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Astral Ltd
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Ladies and gentlemen, good day, and welcome to Astral Limited Q1 FY '24 Earnings Conference Call hosted by Investec Capital Services. [Operator Instructions] Please note that conference is being recorded.
I now hand the conference over to Mr. Ritesh Shah, Head, Mid-Market Coverage and ESG, Investec India. Thank you, and over to you, sir.
Thank you, Lithan. Thank you all for joining for Astral Q1 Conference Call. We have with us from the management team, Mr. Sandeep Engineer, Chairman and Managing Director; Mr. Kairav Engineer, Executive Director; and Mr. Hiranand Savlani, Executive Director and Chief Financial Officer.
I'll hand over the call to Sandeep bhai for initial remarks, post which we'll have a Q&A session. Over to you, Sandeep bhai. Thank you.
Thanks, everyone, for joining the earnings call for Q1 FY '24. I'm very delighted today that this year, Astral is going to celebrate its 25th anniversary in October 2023. Astral started its journey in October 1998. So we are completing our 25 years of the journey in the industry, and we are going to celebrate and which we will, full -- formulate legacy of our innovation, connectivity, brand building, while distribution needs and strong product capabilities across the front.
As you are very well aware, the market situations are highly volatile and particularly the downward polymer and chemical pricing situation within which we have continuously worked to deliver the numbers. I'm happy to say that Astral team is working hard and once again, within the volatility also, we have given fairly a good growth and particularly in pipe 31% volume growth and in adhesive also a very healthy volume growth has been -- is being given by our company.
Demand scenario is very robust and seasonally this quarter is highly loaded with PVC products such as agriculture pipes and drainage pipes. In spite of that, our CPVC team has done a remarkable job and able to give us a very healthy growth. This is the reason in spite of PVC downward pressure, we are able to deliver a very healthy approximately 18% EBITDA margin after adjustment of sanitaryware and faucet losses of the quarter.
In our Pipe business, due to robust demand in pipe vertical, company has decided to aggressively move into expansion -- expanding its capacity. We have now decided to put 3 new plants instead of 2, which we discussed last time. Guwahati 22,000 metric tons, Hyderabad 70,000 metric tons and Kanpur 50,000 metric tons.
We'll push fast-track expansion based on demand scenario. Guwahati plant work is in full swing, and we are expecting the trial production to start from next month. This plant from its inception to commencement has been fast because we have gone ahead with a property which we have leased out.
So we have gone on a lease premises to put this plant. We are working hard to increase our existing plants capacity by putting new machines as the demand is very robust. And so we have to use the space within the existing plant with the lowest CapEx. We increased and we added a few machines after the demand scenario, which came up from April. In the month of May and June, we have added number of machines in our PVC capacity as well as other capacities in various existing plants.
Hyderabad plant expansion work is in full swing, and we are trying to complete the project before schedule, and we'll roll out Phase 1 from this plant in the coming year. Kanpur -- in Kanpur company has purchased 24 acres of land and shortly, we'll start construction activity once again as the plants are ready.
Kanpur, we have taken a decision looking to the expansion scenario and the demand scenario in the state of Uttar Pradesh and surrounding areas, and there is going to be a robust demand coming up from the North India. And with that, we have taken a decision to go ahead to have a plant in Kanpur and already we have an establishment in Kanpur because we run our adhesive 2 plants out of Kanpur.
In adhesive and sealants our Dahej plant has started trial production and will be fully operational in coming months. And we will get the benefit from that plant in coming quarters, we see automization, capacity rationalization. And because most of these materials will be bought in volumes and will be stored in bulk storage facilities, which we have created above the ground and under the ground and which will save a huge amount for us, a substantial amount of us in the raw material cost.
Our volumes are continuously growing high and our prices will settle down, as you see a very healthy growth and the value growth will also be there in the coming years -- coming months with the volume growth in the adhesive business.
In the Paint business, the company has appointed a very senior person now and more senior persons are joining. And we had to go through 2 challenges here. One is the demerger which happened just recently with the various smaller companies associated with Gem paints, with NCLT order, which is now in place. And we also implemented SAP and various systems and processes in April from this new fiscal in Gem. So Gem is now working completely on SAP. Gem has a lot of programs and systems which Astral uses.
And also we need a due diligence and [indiscernible] diligence of every of its buyers, dealers and we had also changed certain policies which are favorable in the way we do our adhesive, paints and pipes business -- adhesive and pipe business on credits and receivable cycles.
Our branding team is working shortly to move the paint business with Astral Synergy, and we will be shortly unveiling the Astral Synergy launch in the paint business in coming months, and we will surely connect with you either through call for this or we'll have a personal gathering for the launch of the Astral Synergy and Paints shortly in Mumbai.
Sanitary and faucets. I'm very happy to announce that we are inching on growth, and we are even looking at a substantial growth in coming months, quarters, and we are going on a firm footing in this business. Our first milestone of 500 stores has been achieved. We are getting good orders and project orders from good builders and good projects, which also is a very positive sign for us. And we are just going out to launch another range called the Tresco range, which will be an economical range in the market.
And this range will be sold through the distribution channel of Astral as well as new distributors and through the retail channel, which are served by Astral and the adhesive and the paints business. So this range is ready, which will be launched in a couple of days and it is going to be a much economical range, and it will give a boost to the faucet and sanitary business with the buyers who go for the economic housing and from the channel which we already have.
We are continuously getting good inquiries from projects for this sales, is very good on the project side in faucets and adhesives. Lot of new SKUs are getting introduced in the market as per the demand, and we are also increasing our product range both in faucets as well as we are also putting new chemistries in adhesives on the waterproofing and the construction chemicals.
We are also working to put new chemistries in the white wood segment, especially the plastic wood joining the products which are used to join the plastic wood -- with plastic wood.
So to summarize, all verticals are doing good, and we are going as per our plans, and we don't see much challenges in the market, and we'll keep giving you a consistent growth for which the company is known.
I now hand over to Mr. Hiranand Bhai Savlani, our ED and CFO, for his opening remarks on the numbers and then myself, Mr. Hiranand bhai and Kairav will answer all your questions. And once again, thanks for joining the -- joining and trusting Astral. Thank you very much.
Good afternoon, everyone, and thanks for joining this earning call of quarter 1. Once again, I'm very happy to share a very robust Q1 number. As communicated in the past, Astral is always believing in consistency, and we will always try to maintain this consistency in the coming time also. As Sandeep bhai said, demand is very robust in the market and Astral being one of the leading player, we are receiving a very good response in the market for our brand and that is the result of this Q1 robust number with a 31% volume growth.
And you all know that Astral is not an agricultural company, we are more focused on the plumbing side of the business. The revenue growth in the Pipe was 7.1% and Adhesive and Paint was 2.4%. The reason for lower value growth was mainly due to heavy reduction in the polymer price and the chemical price, so that was passed on to the market, and that is the reason that the top line growth were lower than the volume growth.
Even Adhesive also, volume was very, very robust. Paint business was highly affected due to implementation of SAP. So dispatches were stopped, and we were completing new KYC norms also. So because of that, we lost around INR 15 crore to INR 20 crore of sales, and that is why the Paint business has degrown by almost 25%, 26%.
Pipe margins were very healthy, close to 18% of EBITDA. If you do the adjustment of sanitaryware and faucet, and there was also some inventory losses were there and some portion was in PVC and some portion was CPVC also because CPVC prices have also fallen in this quarter. So that was close to about roughly about INR 15 crore kind of run rate.
Adhesive, our Indian operation was having a very healthy growth. In value terms, it was 10%, while the volume terms were much higher. In U.K., it was 4.5% growth and as discussed Paint was degrown.
Margins were good in Adhesive also. Indian operation was roughly about 16% EBITDA, while U.K. was disappointing a little bit and having 8% of EBITDA margin. And our Paint business was having roughly about 17% EBITDA margin. So in spite of so much of challenge in the top line growth due to value horizon, we were in the range of 14% to 16% margin, which we guided earlier. So we have maintained that run rate. And even Pipe also, we were at 18% margin.
If you adjust even inventory losses, then it was even a higher margin. Demand scenario Pipe business is very, very robust, and that is the way how we are seeing in the coming time also. Numbers are going very, very excited way, and that is the reason we are going very, very aggressive in our expansion plan, which normally Astral doesn't do so aggressive expansion activity.
But looking to the current scenario, it looks that now the demand is going to be in the right direction. And I'm sure Sandeep bhai has already communicated to you in detail about each location-wise capacity addition and the implementation. We are further targeting that if the demand scenario will ramp up from here that we may complete our projects before schedule also because we don't have any issue of cash because company is already sitting on a sizable cash on time.
Our value-added product contribution like valves, Silencio, FirePro, DrainPro, et cetera, is very well, and that is the reason you are seeing in spite of having so much of pain in the margin in the entire industry, we are able to deliver 18%-plus EBITDA margin in our Pipe segment.
Sanitaryware business is slowly picking up as per our plan as we were focusing at present only on creation of new stores, and I'm very happy to communicate, as Sandeep bhai said, that we will cross the 500 mark, which we communicated earlier that our first goal is to complete 500 stores, and then the next milestone will be decided.
So now we are giving a clear KRA to our team that from Q3 onwards, Q2 still will be some focus on the store creation. From Q3 onwards, we will be focusing on the sales side. And I'm very happy to say that last 3 months, our run rate has crossed INR 5 crore monthly, and this will increase substantially in the coming quarters.
And with this launch of value-add -- sorry, economical products into that category, that will also help us to increase our run rate.
Paint. NCLT order is received and filed with the ROC on first August. So now demerger process has started. And shortly, we will settle down, and our team will take charge of the business under new demerge entity. So we will be seeing Astral Synergy in the business from Q3 onwards. And Sandeep bhai has already taken a very rich experienced senior person had joined in the organization.
So we are confident in that. And so he will be taking this business to the next level, and we are expecting a very, very excited time ahead in that vertical also. Further, I want to highlight here that if you see the number -- the gross profit margin Y-o-Y basis has shoot up from 31% to 37% on a consolidated value. So a 6% improvement in the gross profit margin, but that was not proportionately reflected in EBITDA margin.
That is mainly because of the erosion in the value growth. Volume growth was that, but value growth was not there because of the lower polymer price. It is not proportionally converted into EBITDA margin. But I'm sure that in the coming time when the value will start picking up, which we will shortly see in the Q2 and further improvement from Q3 onwards. Then you will see from Q3 onwards value versus volume will be more or less in the same zone. At that quarter, you will see that the EBITDA will also shoot up.
So we are having lower EBITDA compared to the GP improvement. But still, you can see the number that employee cost, though it is moving in the same direction, but percentage term, it has improved from 6.3% to 7.8%. Similarly, other expenditure also, if you see, that has also gone up from 10.8% to 13.8%. That is mainly because the top line growth is not there. That's a percentage term, it is showing very high.
Even if you compare last quarter, which was a very heavy quarter for us, the other expenditure was INR 183 crores. Now it has come down to INR 177 crores. But if you see the percentage from other expenditures, last quarter, it was 12.1%. Now it has shoot up to 13.0%. So my objective of communicating this number is that the GP improvement is substantial, but that has not reflected into the EBITDA margin, which you will see in the coming times.
Adhesive also if you see that the GP is all-time high. For last 3, 4 years, highest GP 41% we are seeing in this quarter. So I think all front numbers are moving into the right direction, and we are expecting a reasonably good improvement in the margin in the coming time. Of course, these margins are also excellent margins, but looking to the way GP has improved, we are expecting there is a room for the further improvement in the margin in the coming times.
So I don't want to take much time. And once again, thank you for trusting Astral and joining for the call. And now I open the floor for the question-answer session. Over to moderator.
[Operator Instructions] The first question is from the line of Rahul Agarwal from Incred Capital.
Congratulations for a good set of results. Sir, 3 questions. Firstly, on adhesives. You said obviously, the pricing is under pressure, but the volume growth was good. If you could highlight what was the volume growth both in India and outside? And the outlook for the year, sir, in terms of growth and margins, please?
So I think we are expecting 15%-plus full year growth for adhesives business, 15% to 20% kind of growth. And we have guided that we will be delivering 15%-plus EBITDA margin. So we are standby with that number. Q1 was around 14%-something, but we are expecting that coming 3 quarters the margin improvement will be there because the GP are all-time high. So that has given us the confidence that once the value growth will come back, then the margin will also shoot up.
Sir, what was the volume growth, sir, monthly?
We don't have an exact volume because some products are in liters, some are in KG, some are in PC, so very difficult to do. But yes, definitely it should be somewhere around 15% to 20% kind of run rate.
Okay. So demand is not a problem, it's that the pricing has to settle down and then things get back in place, right?
Exactly. Even demand is soar, pricing is also settled down. Only thing is that the prices had dropped substantially. So because of that, we have to pass through some portion to the market. So because of that top line growth in value terms is not there. Otherwise, everything is fine.
Perfect, sir. Sir, secondly, on the capacity, and I want to thank you for the timelines given for capacity addition, really helps us to calculate how next 3 years will look like. But just on the debottlenecking side, if you could help us, what's the expansion plan?
So like Sandeep bhai has already said that whatever additional space is available within the existing plant, our first priority is -- because the way volume growth are coming, which we were not -- never expecting that kind of growth. But looking to the even current quarter's number also, it looks that the volumes are going very fast. So in that case, the easiest way to improve the capacity is the Guwahati which we have taken on a lease premises.
So first will come that. And second easiest way is that, that whatever the capacity is available in the existing plant, we are adding the machineries over there. So our team is working on that. And continuously, we are working on that. Once I think -- number is not freezed, how much we are able to. So team is working on that, but I'm sure there also we can improve the capacity. We can add a few machines and that is what we are working right now. How much exact capacity will be added, I think we will be in a position to tell you in the next quarter con-call.
We have however taken quite amount of machines in last quarter and have put most of them in production in the month of June and putting some in the July. This is going to help us to immediately ramp up the capacity in the products.
So on an average, 10,000 to 15,000 tons of debottlenecking in existing plants, is that a fair number?
Yes, yes. You can expect that number.
Yes. right. So basically, we're adding 1,40,000 tons on the 3 plants plus the 290 -- 2,90,000 existing, so that's about 4,20,000 and plus 30,000, let's say, 10,000 each year, so third year exit fiscal '26 is going to be about 4,50,000 tons is what I'm working with, is that fair enough?
Yes, yes, yes. And see, it is up to us how fast we want to ramp up. If we really see that the demand is exceeding what we are planning, that we can do a little early also because cash is not a problem to the organization. We can deploy a fast-track team, and we can try to complete the expansion activity early also. So it will depend on how the demand is going to work out because last 2 quarters at least, we are seeing a very robust demand. And now this quarter has also started with a very, very bang, I can say. So it looks that the demand scenarios should be better only.
Got it, sir. And last question from my side, Bathware sales. You said INR 5 crore run rate a month. So I am assuming INR 15 crore sales for the quarter. Is that fair?
No. Last quarter, it was around 13.9 or something, okay, because April was low. May, June was very good. So July is again very good. So last 3 months, so I will consider May, June and July, all the 3 months were INR 5 crore plus.
Okay. And Paints, sales and EBITDA, you said 25% degrowth. So my number is about INR 40 crores of top line and 17%...
Yes. INR 41 crore. Paint is INR 41 crore.
Right. and 17% EBITDA, right?
17% EBITDA. EBITDA was good because the GP improvement was substantial in that business also, but that is mainly because of long-term benefit. We have to implement SAPs and we have to do the re-KYCs and all. So that's why we have knowingly sacrifice the sale, but that's fine. We have done this kind of exercise in adhesive also when we implemented the SAP when we acquired the Resinova also.
Got it, sir. Sir, lastly, just one -- squeezing in one. The new person who joined for Paints, could you elaborate a bit? Like could you share some detail what's the -- who's the person...
We will share at appropriate time, but very rich experience person having 20-plus years of experience in paint industry.
We are having some personnel joining there also, but we'll -- at the right time, we'll communicate on that.
The next question is from the line of Dhananjai Bagrodia from ASK.
Sir, congratulations again on a fantastic numbers in terms of volume growth. Just a question regarding -- on EBIT per ton, what number do we think or OP per ton do we think will be steady state for the year? Because there has been some variation assuming we are steady state in terms of inventory gain and losses. What would be that for the year?
I think I don't track EBIT, but EBITDA basis, we are considering that its number should be in the range of 35 to 40 minimum.
Okay. 35 to 40. And these are the losses of the Bathware business is taken in which segment?
Pipe.
It's taken in Pipe only. So -- and that is -- how much was the loss for the year?
Last year was INR 16.5 crore. This first quarter is INR 3.4 crore.
The next question is from the line of Praveen Sahay from Prabhudas Lilladher.
Many congratulations on a very good set of numbers. Sir, my first question is related to volume growth, which is quite a high of 31%. Can you bit elaborate on that? It's largely because of the plumbing and in the plumbing, it's largely because of the project business there that the growth is coming in. How that's -- or the capacity expansion or the geographical expansion you are doing. So can you bit elaborate on that from where these growths are coming in?
Yes. So the growth is coming from all the different segments that you mentioned. It is coming from geographical expansion because we are entering into newer geographies with our plants, which -- where we had limited presence. So growth is coming from that side.
Growth is coming from retail side also. Growth is coming from project side also. And growth is coming from CPVC and PVC segment, both segments also. So right now, growth is coming in all of our product segment across India, and growth is coming from all the different categories like projects, retail as well as geographical expansion. So it is a multifaceted growth that is coming.
So it's fair to assume that's largely because of geographical expansion?
No it is a combination of both. So wherever we already had our plants, there also, we are working, now we are entering deeper and deeper into the smaller towns and villages and we are doing a lot of work on the retail side. Similarly, we have strengthened our project teams also. So we are tapping even a small-scale project. We are very aggressive on retail and project even in our stronger geographies. And in our weaker geographies where we are bringing up manufacturing facilities, there natural way we are also getting growth because affordability comes in. And plus people get confidence that the plant has come, so material availability will be there. So it is not just geographical expansion. It is a combination of all the factors.
Okay. Great, sir. Sir, next question is related to the CPVC pricing. Can you give some color on that because we had seen some softness in that -- so how you are seeing right now in the month of June, July, how is that?
So CPVC prices have definitely softened, but CPVC prices will not soften like PVC prices have softened. PVC prices softened one way. CPVC prices usually soften gradually and usually don't go down to the level of PVC prices. Say PVC dropped from INR 160 to INR 80 or INR 75 that way CPVC will not fall because still CPVC supply constraints are there.
So local players are there, but they don't have the enough capacity to serve the entire market. So India will continue to be -- continue to remain import dependent for the coming couple of years more. So I don't think that the prices -- plus the antidumping duties there, which puts the price of imported CPVC at $2. So it is very hard for CPVC to soften beyond a point.
Okay. Okay. Great. Helpful, sir. Yes, sir.
And the local materials are still settling on the quality issues so it will take time for them to also settle down on a particular quality, which is comparable to the international...
Yes, yes. It's helpful. So the next question is related to the adhesive business, sir. How much is the capacity utilization currently you are at?
So we should be around 65% kind of utilization but we have put up a new plant at Dahej, which will increase capacity substantially. So once that will be operational, we'll come to know exactly what capacity we can operate. So then I think utilization will come down to almost 40%-or-so.
The next question is from the line of Ritesh Shah from Investec.
A couple of questions. Sir, firstly is on capacity. You have outlined a new aggressive plan. What this essentially implies is, are we looking at around 25% volume CAGR for next 3 years? Is it something that we are looking at internally to do?
So Ritesh, right now, market scenario is very positive. Q1 numbers are already in front of all of you. Q2 first 40 day is even higher than the Q1 volume growth. So it looks that the numbers are moving in the right direction and even faster than what we are expecting.
But it is too early to comment on the basis of last 6 to 7 months number. But the way numbers are moving, the way our geographical reach is increasing, the way our team is moving into the smaller cities in the project sites and all, overall positiveness among the team member is very, very high, I can say.
So in that scenario, it is possible that we can do that also. But I don't want to unnecessarily give the commitment at this stage, looking to the last 6, 7 or 8 months number that we will be doing the CAGR growth of 25% because 25% is a very huge number and at a scale at which Astral is there, definitely, it is a very high number.
So I don't want to unnecessarily show the grapevine in the market that we will be able to do 25% CAGR volume growth in the next 3 years. But yes, we are making ourselves ready for that, because initial positiveness is there in the market. So because of that, we are making ourselves ready. And if the time will come, we should not be shy away because we don't have any issue to ramp up the capacity. We have enough cash available with us. So we are making us, preparing ourselves for that kind of growth. But ultimately, it's the market which will take the call, whether we are going to grow at 20% or 25% or 30%.
Right. And sir, just to clarify, when we say this 20%, 25%, whatever comes, this is excluding any government orders, whatsoever?
So we are not in a government order at all. So definitely, it is excluding government order. That is not the cup of tea for Astral.
We are more hooked on the big projects of the -- going around in the plumbing segment, in the infrastructure segments and in applications which connect to various builders, various projects, which are huge projects. But specifically, if you see that water distribution projects by government and all, we are not so much there in those projects.
Sure. Sir, my second question is on EBITDA per kg. If I just adjust for Bathware losses and inventory losses, which I think you've indicated INR 15 crores. So the EBITDA per kg for the quarter comes to around INR 37.5, just correct me if my number is a bit off. But again, as you indicated, that a minimum of INR 35 to INR 40 per kg we are looking at for FY '24. Aren't we far more conservative because of my limited understanding, Q1 is very heavy on PVC and as we get out of Q1, the product mix, all the ratios actually improved. So why this number of INR 35 to INR 40, why can the number be higher?
So Ritesh, it is difficult to predict the ratio in which direction, right? And if you see the number of Q4, okay, where the ratio was totally one-sided in favor of value-added product and CPVC. So we were able to deliver even more than INR 45 also.
So we don't know exactly which direction the ratio will move. We are always willing to move the ratio in the direction of value-added product in CPVC. But you don't know and I don't know what is the market will be at that point of time. So we have to be very, very conservative because we don't want to unnecessarily misguide any of the investor community that this is where we are going. Ratio can change any point of time, in particular quarter, things will change.
And last quarter, even I guided also openly in the my call that Q4, you don't consider as a benchmark because Q1 numbers are always hinting towards the PVC direction. So per kg is going to go down only. So it depends how market is going to behave. If it will be in the favor of CPVC and value-added products, yes, you are right, number can be even much higher.
Sure. Sir, third question is on Bathware. This is for Sandeep bhai. Sandeep bhai, are you happy with the INR 5 crore per month run rate? That is one. Where do you see this run rate, say, 6 months, 12 months, 24 months out? And if you can just help us understand how will we map this with the number of stores which we have indicated we are above 500. So corresponding to 500 stores, are we looking at 1,000 stores in 12 months? And when should we look at an EBITDA breakeven for Bathware as a business in [indiscernible]
See, one thing is that, that -- apart from what basically the first concept is that any [ pipe ] people have come in Bathware, but we have come in Bathware which we have conceptualized even before that. And we have come with our own production facility, which we are ramping up in Jamnagar. All the products in faucets are made in-house, ceramic where we are sourcing from sources which everyone uses, all other competitors. Bathware is something which is not as easy to sell a pipe or a paint or adhesives. It is a product feature design behind it, application behind it and also the marketing channels, the users, the way we have to market is also different.
So obviously, we are going step by step. The good thing is yes, we have a 500 showrooms, we keep increasing, 1,000 we have, 2,000 -- we are here for long term. As we have invested in the business and we have a plant here. So we are not here for just outsourcing, selling and tomorrow doesn't work make a choice what to do.
So we are going step wise. We are -- the focus now -- my -- is that how much repeat orders we are getting. That is very important for us. Secondly, the run rate is always growing. And yes, obviously, I want to see in next 1 or 2 quarters, it will breakeven. It will not be an additional burden on any of the business.
Third, yet to ramp up quite a number of good professional teams, which we have started doing it. And in this quarter and coming quarters, there will be quite a good number of teams in the sales marketing channel, who will be very aggressive in going through the market, consumers, dealers, distributors, architects, builders. So we are on the top, you will see the numbers coming. When we acquired Adhesive, we were a small company of Resinova, and you've seen what we have done stepwise.
We have not jumped overnight to any level in Adhesives. Paint also we are such a serious that will see the numbers coming as quarter. But what we want and what I think in every business is to build the base perfectly and then build the building on it so that your work at the ground level should be so strong that the building built on it remains more stronger.
And similarly, you will see in our faucets and ceramic business. But more going ahead, we are coming with an economic range in next couple of days, the range is called Tresco and Tresco range is what we bought the company, they had this range. We have upgraded that to a level which also satisfies what comes from the house of Astral and which will be widely sold in the dealer network as well as the wide consumption at the level that the consumers would want on the...
Plus, I will add to this, Ritesh bhai, that we are just not making and selling for the sake of making and selling. We have our unique design. We have our teams that are constantly working on product quality, product launches, whatever parts that we have used are all state-of-the-art. And we are also focusing on making Astral a very strong brand in this segment. So we are not just interested in only selling the fast-growing and the low end of the spectrum. We have 4 ranges. So we want to justify all of the -- our product that we launched. So we are working on our base. I think another 6 to 9 months, you will see a lot of difference in this particular segment.
And Ritesh, you should also -- I'm sure you must have studied that in the Bathware project business, the cycle is very lengthy. 18-month cycle is there. Today, you get the order and the completion state take place after 18 months. Because first, you only supply conceal products, then the front product, then the outer product.
So the process is very lengthy. So right now, we are preparing a pipeline for the project. Actual number will come only after 18 months because one cycle you complete and then only -- and any developer cannot give you 10 projects out of 10. He will taste for 1 project. If he is satisfied and then he will allocate the new project.
So it's a cycle of project. So we have to pass through that cycle. And that cycle is very lengthy. So I think we are already present in many projects, but the number will not be there. Number will take some time because we have to complete that 18-month cycle. And then once they will be happy with our product, then the number will ramp up very fast. So we have to keep patient and we have to be waiting for few more quarters. And then all of a sudden, you will feel that what happened, all of sudden numbers -- because then by the time we will be completing the cycle and then repeat order of new projects and multiple projects will keep coming from the same builder.
The next question is from the line of Sneha Talreja from Edelweiss.
Congrats for great set of numbers. Just 2 questions from my end. Firstly, related to CPVC pricing. Where are we right now in terms of -- you said there have been inventory losses. So just would like to know where the inventory losses were more? Was it PVC or was it CPVC? Or can you give us some sense of how much prices would have declined? And what can we see in the coming quarters, both for PVC as well as CPVC from your end?
It wasn't that high losses. Sneha, all put together I said INR 15 crore to INR 17 crore kind of that. So not that high losses. So mainly, it was, some portion was PVC because PVC price was fallen. Now PVC has started coming back, and it is going upward journey. And CPVC price has fallen.
And as rightly, Kairav said that CPVC prices are not going to fall sharply because of anti-dumping duty, there is always a cap. So because of that, there will not be -- but yes, whatever the price has gone up above the anti-dumping duty level, that has corrected to the anti-dumping duty level. So to that extent, some losses was there but not a substantial amount.
But do we see the price fall continuing in the coming quarters?
No, I don't think so...
No. Because antidumping base price you already reached.
So I think the prices in CPVC has more or less stabilized now. So we don't see any major falls coming in this particular polymer going ahead. Because there is that anti-dumping duty, majority of the stuff comes into India comes via imports. So the people who are selling to India, the Japanese, the Americans, the Koreans, they are strictly abiding to the $2 anti-dumping duty law. So that is why majority -- and you can see almost 80 -- more than 90% is currently being imported into India. So I don't think the prices are going to fall further.
Understood, sir. Sir, second, my question was related to -- you answered a lot about demand that demand has been growing at a robust rate, and you are also looking at announced 3 greenfield expansions versus even Leader has done that sort of expansion, which is 15. I just wanted to understand what would have been the industry growth rate in this particular quarter, let's say, and what is the industry looking at? Because we saw a very strong number coming in across the players this particular quarter in the plastic pipe space. So I would just like to get a sense of the industry growth number, is it that it's only the larger player growing...
So I think it's very difficult to see industry growth number because majority of the people who have reported stronger numbers are into the -- more on the agri side of the business. Now 2 years ago, PVC was at all-time high. So last 2 seasons have been very bad for agri pipes. Now since PVC reached the rock-bottom pricing levels, all of a sudden, the demand came from rural India because up till then, that people had shifted from agri pipe to HDP pipe. Now people have gone again back to agri pipe because agri pipes are significantly cheaper than HDP prices now.
So all of a sudden, the surge came for the core agri pipe business. So it's very hard to say how industry has performed because our forte is behind the wall. We are a plumbing brand. So our exposure to the agri side of the business is very negligible. So we cannot comment on what the competitors are doing or what their future lies. But as Hiranand bhai said, we are very confident that we will continue to deliver as per our guidance in the coming quarters.
The next question is from the line of Nikhil Agrawal from Vt Capital.
Sir, my question was on like we heard that Grasim is coming up with a plant under tie-up with Lubrizol and if I'm not wrong, they will be supplying only to Prince Pipes and Ashirvad. So do you think that they might have a price advantage over you once the CPVC plant comes in?
I think it the best understanding given to the market. Today, also, if you want Lubrizol material, it is available in the open market, whether you want resin, whether you want compound, it is available. Even they are approaching us also to buy. We are also getting the quotations from them also. So it is nothing like that, it is restricted to few players. When somebody is putting up such a large capacity, it has to open for everyone. There is no reason that it will be available to only 2 players, whether 2 players will be able to consume that much of quantity? It is not possible for the 2 players to consume that quantity.
So I think it will be available to everyone. But let the plant to come because I think they have given this press release 3 years before also that they are putting up the plant, but nothing has happened so far on that plant side. Again, they have released the press release in the similar fashion that we are coming up with the plant. But still today, whatever our knowledge is there, nothing has happened.
So unless and until capacity is not coming, unnecessary putting a gray point in the market that they will support this player, they will support -- they will not support to this player, I think that's not a fair thing. Let the quantity to come in the market, we will see at that point of time, what is there.
They are already supplying a non-branded compound to few players in India at present.
Okay. Sir, are you open to buying the...
These are big brands. I don't want to name, but we are aware of whom they are giving compound.
Okay. Sir, are you open to buying the compound or the resin from Lubrizol?
Yes. If they are giving us the right price, then we are open to buying from Lubrizol. There is nothing wrong in that. We have a very long and rich relationship with them since 1998.
We will procure resin, we don't buy compounds. And we are open to buy resins from anyone because we have no compulsion to buy resin from one source. And as our demand is growing, our capacities are growing, not one supplier can supply that. So we are open to buy.
Okay. Got it, sir. And sir, just wanted to know your water tanks monthly run rate? And any -- you have no expansion plans as such right now in that segment, right?
So water tank, our run rate is continuously improving. So we will be delivering the number only at the year-end. We will communicate exact numbers because there is no point unnecessary to give every monthly number or so.
Whenever there is a new product we give, but now it is already a 2-year old product. So also your question regarding adding up capacity, so we have made it a rule that wherever we are building our plant, we are installing the tank machines. Most of our facilities will have the tank machines.
Okay. Great. And sir, just one last question. If you could just highlight on your CPVC and PVC mix in Q1 and FY '23?
We don't share all this number. We have stopped it since last 3 years.
The next question is from the line of [ Deepak Jangid ] from Purnartha Investment Advisors Limited. Sorry to interrupt sir, you're sounding very soft. Can you speak a bit louder.
Yes. Is it good now.
Sir, slightly better. Can you increase the volume in the phone.
Sir, my question is, as you have announced the capacity expansion, what is the CapEx requirement year-wise for FY '24 to FY '26?
FY '24, we are expecting to put somewhere around INR 350 crore-or-so. And FY '25, we have still not worked out the exact number, but it should be somewhere around INR 250 crore-or-so.
Okay. And as you have mentioned that for the next 3 years, it might be unnecessary for giving a guidance of 20% to 25%. So as we have grew 31% in first quarter, what do you foresee for the next 3 quarters in terms of volume growth?
So I said that we have -- originally, we have given our guidance of 15%, okay? First quarter is very robust and second quarter started with a very, very good number. So definitely looking to the current situation, it looks that the number will be very, very conservative. So once Q2 will be getting over by that time, we will be understanding the fairly the demand scenario of the market.
We want to understand whether this is the temporary kind of demand or this is a permanent kind of demand. So I think clearly, if 3 quarters continuously volumes are improving, that clearly indicate that the numbers are going into the right direction. So wait for the Q2 number, then after definitely, we have to change our margin on a upward direction -- sorry, on our guidance on an upward direction. So that will be happening only in the Q2 con call.
The next question is from the line of Shubham Thorat from Perpetual Investment Advisors.
Sir, I just had one question. You mentioned that you have witnessed unexpected surge in demand. I just wanted to pick your thoughts on what could be the possible demand drivers behind this surge in demand and how sustainable is this demand?
So sir, I think Kairav has already communicated that the demand is coming from across. It is not specific. One thing that we feel that it is coming from the rural also, it is coming from the urban also, it is coming from the new geographies also. It is coming from the new products also. So I think overall demand scenario is good.
Otherwise, on a scale, if you are growing at a 31% volume cannot be from the one sided. And secondly, we are very clear that we are not an agri-dominated company. So that looks that the overall demand scenario is good. So I don't think that it is a specific any reason where the demand is coming. So we have to, again, wait for one more quarter, that's what I said to the previous question.
So let's wait for the Q2 number, then after, we will be knowing further about the market, and we are also deep diving because we are also committing used CapEx. So naturally, we have to deep-dive the thing so that it should not happen that we will be falling short of the demand or we may exceed too much of capacity and then the demand go away. So we are also understanding in deep.
So hopefully, by another couple of months, we will spend, then we'll be having a fair idea about the market. And then we will be able to say confidently to all of you. But at this stage, I think give us some more time to understand the market. And let's see -- because it is not specific to only Astral.
Other companies are also growing. Of course, Astral is less dependent on agri, but still, overall, the market scenario is good for and very healthy for the industry per se. So in that case, we are of the view that it should be better only in the coming time. But again, wait for some more months and then we will be in a better position to communicate.
The next question is from the line of Ritesh Shah from Investec.
I have 3 questions, 2 for Sandeep bhai. Sandeep bhai, can you broadly touch upon the management structure that we have in place? We had recent promotions also which were there. And I do understand that there have been new appointments at the top level, including CHRO, CTO. So how are we looking at the business segments given we have multiple growth engines in place? That's the first question.
And the second question for you is, again, is there any specific reason not to be into government orders? If we are not risking receivable days, we can still do the volumes via contractors. So any specific reason not to be over here? So those are the 2 questions for you.
And I have a third question for Hiranand saheb. Do we still stick over number of INR 1,500 crores, what we have given, I think, a year back with a 4- to 5-year timeframe. So those are the 3 broader questions.
See, firstly, we are not averse to any government business. We are already doing business through big contracting houses in a big way, only supplying to projects which they take on the government projects because we are in corrugated pipes and we are also in some of those products.
But we have not made SDP or LDP, and we are not in that segment. So most of the projects which have come is basically on the Jal se Nal which is more they use the HDP or PP pipes, only HDP pipes and which segment we are not there at present. And we are also not planning to get into that because we are already getting a robust demand for the segment which are there in the infrastructure business of private housings and various projects which you are aware of.
So that is the reason. And if we have to come, we cannot come alone in pipes, so we need to also have fittings with that. So that is the reason that we have no adverse things on the government business nor at present we are having the products which are used in mass to be supplied to them.
Second thing for the senior management at various levels. Yes, we have put in place a head for the IT division, HR division. And we have a lot of seniors who are there in Pipe division. We are adding a few also there for projects on various segments, which are needed. In a couple of months, there will be more seniors added, adding to the Export division also, we are adding people. And also, we are going to add senior if required especially to address the rural markets.
Coming to the Adhesives, we already have every segment, a 4 segment, the maintenance, the wood segment, the white glue segment, that is the industrial adhesive segment and the last segment is the construction chemicals.
So every segment has their heads and they are on the job to do, how we can grow, and that is already seen in our growth. So coming to the Paints as we communicated, we have already not only zeroed down, but seniors and people professional from the industry have joined and are going to join. And at the right time, we'll also let you know about the profile and the way they think we're going to take...
I've already communicated that in the faucet and ceramicware also, we are strengthening the team on a lot of segments, which is needed to ramp up the sales to see that the product reaches every nook end quarter of year, and that also in next 2 quarters we'll communicate.
So we are strengthening our sales on the professional front, the manpower front, in all the ways. Now coming to the third point, I think Hiranand bhai's point is there, so he will give you the complete...
So Ritesh, I think I can add further what Sandeep bhai said as far as the government order is concerned. The first biggest problem with us is the consistency. Our company always believe in consistency of growth and consistency of margin so that -- and the quality, which is missing in this kind of government businesses.
Secondly, there is no margin stability in that. Thirdly, receivable is always a challenge. If something goes wrong to the contractor there, then there will be always a challenge on the receivable side. Fourthly, these all businesses are seasonal businesses. Particular season, they give you the order rest of time you have to wait and watch.
And many times, government money stuck, your orders get stuck. So there are a lot of ifs and buts connected with the government business. So that's why we thought that we should not enter into these kind of business.
Secondly, we are very happy with the growth, which -- run rate, which we are growing. We are continuously growing the organization at a 20% CAGR for the last 10 to 15 years. So I don't think that even if that portion of the business will go away from us, we don't have any regrets for that. But we always believe on certain principles. And within that principle, this business is having, and there are certain other issues, which I can't discuss on the call.
Now coming to your question specific to me regarding the INR 15 crore from the new project -- products. Yes, we are working hard on that direction. And I think all our new products, whether it's a Silencio, whether it's a DrainPro whether it's a -- you can say, FirePro, whether it is tank, whether it's a paint, all directions, we have done our work.
It is only when it will start picking up fast, that is the only waiting time. So 5-year guidance, whatever we have given, I think we should be moving towards that direction. Even if INR 100 crore plus/minus doesn't go into effect, as long as our long-term strategies are clear. Our -- I can say the foundations are clear, then I think INR 100 crore, INR 200 crore plus or minus is not going to affect us because we are not here for 1 or 2 or 3 years. We are here for next 10 years or maybe 15 years kind of vision. So I don't see we have any challenge at this point of time.
Sure. Just a follow-up for Sandeep bhai. Sandeep bhai, are we averse to increasing exposure to agri as a segment? The reason to ask this question is, we have done phenomenally well on the CPVC side. I'm not sure what our market share is and volumetric terms over here. But at some point, growth will become a limiting factor. So are we open to agri as a segment, say, 12 months out, 24 months out to ensure that we continue to grow on volumes?
Ritesh, we are completely open. And actually, we are continuously building capacity on that. As I told you we have built enough capacity. But last year, what was the demand. And this year, I told you a guy buying INR 1 of material is straight [indiscernible] INR 5 of material. So nobody would [indiscernible] that 5x, 10x demand would be coming overnight.
So we have continuously -- we bought off-the-rack machines and put them in production in June-July. And we are continuously adding machines on that. So we have never adverse. We have the highest range of fittings available here. We are already adding machines at every plant and ramping up the capacity.
And Ritesh bhai, as you are aware that we -- whatever agri product we sell, we want to sell at our price, and we will sell at our quality. And in a lot of areas, the contractors and lumbers use agri for drainage purposes in place of SWR.
So a lot of markets, agri product is used for drainage, and we are selling a good amount of agri, but we are sometimes not in the water supply business of agri lines because that is a very, very, very low margin business, and it will impact our per kg margin also. If we -- we can easily do that business, but then it will affect our per kg margin also.
But we look into the whole scenario we are continuously ramping up our capacity. As I told, I told about the huge capacity in these 3 plants and plus adding in the existing plants. So obviously, so much capacity is not going to come for the plumbing, CPVC products, but it's obviously going to even have a good section of pipes in PVC and agriculture.
So secondly, Ritesh, I think I can add a very, very critical question that agri business is viable with the profitability only if you are a decentralized company. The more decentralized you become -- the agri business becomes very, very viable for you, okay?
So Astral was not so decentralized company. The way now our capacity expansion in now all the four zones our plants are there. Now new 3 plants are coming. So now Astral will be pretty decent level, I can say a decentralized company.
Now once you become a decentralized, you are going to save a huge cost on freight because agri carry a lot of freight element. If you are near to the market, your freight element goes away. So in that case, even agri business is also equally viable because the working capital cycle is very fast with the agri. ROC point of view, also agri business is a reasonably good business, but that is only possible once you become a decentralized company.
So now Astral is becoming a decentralized company, having 8, 9 plants or 10 plants across the country, then it becomes very easy for Astral to ramp up volume into that direction also. I think we are working seriously on that ground also. And we'll, at an appropriate time, we will increase our volume into that direction.
We'll move on to the next question that is from the line of Rahul Agarwal from Incred Capital.
Sir, 3 questions. Firstly, are duplicate products in the country, a big problem because the Leader also mentioned that East India is copying a lot of the Leader brands in the country, and it's become a headache to manage. Sandeep bhai, do you agree to this?
This is going on for years. It's not overnight. But it is not a headache that hurts the volumes down or something that. It is going on from years. It is going on from 10 years and even more I think.
So nothing specific you...
Let me finish. And everyone, we and us, every company is jointly or individually taking actions. And it is going on, very swift actions are now taken, a lot of legal actions are taken, a lot of -- if you see newspaper cutting bring it to the notice of the public at large on these segments. And fairly now, everyone is working and everyone is controlling this. And it is quite getting control in a few months, which happens a few months. But basically, it is not concerned with the growth...
Right. Because Supreme management mentioned that they lost some volume and some market share in East India because of duplication, and it was a bigger issue basically versus the past gone 6 months. Hence, I was just checking with you. But I get what you're saying.
Secondly, on Adhesives, the growth guidance is about 15%, 20% value growth for fiscal '24, I'm assuming this accounts for the Dahej ramp-up in the second half. But fiscal '25 should see a step jump, right, because the capacity increase very high. So any thoughts on fiscal '25 market share gains and top line growth, please?
It would be obviously better than what we do this year because of the capacity expansion, the value, which will help us in the raw material cost because of the bulk production and all. So obviously, this new plant, something will not be working, but we'll be expanding and we'll be getting better. But Hiranand bhai can also add to this.
Rahul, I think we are preparing ourselves for the higher growth. But again, I'm telling you that coming 3, 4 months will give us more confidence to say that now we are ready, and we feel on the market ground that we can easily grow at this level. But right now, we have given a long-term guidance of 15% CAGR volume for 5 years.
I think we have stick to that guidance at this point of time. And Sandeep bhai also rightly said that after 1 or 2 quarters down the line, value growth will also come in back because now the PVC bottom out has been happened. Now there is no further bottom. So from there, we can see that the value growth will definitely going to go up. So keep finger crossed, wait for some more time to have more confidence from the market. But at this stage, yes, we are very positive.
We have always been one thing is that whatever we have guided, the price to the best. But especially, we have been very transparent with everyone about the way the businesses are moving, the way we are looking forward and the way we are changing and the way we have our own vision to keep each segment ahead. So that is helping a very clear communication of what is being -- what we are going to do and what is happening and what is exactly done and what is achieved.
Sure. I understand. Where I was coming from -- purely from the Dahej perspective that my sense was 15%, 20% looks conservative, but I get what you're saying. And last question, Hiranandji to you on the Gems Paint. The payments were 51% and 29% buyouts, are all these done this INR 465 crores is net of that?
No, we have not done the payment, which we are expecting to be complete before 30 September.
So what is the total payout we should expect?
So like total payout will be somewhere around INR 275 crore to INR 300 crore for all 80% buyout.
Okay, INR 275 crores to INR 300 crores. And the balance, you said that contract is like it will be spread over the next 5 years. Anything specific you'd like to share, like when does it happen? Or is it matched to some -- what are the conditions basically there?
No. There is no condition. We have fixed the multiple of EBITDA. That is the 11x or 10.8x or I don't remember exactly, but it roughly about 11x of EBITDA. So whenever we want to buyout the balance 20%, we have to pay that multiple. There is no other condition.
The 11x EBITDA is like for the year in which we will buyout that year we should multiply...
Naturally, trailing 12 months.
[Operator Instructions]
Hiranandji, there are no more questions in the queue. Sandeep bhai, Hiranand bhai, any closing remarks if you wish to conclude the call now?
Sure.
So thank you, Ritesh, for hosting this call, and thanks to every investor for participating in this con-call and always putting trust on Astral management and giving us confidence to work hard, and we assure you that we will continue to work hard and keep giving you excellent results in the coming times.
Thank you, Ritesh bhai, for hosting this call. And we will deliver our best in the coming quarters, and you will see the new divisions and the new businesses firing well in times to come, and we are very excited for the future at Astral and we will come back with even stronger set of numbers going ahead.
Thank you, Ritesh bhai. Thank you.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Investec Capital Services, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.