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Finolex Industries Ltd
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Ladies and gentlemen, good day, and welcome to Finolex Industries Limited Q4 FY '23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions]I now hand the conference over to Mr. Sohil Kaura from ICICI Securities. Thank you, and over to you, sir.
Thank you. Good morning, ladies and gentlemen. On behalf of ICICI Securities, I would like to welcome you all to the Q4 FY '23 Post Results Conference Call for Finolex Industries Limited. From the management side, we have Mr. Anil Whabi, Managing Director; Mr. Ajit Venkataraman, CEO; and Mr. Niraj Kedia, CFO.Now I hand over the call to Mr. Anil Whabi sir for his opening remarks, post which we will open the floor for Q&A. Over to you, sir.
Thank you, Sohil. Good morning, ladies and gentlemen. Welcome to the investor conference call for Q4 FY '23 earnings. We thank you all for continued support and interest in Finolex Industries Limited.After witnessing the robust demand since last couple of quarters, Q4 also reported a healthy volume growth. Overall stability in prices and company's enhanced focus into non-agri side of the business has improved the profitability during Q4. On a full year basis, FY '23 reported a new milestone achievement of record volume growth of more than 3 lakh tonnes in the pipes and fittings segment.As another mark of achievement, during the quarter, the company added a new state-of-the-art manufacturing facility of PVC fittings at Talegaon, Pune. For this per annum capacity of 12,000 metric tons, the company incurred a CapEx of about INR100 crores, which has been funded entirely through internal accruals. The operations are ramping up as per the plan, and we expect to reach full capacity production in 3 to 6 months.Let me give you some of the performance indicators for Q4 Total income from operations dropped 28% to INR1,141 crore against INR1,594 crores in Q4 FY '22. While the EBITDA for the quarter decreased 18% on a Y-o-Y basis to INR217 crores in Q4 FY '23 compared to INR265 crores in Q4 FY '22, as compared to Q3 FY '23, this was an increase of 137% from INR92 crores to INR217 crores. EBITDA margin also increased to 19.06% this quarter compared to 16.6% in corresponding previous quarter over Q4 FY '22. The company reported profit after tax of INR158.35 crores in Q4 as compared to INR493.8 crores in Q4 FY '22 and INR72.07 crores in [ Q3 FY '23 ].Now getting into segment performance, Pipes And Fittings. Revenue decreased by 14% to INR1,102 crores in Q4 FY '23 from INR1,277 crores in Q4 FY '22. Volume in Pipes and Fittings segment reported a growth of about 4% Y-o-Y to 81,452 metric tons in Q4 FY '23 against 7,629 metric tons in [Technical Difficulty]. The EBIT in Pipes and Fittings segment was INR90.32 crores in Q4 FY '23, down 4% on a Y-o-Y basis compared to INR94.2 crores in Q4 FY '22. However, on a sequential basis, EBIT improved 31% compared to INR68.9 crores in Q3 FY '23.Moving to PVC Resin segment. Revenue in the Resin segment decreased 52% from INR1,044 crores in FY '22 to INR501 crores in Q4 FY '23. Volume in the resin segment decreased 27% to 58,132 metric tons in Q4 FY '23 against 79,182 metric tons in Q4 FY '22. EBIT in the Resin segment was INR117.25 crores in Q4 FY '23 compared to INR156.46 crore in the corresponding previous year's quarter. On a Q-o-Q basis, this is a significant improvement compared to INR12.43 crores in Q3 FY '23. The company continues to have a strong balance sheet with a net cash surplus of roughly about [ INR1,500 crores ] as on 31st March '23.Let me now leave the floor open for questions. I have my colleagues, Ajit and Niraj to answer these. Thank you.
[Operator Instructions] We have the first question from the line of Sandesh Barmecha from Haitong Securities.
Sir, a couple of questions from my side. Sir, our annual PVC resin production is down around 10% compared to pre-COVID levels in FY '23. And that is despite the increase in pipe sales volume. So are we facing any challenges in raw material availability front to optimize -- optimally utilize the PVC resin plant? And so what would be your guidance for PVC Resin segment for FY '24?
Hi, good morning. So the answer to your question is both yes and no. See, this is, in general, no shortage or no issue that we have in sourcing materials. But what did happen actually was, for a couple of shipments, there were issues with those particular shipments. In some of the suppliers in the third quarter and fourth quarter, one of them had a force majeure, and they had some plant issues. So we could not source VCM completely as we had envisaged. But generally, there is no sourcing challenges that we face.
Okay. So what will be your guidance for the full year, sir, FY '24 for the PVC Resin segment?
It should be back to normal.
We should be back to around 260,000 to 280,000, sir?
No, not 280,000. Our weighted capacity is 270,000. So between 250,000, 260,000 tonnes should be a number.
Okay, sir. Sir, if I'm not wrong, we have done INR100 crores CapEx for the 12,000 capacity right now in Talegaon, sir. So if I just do a rough math, that comes to around 140 or something -- around INR1 lakh per metric ton. So isn't that a bit on the higher side, sir?
See that includes the cost for molds. So if you look at the machine and all, that cost is not very material. But what happens is, the number of SKUs that you're going to manufacture there, will require mold. So the large part of this investment is towards the molds.
Okay. So we're expecting to increase our SKUs basically going forward, sir?
Yes. Gradually, they will also increase. And some of the -- so this plant will make a large number of SKUs.
Okay. Sir, what would be our growth -- volume growth and EBITDA margin guidance for Pipe division for FY '24, sir?
See, generally, guidance, we don't give. But to give you a basic trendline, if you see in this year, when we see last 2 years, '21-'22 were abnormal, even for pipe segment, because this year, in Q2, we -- obviously we suffered a loss because of the prices going down, which continued in the month of October and November. But if you look at the trendline, after November, prices have increased or have been stable, and that is reflected in the numbers that we have for Q3 and Q4. So slight improvement on these numbers going forward, assuming that PVC remains at these levels or remains constant, should be the numbers.
Okay. Sir, a couple of just data points, sir. Sir, what will be our CapEx plan for FY '24 amount or plan, sir?
Roughly INR150 crores to INR200 crores.
Okay. Sir and non-agri pipe volume for FY Q4 and full year '23, sir?
So the non-agri Pipe segments, we have a total contribution of approximately 35% over the overall volumes. And that is the segment of the industry, which is growing robustly. So we expect a 15% to 20% growth in that segment.
15% to 20%. And sir, same for CPVC pipe volumes and revenue, sir, for this quarter, Q4, basically?
See that -- the growth in CPVC is going to be faster than the overall [ moment ].
Right. Okay. And sir, fittings volumes of our Q4, sir, volume and revenue for Q4 FY '23?
So we normally don't split up Pipes and Fittings volumes.
We normally do, but we -- when we internally discuss we realize that it is not so relevant. It is better to look at the company as a whole than the full segment as a whole.
Thank you. The next question is from the line of Achal Lohade from JM Financial.
So my question is on the agri business. Can you help us understand what has been the growth in the fourth quarter and for the full year? And what has been our market share, if you can give a broader [Technical Difficulty]?
Sorry, we couldn't hear you very well. If you can repeat the first part of your question again, please?
Mr. Lohade, your volume is very low. So could you please increase the...
Yes. Is it better now? Yes. Sorry about that, sir. Sir, my question was on the Agri business in terms of what has been the growth in the fourth quarter and for the full year FY '23 in terms of volumes?
So see, this again is something -- while we gave this agri non-agri split, to be very honest, the end use of these pipes and fittings, it differs from region to region. For example, there are some states and some regions where agri-based pipes are used for non-agri application. So hence, we realize that it is not a right number to give probably -- to give the exact split. What we would request you is to look at the business as a whole.
Yes, that's fine, sir. I mean, what I wanted is the growth, not the specific mix or anything. It appears to us that the agri is probably flattish, marginally higher for the quarter, given the non-agri probably is growing faster, like you mentioned in one of the answers. So just wanted to understand that for the fourth quarter and full year, how has been the agri -- from our -- production perspective, may not be from an application perspective, but from a production perspective, have you seen that it's kind of flattish? And if yes, what could be the reasons, given now PVC prices are pretty much that we bottom or stable?
Yes. So see, if you compare with Q3, obviously, the volumes of Q4 were lower. But if you compare with last year's same quarter, the volumes are slightly higher, okay? On a demand per se, you are right that prices have gone down. But if you look at it, the volumes of roughly 80,000 -- 82,000 tonnes, 81,000 tonnes that we have done, it is more or less at the pre-COVID levels. And what has also happened is that, because of the huge demand surge in Q3, our view is that some of the demand, which would have otherwise come in Q4, may have been pulled back into that quarter. But right now, as we speak, we are seeing strong demand in both agri and non-agri.
So can you talk about full year, sir, in that case? What has been the growth for agri?
So again, full year, if you see our company from 236,000 tonnes to 303,000 tonnes, which is a growth of almost 30%.
So for the agri business, sir?
Similar levels.
So it's kind of flattish. You're saying -- while we are seeing the other companies are growing much faster, and I presume agri is also contributing, does that mean that we have kind of lost market share? And if yes, why? Could you give some clarity on that?
So if you look at it from a company perspective, our full year growth was almost 30% year-on-year. So I don't know how you are saying that we have lost share or market share?
So sir, if I talk about the market leader, grown at 37% Y-o-Y in this year. If I look at from a 4-year CAGR perspective also, like pre-COVID to FY '23, the CAGR for Supreme is 8%, while for us, it is 4%. So I'm coming from that background, sir.
So this, you'll have to look at it in context with the total market and not just of the organized players.
So you think the total market is flattish, Sorry, I'm kind of engaging that to and fro, sir. You are saying the agri market has been flattish from a pre-COVID perspective. I mean, is that understanding right?
No, that is not right. Pre-COVID the highest that we did was roughly 256,000 tons, 250,000, 260,000 tonnes. This year, we have -- on a company level, we have crossed 300,000 tonnes. See why that is flattish.
Thank you. The next question is from the line of Karan Bhatelia from Asian Market Securities.
So what kind of SKU additions we've seen in this year or last 2 years [indiscernible]?
So can you just continue with the question? I'll get the numbers, and I'll tell you.
Yes. And also on the Nal Se Jal Scheme, so how has that scheme shaped for the [ organized pack ]?
So typically, we don't deal directly with the government or participate in the government tenders. These are done by our dealers. And definitely, it has given a boost to the overall industry as such, but we don't track numbers directly with the government.
Right. And on the SKU addition...
I will let you know.
And sir, just the bookkeeping breakup, so prices for PVC in this quarter, PVC and EDC compared to last year, that's [Technical Difficulty].
Sure. So if you look at Q4 FY '23, the PVC prices were averaged $920, EDC was $288, and VCM was $766. For the full year, PVC was $1058, EDC was $410, VCM was $844. These are all average [ axis ] numbers. So the delta PVC-EDC delta for the quarter average was $632 and the PVC-VCM delta was $473. For a full year basis, the PVC-EDC delta was $648 and PVC-VCM was $294. Right now, as we speak, latest, PVC prices are around $800, $810. EDC is hovering around $330, $340, VCM is around $690 or $700. The PVC-EDC spread is around $470, $480. And the PVC VCM delta is around $120, $130.
Thank you. Thank you for the answer. And sir, any thought process on the PVC pricing for the rest of the year or for six months [ Q3 sir ]?
See, they are holding stable as of now, but we'll only get to know how they move, when the year is over 6 months [indiscernible].
Thank you. The next question is from the line of [ Dhvaneet Savla ] from DN Trading. Please go ahead.
I have [ a few] questions, sir. First is a little hygiene kind of a thing. So I wanted to know what would have been our comparable PAT number without the exceptional item in the last year? And on the basis of that, how much growth or degrowth have we posted? And second question is a little longer, where do we see our profitability or our top line heading after the completion of this CapEx? And where do we see the PVC prices settling in the long term, because it's been quite volatile in the last couple of years? Thank you.
Sure. So see, our PBT before exceptional item last year was INR1,000 crores, which for this year without exceptional items, is almost INR300 crores -- INR297 crores to be precise. And this, what you see on a segment basis or a full year basis, in the Resin segment, it was INR722 crores whereas it is INR92 crores -- almost INR92 crores this year. On the Pipes and Fittings it was INR250 crores last year, and it is INR154 crores this year.
Okay. So a significant decline has been seen in the resin -- correct?
Yes. Correct.
Thank you. And on my second question.
Can you repeat that, please? Can you repeat the second question please?
Yes. So we were, on a long-term basis, I know that you don't give much guidance on it, but after our entire capacity addition is completed, what kind of revenues are we looking at the consolidated level, both resins and pipes? And where do we see the PVC prices settling, since it's been quite volatile in the last couple of years. So is the current pricing is where it will settle or a do you see any trend coming out -- in the coming quarters?
So you're right. If you look at the last 10 years horizon for PVC prices, you will see that we have been fairly steady. The pre-COVID level prices were fairly steady for the past -- prior 5 years. Now the PVC prices have almost come to those levels. And since December, they have been fairly steady. The expectation is that, unless there is any major shock, these levels are likely to continue. And difficult to predict, but at this point of time, that is the assumption we are going with.In terms of growth, it's difficult to give a number to this. But in terms of industry, we are expecting that the agri segment is likely to grow 8% to 10%, and your non-agri segment is likely to grow anywhere between 15% and 20%.
Okay. Can you please repeat that? Agri segment to grow at?
8% to 10%, and your own agri segment is likely to grow anywhere between 15% and 20%.
So on an average, we are likely to see a double-digit growth going forward?
Expectation is that.
Yes. All right. Thank you very much and all the best for the coming quarters.
Thank you. The next question is from the line of Pranav from Equirus Securities.
And sir, I just wanted to understand if you can throw some light on this recent imposition of quota restriction on 4 countries on PVC Resin imports. So how does that impact the industry? And let's say, if the quota is overshooting, then what kind of [ implications ] can we see?
Hi, Pranav. Good morning. So these quota restrictions have -- so the guideline which has come on this quota restriction, this is applicable for import of PVC, which have higher than 2 PPM of content. See, while it has come, even in the industry, we are also not very clear how this is going to be implemented; because -- and we don't know what is the tracking mechanism of the government going to be, on how to track when the quota is getting completed. For example, if I am a buyer and I buy something, I don't know whether -- where I am lying in the quota bucket. And similarly, we also do not know what will be the implication if this quota is breached, whether it will be on the buyer or the seller or the industry, we don't know as of now. So hopefully, these clarities will come during the course of time.We also do not know since when is this applicable. There's no start date as such. The whole reason for this was, that very cheap PVC was being dumped into the country, which was not as per the grade that is right for the humans. So the step is in the right direction. Hopefully, some clarity we will receive from authorities. But as of now, I don't have the answer to your question.
Okay, sir. But sir, should this lead to stability coming in the PVC projects since imports were actually creating a lot of problems for the domestic manufacturers, and India being kind of a growth engine, a lot of other countries are also exporting to India. So will there be a stability in PVC credit because of this?
Hopefully, it is a positive move, as I said, because a lot of cheap PVC was being dumped in the country. So let's see how it pans out.
Thank you. We have the next question from the line of Abhishek Ghosh from DSP.
Sir, I joined in late, so I don't know if you have discussed this issue earlier. But in terms of capacity now, what is the peak capacity that you have currently in the system, sir?
So we have the pipe capacity is about 370,000 and fitting capacity of about 48,000 metric tons.
48,000 tonnes. Okay. So sir, is it fair to assume that in a good quarter, can you go to a peak volume of almost about more than 1 lakh tonne now, given the augmentation of capacity that you have done?
Yes, we can.
Okay. Okay. And sir, in terms of going forward now, how should one look at the overall capital allocation, given the large amount of cash that is there in the books? How are you thinking about it? Because what we overall see. that pipe demand continues to be very strong across the country, led by now a recovery in agri, infra and other things and plus housing is also doing well. So how should one look at the capital allocation, if you can just help us with that, sir?
Sure. So if you see, we added this capacity in Pune, on the fitting plant last quarter -- this quarter, sorry, in March. So similarly, wherever we feel that we are probably kind of in the ballpark of reaching the existing capacity, we will add capacities. But nothing concrete as of now today.
Sir, any thoughts on the greenfield, because your presence in some of the regions is still -- you're kind of under indexed in those regions and a greenfield capacity can reaccelerate your rate of growth. So any thoughts on that, given the amount of cash on our balance sheet is quite high?
Abhishek, at this point of time, we have sufficient capacity, both in pipes and fittings. Essentially, there are 2 philosophies, having local plants versus transportation cost. At this point of time, with the necessary capacity that we have, it's a toss-up between paying for the transportation costs versus setting up new plants across the country. So we have chosen the first one.
Okay. And you think this pipe volume of about 314,000 tonnes that you've done for the -- sorry, you've done about 303,000 tonnes in FY '23. You can grow that by 10% to 15% for next 2 to 3 years given your current capacity and whatever little opportunity of brownfield that you have. Is that a fair assumption to make Ajit?
Yes, we should be able to meet the demand.
Okay, okay. And just a couple of other questions in terms of competitive intensity in the segment. How are you seeing, because PVC prices went up so sharply. There were supply issues and they dropped fairly sharply, a lot of people had inventory losses. So given this backdrop, are you seeing some change in the competitive landscape, particularly from the semi organized and unorganized segments? Any color there will be helpful, sir?
So given the price volatility, it is difficult for smaller players to survive. So the consolidation among the organized players is likely to increase at this point of time. But at this point of time, we have approximately 55% to 60% of the industry organized, as it is. So that is likely to intensify further.
Okay. And just one last question, and this is particularly to Ajit, that you've been in the system for some time now. If you can just talk about some of the broader changes that you've brought in, and anything in terms of results that you're able to see? Any thoughts or color on that will be helpful Ajit. Thanks.
So currently, it is work in progress. What the organization is doing, is to continue focusing on what we do well, which is in pipes and fittings. And focus -- stay focused in that segment. There is enough headroom to grow. The other areas which we are working on is digitization of our supply chain and improving efficiencies of our manufacturing. So those are the 2 areas which we are currently focusing on [Technical Difficulty] operations more efficient.
Okay. So just one last thing, in terms of capital dilution, just coming back to the cash on book. So one should expect the higher dividend payout now, given that your capital commitment at least over the next 12 to 18 months doesn't seem to entail a large one? So should one assume a higher payout from that perspective? Any thoughts on that?
See the Board has recommended a dividend of INR1.5 or 75%. So that is for this quarter. Next year, we pay -- obviously, the Board will guide us for what is to be done.
Thank you. [Operator Instructions] The next question is from the line of Udit Gajiwala from YES Securities.
Just one small follow-up from the previous participant. So sir, after the 12,000 that we are doing into fittings, your total capacity will be close to 430,000 for pipes. Is that right? Pipes and Fittings [Technical Difficulty]?
Approximately 420,000.
420,000. And sir, on an annualized basis in this business, what could be the peak utilization that could go? Is it -- 75% could be the peak by which you would go for...
In some of the peak months, we do hit about 80%, 85%.
Okay. Okay. And sir, on the resins front, you mentioned that the Q4 EBIT per kg is maintainable, is my understanding correct about it, or we are still looking at that INR14 to INR15 a kg band?
So long term, 14%, 15% should be the number which we should all strive for and that should be an acceptable number.
Got it, sir. Got it. And sir, this INR150 crores to INR200 crores CapEx for '24 will be largely for -- how much will be for this 15,000 and the rest will be for what?
Sorry? The CapEx that you have guided for INR150 crores to... A large part of that CapEx is replacement and maintenance CapEx.
Thank you. The next question is from the line of Yash Goenka from Auriga Capital Advisors LLP.
So I wanted to ask, what is the market value, product launches initiatives which we are taking in non-agri segment to increase our market share, it would be in terms of agri, geographic [Technical Difficulty] can you talk about it?
Yes, we have -- our product range is fairly full, and we have the complete range. Most of the marketing spend and -- has been going towards the non-agri segment and the construction pipes and -- plumbing and sanitation segment, and also increasing the reach, and in terms of expanding, in terms of visibility to our target segment. Most of the marketing spends have gone towards that.
Okay. And we have [indiscernible] geographic reach as well?
One, it is definitely consolidating where we are strong, and also increasing our reach in the new segments in North and East.
Thank you. The next question is from the line of Achal Lohade from JM Financial.
Wanted to check about the margins. If you look at for the industry and also for us compared to, say, FY '17, '18, the margins have meaningfully improved. If you could guide us as to what has driven this? Is this product mix alone? Is it market consolidation? Any -- bit more clarity on that would be great, sir?
So this enhancement has come from 2, 3 things. See, 2, 3 years ago, our reach in the CPVC segment and overall non-agri, as we call it, was much lower. So in the last 3 years, 4 years, there have been substantial inroads in the CPVC and also other non-agri, as we call it, those -- that subsegment. Plus, our fittings have grown faster as compared to pipes. So these 2 factors taken together have resulted in improved profitability, and we foresee that this upward trend should continue.
And the INR15 per kg margin, you talked about the resin I presume? Is that right, sir?
Yes, that was resin.
And how about the Pipes and Fittings -- would you...
On the pipe segment, we used to be around INR7, INR8 earlier. Now we are in that INR10, INR11 bracket. And we hope that gradually, they should go up to INR12 -- INR12 to INR14.
Understood. Just some clarification, sir, in terms of the semi organized and organized players mix, do you think given the stable prices now, you think these players, these semi-organized, unorganized players would come back, or would that drive the competitive intensity? And hence, there could be a pressure on the margins or pricing in general?
See, the type of customers we deal with, they come asking for Finolex pipes. And therefore, they are very brand conscious and they are also willing to pay the price for getting a branded product. So for these type of customers, I don't think the unorganized segment would be of interest.
Thank you. The next question is from the line of Akshat Mehta from Sameeksha Capital.
Okay. So a couple of questions, sir. One question is on the working capital side, where you see [Technical Difficulty]...
Sorry to interrupt -- yes, sir. We are not able to hear you clearly. May I request you to use...
Hope it is better now?
Yes, sir, please proceed.
So on the working capital side, we've seen some increase in [Technical Difficulty] which is new buildings from around 10, 15 days, which used to be there earlier to around 25 days [indiscernible]. I know debt levels have also increased. So any -- just a question on that, is the improvement in debt and working capital levels more to do with the growth in non-agri segment that is there? And how do you expect this to pan out going forward?
Sure. So see, on the receivable side, you are right. Few years ago, we were predominantly cash heavy. But over the years, as our non-agri portfolio grows, that is the demand of the market, and we move with the market that way. So credit is given to customers. This ranges between 30 to 60 days depending on customers. So that's why you see a slight increase in the receivables. But this is not very away from the market. This is how -- and this is expected to be in this range even going forward.On the debt, we do not have any long-term debt. The debt that you see on the balance sheet on 31st March, that is basically buyers credit, which was not due for payment. So it is normal cycle. I mean, we could have -- it is -- if you look at the net debt number, that is what you should look at because what we've done is, our net cash balance is more, with a slightly more buyers credit. It would have repaid it, and then overall net debt would have been or net cash would have been the same.
Thank you. We have the next question from the line of Dhananjai Bagrodia from ASK Asset Managers.
Congratulations on excellent results. Wanted to ask you, sir, how much of a sales roughly...
Excuse me, sir, your audio is not clear. May I request to please the use the handset?
Sure, this is better?
Thank you sir. Please continue.
Sir, I wanted to ask you how is -- how are we placed in compared to like sales for like the Jal se Nal (sic) [Nal se Jal] program?
Can you repeat that, please?
Can you hear me, hello?
Yes. Can you repeat the question?
Sir, I would request to you to keep your handset a little bit further and speak, because we can hear some air disturbance along with your voice.
One second. Is this better? Okay. Perfect. Sir, I just wanted to ask you in terms of volumes, would you be able to break out how much would be going for Jal se Nal (sic) [Nal se Jal]?
No, we don't deal directly with the government tenders. And this is directly dealt by the dealers and the retailers themselves. So we do not have a split based on what we supply for any of the government programs.
Okay. So because one of the players had mentioned that they had large volumes, but for us, we're not seeing anything of that [ shape ] yet right now, right?
Yes. We don't keep track of the government tenders, yes.
Thank you. The next question is from the line of Vignesh Iyer from Sequent Investments.
Vignesh IyerHello sir. I just wanted the data point relating to...
Mr. Iyer, I'm sorry to interrupt, sir, your audio is not clear. May I request you to use your handset, please?
Yes, I'm using my handset. Is it clear now?
Sir, please continue, we will figure it out.
Hold on a second. Hello? Yes. Is it clear now?
Yes, sir much better.
Yes. Okay. So I just wondered this production volume data for Pipes and Fittings and PVC resins for quarter 4 FY '23?
See, we give the sales data. So if you look at the sales on the resin segment, just give me...
I mean, I guess last time around, you did share the production data?
No, generally, we don't. Okay. If you look at -- okay, hold on. Production on resin Q4 was 65,000 tonnes and on Pipes and Fittings, roughly 87,000 tonnes.
Okay. Okay. And could you tell me also, if we did pay tax around 22% for FY '23. So would we be maintaining a tax rate at 22% going further?
In FY '23, our effective tax rate was lower because we had a capital gain on sale of land, and we are in that 25%.
25% on it, right.
Thank you. The next question is from the line of Abhishek Ghosh from DSP.
So just a couple of questions, in terms of newer products, is there certain new application-based products that you all are working on. If you can just give some color on that?
Abhishek, no, at this current point of time, we have a full product range for the plumbing and sanitation as well as agri segment. So we have not introduced anything at this point of time. When we launch new products, we'll let you know.
So you think in next 12 to 24 months, one should expect some amount of newer products to come through, and see something in WIP?
We will let you know as we launch the new products.
Sure. And just one other bookkeeping question. If you see the other expenses as a percentage of revenue has been steadily increasing in the last 3 to 4 quarters. So last year, it was about 12.5%, 13%. This year, it's moved to almost like 19%, 20%. Anything that one should kind of take...
Two things there, Abhishek, one, this is a result of falling PVC prices. So if you see even in our total overall revenue, where our volumes have grown in the last 2 years, revenue that we -- even this year is lower than last year, which is the reflection of reducing PVC prices. So then when you look at it as a percentage of revenue, you might see an increase. Secondly, on a standalone basis, power expense has increased. So you see some other costs going up because of power and fuel. Apart from these, there should not be anything which distorts the picture.
Okay. Because I was more comparing your other expenses to precrisis level, where the PVC price was kind of comparable. And at that point in time, you had about 14% to 15% of other expense as a percentage of top line, which moved up to almost 20% now, 19%, 20%.
So as I just said, one is power. Power is coal expenses have gone up. This year, if you see, you'll also see ForEx loss because of the weakening of rupee.
Okay. How -- what's the quantum of that number, ForEx loss?
Around INR30 crores.
And most of that would be in second half?
Some first half also and some second half. Both.
Okay. Just the other question in terms of how is the current channel inventory that you are seeing in the system, given that PVC prices have dropped in the current quarter, and how is the overall demand panning out?
So the -- with the drop in PVC prices, the inventory levels at the retail level is quite low. But there is a significant amount of demand. Q3 has been -- was outstanding in terms of demand. And Q4 also has been very fairly robust, in spite of Q3 being a record quarter. We are continuing to see demand going forward as well. Q4 and Q1 are typically the stronger quarters.
Thank you. The next question is from the line of Mitul Shah from Reliance Securities.
First question, again, on this April-May situation compared to Q4, in terms of agri demand particularly and sir pricing, compared to Q4 level?
So on PVC pricing, if you see in January, February, the prices were more or less stable. Prices went up by INR4 end of December and then by INR2 in the beginning of January and entire January and February and mid of March, they were stable. From 14th March, mid of March onwards, PVC prices have dropped by almost INR11. But after that, they have been stable. Current market prices also, they are going up and down by INR1 or 2 every week. But I would call it, in my view, more or less stable.
On the demand side, agri pipes?
So the demand has been fairly robust. Yes, there has been some unseasonal rainfall in the month of April and May, but they have not significantly impacted the demand situation.
Sir, based on the numbers, Q4, production level was slightly higher for both the segment, pipes as well as resin, compared to sales. So those high-value products and right now pricing coming down, so would there be some negative impact in Q1 because of this?
No, not because of this. See, our -- if this reflects that our inventory levels are actually at a lower level, which is a good thing for us, if prices continue to fall.
Thank you. [Operator Instructions] The next question is from the line of Rahul Agarwal from InCred Capital.
Sorry, I've joined the call late. So pardon me if my questions are repetitive. Firstly, on the earlier question on product innovation, and I just wanted to get your thoughts around these composite pipes which are getting launched, combined with plastic and metal, and something on the DWC pipes? I'm aware that you just said that we'll communicate in terms of whatever innovation we do as and when it happens. But just your thoughts in terms of India demand for these pipes. That's my first question.
These new segments which are coming up are fairly small and it has to be -- it's just a wait and watch for most of the manufacturers to see whether they actually take action. At this point of time, the segments are fairly small.
Okay. So basically, it's like more innovative from the manufacturer side and then trial and error in terms of whether there is demand or not. Is that the way to look at it?
Correct. It also depends upon the amount of pool coming from the market as well. So it is both. The companies are innovating and experimenting in various small sections and see how the traction happens.
I get that. And one question was for -- on the other expenses. My sense is, generally, basically, fourth quarter is a higher number for employee cost as well as other expenses. This quarter looks lower. I don't know if you have explained this earlier, but just pardon me for that. But any one-offs here for employee costs and other expenses being lower in the quarter?
No -- one-offs and employee costs during the quarter and -- so employee cost is normal. There is no one-off come in, it's lower actually. And others, as I said earlier, power and fuel is higher as compared to last year. That is because of the coal prices, the way they have moved [ away ].
Okay. Because I can see that the employee cost is actually flat Y-o-Y fiscal '23 over '22. So any specific reason for that, for that being low?
No, that is normal.
Okay. And last question is on the sale of the balance land. Any update if you could provide, please?
So nothing concrete as of now. But hopefully, this year, we'll be able to close the transaction.
That's another INR350 crores, right? Is that correct?
Yes, at least.
At least, okay. Thank you so much and Ajit, all the best for your promotion and best wishes. Thank you so much.
The next question is from the line of Pankaj Kumar from Kotak Securities.
Sir, question is regarding the PVC sales and volume numbers, if you can help us with that in Q4 and for the year?
We don't declare numbers by PVC groups here.
So like the growth that you see in the CPVC is higher than what we see in the Plumbing segment overall?
In the Plumbing & Sanitation segment, the CPVC growth has been far higher than that.
Thank you. We have the next question from the line of Hemang from Anvil Research. Please go ahead.
Hello? Yeah sir, my question is, again, on the other expenses. So in percentage terms, it looks higher, but on the absolute terms, if you are seeing, like pre-COVID it's around INR450 crores right now, it's around INR840 crores for the year. So power costs certainly have gone up in the current year or...
Yes. So if you look at it from a pre-COVID level. Yes even in per unit terms, power cost has gone up because of the rising coal prices. Apart from that, our manufacturing expenses, they also -- in line with our increase in volumes, they have also gone up.
Okay. So there is no one-off in this number. So these numbers will be sustainable on the other expenses?
Yes. Obviously, if coal prices cool down, we will see some reduction in the power cost.
[Operator Instructions] The next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.
Just one question on the [ debt ]. You obviously explained that the agri, non-agri mix is actually going up, and hence, the overall blended receivable cycle is going up. Should we expect further increase from here, or is it -- or this should settle at somewhere about 25 days on a company level basis?
On a company level, it should be less than 30 days.
So in spite of -- the mix actually is expected to further go up, right?
Yes. That's right.
But the debtors will stay at this level. That's what you're saying?
No, it is right now at 25%, right? So it should go up to 30-odd days level.
Okay. Okay. Got it. And just last question on the capacity, could you help me with the year-end capacity for pipes and fittings and resin [ fleets ]?
So resin production, we have a capacity of 270,000 metric tons per annum. For pipe capacity, we have approximately 370,000 metric tons per annum, and fittings capacity, we approximately -- have about 48,000.
And how much do we outsource? Because I think we have some exclusive partners, what's the capacity there?
So this 48,000 includes the capacity of the outsourced partners.
Okay. Okay. So 48,000 is basically both in house plus outsourced...
And outsourced, yes.
And in-house is how much of that 48,000?
12,000.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Sohil Kaura for closing comments. Over to you, sir.
Yes. Thank you, everyone, on behalf of ICICI Securities, I would like to thank the management at Finolex Industries for in this opportunity to host the call. I don't know sir, management, anyone would like to give any closing remarks?
We will just end the call here, thank you.
Thank you.
Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.