll merge with Resinova?
Yes. Now, we will merge. But segment-wise, yes, we were definitely going to give a separate number.
Segment-wise data, you'll give for consol, right?
Yes. Consol, you will get the segment.
Thank you. I now hand the conference over to the management for closing comments.
So thank you very much for joining this con call, and thanks for the AMBIT team for hosting this con call.
If any questions are left out which is we were not able to answer, we were not having the ready number, you are free to call me any time. My mobile number is always with you, so you can call me any time. Thank you very much.
Thank you all for joining this call. It was great interacting with you guys because it's my first conference call. So looking forward to many more such calls in the future, and we will try to work and deliver, exceed the expectations of Astral in the coming quarters.
So thank you, everyone, and happy Janmashtami and have a great weekend and holidays, which are coming for next week. And stay safe, and take care and look forward to again interacting with you after the Q2. Work -- hard work, which we all have to do. So thank you very much. Thank you.
Thank you very much. On behalf of AMBIT Capital Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.