Sirca Paints India Ltd
NSE:SIRCA
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Sirca Paints India Ltd
Earnings Call Analysis
Summary
Q4-2024
Sirca Paints India Limited closed financial year 2024 with a revenue of INR 312 crores, up 16% from the previous year. Despite a challenging Q4, the company saw a pick-up in March. Sirca announced a new agreement with OIKOS S.P.A. Italy to manufacture high-value, eco-friendly paints in India, aimed at revolutionizing the industry. They also acquired Welcome Brand for INR 20 crores, expecting to double its revenue within a year. The company provided guidance of 40% top-line growth and 22% EBITDA margins for FY '25, driven by strong performance in wood coatings and new high-value products .
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Ladies and gentlemen, good day, and welcome to Sirca Paints India Limited Q4 Investor Meet Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Apoorv Agarwal, Joint Managing Director. Thank you, and over to you, Mr. Agarwal. Please go ahead.
Thank you. My name is Apoorv Agarwal and I am the Joint Managing Director of Sirca Paints. Today on the call, I have with me our Chief Financial Officer, CFO, Mr. Shallu Arora; and Hira Kumar, our company's secretary. So again, a very good evening, everyone, and a very warm welcome to the earnings conference. It's a pleasure to be talking to all of you this evening.
Now I will begin with a brief overview of the quarter gone by and the financial year, followed by updates on recently signed agreement with OIKOS S.P.A. Italy for manufacturing of high value-added paints and the acquisition of business undertaking of New Wembley Products, LLP.
So financial year 2024 ended on a solid note for the company. We reported a top line of INR 312 crores versus INR 268 crores in financial year '23, thus registering a growth of 16%. This performance demonstrates the dominant position of Sirca Paints in the wood coating market. Quarter 4, though was not the easy quarter for the whole industry due to muted demand in January and February and deep discounts offered in the market due to inventory destocking from the competition. However, these saw a decent uptick in the month of March with continued momentum going forward.
Now coming to the recent development with respect to our [ impacting ] our demand [indiscernible] for the high-value added paints. We are going to manufacture the 5 said high-value products namely Ultra Patent, Supercolor, [ Rathicol ] in Primer and PlanCore in India on the technology of OIKOS Italy. These products are ultra-high-quality emulsions with A plus air quality standard, no smell, environmental-friendly and are the future products of decorative paint industry.
With the increasing labor problems in India every year, these products will bring a revolution in Indian paint industry. We have acquired Welcome Brand -- so okay. Now coming to the recent development with respect, which has happened just yesterday, it's a new acquisition and let me give you some brief on the same. So we have acquired Welcome Brand at an attractive valuation of INR 20 crores in financial year 2024, the top line of the company was INR 50 crores with an EBITDA of about 14%.
Welcome Brand is a very strong brand in its segment and in some parts of Northern India, and there is a huge scope to grow the business in the other territories of North India. The company aims to double the sales revenue in next 1 year of the Welcome Brand. Acquisition is quite EPS-accretive, business is quite scalable. Welcome is an industry leader in its product segment. The margin further can be improved, and it is a high ROE investment.
Further, with the new strategic development with Sirca Italy, Sirca India will be focusing aggressively on the export to Asia Pacific this year, which started from Q4 itself. And already, Sirca Paints have received order of 340 feet containers with advances. With this, I would like I would like Shallu Arora to put some light on the financials.
Thank you so much. So now I will brief you about the financials. So in the quarter 4 revenue has increased by 21% on a year-on-year basis that is from INR 68 crores in Q4 FY '23 to INR 83 crore in Q4 FY '24. EBITDA has increased from INR 13.3 crores in Q4 FY '23 to INR 16.25 crores in this quarter, registering a growth of 24% and PAT growth of 32% from INR 9.49 crores to [ INR 12.59 crores ] on year-on-year basis for the last quarter.
For the full year financial year '24 company has reported a higher ever top line of 3-1-2 INR 312 crores, delivering a growth of 16% from last financial year and EBITDA growth of 12% and PAT growth of 12% as compared to last financial year. EBITDA margins for the whole year stood at 22%. On the balance sheet front, continue the report that they are not reducing the working capital bases. As we have also planned a CapEx of INR 10 crores in this financial year, which will be done from internal tools for the new plant for producing the alkyl product. Thank you so much. Now I'll let you open the session for the queries.
[Operator Instructions] The first question comes from the line of Bharat Gupta with Fair Value Capital.
A couple of questions from my side. So first, if we look at the geographical mix, so can you share some data points with respect to how much are we concentrated with respect to the Delhi, NCR market over FY '24? And also in light of it with government curving out the construction activities in the winter on this pollution. So how are we looking at the scenario? And what steps we are taking in order to make a presence outside Delhi NCR market?
So if we talk about the whole financial year '24, again, only from Delhi NCR, we -- almost 40% of our sales of the total year were coming from only Delhi and NCR and we have registered almost a 20% growth in the dealer network earlier from 174 dealers altogether in Delhi NCR, we are now almost working with 210 active paying shops and considering the effects of pollution, which happens in the month of late November and carried still early January, leading to a very low sales in this region, we are strongly concentrating to expand our network also in the East and the South in retail along with Gujarat.
So this year, the company already has focus to strengthen its retail network in specified states like Ahmedabad, Surat. Surat has begun on a very positive note this year, along with that, key states of South like Hyderabad, Bangalore and Pune and very strongly in East with Kolkata and allied areas. So practically from Delhi NCR in the month of November, December, means quarter 3, company almost loses a sale of INR 10 crores. So we have a very active plan that it happens the same way this year, the company is going to recover this 10 to 12 crores sale loss from the specified region with a very strong plan on the paper.
Right. And with respect to expanding our network in the other areas, so any headcount like in terms of addition to the sales force as well as in order to improve our network. So how much dealer additions are we planning for FY '25?
For FY '25 from the new regions, we are expecting almost 50 strong exclusive retailers to be added. The company will be working on the strategy of giving exclusivity in a radius of 3 kilometers for active interest of the retailers to start the business with. So for example, if you talk about Surat, we have added almost 17 retailers in Ahmedabad, almost 30, likewise in Bangalore, Hyderabad -- Bangalore and Hyderabad, we will add another 30 to 40 retailers. And the same in the East.
So from all the 3 territories, 50 retailers each counting to almost 100 to 150 active retailers to be add in this year and to ensure that sales in quarter 4 already, we did some aggressive hirings from the wood coating industry itself for the regions of Gujarat and South and also East where the momentum has already started to show in the numbers.
All right. And also in your opening remarks, you mentioned that you have an export order. I remember when we met last, you'd highlighted that you will be in talks with the parent company for supplying out to the Saudi Arabia or the Middle East market. So what's the development on that trend and with respect to Asia Pacific, so which all regions we targeting? And what kind of opportunity it can come in hand for us?
So with our manufacturing agreement coming into live action in late November, the production facility has been ramped up with the production of 10 to 12 set products of Sirca Italy and these products now being tested in the India market are all ready to go for export. The first 3 containers are moving majorly in the neighboring countries of Nepal, Sri Lanka and some parts of Middle East.
Going forward, yes, we already have our materials under testing in Dubai and Saudi Arabia and also in some parts of Eastern Europe.
So any time lines to which we have been like -- any time lines are we sticking on that trend? Like when can we expect an order from the parent company towards supplying out to the Middle East market?
Yes. So I think already -- the 3 containers, which are going to move will move in the quarter 1 itself. And again, within the quarter 1 only, we are expecting some live action to happen in Dubai. And by quarter 2, we are expecting that the samples, which have been sent through Sirca Italy to some Eastern European countries and to other parts of Asia Pacific should come, and we would have at least 6 to 7 containers of export in by quarter 2. So in quarter 1, we are expecting to go ahead with 3 to 4 containers, which will be more in Sri Lanka, Nepal and Dubai.
Okay. Next question is pertaining to the utilization levels across the Sonipat facility. So how -- like what will be the current utilization level and how are we planning to ramp it up? And like what kind of revenue are we expecting from the in-house manufacturing capability?
So now as we talk about the run rate of the manufacturing facility after the manufacturing agreement coming live into action with the first full batches coming into place in November from December, January, the facility has started producing in full swing. And in March, we recorded a manufacturing volume quantity of about 7.5 lakh liters. This takes us to an annual count of about 8,400 tonnes. And along with this, we expect that the kind of growth we are expecting this year, we should be able to reach to almost 90% of the capacity utilization, which is about INR 16,000 crores in next 1, 1.5 year at max.
And any particular guidance which you want to share for FY '25, both in terms of top line and bottom line?
So we are -- with the new products already in the city with the new OIKOS agreement and Welcome Brand coming in the city, we are except -- expecting a minimum of 40% growth this year?
And in terms of margins, so it will be like 23%, [ 20-odd 4% ], are we able to maintain on that level? Or there will be some sort of dilution to it?
So if we talk about the whole year, we are quite confident that for the whole year, we will be able to manage our margins in the range of 20% to 23%. But maybe in the quarter 1, there might be -- it may be in the range of 20%, 21%. But in the year-end, it should be at its original numbers, reason being that we have a good amount of increment at the salary cost side, where we have done the new hiring for the new businesses, which are [indiscernible] related to [indiscernible] and also for the export sales and especially the decorative business, where the business will start coming around in the quarter 1. And that's why from quarter 2, we expect that the margins will be again at the normal level.
But yes, we expect that it will not go down beyond 20%, but will be in the range of 20% to 23%.
And the 40% growth which you have highlighted. So that will be -- it would be across the product categories, specific with respect to wood coatings. So what kind of a growth are we planning for FY '25?
For FY '25, we are expecting the majority of the growth again coming from the wood coating business itself because this current year, almost 75% of the revenue -- more than 75% of the revenue was pure wood coating and then other 8% coming from the economical reporting like NCR and melamine, so also put together almost 85%, 86%, and with the introduction of also new high-value products like acrylic and waterborne, which is the focus for this year, which are high-value products, it will be imported from Italy, will contribute to incremental sales in numbers. We are expecting that almost in wood coating segment alone, we will be growing at about 25%, 30% and then aggressive growth in the wall paint, OIKOS and some additional sales from the Welcome Brand?
Right. So 40% growth on the top line is all inclusive with the respect to the acquisitions also, which we have done.
Yeah. So, acquisitions we have taken as it is without the growth number, so a run rate of 50, where we also intend to take it to 100 this year. So yes, it's -- that's something which is additional.
That will come on the top of the earnings, other than the budget will increase...
Yes.
All right. If I'm allowed another question, so just a color, like if you can highlight with respect to the JV with the OIKOS. So what kind of a opportunity it brings to us and like in terms of value addition for us in the wall decorative side? So what kind of a value addition it can bring us? And how are we looking on this whole segment as a whole? Like in terms of the competitive intensity, which is building up in the segment?
Sirca for last 15 years has been known to give the market the best quality products. And with this new OIKOS agreement, the products that we are going to manufacture are ultra-luxury, A plus quality standard products, which we believe today, no competition has these products to offer, which are super high coverage, gets the work done of 3 days in 1 day. And with the vision of increasing labor problems in India every year, we expect that these products will reduce the [ trend ] space the stock space of the retailer and get the -- help the end user to get the work done very fast with the limited labor.
With this product, we expect that Sirca being recognized as a quality player they will give us a very fast entry within our network, which are the high revenue and high quality products and also is a product which can be easily specified through our strong network of architect. So we strongly believe that where Sirca Paints [ lies ] which is in the influencers and the high value -- to sell the high-value products. This product complements and we believe that the market also stands ready to accept these products with the labor and other spaces problems and with the eco-friendly sustainability becoming the very important -- playing a very important role in the market -- so we are very much confident that with these products coming in, it will strengthen our whole product city. And as a brand also, it will give us a different position among the architects as well.
But in terms of the visibility to revenues. So I think we'll be manufacturing the products for OIKOS. So in terms of the order book, which will be there, so any colors on that front? And what kind of an impact it can have on the overall growth for this particular segment for us?
See, with this luxury wood coating, we are not expecting very huge number this year. We are expecting an additional revenue of about INR 12 crores to INR 15 crores in the whole year from these super high-quality products, which will be referred through architects, which are again 100% smell-free, sustainable, environmental friendly, get the work done in 1/3 of the time of the current decorative industry products, but it will help us to stand out -- to offer some standout products from the market, which are out of competition. As I said that these products are currently not been offered in India, though are now being offered in the other parts of the world, like Europe, but not here.
So in terms of revenue, obviously, we are expecting INR 12 crores to INR 15 crores because the production of these products will start from late-June, so we have practically 3 quarters to sell these products, but it will help us to strengthen our influencer network and to use our existing network of high net worth dealers where we sell our Sirca high-range polyurethane products.
[Operator Instructions] Next question comes from the line of Kaif Khan, an individual investor.
Hello. Sir. Am I audible?
Yes, yes, you are audible.
So could you please provide the volume growth for the financial year.
So the total volume growth in the wood coatings segment was about 18%. The consolidated growth of volume this year was about 18%.
Next question comes from the line of Kunal Tokas from Fair Value Capital.
Hello sir, am I audible?
Yes.
I just wanted to confirm a few you things. You addressed this in the last question, but can you share the revenue split by product, wall paints and wood coatings and adhesive.
So last year, out of the whole year, INR 312 crores, only INR 24 crores was contributed by the Decorative Paint segment and the rest, INR 290 crores was contributed by the Wood Coating segment.
Okay. Understood. And do you expect -- how much do you expect wall paints would be able to -- how strong will decorative paints be able to become a part of your business? How much can they grow relative to the Wood Coatings. Is that a strategic focus that you are having for over the last 2, 3 years?
Yes. No. So this year, the wall segment becoming a separate vertical for us with new at least 50 new hirings in the wall decorative segment after the JV with OIKOS. All the wall paints will be sold under new brand, co-brand called Sirca OIKOS in the coming months. With the addition of these 5 high-end products, we are expecting to add additional revenue of about INR 12 crores to INR 15 crores of the high-end value products, and take INR 24 crores to almost INR 48 crores to INR 50 crores in this financial year of the economical wall paint products, which company is already selling. And now in future will be sold under the supervision and under the name of OIKOS.
So this year, from 24, we are expecting to reach to a sale of about INR 60 crores, INR 65 crores from the Wall Paint segment.
Okay. Understood, sir. I'm toeing the same line, over the next 2 to 3 years, how do you think the new competitive dynamics of the industry with new players entering and competition becoming more intense will affect your business over the next 2 to 3 years? And what is your strategy for dealing with that?
So very smartly, as per the company's SWAT analysis, as per the company's ground situation analysis, we have entered into providing the top high-quality products from Italy, technology and manufacturing it here to the market, which are still noncompetitive, and we see that if we promote these products in the right way, which has very limited or say no competition, we could make our mark on this product range, which will also help us to push the economical ranges of the Wall Paint product where there is heavy competition from the paint towards peers.
So considering the move with the OIKOS, we expect that it will help us to gain much more competitive advantage when it comes to selling of the decorative business in the retail segment with this high-end value products, which will allow us also to sell the primers and the economy emulsions along with this OIKOS high-end products and help us to reach a targeted sale of INR 60 crores, INR 65 crores this year, vis-a-vis INR 24 crores in FY '24. And once we are able to cross this number of INR 60 crores, INR 65 crores this year, we see that then the momentum can go very fast in the next 2 years, we can easily achieve a number of INR 200 crores to INR 250 crores.
INR 200 crores to INR 250 crores only from the Luxury Paint segment.
From the total decorative segment because luxury paint segment, the yes, the luxury product will help us to get in where the competition is still not there, and it will give us a space and place in the market considering the competitiveness in the decorative segment currently.
But can -- once the competitors see the success that you're having with this niche product offering, like is it fair to assume that it will not be very difficult for them to enter this market as well?
Yes. With the kind of acrylic coating with the kind of super high white covering powers of primers and soft coats like Supercolor and [ ultra-patent ] we believe that it will take some time for the company to think over and launch these products into the market. And our plan is to aggressively put these products in the market through influencers. So Sirca reaching to sales of in Wood Coatings of about INR 290 crores, INR 295 crores and growing at a very aggressive rate in the last 3 to 4 years, our influencer as interior designer has played a very, very important role.
And today, we see that the same segment, the same segment of interior designer and architects are now quite interested also to put a revolution in the decorative side, in the wall paint side using the right product, which has the environmental and the sustainability TAT to it, which has the A plus quality standard, no smell even after application and most importantly, the application time to reduce.
So considering that it will be sold under the co-branded OIKOS, which is already a very popular brand amongst the designers and architects in India from the last 18 years. It will help us to specify this product like life wood coatings Sirca brand. And that's why we can have a long-term recommendation from the architects and win the competition in the market even after other competition brands launching the same product in the market.
So is it fair to sum up your strategy in 2 keywords that will be first mover advantage and in a niche market?
Yes. First mover advantage and then the strong hold of the influencer architect.
Understood, sir. And my second question was related to working capital, which is a big part of your balance sheet. So earlier from being a CAGR and marketer of products to now having your own manufacturing facilities, might have expected the working capital to go down? What are your views on this?
So yes, we expected our working capital to go down considering that the production is coming into place in November and from December it should come down. But as also explained in the last of our calls and in our presentations that some of our initial developments took much more time as per the satisfaction of Sirca Italy. And that's why about 30 tonnes to 40 tonnes of materials were all sold just to test the product and were not up to the satisfaction of Sirca Italy in the first go we kept on ordering also in the quarter 4 the stock from Sirca Italy just to be on the paper side and not to be out of the stock in the market, though fortunately for us, in January and the product passed all the tests from the external authorities and SGS, where Sirca Italy has obtained all the certifications of the product with the identical specification, physical and chemical as made in Italy against made in India. But so we expect that in quarter -- in the coming quarters, it should go down deliberately. But quarter 4, again, the inflow of containers was 3x more than what we expected and targeted for.
Understood. That is helpful. And what might be the ideal working capital that you might have in mind?
So considering the total credit days that we have from the vendors and Sirca Italy and considering the credit days we are offering in the market, considering the working capital now, which we have to maintain minimum 90 days from Sirca Italy, which will be the 45% of our total sales and considering the 30 days working capital in terms of RM and SG from the plant side, we are expecting that it should come down at an average of about 60 to 65 days.
Okay. That's great, sir. And just a last question. Regarding your acquisition of New Wembley Products, very attractive valuation? And will Dr. Lamba be continuing in the business?
So yes, Dr. Lamba will continue as a mentor and will be actively involved with us for the sale and manufacturing of the product. He is main and his experience in the industry is outstanding and with his expertise related to this single product and with his expertise related to the manufacturing and sale of these products, we will be an integral part and have exclusive agreement to work with us for one year.
Okay. And I just remember the last question. I think you're having some plans for an acquisition in South India to penetrate that market. Is that something you're looking at?
So yes, that acquisition is still under process at a nonbinding level, but yes, it has its own internal queries, which are still to be resolved. So we cannot comment currently the time lines related to this. But yes, it's under process.
Next question comes from the line of Chinmay Nema with Christian Capital.
And our annuity company to ask this -- raise the question. Since March 2020, the inventory days have been up of 200 days. Just want to understand what's the reason for that? I know you talked about working capital while answering this to the previous question participant, but I just want to understand why do we operate that at such a high levels of inventory days?
So the main reason of high level of inventory days was only the imports because the company's 90% of the revenues till November 2023 were coming from the imports. Now considering the geopolitical condition and the global disturbances from pre -- after COVID, the Sirca Paints had to stock much more initially with the problems of logistics with -- due to COVID, then again, due to the geopolitical tensions between the Europe and Russia and Ukraine, which was increasing the shipment time of the products from 30 days from Europe to Delhi to 60 days and also the turbulence in the raw material industry, especially in the Europe because of the gas problem and other problems in last 2, 2.5 years was increasing their production time from 25 days to almost 40 days.
So the container which after placement of order used to be in our warehouse in total 60 days was going up to 90, 95 days pushing us to store more and more goods because the situation remained very unpredictable that whether the goods will come on time or not. So in 2021, 2022 and also in the beginning of 2023, the high value of stocks were imported from Italy and we were keeping more and more inventories because every 3 months, every quarter, there was a new condition coming in, which was forcing us to put -- to keep more stock fortunately for us. Now 55% of the imports will reduce down immediately now and has already started to reduce from February once the -- all the products had got green signal from the [ SGS ] control quality lab third-party.
Now the dependency on the imports has reduced by almost 55%, which will enable us to reduce our inventory, our inventory days because the benefits coming to the local production, all the goods are edible with a TAT of 10 days, the raw materials. So a total of 30 days RMC and LG will allow us to reduce our inventory days in the coming quarters quite noticeably.
Understood. That's really helpful. Secondly, the ultra high luxury segment that you spoke of, could you give us a sense of from consumers' perspective, at what price point would it lie at, just if I were to benchmark it against your existing products, where in terms of per KG or per liter where this lies?
Yes, for doing this, the company has already planned a very smart move and want to move very strongly initially with the recommendation of the interior designer, which is educated fraternity because the products that we are talking about, which are ultra high-quality, ultra luxury comes at a retail price of averaging about INR 700 a meter, which is much more than the average of what current decorative industries are selling as a luxury product, but the question is that what is -- it is going to cost to the final consumer. Is it going to cost 30% more as the bucket price, but no, because the final coverage of the materials, the final time lines of the material is almost half or you can say 1/3 from the existing product range.
So with the educated fraternity like architect, if there is a labor who's starting for 3 days can get this job done in 1 day, the labor cost gets reduced, #1. #2, the coverage of the material is much more from the highest luxury materials sold by the competition in the market. So with this kind of education and marketing that you can cover your wall in single coat, instead, you use 2 to 3 coats to cover your wall with the competitive product, it will give us an edge to explain that even if you're buying a bucket of 14,000 vis-a-vis 11,000 of the competition, your per square foot cost to do a room would come down much, much more aggressive than the competition.
So we're going to use the education channel and education theories to sell those products. And we have seen and we have done the test price of these products and the appreciation of the product is quite high in a country like Europe, where the labor problem is extreme. And following that, we have started seeing the same. We have started sensing the same signs in especially the metros this year. we see that this product should have a very strong acceptance starting from the influencers like architects and interior designers.
All right. So got it. So lastly, just building on this, 2-3 years down the line, when this is fully set up, what kind of improvements you see in gross margin? How could you see this business from a top line perspective, maybe 3 years down the line or aspirations for the medium term.
Sorry, sorry, I lost you in between. Can you repeat the question?
I'm just asking, given this is an effort towards premiumization, what kind of improvement do you expect in the margins when this business [indiscernible] and in 2 to 3 years, how big do you see this coming? What kind of top line are you expecting in 3 years from this business...
So considering that there are a mix of products which are getting added in the productivity of Sirca Paints India. So now we are going to manufacture also certain products from Sirca Italy, in Sirca India. Now they're going to manufacture certain product, high-end products of OIKOS Italy and OIKOS India. Now we will have products of [ Welcome ] being manufactured by us.
Considering an average of all the products, the gross margin would increase maybe by 2 to 3 basis points, but the EBITDA should remain at the same level, considering the increased amount of schemes and everything to be offered in the market will be nullified with the increased gross margins and talking about a long-term strategy considering the -- only considering the organic growth and keeping inorganic growth aside, next 3 years, again, we are expecting to grow minimum by 40% considering our 40% CAGR growth is what we are expecting minimum as our organic growth considering the new product that you see coming in.
Got it. Sir, this is on the current base of INR 12 crores to INR 15 crores in the FY '25 that you...
Yes.
Next question comes from the line of Bharat Gupta with Fair Value Capital.
Just wanted to check on the OEM space. So how are we well placed on that front? And how do you see that demand action playing out in the B2B side?
So B2B cum Sirca Paints again stands very strong. All the key OEMs like -- key customers like Godrej, who are our key customers, still going to be key customers with Sirca India and the OEM business in India has seen a decent growth in last couple of quarters. The Indian financial industry is growing, there is a strong decline. If we talk about the imports of the furniture from different countries like Italy and China, which is pushing the Indian furniture industry because of the implement of BIS and other norms on the part of furniture to be imported. So this is helping the whole Indian furniture industry to grow, and we have seen a lot of addition in the big customers like Big Fish, ,like Pyramid, like Alder, which is coming into luxury furniture, as you've set up in Northern India.
So the OEM business is growing good and there was a slight sluggish demand in the months of January and February, majorly due to the labor and other problems. But yes, going forward, we are very confident about the growth of the OEM business the furniture industry in India itself is growing and people are more moving towards getting the fixed furniture made from the OEMs, and this gives us a big opportunity because Sirca as stand-alone players stands very strong when it comes to B2B business, when it comes to the kitchen, wardrobe and it's furniture manufacturers.
Right. So in terms of the overall contribution to the top line, so it was close to INR 60-odd crores for FY '24 from -- in the unit side?
No, no, it was more, it was more, so almost the OEM contribution only from North India was about INR 60 crores and other INR 28 crores was coming from the South and the West.
And on top of it, for FY '25, how much kind of a growth do you want to target? And like has there been any kind of hiring like in order to strengthen out our segment on the OEM front?
Yes. So on the OEM front, we have hired some high level technical person. There were a couple of hirings, which was done in last quarter based out of South and we are expecting, again, a decent growth in this year from the OEM segment, especially with the existing customers, who are already also exporting to people like IKEA and also people like [indiscernible] and the Williams Sonoma Group. So we are expecting a very good growth in this year when it comes to the OEM business also.
In terms of the volumetric growth, will it be towards a 25% kind of a category?
Yes, yes, minimum, minimum.
And in terms of margins, so is it accretive on the overall consolidated trend? Or what kind of margins do we enjoy in this segment?
So the margins again comes to an average growth of about 42%, which is more or less the similar like what we have in retail, about 43%, 45% because the retail price is much more higher, but then the scheme payouts to architect contractors and the turnover discount to dealers after moving that all, the net price comes to more or less the same that we offer to the OEMs, which is net of all the schemes.
On my previous question, you mentioned that the utilization level will be close to 90-odd percent for the Sonipat facility in the 12 to 18 months kind of a trajectory, right?
Yes.
But that will be a peak utilization level. So are we -- so will we incurring further CapEx on the newer side or for the brownfield and the further greenfield like anything which is there in mind for beyond FY '25?
Yes, yes. So considering that exports will be a focus area, and we are expecting if from these 3 containers, which are going out in the market, we will have some commitments of the containers from each country, we will be doing 100% of CapEx on the wood coating facility in the Gujarat region, space already identified with a minimum CapEx, which will stand under INR 10 crores, but from the existing facility also with a 16,000 tonnes capacity yearly in single shift, we are already aligning ourselves and planning ourselves to take it to double shift.
So overall, we are doubling on the volumes over the next 2 to 3 years?
Yes.
Also, Apoorv, in terms of the competition, so with the entry of some mega-players, which have recently been entered in the paint segment, how do you read the overall competitive intensity? I'm not talking with respect to the premium, but with respect to the [ PUK ] as a product category for us. Like has there been any kind of a pressure which we are seeing on the realization front?
See, if we talk about our core products, the polyurethane, yes, sir, there has been a temporary disruption in the month of January and February where there was very sluggish demand, and it was a tough time, I think, for the whole paint industry, which was forcing everyone to increase the -- in team that seeing payouts and everything, but seems out to be quite temporary.
Otherwise, if we talk about the competition at the polyurethane front, fortunately, for us, with the polyurethane, there is a strong contribution of sales, which has started to come from the Acrylic PU, where mass competition doesn't lie here. They are only 1 and 2 immediate competitors in this segment. So these products are helping us to average out any additional schemes being offered on the polyurethane products. But, yes, in the beginning of the year, we saw some increase and payouts on polyurethane general products. But then again from March, it was the temporary schemes, which was withdrawn and was coming back to the original level. But going forward also, what we believe is that polyurethane is going to become quite a mass product, which will help us to increase our sales quite aggressively with maybe a little downside in the realization.
But on the other hand, with our competitive advantage on the quality of the Acrylic product, which is becoming a very strong product in OEM and also in retail with the increased sales of preprinted and life and natural veneers from companies like Green, from a company like [ Bureau ], from companies like Marino, it is becoming a very strong product the Acrylic PU, which is, again, a high realization products and low competition. It is helping us to quite easily manage our margins going forward.
So if I look at the overall revenue composition, so how much we would have enjoyed from the base category of PU versus the, you can say, value-added side of acrylic PU?
So acrylic PU their pricing fits for us this year in numbers has grown double. So almost INR 60 crores was coming only from the Acrylic PU and this is growing very, very, very fast. So acrylic PU has better gross margins, better as a product, low competition and is aggressively growing especially when it comes to the application on the veneers and especially preprinted die veneers, which is the core product offering by all these plywood and veneer companies. So it's a kind of a PU. It comes under the category of polyurethane only, but it comes with added physical and chemical properties and have additive called the UV additive and becomes a acrylic PU.
So in terms of realization, what kind of a benefit or leverage it carries over the base view, like how much premium one has to pay for the acrylic side with respect to the normal PU. And with respect to INR 60-odd crores top line in FY '24. So if I look 1 year or 2 year down the line, how much can this particular product category be you can say, has contributed towards -- to our overall top line?
So currently, if we talk about the average realization of PU along with the thinner has comes out to be about 500 to 550, the average utilization of acrylic PU is about 720 to 730 as an average, which is about 30%, 35% more than the normal PU. Considering the use of massive veneers and the trend of mass policies coming in with the increased involvement of the designers and architects while building any commercial or residential projects.
We are expecting that the acrylic PU is going to grow very aggressively, and we are expecting that this year, out of the total wood coating sales, we are expecting about INR 370 crores, INR 380 crores, and almost 30% will be contributed by the acrylic PU, which was vis-a-vis 15% last year.
Right. That's very helpful. Last question. Like in terms of the top 10 products, which I think we are manufacturing in-house. So overall contribution, like you mentioned in the presentation, can be in the tune of close to INR 20-odd crores.
So that is with respect to the basic PU, which is there, which you are manufacturing in-house. Going forward, with respect to the acrylic PU, so that will be -- like we will be importing it from the parent company? Or there will be further licensing, where we can manufacture it in-house going forward?
Yes. So for the financial year '25, the agreement is to keep importing these products because we want to streamline our activity with the manufacturing of the polyurethane products and focus on the export of these products and compete with the market in India by producing it here because currently, we see that in till next 6 to 8 months, we are quite safe considering the imports of the acrylic. But yes, if you talk about the long-term strategy already in our agreement with Sirca Italy, we have provisioned it to produce it in coming years. So maybe in the beginning of the next financial year, we will be producing the key 6 acrylic products in India only.
So finally, it's going to happen. Will it happen after 1 year or 1.5 years. Still, we are contemplating on that.
Right. So in terms of the overall guidance, with 40% odd growth on the overall top line front with a 22% kind of EBITDA margins you are saying it for FY '25 and beyond which we want to grow like towards 25% to 30% kind of a growth rate beyond FY '25. That remains on guide for us, right?
Absolutely.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Apoorv Agarwal for closing comments. Before that, I just want to inform you that we have one question. Do you want to take it?
Yes, of course.
Okay. It's from Kunal Tokas with Fair Value Capital.
Just a quick question. Just wanted to confirm your guidance beyond FY '25 for wood coatings and for overall top line and margins?
So in the long-term strategy, say, down the line 3 years from now, we are again expecting to grow at a CAGR of 40% in terms of the top line, considering the additional productivity, which does not include any inorganic growth. And the EBITDA, we -- as mentioned, the long-term vision and the long-term estimation of the company is that even after growing gross margins by producing a lot of products in India, the EBITDA should more or less remain in the range of 20% to 23%.
As there are no further questions, I would now like to hand the conference over to Apoorv Agarwal for closing comments.
So again, a very -- thank you from the whole Sirca Parivar for joining the earnings conference and the FY '25 has begun on a positive note considering the OIKOS agreement, considering the acquisition of Welcome Brand, considering the strategic development at Sirca Italy on the export front. So the whole Sirca Parivar stands very excited for the financial year '25, and we strongly believe that we will outpass our expectation and the expectation of the shareholders this year. So have a wonderful evening. Thank you.
On behalf of Sirca Paints India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.