HIL Ltd
NSE:HIL
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2 436.75
3 099.3
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to HIL Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, sir.
Thank you. Good morning, everyone, and welcome to HIL Limited's Q1 FY '23 Earnings Conference Call for Investors and Analysts. Today, we have with us Mr. Dhirup Roy Choudhary, Managing Director and CEO of the company; Mr. Saikat Mukhopadhyay, CFO; Mr. Ajay Kapadia, Vice President, Finance and Accounts. We will first have Mr. Dhirup Roy Choudhary making the opening comments, and he would be followed by Mr. Mukhopadhyay, who will bring out financial perspectives.
Before we begin, I wish to state that some of the statements made on today's call could be forward-looking in nature, and details in this regard are available in the earnings presentation, which has been shared with you and is also available on the company's website.
I shall now call upon Mr. Roy Choudhary to present his views. Over to you, Dhirup.
Thank you, Siddharth. Good morning, everyone, and a very warm welcome to HIL's Quarter 1 FY '23 Earnings Call. Thank you for taking the time to join us today, and I sincerely hope that all of you are doing well.
Before I share my views on the business performance, it gives me great pleasure to welcome Mr. Saikat Mukhopadhyay, our new CFO, to the ONE HIL family. Coming to the business results, I'm pleased to share that we started the final financial year by delivering activity double-digit revenue growth. Our performance during the quarter reciprocates HIL's agility, nimbleness and boldness. During the quarter, we continued to face inflationary pressures in most of our business segments. These ripples were caused by the persistent inflation in key raw material costs, high fleet rate and the ongoing geopolitical scenario in Europe.
Let me now take you through the individual performances of each of our business segments. The Roofing Solutions business continues to deliver strong results in terms of volume and pricing. This was primarily driven by our team's efforts using digital connect and last-mile reach, our robust brand image, superior product offering and a deeper distribution reach. Due to our impeccable planning, operational efficiencies, market reach using BI tools and execution at the ground level, we could improve market share in first quarter. As I have alluded in my previous calls, our teams have been relentlessly working to plan for alternative raw materials and recipes in response to the ongoing inflation.
The continued cost optimization initiatives undertaken by our teams together with effective use of IoT 4.0, EPM and Six Sigma implementation in most of our plants, helped in reducing the impact of ongoing volatility and limited the impact on profitability margins. Our green Charminar Fortune product continues to garner interest in the market, delivering superior volumes during the quarter. Overall, we remain confident of maintaining our position as the market leader in Roofing segment, and as supply bottlenecks for some of the key raw materials and inflation eases, we will come back to our profitability while maintaining our growth trajectory in this business.
Coming to Building Solutions business, our meticulous planning and strategic execution over the last year or so had helped us deliver the highest ever revenue and profitability during the quarter. We have now been able to penetrate the Tier 4, Tier 3 cities and cherry pick our orders proactively. We are widening our reach in the Eastern region by acquiring the blocks facility near Cuttack, developing new facilities for panels and boards in Orissa and further enhancing capabilities and capacities of our existing plants by using digital efficiencies and automation.
Our plants are 100% utilized and the new acquisition of fast build in Orissa will immediately help us to profitably ramp up this business in Eastern geographies, where we see a huge demand potential. The teams have streamlined their efforts on tightening the terms of trade in the channel and as a result, we are expected to deliver profitability on a sustained basis in this business going forward.
Moving on to polymers segment. The segment has been consistently delivering high growth rates driven by the manifold increase of our reach and SKUs on offer. Our aspirations for the piping business remains very high, and we continue to witness LD utilizations across all our plants. However, a sharp fall in PVC resin price by almost 20% or more from the mid quarter onwards impacted near-term sales due to channel de-stocking and inventory losses, which has resulted into negative margins in pipes and fitting business in the last quarter.
We are also witnessing a similar trends in current quarter, which will further put high pressure on our margins in this segment in quarter 2. However, we are confident that this business will jump back profitably from quarter 3, and we will continue to focus on expanding our business and product portfolio in this segment. Our aim to get this business up to INR 1,000 crore remains intact.
Coming to our Flooring Solutions business. Europe continues to face high headwinds owing to the geopolitical situation, where all flooring companies, including Parador will pose with a steep scarcity of raw material and doubling of raw material costs over the last few quarters. Our teams have taken returning efforts towards augmenting long-term supply contracts with key dependable raw material suppliers and innovating alternative products during the months, which have all supported towards partially offsetting the impact of huge cost adversely and restrictive demand. The ongoing war between Russia and Ukraine has created an inflational pressure in all European countries, which have thrown open a new challenge for us in view of negative consumer sentiments.
The EU market continues to face gas and energy crisis and market sentiment continues to be weak driven by fears of recession on the back of high inflation. Our attempts of scaling up the business outside of Germany, Austria, our home markets continues. I am pleased to say that we have been successful in doing so and crafted a strong brand image in European market. Spain and U.K. have continued to show better growth. Looking at the future growth profile in U.K., we have incorporated a new legal entity in U.K. while planning for further global expansions are still on the table. Our joint venture in China has also recorded a modest revenue growth, and we remain hopeful that things will be, post the pandemic situation in China, fizzes out. Quarter 2 will remain challenging as is normal during summer in Europe, but we are confident to come back to our profitable growth as the current transitioning conditions eases.
HIL continues to remain a people's organization, and once again, for the 4 consecutive years, we have a Great Place to Work have certified us, and we are -- we have been rated the best company in cement and building materials in India. Our business achievements are backed by the sterling contribution of our teams. Our growth, profitability and cash remains intact as we navigate through these tough times. Your commitment -- deliver your company towards a $1 billion one-stop building solutions provider by 2026.
On that note, I would like to invite our CFO, Saikat, to give a more granular view on the financial performance during the quarter and would happily come back to answer your questions thereafter. Over to you, Saikat.
Thank you, Dhirup. A very good morning to everyone, and thank you for joining us on this call today. I'd like to take you all through the financials and operating highlights of the business during Q1 FY '23. The ongoing geopolitical tensions and the consequent headwinds affected the financial performance during the quarter. It is noteworthy that all our teams drove hard to offset this effect, and these initiatives help in delivering better-than-expected growth and margin. We recorded consolidated revenue of INR 1,085 crores during the quarter, growing by approximately 10% as compared to INR 984 crores in Q1 FY '22. EBITDA for this quarter degrew by 21% on a year-on-year basis coming to INR 137 crores with margins at 12%. PAT for the quarter stood at INR 87 crores. In Q1, the Roofing Solutions business grew by 10% year-on-year, coming to INR 453 crores as compared to INR 412 crores in the corresponding pass quarter last year.
We continue to have a higher market share in the Roofing business and this revenue growth is a testimony of that. The Building Solutions business grew by 49% year-on-year and 8% quarter-on-quarter during Q1 FY '23 coming at INR 134 crores. We have been able to recover the impact of high inflation in raw material prices in this segment by strategic pricing and cost rationalization mechanisms. Polymer Solutions business grew by 31% year-on-year to INR 141 crores in Q1 FY '23. It is our endeavor to cross the INR 1,500 crore revenue mark in the next 3 to 4 years, which will be driven by the introduction of new SKUs, increasing volumes and prudent pricing and obviously, inorganic strategic initiatives. The Flooring Solutions that is Parador business degrew by 4% year-on-year and stood at INR 365 crores during the quarter under review.
We continue to adapt to the current conditions, and are focused on growing into Europe as well as globally. It is our constant effort to keep the cash focused approach in the business, which has supported once again to maintain a healthy balance sheet for us. We have successfully reduced the debt by INR 35 crores during the quarter. And once again, you will be happy to note, we have become interest free, debt free as far as India business is concerned. The debt at consolidated level stands at INR 253 crores, and the total debt equity ratio is at 0.20.
With this, I would like to conclude my opening results. I request the moderator to open the floor for questions. Thank you.
[Operator Instructions]
The first question is from the line of Baidik Sarkar from Unifi Capital.
Congratulations on a strong quarter given the constraints of inflation around us. A couple of questions, and in interest of time, I'll leave them all together. First up, on Roofing Mr. Choudhary, there was an indication that roofing volumes might have been a tad deficit towards the end of May and June. Just wanted your comments on how we performed on the volume front? And given 1 month into Q2, how does the current quarter look like growth-wise and margin-wise? There were issues around high container transportation costs in Q4 and heading into Q1 as well. So any insight there would help. And secondly, in Parador, it was expected that our sourcing of FTFs will probably come back by Q2. Any outlook on how the supply chain there is looking and is inflation and [ back offs ] in Germany should be seen as a headwind and [indiscernible] in profitability? I'm sorry, I missed it, did you mean the return to profitability in Parador in Q2? Or was it Q3?
Mr. Sarkar, many thanks. Your good words means a lot of meaning to me and my team. Yes, situations are very difficult, but our team is fully on the job, and I can assure you that. Coming to Roofing and your questions on quantity, I think that was your first question in quarter 1. I think we did extremely well in quarter 1 on Roofing in quantities. We have gained market share close to about 1% over the last -- first quarter as well, and this consistent quantity drive ground to the level has really worked well. Our materials were not at the place so we have mechanisms that we could organize and therefore, stocking before even the season started and thereafter, working throughout the season was impeccable. Yes, you're right May and June or rather, I would say, towards the end of May and June did see a reflection of slowing down in the market.
And badly, for some of our competition, they started becoming panic because they have not gained the month or 2. They wanted in April itself, and therefore, there was madness, I would say, in trying to gather speed. And for the first time in my 5.5 years with this company I have seen prices getting lower in June. NSRs getting lower which is absolutely not required, and I think I would not be able to comment how they would maintain themselves to rising cost issues, but that's their decision. I think we posted very healthy volumes of in excess of 375,000 metric tons in quarter 1, which I would say is phenomenal.
Quarter 2 has started, and it has started again with same moves of material costs. The fiber cost that we get along with the sea freights are exorbitantly higher to last year same time. Cement is lowering a little bit, but it's still not anywhere comparable to last year, and fly ash would be another [indiscernible] already facing in quarter 2. So my 2 trends here would be, quarter 2 will be, again, quite a challenging quarter for HIL. But in a way of growth volumes, market share, we will outshine everyone else amongst what is available in the market and the present situation HIL should be far better is my reckoning. That's about your Roofing, and let me come to Parador.
So yes, Parador not relying exactly to your question, but given overall and far better, let's say, view on Parador, let me first comment by saying that Parador made a sterling performance in many ways in a year before. I think we were going absolutely smooth in Parador and we have our settling on acquisition and thereafter, moving towards customer in different parts till maybe the second quarter last financial year.
Quarter 1 last financial year was about bumper performance by Parador, and that's making it even more worse to compare with the same quarter this year. However, last year, we faced a material cost issue and availability issue, CF, LDS, and all the concerns which I have already talked about in my earlier calls. By quarter 4 last year or quarter 1 calendar year this year, I thought we have been able to address all of that, and therefore, we made another very good quarter results in calendar year first quarter this year or Q4 last year. And everything seems to be coming back, and we were again poised to ramp ourselves up, but came this geopolitical issues, Russia and Ukraine war.
This definitely has created an inflationary pressure in all European countries, which have thrown up a new challenge for us in way of negative consumer sentiments DIY that dried out. Consumers are not spending enough for renovations as it start with sales today in Europe. They are -- they have gone with [indiscernible] for vacations and therefore, their spending for vacation has offset a lot of their savings.
And we'll definitely see this market sentiment to continue to be weak, at least for another quarter or 2. Company is well aware of the challenges being faced in ground and are taking bold steps to mitigate these by way of strategic customer acquisition, cost savings, efficiency and enhancement and selecting key product to be sold to stay apt with the business. We are confident that as the situation eases, our growth profile and the overall fabric of getting Parador to 250 million, 400 million in the next 3 to 4 years stays absolutely resounding. I hope I've answered both your questions.
Sure. I mean just want -- in terms of profitability, did...
Mr. Sarkar, I'm suddenly not able to hear you. If you can please come closer a little bit to...
Did you allude that Q2 might be a profitable quarter for Parador? Or we believe that we should probably experience that by Q3 of the financial year?
So Q2 in Parador is always a weak quarter being summer, and this year, it will be definitely challenging. Q3, I'm sure that situation will ease out in many ways because the material costs will start coming down as the inventory builds up or as the demands go down. And I'm very positive Q3 will be better.
Next question is from [indiscernible] from JHP Securities.
Sir, Am I audible?
Yes, you are audible, sir.
Sir, my question was on the Building Solutions business and specifically, in the boards and panels part. So sir, could you give some understanding on the industry structure and what are the growth rates that the industry see? Because when I look at this particular business and when I read certain industry reports, what -- the sense that I get is that the industry is growing at, say, about early teens kind of growth rate. But when I look at the benefits of drywalling, the speed at which the building can be done et cetera, one would expect a much faster clip in the growth rate. So sir, could you give some understanding on what's holding the growth rates back?
Shivam, you are absolutely about right, and I complement your business knowledge in the market. This is a segment which is showing up, and it's furthermore favorable for HIL because over the last couple of years, a lot of efforts have been made in [ pin code ] mapping, and heat maps, and BI tools that we are using to map really where the activities are. And Tier 2, Tier 3 cities, we have actually migrated in many ways from the Tier 1 customers to a lot of these in deep pockets of the country. And I can tell you that we are very, very upbeat on this segment as well as you are. Our constraint was capacity, and we had not invested enough in this particular business because the profitability of this business was always lower single digits. And somehow the -- I was not convinced that we should park our capital here by investing more till 6 months back. So last 6 months, 8 months, you would have seen, we have announced a new capacity in Orissa for boards enhancement and for panels and for AAC Blocks, which is our block business.
So boards we are -- our existing roofing line because about 4, 5 months in the year, they are hardly utilized, and we will make that capacity available for boards, panels we are setting up a brand new facility. We were also planned to set up a brand new greenfield for blocks, but they came in a huge cost pressure on steel and everything and suddenly, the project cost went to a different leg, which was absolutely uneconomical for us and post therefore, the placement of new greenfield for AAC Blocks and rather looked at alternative methods to still ramp up in east. You are aware that we have for our blocks, we have 3 to 4 factories. One is in Jhajjar, Haryana. One is in Golan, Gujarat. The other is in Hyderabad and the fourth one is in Chennai. We don't have anything unused and therefore, there was definitely a need to set up a blocks components.
The market in East is growing as well, and I think the market size in East is about 280,000 to 300,000 cubic meter and amongst the best known people who are producing and a brand which is accessible to consumers, Fast Build comes as number one. And therefore, it was a good deal that we have been able to see through. With Fast Build now coming to our family, we would immediately after closing, start including our top line and bottom line from this plant. In the process also, we would be able to take away one of our biggest competition in that zone, and therefore, we'll be able to consolidate ourselves in this market. Fast Build as a brand is also known very well and accepted by some of the B2B customers. So that will help us immediately to ramp ourselves up.
I think on a capacity front, they have 150,000 cubic meter. We have looked at that machine technology and everything, so we are well aware of what lies ahead. They are using about 60% of the capacity at the moment, and I think we should be able to ramp that up. So overall, we are also increasing the capacities of our existing plants by automation and IoT 4.0. And let me assure you that we are -- we are committed to all of you that this business, which was about INR 270 crores a year before, and last year, we were about INR 400 crore will move to INR 750 crores, INR 800 crores in the next 3 to 4 years.
And I do not -- I'm not committing we will do more acquisitions and mandates. I'm also not committing that we will pump in a lot of CapEx in this business, but I'm committing that the business will grow, and we will look at alternative methods to grow this business profitably. Happy that we have been able to work on and bring this profitably above 10% now. I think quarter 1 was about [indiscernible] business. And I'm confident that with all sales and processes that we have augmented now, the business is sharp enough to deliver high profitability consistently for this business.
Sir, you said INR 750 crores to INR 800 crores in few years. So when I look at the mix between AAC Blocks and boards and panels, what would it be? Currently, I think it would be 60-40. Would that be the same mix when you look at INR 700 crores, INR 800 crores of top line.
So the only difference between maybe 4 years back and today is, we have merged this business so meticulously that most of our plants now deliver all the products together. So there is a lot of commonality in cost structures and other things, which is helping both the businesses. So I would not be too conscious about this mix, though what you said, it should remain that way. I would rather be looking at overall growth in this business profitably.
Okay. And my last question regarding this business is that in the market, where is the -- is there a reception from the retail homebuilder for products like the drywalling solutions. Are you seeing that or these get mainly used in commercial spaces for partitions?
So this is one business where I would stay away from a product space and therefore, a retail space. I would rather do a system sale, which I had declared about 2.5 years back. We are -- we have strengthened the very, very high-quality technical team across the country to work with influencers, vendors and plan and get our whole solution impacted in the projects, and that's the way we would continue to do this. So we are getting a high margin by our connect with the customers that we want.
Hello. Hello.
Yes. Could you hear me?
Sir, I missed the last part. If you could just...
So we are continuing to build this business as a technology sale, as a system sale, and we will continue to do that. It will remain primarily a B2B for us as a strength.
Okay. But sir, you would be knowing the end use of the product, right? Is it going more into the commercial spaces? Or is it going more into the residential spaces? Do you have that kind of data?
Even this product can get into all these. So it's all about creatively looking at different regions and the strength of growth coming through, and we are doing that through the heat maps. So we are going into both commercial and residential as the need arises.
Okay. Sir, and one last question, if I may. Sir, we are getting into many products and segments. In the pecking order of growth where would the management bandwidth be focused mostly? If you could give some sense.
I'm very sorry, I couldn't understand your question at all. I heard the management bandwidth, but what was...
Sorry to interrupt you, but can I request you to come in a better reception area, please?
Okay. Is it better?
No, sir, the volume -- the audio is still not clear. Can I request you to rejoin the queue, please?
Okay. Is it now -- if you can hear me?
Sir, slightly better.
Yes. So sir, my question was that we are getting into many segments. And in terms of management bandwidth and in the pecking order of growth, where would the most amount of management bandwidth be focused on?
Each of the segments are babies, which we want to garnish and grow. Therefore, it will be very difficult for us to pinpoint where our focus will be, but major growth you can expect will come from the polymer segment as well as from Parador. So a lot of -- that's an interesting segment to put a lot of energy and investments in, and we would continue to do that while continuing to strengthen our roofing and building material because they are evergreen, and they are our solid profit providers, and we'll continue to do that. So management bandwidth is being widened and that shouldn't come in between our growth profile.
[Operator Instructions]
The next question is from the line of V.P. Rajesh from Banyan Capital Advisors.
Congratulations on a good set of numbers. My first question is regarding the roofing business.
Can I request you to be slightly closer to the mic? My apologies, I'm not able to hear you well.
Is it better now?
Yes. And can you be a bit slower and come to the mic a little more? Yes, please go ahead, Rajesh.
Yes. So my question was, you said, in terms of Roofing business, I think you mentioned that there was some pricing weakness in Q1. So did we lose market share or did we gain market share because of the pricing movements?
So in Roofing, I mentioned and I'm happy to repeat. We have gained market share in quarter 1, and we are #1 by far big numbers to the next level.
Okay. So then why would a player which is much smaller try to undercut on the pricing? Do they have any more capacity? Or is there any player in the industry who has entered, if you could give some color on that?
So quarter 1 is the most potent quarter for Roofing, everyone knows that. Prices in quarter 1 for Roofing products are the highest in the year, and therefore, everyone would try to make the best of it. And I can only emphasize that if you have not done well in your homework, you would have lost a bit of your market depreciation in April. We got April very solid behind us. And as the market demand did not show up to the extent that possibly everyone wanted to be in the later part of May and June, there was a stress and panic in the market, and that's what I alluded to. But HIL maintained its posture, and we have been able to gain both market share and also done very well on our NSRs.
Understood. Okay. The second question is regarding Parador. I know you gave the commentary on the near term, but let's say, beyond this year, what kind of growth do you expect from Parador just on the organic business side by expanding in different geographies and in its core markets.
Sir, we are taking very, very active actions for growing this business. Our problem this quarter that is quarter 1 was because of a setback due to the geopolitical situation, I will repeat again, the sentiments are pretty low in Europe -- in most of the countries in Europe, and we are seeing that in every day. So at the moment, therefore, the demands were muted. Summer are also the worst time in Europe from a demand perspective, and that is normal for every year. So let's wait for Q3 to come and we are taking a good bit of actions to ramp up our sales in U.K., as I mentioned, with the new creation of our U.K. company, Parador. China will also pick up. We are going to move very fast in Spain and in France and in Switzerland.
So these will be the countries that we'll be focusing specifically 3 years -- sorry, 3 weeks, I have extensively personally traveled in all these countries to have a first-hand view of our brand positioning, our marketing in -- so far is what we are doing and how to posture Parador and what would be the levers for exciting Parador sales. I can tell you I stay bullish. Our entire fabric is to grow Parador to more than double of where it is today in the next 3 to 4 years, and we will completely move towards that direction.
Next question is from the line of Amit Vora, individual investor.
Am I audible?
Yes, Amit, you are audible.
First of all, you have given a good heads-up in the previous quarter of what is to come. So that has been really helpful to understand and make sure how things will be. I have a few questions. One is on the Roofing segment. I understand Q2, Q3 are softer, but just to understand, where is it on the raw material side? Is competition facing some problems in terms of getting raw materials. Going forward for -- from Kazakhstan and Russia, that's one. Second, pipes, what would be our utilization level and the loss that we have reported in the segment? Is it majorly from one of the segment? Or we can assume that it is from both putty and pipes. The third question is on the new acquisition. Of course, you have shared that it is at 60% utilization, and it is doing around INR 25 crores of sale. With HIL's efficiency, what is it that we can achieve in this year -- financial year post we completely take over in terms of profitability? And any target in terms of ROC that we are looking at? And what it is currently? Yes, these are the 3.
We can spend the next whole day Amit on all these questions, but thank you very much for your kind words. Very, very interesting and important questions. First of all, about the clarity of as we give as these are -- this is your company. This is every one of yours company. So it is my job to be as transparent as possible to the extent we understand the business, and you will always hear that from us. Coming to your specific questions on Roofing. I think the raw materials side, fiber, I heard from you that competitors are facing problems in fiber procurement. We are pretty safe on fiber procurement from where we buy. So Brazil is our major supplier, and I think there is absolutely no problem in getting the fiber. The costs have gone up immensely and sea freights are the other bit, which has not softened between Brazil and India, which is continuously posing a headwind for us. So raw material on fiber is our biggest element of cost enhancements that we are seeing, and it will take some time for that to come under control. So quarter 2 also, we will take that issue.
Cement is a normal process. Every year, quarter 1, it's a high cement price, which we have seen even higher than last year. And it's slightly softening, but it's nowhere closer to last year in quarter 2 as well. So raw material pressures will affect us in quarter 2 as well, but quarter 3 onwards, we will once again be back is my appreciation on this. Whereas on the top line and on market share and on quantity, we go all out to secure ourselves far better than anyone else. That's on Roofing.
For polymer, yes, the capacity utilization is about 55% to 60% of this, and we are growing quarter-on-quarter, year-on-year.
And I think quite satisfactory in the last 12 months, the growth has been in order. We have brought in lots of SKUs today into this business and getting into newer markets. South and East have been the latest tranches that we have done. And from a top line, from our market presence from our distributor that connects and building that distributor network, I think we are absolutely there.
Yes, PVC prices have posed a lot of problems to this market, and in general, also to the costs because we have lost at least about INR 78 crores in the quarter on account of lowering of PVC price, which was not anticipated to this levels. Yes, there's a lot of value that we are -- quarter 2 also will be rough owing to a lot of material which are in sea and the costs will be hitting us on the plant. But we have taken some alternative routes now and quarter 3 onwards, we'll be able to stabilize this. On the new acquisition on [indiscernible], it's a very strategic acquisition that we have been able to do. We have been able to, therefore, compromise a potential big competitor who have been in that region had been set up for greenfields.
And we have got a fantastic brand and a good quality product through this acquisition, and also from day 1, we will make top line and bottom line contributions in this business. So they do about INR 25 crores top line. There are about INR 4 crore plus EBITDA at the present level. But as I said, they utilize their capacity to about 90% -- 60%. So there's a good room for us to evolve this business up, improve the business up in both top line and bottom line, which we will do. Calculations and ROCE, it's too early to predict, but I would assume, 15%, 20% in the first year and then move forward.
Okay. INR 4 crores EBITDA is what I heard it, is that correct?
Yes, they are at INR 4.5 crores, INR 5 crores roughly on an annualized basis in the present scale that they are operating.
At 60% utilization. So there is definitely room for with HIL's efficiency in your leadership, we can just definitely take that up.
Again, thanks for your faith.
Yes. Just one question, if I may squeeze through. Is the U.K. subsidiary that we have set up there for Parador, is it in same line the way we have done it for China JV? Or how is it -- what is the rationale and one more thing is the rationale for that? That's it.
Thank you. Again, a good question. So first, let me explain the rationale and then how that JV has been conceived. So the rationale is, U.K., we see as a very, very good market for us. It's the market, which favors the last leg brand, and Parador can have a very, very fruitful business. We do about EUR 3 million to EUR 4 million business in Europe historically, which has grown to almost about EUR 6 million, EUR 7 million in the last one year, and we are hoping that this business will grow further in Europe. The reason for setting up U.K. subsidiary is because with Brexit, there were tremendous problems in way of documentation, material movement and clearances.
And customers, there are used to over the night delivery of products, and there are no big manufacturer of flooring in U.K., so everyone basically sells outside -- from outside -- from Europe and America into U.K. So we wanted to have a lead there by setting up our own inventory warehouse. And so this will be a 100% Parador company, so there won't be a JV there. We will set up our own sales teams. In fact, we have a small team, which we will improve further and utilize our base and our local company to channelize customer demands in the U.K. And the investment in U.K. will be far lesser than 100 million -- Sorry, 100,000 will not be at all a big investment.
Next question is from the line of Vinit Shah from Shah Group.
I want to ask regarding the outlook on the pipe solutions. So basically, in the market, such as aggressive players such as Astral and Apollo, which has a great distribution already set in place. What is the right to win in that particular segment? And can you please share about any CapEx plan in this segment.
Thank you, Mr. Shah. Pipes business is a very interesting business. There are big 5 as we say there, and then there are lots of smaller players. The rationale of our huge momentum in pipes is because, first of all, it's a big market. The market is driven by 3 big pillars: one, a good quality product; number two, a great spread in the market, so retail presence; and number three, the brand. So unlike any other product, this one is a brand push our brand fully business. So we have all 3, and over the months and years, we have developed ourselves to be on top of all 3. So we are -- we have the best product in the market on quality which compared with the likes of Ashirwad who are the #1 quality players in the market. Number two is, we are gaining strength in our retail and distributor network. So every month that our goals to be achieved -- are you all able to hear me?
Yes, sir.
Okay. That's the second part of it. And third is, of course, there is no build or brand of pipes, and that has a good pull into market. So all of these are helping us to grow this market. We are moving now in a big way into B2B earlier it was only B2C. Earlier, it was only north and west. Now we are moving into south and east of the country. So we are well on course to make this a big story.
Okay. And then any plans regarding your future CapEx?
At the moment, as I said, our CapEx utilization is 55%, 60%. There's good room to grow there, but we don't have any facility in East. We will definitely be conscious of that and see what to do about it because otherwise, the freight could be [indiscernible] the products from either building factory or from the size of our factory. So we are conscious of that. We will -- we have not taken a call on an immediate CapEx in a big term. There will be small CapEx that we utilize for new SKU, molds, et cetera, but in a big way, we haven't yet taken a...
Next question is from the line of Nikhil Gada from Abakkus Asset Managers.
Sir, just first couple of questions just from a data perspective. If you can give the volume and value growth. Value growth we know, but volume growth for the roofing as well as the Parador business for 1Q.
Nikhilji, Parador volume will be a very, very difficult comp because there are too many SKUs of different varieties. I can only say that we have seen growth on sales in quarter 1 on Parador because we had an extremely good quarter 1 last year. In volume terms for Roofing, we have grown by 6% over last year. And for last year, quarter 1 was a very, very high volume gain for Roofing, where we had crossed 350,000 metric tons. So going over that was a very big target, and we have been able to achieve that.
And sir, when we say that we gained 1% market share, so then is it fair to assume that the industry might have grown at 3% to 4% or 4% to 5% sort of levels in this particular quarter?
Industry would have grown by about 3%, 4%, you're absolutely right, and we have grown by 6%.
Understood, sir. And just secondly, sir, once again happening on this pipes part, but I think you mentioned INR 6 crores, INR 7 crores. Should we take that as the inventory loss for the PVC because of...
We take that as inventory loss, and there will be some more losses in Q2, which is prebooked because the price at which we have ordered already for international circuits and the materials are on freight will land in quarter 2 or is already landing in quarter 2. So there will be some more losses in quarter 2, but we will put a back to that and look forward to a better quarter 3, yes.
And I believe that 70% to 80% of the RM, raw material, we import in PVC resins, right?
Yes. It is, again, depending on the posture we take, yes, we have gone a little bit wrong, and that's where the losses are coming through. And we could not anticipate it such a steep PVC price reduction by Reliance. That has put us under the belt. We will be much more focused on this going forward.
And sir, in general, for pipes, we generally see for raw material inventory of 30, 40 days?
We have a little more than that because, a, there are quite a few new SKUs, which are coming through these -- the shipping itself is 45 to 60 days. So yes, it's slightly more than that.
Understood, sir. And just last question from my end. If you could just -- I know it's a very difficult time right now and you already called out that 2Q would be weak. But from a full year perspective, is it possible that we might be able to grow on a top line and still be able to maintain our margins on EBITDA level for FY '23?
For Q2, no. A very clear answer, Q2, we will weaken on profitability. But the growth of cost will continue, so we will grow on top line. And that's upon [indiscernible] have made already. Q2 will be weak on bottom line. I'm conscious that Q3, we will have to come back, and Q4 definitely will be far better. So that's all I think.
I understood, sir. I understood. Sir, just lastly, because you mentioned about the RM inflation still having an impact. Is it still very difficult to take price hikes in the market right now to sort of pass on this RM cost?
It will be the price rise for -- let's talk of segment by segment. So for roofing, the price rise time was Q1, and we did quite a bit there. But we could not pass on the entire cost rise. So we did -- approximately half of the cost rise we could pass on, and half of it is therefore written into our profitability.
Quarter 2 is not a time for price rise because, normally, there is a split in price by about 5% in quarter 2 that happens over quarter 1. As the demands come down with the rain, that's typical of the [indiscernible].
We are trying to hold to our price of June as much as possible. So we are trying to play a little different game. But again, it all depends on how the competitive market in this landscape phases out. If we see them really going mad on prices, then some time, while we are leaders on prices, we will have to take a bit. So I don't think price rise over quarter 1 is even a fair expectation for Roofing.
On building materials, yes, definitely. We have no capacity because we are 100% up there. And therefore, we will be very, very conscious to see how to increase the prices for building materials. I would say, the entire cost rise of materials and building materials would be passed on so far as this is concerned.
On polymer, it's always a pass-on as the PVC prices go down. So those have to be done by polymer. When the PVC price goes down, it picks up in 3 ways. One, the sentiment in the market goes down because no primary stocking happens. They are expecting a new price to be declared, which will be lower than that. So the demands go down. Number two, we are hit on whatever inventory that are there at the moment in hand. And also point number three, we are hit on inventories that are on ship. So that's what happens when the PVC price will go up, then the market will have a positive sentiment and then situation will be reversed. So that's -- did I answer your question, Nikhil?
Yes. And on Parador as well, if you could just...
So Parador, there has been 100% cost rise on key raw materials package, [ HDF ], et cetera, over the last 1 year. We are now seeing that with summer, as the demands are coming down, we are seeing that we would be able to bring back some of the costs, though, they are still significantly higher.
But we have to see really how the gas and energy prices and its implication on raw material suppliers pan out. We are keeping a very, very close look on that.
But selling prices are also weakening in Europe because the demands are weakening, and therefore, it's a double edged sword that we are at the moment [ bring ]. But the team has already gathered skills in recognizing these risks, and there is a very, very clear charter on risk mitigation that we are doing and therefore we will be far better than our competitors in these things, I can tell you that, while we will lament a little bit still in the next 1 or 2 quarters.
Next question is from the line of Satish Kumar, individual investor.
Congratulations to HIL team for its strong performance in another challenging quarter. And my first question, in annual report, we mentioned we are entering construction chemicals next financial year. So what are the products we are using? Can you give us some details?
Second question, are we manufacturing GFRG panels? If not, do we have any plan to enter into that market?
Satish, we had already talked about our entire blueprint of [ 1 billion ] -- let's say, [ 7,000 ] by Q2 of '26, where roofing will achieve -- where building materials will achieve, what polymers and where flooring will be. There was always a delta of INR 1,500 crore, INR 2,700 crore, which had to be brought in to other verticals. We have canvassed the entire market. We have looked at various products which are complementary, which are -- which can be through the same route to market. And construction chemicals turn out to be the best amongst all that we have been able to yield.
Of course, paint is another big thing, but paint, there's a huge investment. And at the moment, we have decided to go for construction chemicals. Now construction chemicals will be consisting of water filtering solutions, [indiscernible] and many test products. So this is an interesting business because it's a brand play and a lot of things there are where there is a consumer pull to brand, and we would be able to bring in, build out, therefore, very constructively there.
Second is, it has a huge risk to market sensitivity and with so many retail spots that we have about 26,000 active retail spots that we have around the country, we will expand that further. I told you last time, we will grow this to about 100,000 in the next year or 2. Aggressive work is going on there.
On your question on whether we will be investing in our own manufacturing, at the moment, we are testing the market through outsourcing, and it's working well. Our target for construction chemicals in the first year itself is INR 25 crores organically, which we will do. If we are able to look and find a company which gives us the recipe for many more SKUs that are needed here, it's -- construction chemicals needs about 150 SKUs, if not more. So R&D is working aggressively towards these. We have in home now about 40, 45 SKUs.
So the rationale of buying a company, M&A would come with acquiring more SKUs, and we are on the look for that. But at the moment, we are doing roughly about INR 1 crore-plus every month already in the last 3, 4 months. And we are hoping that we will be able to grow to at least a INR 300 crore to INR 500 crore business in the next 5 years' time.
So other question about GFRG panels. So are you manufacturing now?
Sorry, your question?
GFRG panels. Are you manufacturing GFRG panels?
I'm unable to answer this question, sir. Would request you to send us an email, we will get back to you.
Next question is from the line of Alisha Mahawla from Envision Capital.
I hope I'm audible.
Yes, ma'am. If you can be a bit louder, it will only help.
I hope this is better. Just need clarification with respect to our building solutions segment. We were setting up some capacity in the East, and I know we've done an acquisition now. So is that capacity come on board? Is it scrap? What is the status? If you could just share that.
So we had 3 projects in East for which INR 82 crores of CapEx was approved by all of you. One was to enhance our roofing manufacturing facility to make [indiscernible] boards there. And I think that facility will come on board back in the next 2 months' time. The second one was to have a complete brand new greenfield projects for making panels. But taking sheets will go from this roofing manufacturing capacity, and then we will do the [ sandwich ], and we will finally make the panel.
So that particular facility is coming up on speed. I think by the quarter 4, we will be able to start commercially in that. And the third one is blocks, and that facility, we decided to deter through a greenfield and have rather gone for an M&A there, acquired the [indiscernible] business of [ Fast ]. So as soon as we are able to complete this deal, the closing should be faster than 60 days, and thereafter, the facility will be with us, both top line and bottom line.
So for the current year, except the capacity that we have at [ Fast ], there are no incremental capacity to grow this segment because the panels is coming towards the end of the year.
Well, I would -- we have already seen that business has grown in quarter 1, and it has also grown last quarter, that is quarter 4. The business will continue to grow, and the reason to grow is we are not only dependent on Orissa capacity station, we are also looking at increasing our own capacity for panels and for blocks and for boards in the present capacity that we have across the country. So we have, as I already talked about, 4 blocks plants that are already there.
We have 2 panel manufacturing facilities, 1 in Hyderabad and 1 in Faridabad. And we have 2 boards manufacturing facility, 1 in Faridabad and 1 in Hyderabad. So all of that is going through additional capacity increase by automation and also IoT 4.0.
So therefore, we will continue to expand the facilities, of course, through automation and look at inorganic that's in East, which we have already completed. And thereafter, there will be outsourcing that we would do. So we are continuously in touch with companies from whom we can have our quality products made by our quality infusion and contract manufacturing. So all of that is going to help us.
Sure. And except the INR 82 crores, there is no other CapEx that we're planning for the current year.
There is other CapEx. There are maintenance CapEx that we have, which is ongoing. I think this year, we will do about INR 150 crore CapEx in India and -- yes. So that's very much what's declared earlier also, and we continue to...
Sure. And just one last question. In the flooring -- in the Parador business, if you can just give the geographical split. How much is coming from Germany and then from other geographies?
So Germany and Austria contributes about 50% of the -- 50%, 55% of the business. Rest comes from outside. There was a halt to the outside business because of COVID. So we have now concentrated a lot in the European countries because it's easy for materials shifting as well as the brand realization. So we are looking at Spain, France, Switzerland and U.K. to be very specific, as the 4 major locations within Europe, while our hopes in China still continue because that's a big market.
You are aware that COVID is not allowing travels into China, and there are a lot of restrictions. So I'm hoping that gets eased out very soon. We will -- I'm sure we will be able to get good markets out of the other European countries. Also to the extent, I don't know.
Next question is from line of [ Marshall ], individual Investor.
Am I audible, Dhirup?
[indiscernible]
Yes. See, my question is majorly on the strategic and that how are we going to execute the strategy? Since we said that, for Parador, we are going to have a target of achieving $400 million turnover. Currently, we are only at $200 million only. So this is not going to be achieved by just an inorganic way.
I know that like this year, we have incorporated a new company in U.K. So my concern is that how much turnover we are expecting from the U.K. number one? And then to leapfrog from $200 million to $400 million, which other market are we trying to enter? Do we already -- are we already covering the entire new regions?
Number two, are we also starting to enter into some CIS country or you can say [indiscernible] because the brand Germany is very [indiscernible] country. So can you please give some more, like not in general, but little bit specific details. In next 3 to 4 years, how are we -- that what are the major milestone and how are we going to [indiscernible] to leapfrog from $200 million to $400 million for Parador?
Thank you very much. Again, a very good question, and I can take hours to explain this, but let me be brief. We are very, very clear on how we wish to grow in Parador. So it's not just a dream, it's something that we are putting into practice since last almost 1.5, 2 years. We have got a bit of a jolt in the growth process owing to, first COVID, where travels are hugely restricted and thereafter came in the material crisis last year and now the geopolitical, but that's not broken our intention to grow at all. $140 million was Parador when we bought it about 2 years back. We have come to $190 million at the moment, not $200 million. And we will grow to $350 million, not in excess of $400 million. As I said $350 million to $400 million, that's our goal. And that we will achieve.
So in order to achieve that, what we are going to do is expand Parador operations first by sales and then we'll look at manufacturing, but sales into Spain as our most important countries, France, Switzerland and United Kingdom. These are the 4 around Germany that we will expand to. Other than this, there will be China, and we can look at United States. So this is how the leap will be for expansion that we have planned.
And what we are doing is, we are setting up joint ventures or our own subsidiaries in them one by one and then trying to grow. It's far easier to immediately invest a big sum, like an M&A, and grow. But that's not the route we will follow because that's a lot of CapEx and a lot of money that we don't want to take that kind of a route in a hurry. So we are doing this in a very systematic, but planned manner.
Parador -- when it went into China after we took over Parador, we have only invested EUR 150 million into China. And the JV was created where we have a 50% stake there. China is a very big middle-class consumer base, and they look for the European brands. So I'm conscious that as COVID relaxes there, we are going to once again have a very good ramp-up from China. My estimate is, China will give at least 30 million, 40 million growth particularly on the top line. Then we will look at all these countries that we are looking at one by one, we are trying to go into them.
Our capacities in manufacturing for what we have in Germany and Austria will lead to roughly about EUR 250 million, EUR 260 million. And beyond that, we will need new capacity. Products that are contemporary around flooring so that we are able to have a packaging of products so that the brand, only the flooring that Parador maintains. So all of that is being looked at as we speak to grow this.
And are we also planning to enter the Scandinavian countries and Netherlands? For example, Poland or Czech Republic, which are the neighboring country of Germany and Austria.
So the Netherlands and the Scandinavian countries, we are very much there. We supply to 80 countries out of Parador. And definitely, the Scandinavian countries are very much there. We do about close to 4 million turnover there, 3 million to 4 million turnover -- yes, 3 million to 4 million turnover. They are primarily a good product, so the engineered wood is what they buy. The margins is low there. For specific reasons in that market. The margins are low. Therefore, that's not our priority country. And when we expand, we are not going to make sales growth in a big way into that country.
And sir, like on the overall target, you mentioned that by 2026, we plan to have this turnover of about $1 billion. Currently, we are at $500 million. So like you have -- like nicely explained about the Parador, so can you please also give the similar -- your strategic view, milestone which you want to achieve and execute to increase our overall turnover from $500 million to $1 billion, say, by the next 4 years for the other 3 sectors.
Sure. So roofing is presently around INR 950 crores. We will grow roofing to roughly about INR 1,400 crore, INR 1,500 crore. That's my aspiration. How that will be grown [indiscernible], and third, we are also creatively looking at other products that can be sold through those routes to grow that market.
Your building materials, which is at the moment at about INR 400 crore will grow to about INR 700 crore, INR 750 crore, mostly by outsourcing because CapEx influx into that business will be expected more because the asset turn is 1:1, 1:1.2 in that business. So that's that.
Polymer will grow to about INR 1,500 crore, INR 1,600 crore from INR 500 crore what we are today, and that will be [indiscernible] together. And Parador will be EUR 350 million, and then the balance would come from additional verticals. Construction chemicals will be one, and then we are keeping our eyes and ears open for what next to do.
And sir, are you also planning to launch some products like when is construction chemical likely or something. I guess you were also saying because it also has a very good synergy with our existing business and which is a good margin also.
Yes. Construction chemicals will be a broad basket. And once we are able to figure out our route to market very well, that's exactly what we have started from April, and that's how the announcement was also made. We will be absolutely broadening that basket, and everything that is favorable in that business will be done. It's a brandfull business. It's a very, very good profitable business. I think I'm upbeat on that.
And sir, this plywood business, all the companies in the plywood sector are doing fantastically. You can have all the leisure company numbers. And so -- can we also plan to have [indiscernible] like some [indiscernible] like just a technical study to say [indiscernible] should we also have a foray in the plywood sector? Because I can see all the 3, 4 leisure company are doing fantastically, and they are doing [ those things ]. And all the market getting consumed because, as you know, the ply business, all these housing sector is booming, [ CFRD ] is booming. Plywood also -- plywood [indiscernible] also get [indiscernible]. So are we -- is this some sort of new vertical?
Thank you for your input, sir. Let me just once again relook at what we had looked at HDF, MDF earlier, and we had found that it needs very high investments. And it's B2B primarily supplying to OEMs and while I completely accept last one year had been bumped off for these companies. But historically, they haven't been doing well. And last one year, if that's a trend for future, we will be attracted to it. I have not seen that to last for too long. So again, it's a matter of assessment. I would love to talk to you separately to get your views on this, but let me look at plywood once again.
[indiscernible] may I request you to please come back in the question queue for a follow-up question?
Here's the last question, my dear. Sir, polymer business margin loss in Q1. So what about [indiscernible] its perspective for the Q2? Do we -- will we get the benefit of this [indiscernible] enterprise of RM?
Well, I have already mentioned and I'm happy to [receive] that, for polymer, we are in a little bit of [indiscernible]. Quarter 1 has been back on profits. Quarter 2 will also continue to be back on profits, but we are going to return from quarter 3 on this.
Next question is from the line of Satish Kumar from [ InCred Capital ].
Satish, we are not able to hear you.
I'm unable to hear you.
Sir, so I was asking regarding Parador. Do we say that the worst of the margins is behind us? Or still there is something to go?
Give me one more quarter to answer that question, sir. We are still evaluating how this war is going to span out and what kind of dent it leaves behind to us. There's lots of concern in Europe at the moment on demand, on inflation. I don't think I have an answer very ready for you. We are completely ready for all that we have to face there as a team, but I don't think everything is behind us yet.
[Operator Instructions]
I think let's take the last question, if there is any, and we are happy to come back to the investor calls.
Sir, we don't have anyone in the question queue. Would you like to make any closing comments?
Okay. And we can end the discussion, if you wish. So thank you. Thank you very much, everyone, for this wonderful interaction. I hope I've been able to clarify your concerns, and I hope I've been able to transparently paint the picture of what we are going through at the moment. There are very good stance taken by your organization towards our [ $1 billion ] goal, and I can only assure you the target stays absolutely intact.
There are concerns that we are facing on profitability, which we will find a way around and deliver positively to you. We value your continued interest and support. If you have any further questions or would like to know anything more about your company, kindly reach out Investor Relations. Thank you, all. Bye-bye.
Thank you very much. On behalf of HIL Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.