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KEI Industries Ltd
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Ladies and gentlemen, good day and welcome to the KEI Industries Limited Q1 FY '23 Earnings Conference Call hosted by Monarch Networth Capital. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Dani from Monarch Networth Capital. Thank you and over to you, sir.
Thank you, Andrew. Good afternoon, everyone. We are pleased to host the senior management team of KEI Industries today. And we have with us Mr. Anil Gupta, Chairman and Managing Director of the company; and Mr. Rajeev Gupta, CFO of the company. We'll start the call with initial remarks from the management followed by Q&A.
Thank you and over to you, sir.
Good afternoon, everybody. Thank you very much for taking out time for this conference call. I'm Anil Gupta, Chairman and Managing Director of the company. So I'll give you a brief about the performance of Q1. In Q1 of financial year '22-'23, the company has achieved a net sales of INR 1,565.41 crores against INR 1,017.56 crores in the same quarter last financial year. So the growth in net sales is 53.84%. EBITDA in this quarter is INR 163.16 crores so this has led to a growth of 40.05% compared to previous quarter of the last year. EBITDA/net sales margin is 10.42% as against 11.45% in the same period previous year. Profit after tax this quarter is INR 103.76 crores against INR 67.12 crores. Growth in the profit after tax is 54.59%. PAT/net sales margin has improved to 6.63% from 6.6% last year same period. The total sale, domestic and international sales, through the B2B is around 49% of the total sales.
Domestic institutional cable sales of high tension and low tension cable is INR 472 crore in the first quarter against INR 414 crores last year. Growth is approximately 14.06%. However, the domestic institutional cable sale of extra high voltage cable is INR 100 crore in the first quarter against INR 29 crore in the previous year same period. Export sale of the cable in this quarter is INR 247 crores against INR 93 crore. The growth in the export sale is approximately 167%. The sales through distribution network, which is B2C, was INR 652 crore in the first quarter against INR 387 crore in the last year same quarter. The growth is approximately 68%. We are continuously in the process of strengthening our dealer/distribution network and the total active working dealers of the company as on 30th June 2022 was 1,800. That distribution -- sales through distribution network contributed approximately 42% in the first quarter against 38% in the last quarter -- last year same period.
EPC sales, engineering, procurement, construction, project sale, other than cable is INR 84 crores [Audio Gap] INR 86 crores, almost flat. Out of the total sales of EPC, the extra high voltage EPC is INR 36 crore in this total INR 84 crore sales. The sales of Stainless Steel Wire in the Q1 of FY '20-'21 is INR 61 crore against INR 48 crore same period last year. Growth is approximately 26%. Pending order as on 23rd July 2022 is approximately INR 2,741 crores. And besides that, we are L1 in another INR 229 crore worth of orders, which are expected shortly. In this INR 2,741 crore, the EPC orders are INR 878 crore; which is basically Nepal, ADB-funded project and Gambia World Bank funded projects. Extra high voltage cable projects is INR 353 crore. The domestic cable orders pending are INR 1,428 crore and export order for cables are INR 82 crore.
The 42% sale which the company is doing through KEI retail network or distribution network, we do not add up any orders to the order book because these orders come and executed from the stock or executed within a week to 15 days. So we do not add them into the pending order book. The India Rating and Research Analysis research has upgraded and assigned IND AA/stable rating to long-term bank facilities from IND AA- and reaffirmed the IND A1+ rating to short-term bank facilities and commercial paper availed by the company. The book value of the company per equity share is INR 248.62 as on 30th June 2022 as against INR 236.98 as on March 31, 2022. The total borrowing, including channel finance, as on 30th June is INR 88 crores -- sorry. Total borrowing is INR 101 crore and cash and bank balances of INR 172 crore as on 30th June 2022 as against total borrowing of INR 331 crores and cash and balances of INR 360 crore as on 31st March 2022.
Acceptance creditors as on 30th June is INR 103 crores as against INR 299 crores as on 31st March 2022. So the net debt, including acceptances of LC, has reduced to INR 32 crore as on 30th June as against INR 270 crore as on 31st March 2022 and INR 336 crore as on 30th June 2021. During this quarter, finance cost has decreased to INR 9.23 crore as against INR 11.42 crore previous year same period. Percentage of the financial charges on net sales has decreased this period to 0.59% from 1.12%. So the company has used operating cash flow for cash purchases resulting in the reduction of trade payables, acceptances and substantially by INR 195 crore. As for future outlook, as communicated earlier, working capital of approximately INR 100 crore is expected to be released during financial year '22-'23 from EPC data retention money, which will be used for increased sale of B2B and B2C sales of the company and as well as the CapEx requirement of the current financial year.
So the company will be having sufficient cash flow to meet its working capital and growth requirements in the future. We are aiming of increasing the sales through distribution network by approximately 30% to 35% this year so as to achieve a projected 16% to 17% overall turnover growth in this financial year. The capacity utilized during Q1 financial year '22-'23: 78% cable -- in Cable division, 65% in House Wire division and 80% in Stainless Steel Wire division. So company already has capacity in place to achieve growth for the next financial year by the time new capacity needs will also be available. The company expects to have a CapEx of approximately -- capital expenditure of approximately INR 200 crore to INR 250 crore for next 3 years to maintain a CAGR growth of 17% to 18% per annum as against achieved CAGR of 15% during last 15 years.
The industry outlook. We see strong growth in the infrastructure segment especially from power generation through solar and wind and other energy sources, transmission and distribution and industrial sector like steel, aluminum, cement, fertilizer and refinery expansion which are underway at the moment. And also the government emphasis on infrastructure development projects such as national infrastructure pipeline in important areas such as energy, railway, metros, construction, road and highways, building projects, hospitals, ports and airports and modernization among others. Increasing government attention and funding support for rural and railway electrification projects and higher and more efficient transmission and distribution infrastructure is also attracting good demand for underground cables.
So this is a commentary from management side. You are requested to raise any queries, we'll be happy to answer the same. Thank you.
[Operator Instructions] The first question is from the line of Naval from Emkay Global.
Couple of questions. First, you stated in your opening remarks that target is for 30%, 35% distribution expansion and this number for revenue to achieve that 16%, 17% revenue growth is for consolidated if I'm not mistaken. Is that correct?
Yes.
And sir, because if I look at you had guided for 16%, 17% revenue growth at the end of June also in 1 of your media interview and since then, commodity prices have seen a sharp correction. So you still see this number achievable because of the strong volume growth outlook.
Yes, we still feel that this numbers will -- are achievable.
Because we are having sufficient order book position, Naval.
Okay. Understood. Second, in terms of the land parcel acquisition, Rajeevji, last time you had stated that almost 35% of the total land parcel has been kind of acquired. Can you give some update on that? What is the status and progress over there?
It will take further more -- 1 month, 1.5 month more to acquire the full land because these are agricultural land, they are taking some time. But we are in the process and definitely we will do expenditure in this financial year preferably.
And there is no delay because of this 1 month, 1.5 month delay on capacity expansion outlook?
No. That's because in these kind of projects, 1 to 3 month delay is not the delay. But for the capacity expansion where Anilji has taken a step further ahead because in our Silvassa plant, we are putting a low tension power cable facility there where our housewire is there. So that for the upcoming financial year and last quarter of this financial year, the growth momentum can be maintained from there itself. We are taking care for the growth of 17%, 18% in the next financial year also.
Understood. And on the balance sheet, as you rightly stated on retention money recovery and other aspects which have been benefiting you on working capital aspect, so the current net debt number of 1Q, is that fair to assume that should be the ongoing run rate going forward as well because cash generation will be enough for CapEx as well as working capital incremental?
Yes, that's right. We are already having the INR 170 crore plus fixed deposit in our accounts. So whatever CapEx requirement, that fund has already been accumulated so there will not be any further requirement from any loan or et cetera. Loan has already been nil. The working capital loan has already repaid full. Only the INR 13 crore term loan is outstanding, which will be repaid in the next 3 quarters. So by March '23, all the term loan will also be repaid because this is external commercial borrowing so we cannot pay the rate. That is why it is there in the books.
Got it. And sir, lastly if you can repeat your order book breakup, I missed couple of numbers there.
Order book number is INR 2,700 -- just a minute. It is INR 2,741 crores; in which EPC order book is INR 878 crores and extra high voltage power cable order book is INR 353 crores and cable low tension, high tension and other cable domestic order from institution is INR 1,428 crore and export order of cable is close to INR 82 crore. Apart from this, extra high voltage power cable we are L1 in INR 229 crore order book. So if we include this, then it will be closer to INR 3,000 crore order book.
Next question is from the line of Parin Gala from SageOne.
Sir, the export number for IC is that INR 193 crores and Y-o-Y it's been large growth. Sir, is it just significantly and the last quarter being COVID affected and the number was lower or this was a steady or something one-off has happened in exports?
It is not on the quarterly number we should assume anything. Sometimes the order is to be deliverable in a particular quarter so we have to deliver in this quarter itself. But normally the composition of the exports will be 10% to 12% of the total value -- total profit/loss.
So we can -- we expect a total export on the full year basis of between INR 700 crore to INR 750 crore.
Okay. So is it order book based just generally or even on a spot basis like we sell in...
It's order book based.
This is order book based. Okay. And sir, lastly, the CapEx number which you mentioned of INR 200 crores to INR 250 crores, this will be over and above the greenfield investment which will happen, right, of about INR 600 crores, INR 700 crores, which were mentioned earlier. Is my understanding correct?
In the new projects, which we are going to be happening in the Gujarat region, wherein we are acquiring the land where the investment size on a per annum basis will be INR 200 crore to INR 250 crore for next 3 to 4 years.
Next question is from the line of Rahul Agarwal from InCred Capital.
Congratulations for a decent set of number. Sir, few questions from my side. Firstly your peers, Havells and you talk about Polycab, they saw some kind of destocking during the quarter. Could you share your own experience between across your cable and wire segment? What was the experience with KEI? How did the channel behave? What is the channel inventory right now? And copper obviously last 2 weeks has bounced back again by 10%. How do you see second quarter, third quarter panning out in terms of demand? That's my first question.
First of all, copper is always fluctuating. Sometimes it is more fluctuating, sometimes little bit in the rainbow fluctuation. So last year there was the full year which was increasing. Now again it has come to the situation wherein copper will increase or decrease in a particular quarter. So it will increase also, it will decrease also. So this momentum we are seeing in the last so many years so we are used to it. With regard to the destocking in the channel, sometimes people are worried about the -- more of the copper going down so sometimes they are holding the position for 8, 10 days. So it will not impact much because everybody has an inventory of 15 days each dealer distributor. So they are playing with that inventory and by that time the price stables and they are again start buying.
Rahulji, you're right that some destocking has taken place and because it is very natural when the prices are unstable to the -- and going down, naturally anybody will not stock. They will take the material whatever is immediately needed by the actual customer. But we have not seen a very big impact of this in the first quarter, but -- and we are trying to revise and adjust our list prices as soon as possible so that the same form maintains.
Got it. Sir, to understand it correctly. The channel inventory right now should be pretty low and it should see a pickup in second quarter. Is that the way to understand?
Yes, it should be. It should be very good.
Okay. Got it, sir. But we couldn't see -- your numbers have not really fluctuated in the first quarter, been very stable for KEI. So that is why I was wondering that destocking didn't really impact KEI versus the other players actually reported lot of degrowth. Any specific reason for this?
See, the companies who are very heavy in retail, I think they are impacted more like Havells or Polycab. I mean we are also now going heavy on retail so maybe in future we may face the same problem. But at the moment, we have not faced.
[Foreign Language] This is not the case they have not grown. They have also grown in the first quarter.
Yes, sir. Sure, I understand where you're coming from. So I'll move ahead to my second question. On the CapEx, I think, sir, I just need a recap on the entire total CapEx. This INR 200 crores, INR 250 crores per year, you are broadly talking about INR 800 crores of CapEx in total for the project. Between that, could you help me break down what is the land cost and what is going to be the construction plus the machine cost? Just to get a clear opinion how much is maintenance CapEx for the company every year and how much is whatever CapEx in total? And you'll spend obviously INR 200 crore, INR 250 crore every year. But if you could help me understand the project cost better, it will really help.
So our maintenance CapEx in our company is hardly INR 20 crores, INR 25 crores in a year. That is number one. The project cost for the new projects cost it will be decided only once the land is fully acquired because it will -- construction costs will depend how many acre we have acquired actually. But overall in our industry, the CapEx ratio is 1:5. So we want to create a INR 4,000 crore to INR 4005 crores -- INR 4,500 crores sales from there. For that we are envisaging investment of INR 800 crores over the year put together all. The land cost will not be more than INR 50 crores to INR 60 crores because it's agriculture land so land cost is less amount.
Got it, sir. That really helps. Could you help me with the volume growth number for cable and wire segment for this quarter? The revenue growth was 61%. How much was volume?
Volume growth for the metal has grown by 27%, aluminum and copper put together.
This is Y-o-Y, right?
Yes.
And you talked about aluminum, copper consumption for first quarter?
Correct, first quarter.
Okay. Got it. And sir, lastly, just a follow-up on export. So as you said, we were targeting 10% to 12% and this quarter number looks high and INR 700 crores to INR 750 crores for the full year as Anilji said. Overall are we -- how does the pipeline look like? Is there anything happening from certain geography where we could see something like a Dangote happening again where we could see a very large number or it's right now pretty steady state?
No, no. Nothing of sort of Dangote happening now. So it will be the sale export to our regular and stable customers.
[Operator Instructions] Next question is from the line of [ Dhanush Mehta ] from JM Financial.
Sir, firstly congratulations on a decent set of numbers.
Dhanush, little bit loud please.
Firstly, congratulations on a decent set of numbers. Sir, I have a couple of questions. The first question is sir, do we have some kind of hedging policy in our wires and cables business on an overall company level?
No, we are not hedging. We are under natural hedge as we have communicated earlier also because we are having 3 to 4 months pending order position from the domestic institution side and close to 2 to 2.5 months we are carrying inventory in our shop floors. So that is under natural hedges.
Okay. Sir, my second question is that when we see a business between the dealer and the institution part, how difficult or easy or how do you define the lag in which a price increase can be passed on in both the cases or is it the price increases at the same time?
The price in case of B2B sale whenever we are making an offer to anybody, it is based on the current prices and also the forward-looking outlook that what we can perceive as the price situation in the -- during the validity period of the offer. Maybe the validity period is 1 week or 15 days. In case of utilities whenever we are making tenders, 80% to 90% tenders are on the price variation basis and only 10% -- 15%, 20% are on firm prices basis. That much of inventories we are always carrying so -- and the related period normally we are maintaining within 15 days to 1 month. So far as distribution network is concerned, I think every -- in case of Cables, we are adjusting the prices on every 2 weeks basis, fortnightly basis, and so is the House Wire and Flexible.
Okay. And sir, just a last question. So we've seen a lot of traction in the renewable sector that's catching a lot of base and a lot of power companies and et cetera are putting up good money there. So actually what is the -- I mean, how much can wires and cables or maybe from our order book, how much of our sales are we seeing there or is there any inquiry coming from that end or what is the potential from that sector?
We are having substantial sale to all the solar power developers who are setting up the projects either to them directly or through the EPC contractors who are constructing their projects. So I can't give you immediately any numbers that how much is out of solar, but we can take it out and send it to you later. But at the moment I cannot tell you exact numbers, but the sales to solar companies are substantial.
Next question is from the line of Akshay Kothari from Envision Capital.
Congratulations on good set of numbers. Sir, what would be our channel finance as a percentage of retail sales correctly with recourse and without recourse collectively?
Almost 60%, 65% is under channel financing.
Okay. And I'm assuming that our with recourse has come down because without recourse has increased, I guess?
Yes. So now the limit was set up with the banks wherein they are recourse of in 1 bank it's 50%, in another it's 30%, in few banks it is 100%. So as a whole, recourse will be close to 60% on an average.
Okay. And what could be the percentage of RMC like copper, aluminum and can you give the breakup...
It depends on the order to order actually because sometimes the copper order is more, sometimes aluminum order is more. Like in this quarter we consumed around 18,196 tonnes aluminum and copper, out of which copper was 7,000 tonnes and aluminum was 10,400 tonnes.
Okay. And sir, this revenue of INR 100 crore working capital, when is it expected in which quarter?
No, in the whole financial year.
Okay. And sir, lastly, on the retail revenue growth side. We have seen that there has been significant jump in the retail and our focus is on B2C. So how has this journey been and what were the triggers and how could we go? Is it only because of our distributorship increase and what were the steps which we had taken? And going forward, how do we plan to grow this? You have given a guidance of 30% to 35%...
It is a whole mix of strategy when you want to grow from section or vertical of the business. It includes an efficient marketing team close to the region and stocking points where you can deliver fast, then business development activity who are [ builder ] or specifier in that area so that we -- our teams are connected to them who are doing description of cables in their tender documents or whosoever is buying it. Dealer is only a front so ultimately a whole lot of business development activity has to be carried out to enable them to sell. So it is a complete strategy and management of the dealers and prevailing as you know surrounding to enable the dealer.
Next question is from the line of Sanjay Dam from Old Bridge Capital.
Sir, did I hear right? You gave a guidance of 17%, 18% kind of top line growth in the context of lower commodity prices, is that correct?
There are some questions to whole guidance, Sanjayji.
Right. No, I just thought I'd confirm it.
[Foreign Language] So that maintains 17%, 18% growth.
So the second question is --basically the second question is that what would be a reasonable aspiration to have in terms of market share gain in sort of next 2, 3 years? Probably you could put it in the context of the last 2, 3 years -- or last 5 years and the next 5 years, whichever way?
Market share continuously, definitely, in the House Wire segment, we were very small player. Now we have reached to the level of 6%, 6.5% market share. In the unorganized sector market share is shrinking year-on-year basis, every year 1.5% to 2% market share of unorganized sector is shrinking. Apart from these, like small companies those who are in the region so INR 300 crores to INR 500 crores company -- small companies, few are listed, few are unlisted. They are also struggling with the working capital and they are not having that kind of management bandwidth that KEI is having. So because of all these factors wherein now KEI is getting sufficient working capital, we have reduced the debt. So we are more focusing on increasing the market share year-on-year basis. In last 15 years our growth of the company is close to 15% wherein all ups and down in the market was there. So in future next 5 years' time, we have taken a target we should grow at least 17% to 18% CAGR. So because earlier growth was with the EPC. Now we are reducing the EPC and we are growing in the same fashion. So which mainly because of the wire and cable segment, the market share we are able to take.
And if I look at your commentary for the last 2, 3 years, you'll have outlined your retail strategy and things have worked out quite well. Could you give us some sense of how the next 3, 4 years is going to be. So from a base perspective, I understand it won't be probably that difficult. But what is -- how do you kind of like to -- would you be more concentrating on the larger urban areas or you would like to kind of spread more in proportion to how your geographical presence is? If you could give some sense on that.
Definitely we are putting our best efforts to increase our geographical footprint because when we target the larger area of our delivery, the sales comes from white spaces where we were not present. So that gives you extra revenue without stressing a particular market. So definitely we are taking all steps for improving the sales in the existing areas where we are strong by putting more business development activity and also in the areas where we were not present or we were weak. So we are strengthening our geographical footprint.
And as Anilji has mentioned that the 30%, 35% growth at least for 3 years from here, we will be looking from the dealer distributor segment. So that kind of guidelines we have set in, that kind of infrastructure and the manpower we are engaging to do that kind of growth from the dealer distributor market.
Yes. I mean see the context actually from which I was coming is that the larger centers and larger Tier 1 cities and the next maybe 25 or 50 cities and the next 100 towns, they have some sort of a differentiated profile of buyers, right? And as you go deeper into the hinterland, the nature of distributors and the clients both of them change. right? So they could be larger in number, but maybe lower ticket size. And so having covered quite a reasonably successful journey so far, is there -- do you think that your next leg of journey in the retail strategy would be any different from what you've done in the last 7, 8 years?
We say that the top cities still we are not covered fully. At least for 2, 2.5 years we will be covering those cities first because that's why we are targeting a 30%, 35% growth in the coming 3 years' time. Apart from that, then we will be focusing to the rural part or the town side of the country.
So do you find yourself...
[indiscernible] to do because at present we are having only 1,800 dealer distributor. We have to double the dealer distributor strength in next 3 years' time.
So when you double that, would you still -- so would you say that the Top 50 cities and towns in this country have the bandwidth of doubling your distributor base in whatever time frame it takes?
Sir, we are working on the number at one side. Second side, we are working on the geography to be covered, then we will be covering the rural segment. So it is at least 3 years away in our strategy to covering the rural segment.
But your doubling of distributors would kind of take how much time?
Yes, within 3 years. So because of that, we are saying that at least 30%, 35% growth we will be maintaining year-on-year basis.
Next question is from the line of Shrinidhi Karlekar from HSBC.
Congratulations on a great performance. Sir, you gave a good guidance on revenue growth for this year as well as medium term. Would it be possible to share some guidance on margin for this year as well as medium term?
Sir, margin in our industry -- in our company, we are close to 10.5% to 11% range bound we are there. Last year also in spite of so much volatility, we were able to close our margin close to 10.5%. This year also we will be in the range bound 10.5% to 11% range.
Okay. And sir, isn't retail contributing more to the overall business mix should support margins in medium term or it's unlikely to happen?
Please repeat your question because something we have missed.
Yes. I was just wondering your contribution from the retail segment is increasing. So just wondering isn't it -- can that help you in doing better than --better margin than what you have done in the past?
Retail already helping us, but the volatility of the metal which was sharp this last 1 year whether it is upward or whether it is downward. So in that case, certain things which are not manageable. But if these situations does not arise and the normal fluctuation are there, then definitely our margin will be much, much more because I see our expenses versus sales percentage has already come down. So because of that, we are hopeful that the margin will not be difficult to maintain.
Okay. But isn't like there should be like as the volatility kind of reduces, is there a scope to do higher than 10.5% and 11% margin then?
Definitely.
Okay. Great. And sir, second is on the EHV segment opportunity. I just want to know how large is the Indian EHV cable market and how much of that demand is actually served by the import of the cables?
See, EHV market at the moment I believe is close to INR 3,000 crores. And so far as -- I think imports are continuously vanishing now I mean because to the highest level of voltage grade like up to 400 KV we are manufacturing and we have executed the projects. We are focusing that no utility should import the cables. I mean if some import is coming up in some package or from overall project constitution, that may be there, but we are not really aware of. We are really focusing that it should be done by Indian manufacturers.
Okay. And correct me, sir, there are 2 players in the Indian domestic market, right, who services EHV demand. Is that right?
No. Apart from us, there's Universal Cable who is significantly working on this. But another 1 player is more like LS Cable, et cetera, who are also doing EHV cables, which is it is a Korean company set up a factory in India.
Okay. And this INR 3,000 crore odd compares with about INR 500 crores what KEI did last year, right?
Correct. Last year the market size was less. Now the markets are consistently growing. The demand is demand from the transmission utility.
Understood. And sir, how much are our utilization levels in the EHV cable segment?
We are almost utilizing I mean, 80% to 90% capacity. But we are having some space by debottlenecking so we will be able to grow by another 20%, 25% from hereon.
Okay. And then last bit on this again on EHV. Is this business about 3 percentage points, 4 percentage points higher margin business than your portfolio margins of 10.5% to 11%?
Yes, definitely.
Okay. Great. And sir, last one, if I may. So we have seen very strong performance on working capital, particularly on receivable days. And if I remember correctly in the last call, you had mentioned a scope to improve working -- receivable days by about 15 days. Just wondering are receivable is likely to improve much to what you provided of 15 days.
Yes, receivable days will be close to 2.4 months to 2.5 months as compared last year it was 2.9 months and before that it was 3.8 months. So in March '22 it has come down to 2.9 months. So on an average for the current financial year, it will be closer to 2.4 months to 2.5 months.
[Operator Instructions] Next question is from the line of Bobby Jayaraman from Falcon.
Could you explain what the INR 103 crores of acceptances is?
Yes, these are the LC acceptances.
From your export customers?
No, it is for the purchase import.
Okay. The imports for your copper and your raw material?
Yes. This is part of the creditor.
Okay. And how long is that for usually?
It is normally 90 to 120 days creditor.
Okay. And do you ever pay an interest on this?
Yes, it is interest bearing. It is 5% to 6% interest per annum.
So why don't you avoid these interest charges by paying earlier?
No, because we are abiding while we are purchasing from the local markets, we have converted into the cash purchase now. Since these are the import purchase so we have to open the LC.
Okay. So they'll reduce going forward?
Yes. This is -- we have already reduced. Earlier in '19-'20, the LC purchase was more than INR 800 crore, INR 900 crore. Now it has further reduced to now only INR 100 crore. As of March '22, it was close to INR 300 crore. Now it has reduced to INR 100 crores. So we are opening the LC only for import. We are not opening the LC for the domestic purchase now.
Right. The domestic is all cash?
Yes. All cash we have converted because we are sufficient cash in hand.
And the other question is how long is your dealership -- aggressive rollout of the dealership network going to continue for?
Can you repeat your question?
How long is the aggressive rollout of your dealership network going to continue till such time that it stabilizes at?
So we already have an aggressive rollout of dealer network. I mean ultimately dealership also comes along with our marketing teams to make efforts on the business development activity and bringing dealers on board where we can help them to grab the order.
I know I understand that. What I'm asking is right now your rollout is very fast, right, it's a pretty aggressive rollout. At some point, there will be saturation of the dealership network.
Maybe after 2, 3 years there may be stability or saturation, but at the moment we don't see that. And with the excessive strong growth of the Indian economy, the demand will also be going up and standing. So more people are coming into businesses across India, we'll also get to know more markets maybe in the semi-urban markets or rural markets. So it's difficult to predict that what will be the saturation point in this.
But at least for next 4 to 5 years, we will be growing number of dealer distributor at least by 10% at least for 5 years.
10%?
Yes, 10% to 12%.
Next question is from the line of Amber Singhania from Nippon Mutual Funds.
Congratulations on relatively good set of numbers. Sir, one thing I wanted to understand. You mentioned that you are aiming around 17%, 18% kind of growth. We all have seen that the commodity has corrected significantly in last couple of months so that would require a significantly higher volume growth of further 35% plus to achieve this kind of growth numbers. So what is giving you the confidence of such a high volume growth is achievable in this scenario where we are already seeing some slowdown from the offtake?
We perceive that there is a good infrastructure pipeline and projects and a good inquiry flow from our customers of, I mean, different project verticals. So that gives us the confidence. And normally we never overproject and we have never overpredicted our -- what we say and we will try to achieve what we say. Rest the year-end will tell us.
And sir, if you can give some color about the demand scenario currently? Are we seeing any deferment or delay in the demand coming in from B2B and all assuming the prices may come down further?
No, we are not seeing any deferment of demand. In fact with the commodity prices corrections, the demand is coming back to the -- on the table. So I mean -- and in fact the demand has become stronger.
How much prices we have reduced from the peak in last couple of months?
I think around 10% to 12%.
10% to 12%.
In '18-'19 and '19-'20 was the year where the commodity price has gone down. But we have grown by more than 20% year-on-year basis.
Okay. And sir, lastly on the margin front, you mentioned that you still will be maintaining the margin of last year 10.5% to 11%. But on a falling commodity prices when we are seeing the realization is coming down, but EBITDA per tonne may remain constant so logically the margin should go up. So what exactly -- how exactly we work on the margin part? Are we purely focusing on the percentage terms of per tonne EBITDA?
We are mainly focusing on percentage terms.
Okay. So in that case, in the falling commodity prices, our per tonne EBITDA comes down?
See, margin, whatever will come, will come definitely. But what we are working is for the 10.5% to 11%. So this means in each and every adverse circumstances also, we need to keep finger crossed and we are working for that. Whatever we are quoting, we are quoting on that basis only. But something or other in every year is also happening. So for that reason also, we need to guide properly to you because we don't know what other things will come in the market.
Understood. Sir, what I'm trying to understand here is that with this current kind of correction in the commodity prices almost 20% to 30% from the peak, is it possible for the margins to go significantly higher, let's say, 12.5%, 13% kind of range here?
Not at all.
[Operator Instructions] Next question is from the line of [ Santosh Kumar Keshri from Keshri Wealth ].
I just have 1 question. Looking at the financials for the last 10 years, I can see that our interest burden has come down. Earlier we used to pay something like INR 100 crores plus of interest, now we are paying just INR 40 crore. And what I can see is the dividend that we are paying to shareholders, that appears to be measly if I can term in that way. Like it used to be 10%, 12%, way back in 2013 and since then, it has never crossed 10% except in 1 year. And I can see that all borrowings have now moved to paid off and there's some CapEx requirement. And as you said earlier that the CapEx to sales ratio is 1:5. So I have 2 questions on this. One is that are we looking at increasing the dividend to shareholders by that, one? And secondly, you are guiding about CapEx in terms of domestic sales ratio. What is the payback period for this CapEx in terms of profitability?
So normally the payback period is close to 5 years because as per industry norms, 1:5 or 1:6 is the sale versus CapEx ratio. So we are going to invest around INR 800 crore worth so we can take the top line of INR 4,500 crore plus from this investment. Second, with regard to dividend so we have already paid in the month of March. So whatever will be the cash flow and the CapEx position, we will decide only in the fourth quarter. But definitely the payout will be more as compared to last year because now our borrowing has gone down, but still we will be more focusing on the growth of the company wherein more number of increasing PPS you may see in our balance sheet.
And the more focused that if we are strengthening the balance sheet, the capital appreciation also goes up, improves to the shareholders.
That's right, sir. But rewarding the shareholder in terms of bonus issue or dividend or buyback actually makes them a little better off because they get to have some cash.
Definitely in the second quarter we will be reviewing this and definitely whatever your advice and suggestion, we will be discussing internally in our Board.
[Operator Instructions] Next question is from the line of Bhavin Pande from TrustPlutus Family Office.
Congratulations on a decent set of numbers. So I have just 1 question. So as we are witnessing the proportion of fees, why are the distributors have gone up. It's more to 40% now as compared to 38% in the previous quarter. So I was just wondering like in long run, how much do we expect this proportion to be? And can you just throw some light on economics of going for this approach? Is it more asset-lite, is it and more margin lucrative or is it more convenient?
Distribution as you said that 10% to 12% year-on-year basis, the number is increasing because we are appointing new distributor or we are converting the weak dealer distributor to the good one. So that is the restructuring of the dealer distributor network is going on. We are focusing on to increase the sale of the existing distributor dealer network as well as for the new dealer distributor network.
Your question was basically that the sales through distribution network has gone up from 38% to 42%. It is because of the increased focus of our geographical advancement where we were not present, appointing distributors in those territories so that our footprint in untapped areas grows and from there the sale is improving.
So within 2 years' time, we have taken the target to reach 50% contribution through the dealer distributor network. So that is also our initiative.
[Operator Instructions] We'll take the last question from the line of Khadija Mantri from Sharekhan.
Congratulations on a good set of numbers. I just had 1 question. Sir, was there price hike taken in Q1 in the month of April and May -- and are we -- do you think that any price set in the next few quarters?
Price revisions are done either up or reduce the prices based on the input costs. So because of some corrections in the input cost, I think cable prices has already been corrected in the last 2 months and now it is levelized. And regarding House Wire and Flexible also, I think the prices have been reduced around to the level of 8% to 9% in last 1 months, 1.5 months and it has been corrected in line with the present copper price. So we don't see any immediate revision of prices in next 1 month.
Thank you. We have reached the end of question-and-answer session due to time constraints. I would now like to hand the conference over to the management for closing comments.
So thank you very much, our investors and colleagues, for taking out time for this investor conference. I hope that we have been able to satisfy you with our answers. But if still you have any queries, you may reach us back and we'll definitely give you clarifications. Thank you very much.
Thank you very much to all.
Thank you. On behalf of Monarch Networth Capital, that concludes this conference. Thank you for joining us and you may now disconnect your lines.