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Ladies and gentlemen, good day, and welcome to HIL Limited Q4 FY 2021 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, Nirav. Good afternoon, everyone, and welcome to HIL Limited's Quarter 4 and FY '22 Earnings Conference Call for investors and analysts. Today, we have with us Mr. Dhirup Roy Choudhary, Managing Director and CEO of the company; Mr. KR Veerappan, CFO; Mr. Ajay Kapadia, Vice President, Finance and Accounts. We will first have Mr. Dhirup Roy Choudhary making opening comments, and he would be followed by Mr. Veerappan, who will bring out financial perspectives.
Before we commence, 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.
I shall call upon Mr. Roy Choudhary to present his views now. Thank you, and over to you, Dhirup.
Thank you, Siddharth. Good afternoon, everyone, and a warm welcome to HIL's Q4 and FY '22 earnings call. Thank you for taking the time to join us today, and I sincerely hope that all of you are doing well.
I'm happy to share that we have closed FY '22 with a 26% growth in top line on a standalone level and 16% growth at consolidated level, and have reached a top line of nearly USD 0.5 billion. This is driven by our committed reforms, by our dedicated teams to various business headwinds. While the flooring segment countered nonavailability and pricing of HDF-MDF both, we have observed inflation buildup across other key inputs in every other business segments. However, we believe these challenges are transient. And as these situational adversities recede, we will regain our focus on profitable volume growth.
I will now take you all through the individual performance of each businesses. The Roofing Solution business saw yet another quarter of good performance, marking a seasonal upside. Given our brand supremacy and strong product attributes, we have been successful at gaining market share even as we took price increments. In line with the overall economy trends, the business has seen a certain pickup in the cost of cement, fly ash, fiber and sea freight. Our teams have been working on various avenues of cost reduction methodically, including looking at alternative raw materials and recipes. This is being done as a trial for a few quarters now, and hence, despite the shortcomings on the supply side, we have been able to grow our market share [Technical Difficulty] impact on margins.
Last year, the monsoon was better on the back of which our optimistic outlook for sales in the present quarter holds strong. Our leadership extends across pricing, quality, distribution and connect, and we are striving to better our performance this quarter as well. Our non-asbestos roofing Charminar Fortune brand continues to garner business growth and robust traction in the market, where volumes have shown improvements. Since last 1 year, our team has been graduating production towards unit care, which comes with better manufacturing efficiencies, thereby aiding our competitiveness. We are confident in maintaining our status as industry leader in roofing segment as well. As the supply bottlenecks and inflation ease, we will certainly regain our profitability as well.
Coming to the Building Solution segment, your company was able to deliver a robust performance in FY '22 compared to FY '21. Revenue grew by 44% and PBT grew by 86%. We are witnessing very high rates of utilization of capacity. Our next growth lever will be geographic expansion in East and capacity enhancement in existing plants. Amidst the raw material inflation, the real estate and building materials industry has actually seen a healthy demand, and we are confident that we'll be able to maintain our growth trajectory on the back of our strategy for this business.
In Polymer Solution business, margins remained under pressure due to volatility of resin prices and high cost of other chemicals and polymers. PVC prices have come down during this quarter, leading to an element of inventory loss. The putty business too is impacted by the higher material cost and competition. However, our strategy of geographic expansion continues to help us gather growth. We witnessed a healthy 36% growth and have successfully crossed the INR 500 crore revenue mark last year. The challenges are far more in European context where Parador faced a huge scarcity of raw materials and a doubling of key raw material costs.
Other challenges like increase in energy cost and tripling of sea freight impacted the operations. Yet Parador registered growth in top line over last year on an entire year basis. Our European team have taken determined effort towards augmenting multiple selling price escalations across product categories, entering long-term supply contracts with key dependable raw material suppliers, improving product mix and continuously working on cost base, which have all supported towards partially offsetting the impact of cost adversities.
As a result of all of these, as committed earlier, we could register good sales in Q4. However, towards the end of the year, the geopolitical crisis within Russia and Ukraine as well as the serious COVID spread in China have brought in new challenges, which has impacted the availability of wood products, vinyl products, increased energy and freight costs. Relentless efforts are being made to mitigate these challenges by developing new wood suppliers to reduce dependency on Ukraine. Parador continues to expand in Europe at a very good rate. Globally, China continues to be an important market for us, while plans for further global expansion are still on the table. We remain optimistic on the potential of Parador becoming a global brand catering to the flowing needs of customers all over the world. We are orienting the business for a global growth curves.
As we tap new countries, our approach is deliberate, and we are -- and we ensure that we understand local nuances in order to maximize the opportunities. We believe we have a strong trademark on design and quality, and this gives us the ability to drive our products well. The coming years will be most exciting for Parador. Overall, and with stuff in place, inflationary and volatile times, we have demonstrated 26% sales growth in domestic and 18% EBITDA growth, maintained EBITDA margins at 14% and increased market share in all segments in domestic markets. The fabric of HIL is intact, and we are well on way to achieve the goal of becoming USD 1 billion company by 2026, serving as one-stop building material solutions company with both domestic and global presence. The Birla brand has a reputation for quality and is one of the most well-known brands in the country.
These factors, combined with our strategies and valuable experience gained in the last 2 years has helped ensure business growth despite all the challenges, and we are committed to continue to leverage this going forward. I would like to thank all the stakeholders for their sustained support in helping us close yet another successful financial year.
Thank you for your patient hearing. I would like to hand over the call to my CFO, Mr. Veerappan. As you all know, Veerappan is moving on from the organization, and I would like to take this moment to thank him and to appreciate his valuable contribution for all these years. Over to you, Veerappan.
Thank you, Dhirup. Good afternoon, everyone, and thank you once again for attending HIL Limited's Q4 FY '22 earnings call. I hope that you and your loved ones are safe and healthy.
I will now take you all through the financial and operating highlights of the company in Q4 FY '22. We have practically closed FY '22 with 16% growth at a consolidated level in the year, coming in at INR 3,520 crores, which is USD 0.5 billion. PBT grew by 1% amidst higher raw material costs and margin pressures, persisting almost throughout the year and was recorded at INR 295 crores.
Moving on to the quarter. In Q4 FY '22, revenue was recorded at INR 949 crores, having grown by 12% year-on-year and 16% quarter-on-quarter. EBITDA grew by 12% quarter-on-quarter, coming in at INR 96 crores. PAT for the quarter stood at INR 51 crores. Roofing Solution revenue grew at 5% year-on-year to INR 241 crores in Q4 FY '22 and, for the first time, crossed INR 1,000 crore revenue in the whole year in FY '22, growing by 17% year-on-year. As Dhirup stated, despite margin pressure, we are yet again seeing an increase in our market share. We continue to bolster our position as a leader in the Indian roofing industry on the back of such performances.
The Building Solution business grew by 20% year-on-year and 9% quarter-on-quarter during the quarter, coming in at INR 115 crores. For FY '22, revenue for the segment stood at INR 400 crores, having grown by 44%. We have been able to minimize the impact of high inflation in raw material prices in this segment by strategic pricing and cost saving mechanisms.
Polymer Solution business grew by 15% year-on-year to INR 137 crores in Q4. In FY '22, the segment grew by 36%. I'm glad to share that this year, we have crossed a revenue of INR 500 crores and are hopeful of this number to continue expanding in the future.
With introduction of newer [ queues ], increasing volume and prudent pricing and adding new distributors, we have been able to grow this business to where it stands today and will continue to do so.
The Flooring Solution business growing by 16% year-on-year and 22% quarter-on-quarter stood at INR 454 crores in Q4. For the year, it has achieved a revenue of INR 1,549 crores having grown by 5%. We continue to adapt to the current conditions and are focused on growing into Europe as well as globally.
Our constant endeavor to keep the cash focused approach in the businesses has supported once again to maintain a healthy balance sheet. The debt has been reduced by INR 122 crores in FY '22 and now stands at INR 288 crores at the consolidated level and INR 25 crores interest-bearing debt in HIL India. However, as on date, HIL in India has become once again a debt-free organization. The total debt-to-equity ratio improved 0.25 -- improved 2.25 on 31st March 2022 as compared to 0.41 as on 31st March 2021. HIL's net worth stands at INR 1,166 crores, registering a growth of 17% over last year.
HIL is making significant strides towards the goal of becoming a USD 1 billion company even in the current economic scenario. Apart from the pressure on margins due to the inflation in raw material prices, the business has delivered very strong growth. We fully expect the margins to recover in the coming quarters as this situation -- as the situation gets resolved.
With this, I would like to conclude my opening remarks, and I thank once again for all the support, and I would like to thank Dhirup also for the support you have given me during all these years. Thank you once again. I request the moderator to open the floor to -- for any questions. Thank you.
[Operator Instructions] The first question is from the line of Baidik Sarkar from Unifi Capital.
Given the challenging environment, congrats to you and the team on a very strong quarter execution. A couple of questions. What's the environment in the domestic roofing segment looking like now? We've seen segmental margin pressure here. If you could highlight the areas that are inflationary for us and importantly, how the growth and margin profile is looking for the coming quarter and year.
Thank you very much for asking this question, but Your line is extremely weak. I just couldn't capture your question in total. Would you like me to guess your question or would you like to just repeat it once again, sir?
No. My apologies for that. Is my line any better now?
Yes, it sounds much better.
I was just hoping to ask you what the environment in the domestic roofing segment is looking like. We've seen margin pressure here. If you could please highlight for us the areas that were inflationary for the quarter. And importantly, for the coming quarter and for the coming year, what is your opinion on growth and the margin profile as far as the segment is concerned?
Thank you very much. I must say that the margins have been low last quarter and was significantly pulled down due to several material cost pressures or headwinds that we had, whether it be fiber costs that went up, cement, fly ash, pulp, the freight cost had almost tripled. And all of that had its due course. There is only a finite bit that we could have done in improving the selling prices in the market. And Q4 is always a buildup for Q1, and therefore, there is less availability of opportunities, if I may say, to increase the price. But in Q4, we have already raised our selling price by about 6%. And we then prepared ourselves for quarter 1 in every aspect. You would have also noticed that inventory levels were kept higher. And one of the reasons for that was for roofing to be better prepared to meet what we would estimate to be another bump of quarter 1 for us because the [indiscernible] very good last year, and we believe that we will have a very [ positive ] year ahead, including this quarter.
So I definitely see that this quarter has started well, and we have raised another 8% to 10% selling prices in this quarter. We have been able to penetrate the market even better than last year by virtue of our last leg connect and the number of dealers, distributors, retailers that we have been able to build to our team. I definitely see that situation will continue to remain tough on material costs, but HILs performance will definitely be better than the market.
That's good to know, sir. So with this 8% to 10% price hike, do you think we would be in a position to pair our margins to where they were in the previous year? Or would you reckon we have some ground to cover before the previous year's margins are fully met?
I would go for your second guess. Yes, there is some room to cover, and we will continue to start doing that. You see, over all the country, the market prices are not the same. And while we are determined to stay market leaders on selling prices and HIL being the market leader in roofing with close to 22% market share, we'll dominate this market in every way due to its brand and policy. We will try and be opportunist not to lose our market share and yet grow the prices. So this is a very, very dynamic balance that we maintain, Mr. Sarkar, and I assure you that any forward potential of increasing price will not go [indiscernible]. So HIL will continue to raise the price as the quarter progresses to meet up to the cost challenges.
Sure, sure. The rebound in Parador has been very sharp. Again, great execution here, given the environment and the geopolitical environment. What's the theme now with regard to margin improvement? Would you reckon that, that gradient will continue, given recent shocks in energy prices? And if you could also please dwell upon where and how we stand on the HDF sourcing challenge and how things are looking there today.
Parador has been a very interesting and difficult story for us, and I've been extremely transparent all the time about all your businesses. And I'll continue the same with Parador. So sometime, middle of last year, we were stressing we didn't have HDF-MDF, the prices were haywire, but more than that, the availability was not present at all. And I've been keeping you fully informed, Mr. Sarkar, that we are trying our best first to remove one variable, which is availability and then we will go for the price. And I had given comfort to all of you that I believe, by quarter 4, we will be coming to some balance on this HDF-MDF concern that the earlier 2 quarters had. And we were absolutely there. So quarter 4, we had materials, we had orders. We had ramped up production in Europe. That's not easy, but believe me, they're working exactly our style, Indian style, and we are working their style. So it's a fantastic coalition. Quarter 4 has been the best ever revenue quarter by Parador in any [indiscernible]. And that was very, very pleasing to us.
But then came in this geopolitical Russia-Ukraine crisis, and I'm sure all of you are updated. Ukraine supplies almost 40% of oak lamellas, lamellas 3 and 4 millimeter fixed oak. And Ukraine is the supplier of 40% of the global supplies of Lamellas. And Oak is an imperative part of engineered board, which is almost 30% revenue of Parador. And 80% of Lamellas that Parador buys comes from Ukraine. So you can see that we have sorted out one issue with HDF-MDF and your question -- last question was, where are we. That has been sorted out. So the quantities have been all now committed. We have long-term supply agreements with some of the big, big HDF-MDF suppliers in Europe, which we have done over the last few quarters with me jumping in directly into it, and that has helped the organization immensely.
But we have a different problem now. The problem that is -- which was completely unacceptable and unprepared for was the Lamella issue. So I was in Europe for almost 2.5 weeks and we were trying to meet all suppliers that we could even think of, dream of, around Europe, right up to Americas. And I'm telling you, we are doing everything that we can to meet up even this challenge. Order book looks good in Parador. I can take pride in saying that the growth that we wanted to bring through exciting our sales to different countries outside Germany has worked very well last couple of years, and the fruits are there for you to see. Spain has grown immensely last year. U.K. has grown immensely. China is still -- has grown, but still to really flower for us, and we are waiting for COVID to really come down there. But we are aggressively working at getting orders, and that's working well.
Now, the question is, can we continue to get Lamellas from different countries? How can we safeguard materials? How can we keep up the revenue? So where I was looking at, maybe a little bit of a restful period, and saying quarter 4, we are -- the challenge is behind us, it doesn't seem that way. So to the objective, we'll have to wait and watch. We don't know how the world is going to still pan out. We don't know what kind of challenges it will bring to Europe in way of inflation, gas prices, demand structure, what consumers. At the moment, the orders are flowing in for Parador, and we are happy. But I'll caution you to wait for another quarter or 2 to be really certain that, yes, we are back once again.
But once we are back -- this is transient, once we are back, the fabric is well constructed. Parador will grow and will double itself. We are roughly about EUR 180 million turnover from EUR 140 million, which we were 2 years back, and we will ensure that we are moving towards EUR 350 million in the next 3 to 4 years.
[Operator Instructions] The next question is from the line of Subham Agarwal from Aequitas India.
Firstly, I'd like to congratulate the entire team to post such a good number despite severe headwinds. Sir, my first question would be regarding Parador. So I would like to understand a bit more about the demand scenario because, obviously, we know the cost of living has also gone up significantly in Europe because of the war. So -- and this being a discretionary product, obviously, it will face some demand challenges. So I wanted to understand what's the ground reality currently and what's your view regarding this.
Thank you, Subham. Thank you so much for asking these questions. And thank you for your appreciation. It means a lot. I must say that I'm well aware that all the investors of HIL -- all owners of HIL, do not maybe have a direct approach to the European market. And therefore, you may at times feel a little helpless to understand the reality. But you have me and your trust has always kept me alive. Let me give you the reality as we see in Europe.
So we have certainly a different challenge with the war. The HDF-MDF problem is behind us at least on availability. The costs are still high, but it's only a matter of time when these costs will start sliding down. But the war has put lot more threats to us. There were lots of wood that were coming from Russia into Europe. There was, as I said, pure wood, that is Oak, coming from Ukraine into Europe. Those, you have to ensure availability from elsewhere, and that's a challenge and challenges keep us alive. So we will go through that. Prices are high, but selling prices have been improved. Because we have been able to get into different areas, which is not Germany alone, it has helped us to construct our selling price direction very well. We have increased our selling price last year by 35% on wood products and 25% on rest of the products. So definitely, the selling price has gone up immensely in Parador, and we have been very opportunistic in picking up the orders. We still have a good order base.
The other challenge is some of these existing products have to be reworked on. So if we -- we had an HDF-MDF problem, we had to rework and come around and sell non-HDF-MDF products last year. Now we will have a wood problem possibly to solve that out and get into non-pure wood products. So all of that, the R&D is working immensely. The market still is holding on, but we will have to wait and watch. That will be my gauge on the market, Subham.
So what would be our current order backlog size -- would around be?
So Subham, a very hygiene order backlog that Parador always carried was about 16 million, 17 million. We do have 16 million, 17 million order backlog as we call now. But the order backlog has gone up for engineered woods and is lower for the other products that is vinyl and laminates. That's not a comfort area because engineered wood orders have a long-drawn deliveries, whether it's laminates and vinyl have a shorter delivery. So we need more of vinyl and laminate orders to now plug on, and that's what the team is doing, so that the current monthly revenues can be tracked. April in Parador has not been a very good month on revenue, while it has been a fantastic month for the rest of India. But we are hopeful that we will climb on and make good all of this, Subham.
The next question is from the line of Mohit Khanna from Banyan Capital Advisory (sic) [ Advisors ].
Really strong set of numbers...
Mohitji, I can't hear you, sorry.
Yes. Am I audible now? Congratulations for a strong set of numbers here.
I can't hear you at all, my apologies.
Am I audible now?
Yes, could you go slower maybe?
Is it better now, sir?
Yes, sir. Please go slower in your question, please.
Yes. So I just wanted to understand that in the current scenario, what are your margin expectations for the first half '23 from where we are right now, first? And second question was that in the 17% revenue growth that we have posted on an overall ratio in FY '22, would you be able to give us a breakup in price and volume growth terms?
So your question -- first question is on margins and how do I see this particular year proceeding, if I heard you right. I think we are well poised for a decent margin this year as well. The exact numbers will be very difficult for me to pronounce, but I can only say that every adversities that we are facing on material cost, availability and everything will be sorted out by this team. We will help this company to continue in its stream. That is point number one. The second question is on quantities versus prices for last year. Did I hear you right, Mohitji?
Yes, sir. Yes, sir.
Okay. So last year, more or less, in quantity terms also, roofing has done fantastically well. As I mentioned, we have increased our market shares, and now we are close to 22% in roofing. So quantities have done well. Selling prices have done well. Roofing has grown last year. So I think overall, that also -- building materials selling prices have gone up in Q4 by a cherry picking that we have done, and this will continue. Therefore, the margins for building materials and growth profile should continue. We are absolutely at the zenith of utilization there. So 2 things we are doing. One, of course, you had been kind to approve a new CapEx in East. So we are proceeding with that CapEx but it's been slightly slower than our expectations because of COVID and other reasons. But it's well in frame I think by quarter 3, quarter 4, we'll start delivering from that CapEx.
The other part that we are doing is on improving capacities in building materials in every plant by automation and small investments there to improve. IoT 4.0 is helping us immensely in also transparency and preventive maintenances of our machines. So that's helping another part of it. In plumbing sector, of course, the prices had gone up extremely. So on pipes, I think on quantity, we have delivered less than last year -- we have delivered 19% growth, I think, on quantity. And on overall, we have -- there is a 55% growth in pipes. Putty was slightly lower. So overall, 35% growth in plumbing sector is what we possibly see from your results. And Parador I have already talked about.
The next question is from the line of Alisha from Envision Capital.
I hope I'm audible now. My first question is with reference to a comment made earlier in this call. In Q4, in the roofing business has taken about a 6% price hike?
That's right.
So was it a volume degrowth in -- during the quarter?
No, we have grown in quarter on volume as well.
On Y-o-Y basis, I'm saying with referring to the Q4 of last year.
We have almost done the same volume, about 1% growth.
Okay. Sure. And a couple of quarters ago, we were discussing this in the call that some -- there is, at an industry level, an increase in capacity in the roofing space. Is this one of the deterrent, which is probably impacting our volume growth or because of the increase in competitive intensity impacting our margins in this business?
So there are multiple questions you have asked. And let me answer each one of them separately, Alisha, for clarity for you and for everyone. Yes, our competitors are increasing their capacity, but that's not at all a problem for HIL. And I once again say, it's not at all a problem for HIL. We will never increase capacity in asbestos roofing in HIL. We'd rather use your money for far better utilization. And so far as the competition is concerned, they are not able to get to those performances that our plants are delivering and those kind of efficiencies that each machine is delivering. So we will never be the tough quantity when it comes to selling and that's my commitment to you. So we have not degrown. We have grown in asbestos, and we have taken more market share from about 19.5% to 22% in 1 year's time. That's point number one.
Point number two, quarter 4, always, we are lower in market shares because we want to ramp up production during this time for a better quarter 1. So we prepare ourselves better for quarter 1 when the prices are at its peak, and we want to really maximize the utilization of inventory versus shares. Last year, also quarter 1 was a bumper for us. And this year also, it will be so. So we will not be staying back on account on any capacity constraints.
Understood. That's really helpful. Also, is it possible to quantify what is the contribution from Charminar?
Contribution from Charminar? I couldn't understand that question of yours.
What is the contribution to revenues?
Charminar -- roofing is all about Charminar. So...
Sorry, I meant the non-asbestos.
Non-asbestos is only a very tiny element. We have sold some -- primarily Charminar there.
Understood. And just one last question. What is the capacity utilization in the polymers business currently?
Polymer business is different plants have a different capacity utilization. Overall, we are about 60% utilization. Golan factory is slightly low, around 51%, 52%. Faridabad is almost about 80% utilization and Thimmapur is almost 100% utilization.
And is there any CapEx plans for FY '23?
For polymers?
Yes.
Yes. So polymers will continue to grow. This is a business which we have now touched INR 500 crore. And you may remember, just 3 to 4 years back, we were INR 55 crore in this. So we have grown well, but the aspirations are far higher. So this business will be INR 1,500 crore in the next 3 to 4 years, so INR 500 crore to INR 1,500 crore. Part of it will be from the organic growth levels from the existing machineries and part of it will be new SKUs that we will continue to add. Last year, for instance, we have added 200 new SKUs in this business. And part of that is where you see the inventories of our polymer is quite high because with our new SKUs and we have the platform at that. We will continue to add CapEx wherever there is needed for range expansions on SKUs and grow this particular business, Alisha.
The next question is from the line of Shivan MS from JHP Securities.
Am I audible, sir?
Yes, very clear.
Sir, my question is on the roofing business and specifically on the industrial applications. So sir, I was referring to our previous con calls, and you had said that the industrial segment has more or less transitioned from the asbestos roofing to the non-asbestos and the other options available since 2005. So sir, my question is while this transition was going on, majority of the market share has been taken away from the asbestos by the steel -- by the metal roofing segment. So sir, what is the reason for the non-asbestos cement roofs not being able to penetrate this market while the transition was going on because they are a much cheaper substitute compared to the metal roofing? So that's my first question, if you could just tell me this.
Thank you, Shivan. Very, very strong question and very correct question. If there is one business where we have not been able to do as well to our expectation is this, which is the Fortune business. The reason was we had gone for an autoclave technology earlier, which was very, very high on costs. And we found very soon that it is unsustainable. So then we went for the humid cure. Last 12 months has been humid cure technology, which we were stabilizing. Remember, this being roofing, Shivan, we can't go full out into the revenue path till 12 months application is over, all the seasons are over, and we are able to then understand whether our technology is really proven. Today, it is proven. So you would see a ramp-up on this business definitely. Yes, the costs are still higher, but we are working on that regularly, and we will position it. So last year, in the last third and fourth quarter, we did roughly about 5,000 metric tonnes every quarter. I'm hoping that this year, we would be able to see that number go up.
Okay. My question was more from an industry perspective. So the industry as a whole, so not only from a Charminar Fortune perspective, rather than non-asbestos cement sheets being used in the industrial segment, during the transition, that demand was weighed towards the metal roofs and maybe RCC -- the RCC construction market. So sir, why did that happen? Because if we see the characteristics of a cement roof, they are much less on the noise, much better in terms of heat resistance, et cetera. Then why do people prefer the metal roofs compared to the non-asbestos cement roofs?
Shivan, You're absolutely dot right that the market should have been taken full time by non-asbestos cement roofing than steel. The reason is very clear. There weren't any other product in the country. So there is no other supplier which is making Fortune as well as we do, the non-asbestos roofing sheet. So we came out with this technology primarily to ascertain our future in case asbestos goes out of the market. But at the moment, we definitely see there is a good potential for it to be sold to industrial customers. And we are the only one which are doing this in big numbers. The others, maybe, have some product, which is 3,000, 2,000 tonnes in a year, which is as good as [indiscernible]. So the answer to your question is non-availability of the right product in past allowed this market to go to steel. And the future will be Fortune for us.
Great. And sir, if you could just give a broad idea about the market size in the industrial application and the broad breakup between cement, metal and RCC, if that's possible?
No, it's a tough question for me, Shivan. Because we are not in those markets, we will not be able to address the whole market. I can say that the steel sheet market will be as big as asbestos market for roofing. So there's a big, big room for non-asbestos products to capture there.
Okay. Okay. And sir, my second question is on the Building Solutions business. Sir, we've done about INR 400 crores of top line. Sir, could you give a broad breakup of how much is in blocks, boards and panels for the year?
So blocks is majority of the INR 400 crore. Roughly about INR 250 crore is blocks. The rest of them is panels and boards. And we are growing in all these segments. So we are 100% utilized on capacity for blocks as well as boards and panels. And therefore, the new plant is being set up in East for enhancing this capacity, plus as I mentioned, we have also taken some actions on automation as well as through IoT 4.0 to enhance these capacities.
The next question is from the line of Sagar Jethwani from Phillip Capital.
Sir, I have a couple of questions. Firstly, on the flooring business, how is the competitive intensity in Europe now? And in last 1 year, many headwinds actually, so how are -- what steps do we have taken to stand out from the competition? What are those steps which we have taken? This is my first question. Second is on the building material waste disposal policy in Europe. I guess it's a concern somewhere I was reading and how do you see this? So these are my 2 questions.
So your second question, if you can repeat, please?
Yes. So yes, my second question is on the building material waste disposal policy in Europe. So my understanding is that there were some concerns. I was reading on the net. How do you see this concern for us in long run?
Okay. So thank you, Sagarji, for your questions. First of all, competitive intensity of the flooring business and what steps we have taken. The competition is pretty loud and clear in Europe. And in Germany, we are #1 in flooring with the brand and the penetration that we have in both DIY as well as projects business. Austria, we are very, very strong again in flooring. We are not a big player in the other countries of Europe. Therefore, there's good potential for us to grow. Spain, we have now taken a good positioning in the last 2 years. Whatever we have done has gained up to come to the second positioning in Spain. The other part is France, U.K., where we are small players, and we will try and gain competencies on that.
There are 2 types of players there. One are who have their own HDF-MDF in homegrown. So they have those materials being produced by their company and then they utilize it for their flooring. So they were slightly benefited than us because we were to buy HDF-MDF from suppliers. And suppliers who are neutral, so they don't -- didn't have flooring, were the suppliers we could go to because others were more interested selling it to their own companies. So therefore, that was a disadvantage we had, but that's now behind us, we have got now long-term contracts with big players there. And hopefully, we will be able to mitigate the HDF-MDF risks. I've already discussed about the Ukraine crisis and how it's posing a concern. We are still good, but we'll have to watch and see.
Now your second question is raw material waste disposal policy in Europe, that's very strong. But Parador is absolutely safe because we have wood-based products and our scraps of wood are reused by boilers to generate power. And therefore, there is absolutely no problem in waste disposal.
The next question is from line of Sandesh from Haitong.
Congratulations on good set of numbers, sir. I have just 2 questions. First question is for the pipes and fitting segment. So what kind of volume growth have we recorded in this quarter? And so what are the utilization rate for Gujarat and Telangana plant for pipes?
Thank you, Sandesh. See, for your second question, I had answered earlier, but I'll repeat it just for you again. So we have roughly about 60% capacity utilization in totality and Telangana is almost 100% utilized. Golan is about 51% utilized, so that being so. Your first question was on quantity growth. Very difficult to track because each product are different. There are plenty of SKUs and we don't monitor therefore through that because it's quite confusing to monitor the quantity from that angle. We monitor the sales growth, which has been 55% for pipes.
Great. Just one last question, sir. So when do we expect the capacity in each to come online?
So this is on your building materials, right?
Right, right.
There are 3 things that we are doing in the East. First thing we are doing is boards manufacturing capability. So that will come online, I think, in the next 3 to 4 months' time. The second is panels to be made in East. So that's a brand-new facility that's coming up. As I mentioned in my opening remarks, about quarter 3 or quarter 4, that will come on board. The third is blocks. That will take a little more time, and we will keep you fully informed on that, sir.
The next question is from the line of [ Amit Vora ], an Individual Investor.
Congrats for a good set of numbers in a very tough environment. My first question is, you have mentioned that you are going to stick to the USD 1 billion mark -- target. Will there be change in the time line on that? Or we still think that 3 to 4 years that we can make it with all the situations across Europe changing and inflationary situations coming up in India? That's my first question.
Thank you, Amitji, for your appreciation and thanks for the question. My counter question to you is, as I know now, would you give me some more time, and I think -- so therefore, my standard response is you trust me with all the management, we will do it as per the time line we have committed to you, [indiscernible].
Great, great, great. The second question is, if you can give some numbers on the number of dealers that we have, the sales points that we are touching right now compared to what it was last year to just give us an estimation of how we are growing in that aspect, if that is possible and if it is handy with you.
That's a little sensitive question, Amitji. I normally don't hide any information from my shareholders. But this is sensitive because we are extremely strategic in each zone on what we do. I can tell you with a clear confidence that we have grown on our spread immensely last year. And the number of counters that we have added on is huge. I believe that huge to be get.
I respect that and totally understand. One broader point that I just want to highlight here is that, of course, Parador, if we see the total profit that the company has done, the differential that has come down this year is because of Paradors performance just slightly dipping. So I think once with your efforts and the people and team that you have put behind it, once that gets back on track, which we are hopeful you are doing the best efforts for that, we should see the best results coming in very soon. All the very best from our end.
Thank you. Your assessment is absolutely right. I mean Parador, I would have said, with thumping note that Q4 onwards, we are back and profitability will only go up, but this war has put another set of questions and challenges, but the team is working on it, Amitji, but India will continue to grow strong.
Next question is from the line of [ Satish Kumar M ], an Individual Investor.
Congratulations for the good quarter in the challenging time. My question, do we have any plan to invest more on green energy?
Green energy?
Yes.
Satishji, green energy -- we have no plans to invest in energy, but we are definitely looking at putting up solar plants in our factories, wherever that's possible. And if that answers your question, then that's what we are doing, sir.
Yes, yes. To be self-reliant on the green energy and not on the business purpose, for our own purpose, I'm asking.
I completely agree, sir. There is a challenge there that our roofs in all the plants are asbestos roofs, which are now 70-years old, 60-years old. Putting up solar plants on those roofs do not seem to be a possible way. So we will have to look at where to put those solar plants. Those actions are going. There is a [ CST ] that is working on it, Satishji, and we are very, very clear. We will go for all of that.
The next question is from the line of Viraj from Securities Investment Management.
Yes, can you hear me?
Yes.
May I request you to speak a little louder, please?
Yes. I just want to understand a little bit on Parador. I just want to understand the kind of price increases we have taken. You indicated that the order book is still healthy. So I just want to understand how is the demand environment broadly like in medium markets. And how is the overall competitive landscape? So in last 1 year gone by, especially in the last 6 months, how has our market share in core regions kind of changed?
I would repeat a part of it, which I've already stated, Viraj. The demand environment is strong, and we have cascaded our sales to many, many countries, which is helping us to more or less spread out the risks. And what we see is that our strategy of moving to different countries has helped us. Order book at the moment looks good, not really big, but it's good enough. That's what we would say. And so far as market share, I mentioned that in Germany, we are #1 and Austria also we are doing very well. And Spain, we are #2 now. Other markets, we are not market leaders at all. And we have to work on that. So specific markets would be -- outside Spain will be Switzerland, would be United Kingdom, would be France, would be Nordic countries. And we are working on that.
China, we have a joint venture and that joint venture is growing. We have done about EUR4 million turnover in China, which is a growth over last year. But this is -- there is plenty of opportunity in China to grow with solid medium -- middle class base that Chinese have with a good interest for European products. We're just waiting for COVID to slide down a little which is taking time, and you are aware of what's happening in Shanghai. So give it some time. China will be a very good growth profile for us.
We are looking at North America. We are looking at Canada, we are looking at United Kingdom in a big way to grow. So all of those will be avenues to grow Parador as situation eases out a little bit.
So the reason I asked about market share, sometime back, you also talked about the market structure where it's quite large -- it's a very fragmented market. And given the kind of supply chain pressures you are facing, I'm just trying to understand, does that also kind of has enabled us to gain more market share vis-a-vis other players? Just trying to understand how is the overall landscape in terms of competition, given the supply challenges in core markets.
Yes. So I mean, the challenges would be same for all flooring players. There'll be something which is good for guys who have their own down-the-level HDF-MDF products. But otherwise, we are all on the same base and Ukraine crisis will be a crisis for everyone, so it will not be a Parador issue. It would be a critical issue unless we are able to sort out. So we have taken quick actions to gain accessibility to several other suppliers for both. I'm keeping my fingers crossed that war ends rather quickly, and we are back to where we were, let's say, a year back and drive Parador to newer countries. So yes, competition are taking the challenge, so are we, but we are doing well and under the limited potential that we can with so much of headwinds. But we will come back in a quarter time or so once the war recedes with far better numbers.
Okay. Just one last question, if I can squeeze in. On the supply chain part, especially for Parador, I mean when we started the -- we were kind of put in a spot because of the MDF supply issues and now this is related to Oak wood. So just want to understand, other than these 2, are there any other elements in the value chain where we are kind of more overly dependent on a single source or a single country? Any thought process on the supply chain sustainability more from a...
So last year was a very, very good quarter for Parador and both on top line and profits. I will not at all predict that we will reach those numbers this quarter because of the war. But quarter 2 onwards, we should be able to stabilize Parador in a far better way, better than last year. It's my advocacy. So far as materials and every bit in Parador is concerned, I think we are no more dependent on single suppliers. We have broadened the basket for all suppliers. Costs are still very high in Europe. Other than HDF, MDF and oak, the vinyl costs have gone up because they used to come from China in a big number, that stopped. The chemical costs have gone up, which has an invariable issue on HDF-MDF costs because chemical gets into that, plus the insulation that gets on in some of our products, so that also. So those are criticalities, which we are seeing, but our team is managing it little better.
The next question is from the line of Chirag Shah, an Individual Investor.
Sir, could you hear me clearly?
Very clear, Chiragji.
Congratulations on a great set of numbers. Sir, I had a question -- a couple of questions on the board segment. So you mentioned that you will be setting up a new capacity -- sorry, the new capacity to come onstream in the next 3 or 4 months in eastern part of the country. Could you help me with the unit economics in the boards segment?
So sir, we are not board-focused, we are panel-focused, so first of all get that. Second is, we are not setting up a greenfield factory on boards in East. We are augmenting our asbestos solution plant in Orissa, where we have at Balasore, so that during off-season, we can make boards out of that plant because the capacity utilization in off-season goes down to 45%, 50%. So boards will be made locally for panels to be made locally. And therefore, we'll make boards in Orissa plant during off-season and then utilize it for our panels facility, which is your brand new facility. So at the moment, if we were to set up a panel plant in East, we would have had to bring both either from Faridabad or from Hyderabad, which would have been very expensive on freight. So that's the reason this augmentation has been done.
So sir, the capacity with roofing, it's fungible. Am I right?
Yes. Because 2 quarters, we use at 95%, 100% and 2 quarters, we use at 50% or 60%. So those are the capacity utilization, therefore your fixed costs won't go up. Your -- it will only be the variable cost and far more utilization.
Next question is from the line of Saurabh Patwa from Quest Investment Advisors.
Congratulations on a very good performance despite the challenging times. So just want -- and also thanks for giving a lot of insights here in the last 1 hour. Sir, just my question was related to the asbestos fiber roof availability. I think you touched upon it and also provided insights on how our company is placed for it. But on a structural and industry level, how do you see the impact of this war, because it's a very limited -- so I think Russia and Ukraine supply would form a very large part of the global supply chain. So how is it impacting the supply? Is it the pricing on an industry level? If you can just throw some light.
Saurabhji, you were off and on the voice, but let me try and recapitulate your question. Your point is how would the war impact supply chain. Am I right?
Of the roofing -- of the fiber availability.
The roofing, yes. So my estimate is, Saurabhji, that the Russian supplies of fiber will definitely see a little bit of a concern. If not for availability, at least from the shipping lines and payment terms, et cetera, so would the Kazakhs. So a lot of dependence now will be therefore on Brazil. And we can already see it because almost all competition has rushed to Brazil to get more quantities of fiber from Brazil, which we get an indication, and that has also impacted Brazil raising their fiber costs. And the other thing is the sea freight. So sea freight is becoming far more expensive which will be hurting everyone. So on fiber side, it will be an expensive game for everyone. Some of them will also lament under availability issue, and I feel for them. But your company, HIL is absolutely safe. We have both the availability of fiber, and we have been able to mitigate some of these cost structures also well. It will hurt us immensely this year over last year so far as landed fiber costs are concerned because of sea freight and some things but that's something which is far better to be handled than availability.
Right. So I believe the pricing as a transitory impact would be there, but on a structural basis, you would expect much better than everyone else.
Absolutely correct, sir. Thank you for picking that through for me.
Next question is from the line of Deep Gandhi from Astute Investment Management.
I hope I'm audible.
Yes, Gandhiji, Very clear. Please tell me your questions.
Sure, sure. So my question is about the fiber cement board division. So in the past call, you have been mentioning that the company has not focused much on this division. So can you please elaborate on the reason behind this? Because if you see some of your competitors, they have been talking a lot of good things about this industry, and they've also been planning to do CapEx to expand their capacity. So just wanted to know your view on this.
You're right, we did not focus on FCBs, whereas our competitors have done, and some of them are doing well, and I give credit to them. We are more focused on panels because we believe that's a good value-add product for us, sir. And we have -- we were making fiber cement boards only from Hyderabad earlier, historically. Now we have set up the Fortune line in Faridabad and 50% of that capacity is utilized making fiber cement boards. So the board requirement for North, which we needed for our panel plant in the North is now being completely met from Faridabad. So that's giving us a profitability benefit. That's where in Building Solutions, you have seen the profits go up by 44% this year. I would say our focus will continue to be in panels, and we are setting up -- we are augmenting our asbestos manufacturing line in Orissa for making fiber cement board for again panels [indiscernible]. We will focus more on that. We are going to park more and more money to invest into pipes business and grow that, which will be significant value-add in some time according to us.
The next question is from the line of [ Sagar Doshi ], an Individual Investor.
Am I audible?
Sagar sir, your voice is breaking terribly. Can I request you to come in a bit?
Better now?
Yes.
Okay. So my question is firstly regarding the margins. Okay? So as we could see like this quarter, Parador won't be performing that well. So could I expect that on a year-on-year basis, even though we will be having a good product for the roofing, there would be a hit on a consolidated level due to Parador or will we be able to manage it? The second question is, are we taking any steps to reduce the cyclicality of our business? Means, I know there would be around 20% of hike in the quarter 1, quarter 2, but somehow due to more revenue from other segments, let's say, the next 2 years or something, do we see our cyclicality being softened up?
So I'm not sure I heard you fully, Sagarji, and my apology for that. The line wasn't good, but let me still try and answer what I've heard. So your question on cyclic element of the business, quarter 1 will continue to remain the bumper quarter for HIL followed by quarter 4, and quarter 2 and quarter 3 will be weak. This is also sadly the same story in Parador because in quarter 2, they have their summers and quarter 3, they have Christmas vacations. So that remains in Europe, a cyclic issue again.
Now so far as the product cyclicity is concerned, as you've been hearing, and I've been saying very openly, we are trying to use our asbestos roofing facilities for non-asbestos to ensure that the plants are run continuously across the year and provide us incremental revenue as well as profit. And that's the process that we do. Pipes is another business that has come in now and as it grows and the profits come up -- at the moment, the profits are low there, but as the profits come up and as the volumes go up, you will see that, that is going to compensate for loss of profitability in quarter 2, quarter 3 for HIL results on account of roofing bids. So we are hopeful that in the coming years, you would see for yourself that HIL has come out of this cyclic nature and every quarter, there are strong foray into profitable growth.
Got it. Just one more thing on the margins. Like can I expect, like, this year, we had inflation issues, et cetera, which would, let's say, continue for, say, quarter 1 of quarter 2. But in the long term, let's say, around 4 quarters down the line also, can I see the margins being at a state where it was in FY '21?
FY '21 was a booster year because a lot of cost was subdued into COVID. We had taken a lot of discretionary measures on that. Let me say that -- okay, a few things, let me clarify. One of all, your company will grow. So top line will see a growth. With that, the profits will grow on absolute value and that you will see in a disciplined manner. So absolute value of profits are going to grow. Profitability percentage to revenue looks low because of the huge challenges on materials, we will be able to come back to a greater amount as situation normalizes, and that's my plea. So overall, a profitable growth towards the USD 1 billion, I promise you that.
Can you -- if you can give any number towards the margins that you can generate, let's say, in long term?
Sagarji, it's not that you're asking this question, it's in general, I don't give futuristic number because, a, it's not something that [indiscernible] likes it. And number two, I'm sure you will appreciate, this can go either side based on several headwinds that we keep facing. So I would not like to shame our trust. So please allow me not to give a direction, but I'm just saying you will have a very profitable growth from HIL, sir.
The next question is from the line of Ajox Frederick from Unifi Capital.
Sir, we understand Ukraine is the major source of Oak wood. So as things stand today, are borders open for trade? Or is it just completely shut for...
So Mr. Frederick, thank you very much for your question. Ukraine is quite a big spread and the eastern side of it is absolutely closed and [indiscernible] -- sorry, western side. But on the East, it's still something that we are able to do. So the question is more about how they run the factory because there is a dictate that all males have to join the war. And therefore, they can't run the plants only based on women employees. And that's the constant issue. But there are a couple of our contacts there who are trying to support us, and we are trying to do as much as possible there.
Got it, sir. Sir, and I mean, if I may, what is the breakup of Building Solutions business, let's say, '23 mix, putty and others?
Building Solutions?
What is the expected breakup, FY '23?
So INR 250 crore is blocks and the rest is panels and boards, sir, out of INR 400 crores. Is that your question?
For next year, sir, for next year.
So next year also we will remain the same. See, as soon as the new operations come in place in Orissa, then we will have more panels there coming in till the boards plant comes in. But we will grow because our NSR is growing. So I think you can steadily expect the growth in both profitability and top line in Building Solutions, I can vouch for that.
The next question is from the line of Dhananjay Mishra from Sunidhi Securities & Finance.
Sir, just wanted to know how is the penetration level in Tier 2, Tier 3 for our AAC blocks. I mean is it increasing or it is still...
Mishraji, the business normally is mostly driven through big construction agencies. So Tier 1 has started. Tier 2, Tier 3, we had penetrated during the COVID times, and that has helped us to do a cherry-picking of orders and improve our NSR. The better thing that I can say in penetration of Tier 2, Tier 3 has been the working capital. So we have almost started getting 50% advance for this business, and you would have seen that the working capital of this business has gone down immensely and the reason is that. So our penetrations are good. Our selections are good for customers. There are no bad debt provisions, which used to be quite a recent thing 4, 5 years back. I think this business is actually pretty streamlined, sir.
No, sir, I was asking in the sense that is market increasing for AAC blocks in Tier 2, Tier 3...
There is a huge demand that we see. We have a problem, and supply more than orders really. And therefore, we are able to cherry-pick.
Okay. And I would like to thank Mr. Veerappan for his contribution and addressing the analyst community for so long and wish him all the best for your future. Thank you.
Thank you, Mr. Mishra.
Yes, Mr. Mishra, we are all going to miss him, but I'm sure you will be in touch with him because he's going to a listed company.
Ladies and gentlemen, we'll take the last question from the line of [ Deep ], an individual Investor.
Am I audible?
Sir, there's lot of echo from your line. May I request you to speak through the handset?
Am I audible?
Yes.
I didn't get your name, sir, sorry about that.
[ Deep Sukhwani ].
Okay. Please tell me, sir.
Yes. So I had a couple of questions. First one is on the -- given the competitive scenario and the dampening valuations because of commodities pricing and the global crisis regarding Russia and Ukraine, are we seeing any prospective inorganic growth opportunities right now? And -- or are we pursuing something -- I understand that due to competitive reasons you might not be able to reveal the details, but are we pursuing something in those directions? And secondly, one administrative question, in the independent auditor's report that we were reviewing, there was one emphasis matter, which I couldn't get much my head around was around the compensation thing. If someone could throw light on how that works and like which -- what required us to pass a special resolution due to this compensation numbers and all that. And, yes, those are the only 2 questions I had.
So which compensation number? That, I couldn't understand.
On inorganic growth story, I can say, sir, this organization has pledged to you to take it to a USD 1 billion story. USD 1 billion won't come from our existing lines alone. We have to be opportunist in our ways in seeing which is the new vertical we will get in and how we grow that. So those aspects are all being reviewed at all times, and we will soon come back with more details on that to you. At the moment, we don't have any inorganic acquisition in our sights, and therefore, I'm unable to talk about that, sir. About compensation, could you please define it a little more, and I will definitely answer that, sir?
Yes. So there was something in the emphasis of matter called out in the independent auditor's report, which said that due to certain limits described by Companies Act, the compensation should be around 1,205, but due to it being around 1,627, we will be seeking the shareholder approval through a special resolution during AGM.
Okay. Okay. So this was about my salary. And let me define this to you. My salary hasn't changed. And if you can put in a word to my bosses, that would be great for me. But on a serious note, the expansion of salary that you see is only on account of ESOP. ESOP was approved by all shareholders and in the AGM also and just that the trench has been due, and I have staked my claim to the first trench of ESOP. There is a valuation that comes when you buy the ESOP and you pay half of it as tax from your personal taxation and the whole valuation stands as a persuasive value in the salary. And therefore, around INR 8 crore is coming as a persuasive value of ESOP, which is nothing that I or anyone could have controlled. Since the amount of the salary as it will stand with this ESOP, which is primarily a persuasive value getting defined will be more than 5% of the PAT of the company, that's where it will need a resolution and an acceptance by shareholders. So that's what has been written, which will come in the AGM, sir.
Got it. Got it. And once again, congratulations on the great set of performance, on great -- I mean, the way we hear from the management in terms of getting responses. And also, thanks so much to Mr. Veerappan for the contributions he has been giving us.
That will be the last question for today. I will now hand the conference over to the management for closing comments.
Thank you very much, Nirav. Thank you all. It has been a pleasure interacting with all of you over this call. We thank you for the time taken out and engaging with us. We value your continued interest and your questions and your thoughts. If you have any further question, or would like to know anything more about your company, kindly reach out to us at the investor relationship desk or I will be most happy personally to interact with you. Thank you all. Bye-bye. Stay safe.
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.