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Supreme Industries Ltd
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Ladies and gentlemen, good day, and welcome to The Supreme Industries Q2 FY '21 Investors conference Call hosted by Axis Capital. [Operator Instructions] Please note, that this conference is being recorded. I now hand the conference over to Mr. Kashyap Pujara. Thank you and over to you, sir.
Thank you, Asha, and good evening, everyone. Thank you so much for standing by. It's a great pleasure to have the management of Supreme Industries for Q2 FY '21 earnings conference call. From the management side, we are represented by Mr. M.P. Taparia, who's the Managing Director; Mr. P.C. Somani, who is the CFO; and Mr. R.J. Saboo who is the company Secretary and also looks at Corporate Affairs. I now hand over the floor to Taparia-ji. Taparia-ji, a big congratulations for a very good set of numbers. And over to you, sir.
Good evening to everybody. Thank you very much Shri Pujara-ji. I'm M.P. Taparia, Managing Director of The Supreme Industries Limited. I along with my colleagues, Shri P.C. Somani, CFO; and Shri R.J. Saboo, Vice President, corporate Affairs and Company Secretary, welcome all the participants who are participating in the discussion of unaudited stand-alone and consolidated financial results for the quarter and half year ended 30th September 2020. The stand-alone results and the consolidated results are already with you. Due to COVID-19 and resultant impact on the business performance of the current half year is strictly not comparable with the corresponding period of the previous year. However, I'll give you brief on company product, operating performance and other highlights. The company sold 94,836 tonnes of plastic goods and achieved net product turnover of INR 1,322 crore during the second quarter of the current year against sales of 93,500 metric tonnes of plastic goods and achieved net product turnover of INR 1,255 crore in the corresponding quarter of the previous year, achieving product -- achieving volume and product value growth of about 1% and 5% respectively. The company sold 1,86,287 tonnes of plastic goods and achieved net product turnover of INR 2,362 crore during the first half of the current year against sale of 2,06,928 tonnes and net product turnover of INR 2,673 crore in the corresponding half year of previous year resulting volume and product value de-growth of about 10% and 12%, respectively. Total consolidated income and operating profit for the second quarter of the current year amounted to INR 1,375 crore and INR 282 crores as compared to INR 1,271 crore and INR 184 crores for the corresponding quarter of the previous year, recording increase of about 8% and 53%, respectively. Total consolidated income and operating profit for the half year of the current year amounted to INR 2,429 crore and INR 396 crore as compared to INR 2,708 crore and INR 364 crore for the corresponding period of the previous year, recording decrease of about 10% in consolidated income and increase around 9% in operating profit. The consolidated profit before tax and profit after tax for the second quarter of the current year amounted to INR 228 crore and INR 175 crore as compared to INR 126 crore and INR 138 crore for the corresponding quarter of the previous year, recording increase of 81% and 27%, respectively. The consolidated profit before tax and profit after tax for the half year of the current year amounted to INR 283 crore and INR 215 crore as compared to INR 253 crore and INR 225 crore for the corresponding period of the previous year, recording increase of about 12% in consolidated profit before tax and decrease of about 4% in profit after tax. The business scenario of all the product segment of the company for the second quarter of current year ended September 30, 2020 as compared to corresponding quarter in the previous year has been as under: Plastic Piping System business de-grew by 2% in volume and grew by 4% in value terms. Packaging Product segment business grew by 11% in value and volume terms. Industrial Product segment business grew by 13% in volume and 8% in value term. Consumer Product segment business grew 1% in volume and de-grew by 1% in value terms. The overall turnover of value added product increased to INR 533 crore during the current quarter as compared to INR 491 crore in the corresponding period of previous year, achieving growth of 9%. The Board of Directors has considered the payment of interim dividend for the financial year 2020/'21 at a rate of 250%, that is INR 5 per share of INR 2 each, and we paid to the shareholders on the shares held as on the record date that is 6th November 2020. Total net borrowing of the company stands at surplus of INR 215 crore as on 30th September 2020 as against net borrowing of INR 217 crore as on March 31, 2020. Average net borrowing level during the current half year remained at surplus of INR 4 crore against borrowing of INR 205 crore in corresponding period of previous year. Average cost of borrowing as on September 30, 2020 decreased to 5.89% per annum as against 8.35% per annum as on March 31, 2020. The negative impact of pandemic on the business has started withering down. After July, the intermittent lockdowns were mostly not extended in many parts of the country and opening of the economy has progressed. This has broadened business prospects of the company since August in all its segments. By judicious product mix and cost control, the company was able to achieve significant increase in profit in the second quarter. In spite of weak working of the first quarter, the company could attain higher profit in the first half of the year compared to corresponding period of previous year. The harvesting of Kharif crops are moving briskly. The crop output is estimated to be better than last year. With most of the water dams are close to full capacity, it is expected that Rabi crop sowing maybe in a larger acreage as compared to last year. With higher minimum support price declared by government and various other supports provided, the rural economy and Tier III and Tier IV town economy is expected to do far better than last year. With the return of migrant workers on most of the construction sites, supported the lower rate of interest, lower rate of stamp duty in some states along with the drop in prices of residential homes, the demand of new homes has picked pace throughout the country. Consequently, the company's Pipe System for housing is also seeing better demand from September onwards. Packaging segment is witnessing good demand supported by many new applications and SKU targeting agriculture sector and customized requirements. Material Handling Products are being extensively used for logistics solutions, fruits and vegetables and fishery segments along with revival of demand for industrial applications. Raw material prices, except PVC resin prices remain range bound. PVC prices due to tight availability are still making an upward march. It is expected with the starting of plants in U.S.A. and other countries, coupled with lower winter demand for housing in U.S.A., Europe, China and other parts of the world, prices may start softening from January 2021 onwards. The company's investment plan are going as envisaged. It is expected the Orissa land deal may fructify by November. Company is exploring to put up new plants in other states, for which land negotiations are progressing in Assam and Tamil Nadu. This is brief and overall summary for the second quarter and first half of the year under reference. Thank you for your patient. Now I and my colleagues, Shri P.C. Somani and Shri R.J. Saboo are available to reply to various queries you may have. Thank you very much.
[Operator Instructions] The first question is from the line of Ritesh Shah from Investec Capital.
Yes. Congratulations on the good set of numbers. Sir, my first question was any specific updates that you have on Biofloc launch? That was one. And secondly, on tanks, we had emphasized a lot in our last conference call about setting up new facilities. Any update on this? That's the first question. And any update on the new launch, which was expected from the Halol plant? Sir, that's the first set of questions.
The Biofloc, we have supplied 212 units of Biofloc in 11 states. The material is still under observation. We have not moved throughout the country to market the product unless we get full results of the 212 Biofloc units. It will take some time to get the full report. So I cannot say precisely when we'll be able to launch commercially throughout the country. On the water tank business, we are moving extensively. So we are planning to put up water tank unit, the manufacturing unit at Orissa, Tamil Nadu and Assam, all the 3 locations. Other places where our water tank production is going on, yes, we have expanded more capacity, and we are increasing our dealer network and [Audio Gap].
Great. And sir, on the Halol plant launch, the new product launched from Halol plant.
At Halol plant, whatever major product we have launched other than Biofloc, all have been very well accepted. Other than that, also, we are developing several new fabricated products for agriculture and horticulture application, mostly to protect crops and vegetables -- fruit crops and agriculture -- fruit crops and vegetables. And they are very well accepted in the agriculture market, and we expect that this will give a great saving and reduce the wastage of fruits and vegetables going forward in our country. We remain quite optimistic. So that's why we are now planning expansion of our capacity also of Halol and at Ambala unit by 3,000 tonnes per year.
Sir, this will take the eventual capacity to what after expanding the 3,000 tonnes.
Our installed capacity will go to 30,000 tonnes. Currently, it was 27,000 tonnes, now installed capacity will go up to 30,000 tonnes. It may take 6 to 8 months to be in operation.
Great. And if I can squeeze in last one, sir, any new products, any new more launches that is there in the pipeline that you would like to highlight.
Yes, any more point please?
Sir, any other new product launches that we have in the pipeline for next 6 months that you would like to highlight.
We are launching every month new product. There is a big list of product. There are so many range of products in our company, material handling, furniture, piping system. In fitting, we are going to launch 230 new varieties of fittings. We already launched 50 varieties and more and more products are getting launched every month actually.
[Operator Instructions] The next question is from the line of Navid Virani from Concept Investwell.
My first question is regarding the overall margins. So we have seen a very significant improvement in margin this quarter. So how much of this can be attributable to premiumization? And how much of it can be attributable to cost savings? And how much of this cost saving is sustainable, sir?
Somani, will reply.
I'll just emphasize the cost savings, whatever we are making, there are 2, 3 aspects of it. One is product efficiencies, operating parameters and strict monitoring of the fixed and variable cost. Those savings would sustain continuously because those are the operating parameters, which we are following. And with aggressive monitoring because of the COVID effect, they will sustain for a long-term and a continuous benefit. For other part, M. P-ji.
No, other than that, I can only say that Plastic Piping system, the operating margin, which has gone quite high, is partly due to inventory gain.
We may add here also, like as you asked regarding the premiumization of the product to why the overall margin has improved, factor responsible for premiumization. That is stated that we have also increased the value-added products also by 9%. That is also one of the reasons for increase in the margins.
[Operator Instructions] The next question is from the line of Bhargav Dave from Kotak Mutual Fund.
And congratulations for a great set of numbers. Sir, my first question is that if I look at your closing inventory as on September 30, I get a feeling that on a tonnage basis, it could be a decline on a Y-o-Y basis. So is it that we are a bit cautious, given the significant value in PVC prices, and hence, we are carrying lower inventory? Or how should we look into that?
We are not reducing our inventory. After all, I have to service the market. So we must have a stock of raw material, we must have a stock of finished goods. We supply throughout the country. We don't curtail our production for that and don't load the inventory also. I have to keep the stocks to support my customers.
So sir, do you think that because of the significant increase in PVC prices, customers may lead to some delay in purchase? I mean, you obviously have a very vast experience, and you have seen many cycles historically. So in your experience, what would be the customer behavior given such a spike in PVC prices?
We believe that most of the customers now try to maintain as low inventory as required to service the customers. Customers are all are concerned that the price has gone quite high so it may drop down. We also believe that the prices are bound to go down. But not now, it may still take 2 to 3 months. So we have to keep inventory because when customers are not keeping inventory I have to keep more inventory so that the service is without any hassle.We are a very reliable and responsive supplier and resale system. When there are more than 8,500 varieties of product in our Plastic Pipe System, we have to keep stock of all the item/product properly available, not only in our main plant but also in many of our depots. That's why we became a reliable supplier to the market.
On this Plastic Tank business, sir, what would be our installed capacity by FY '21? And at this capacity, what could be your peak revenue, sir, in the plastic Tank business?
Somani, can you take. Installed capacity only you can say.
Yes, our capacity was around 14,000 metric ton, which was there. I think, by end of this year, when our -- this year expansion, which is just fructified, it will be around 17,000 metric ton to 18,000 metric ton at the most.
And what can be the peak revenue we can generate from this capacity, sir?
As on today, maybe around INR 200 crore to INR 230 crore per year.
Okay, sir. INR 230 crore per year. And lastly, sir, now that we are a net cash company with almost INR 215 crore of cash, which will most likely sort of double by year-end, what would be our capital allocation plans broadly as we enter next year?
Our earlier investment plan was [Audio Gap] for this year. Now as you have read in our statement that we are now planning to put new plants in Tamil Nadu and Assam. So definitely, it can frutify in time. Our CapEx outflow will be more than our quantum what we envisaged. So we'll go and invest the money as required to various segment of our business.
So what would be your CapEx for the next 2 years, sir?
No, we can talk only this year, which we have already conveyed to all of you.
The next question is from the line of Sonali Salgaonkar from Jefferies India.
Congratulations on a great set of numbers. So my first question is could you approximately quantify the inventory gain that we got this quarter because of the PVC resin going up. And secondly, our distributor and retailer strength currently. That's it from my side.
Inventory, again, not possible to quantify today. We will quantify in the month of April. Because we are definitely going to have inventory loss in the January-March quarter.
Okay. Understand. Sir, and our distributor and retailer strength. Sir, and also one more question. Our margins in pipes and packaging have been consistently improving year-on-year over the past 5, 6 quarters. So what would be the key strategies that we are delivering on leading to such a robust margin expansion. That's it from my side.
Cost control and product mix and reducing various manufacturing cost and improving operating efficiency.
Right. And we think that is sustainable, right?
And that will go on continue.
The next question is from the line of Madhav Marda from Fidelity Investment.
Sir, my question was that given that half of the year is gone, would you be able to give us some guidance on what the volume growth could be or the volume decline could be for the full year of FY '21?
Nobody can give guidance because a lot can happen between November to March. And winter is also approaching and as we are seeing second wave coming into Europe of COVID-19, third wave coming of COVID-19 in U.S.A., very difficult to give any forecast. We can't forecast what could happen. In the beginning of March this year, we never expect that this is going to happen. Forecast, not possible, please.
Understood. Understood. And in general, the demand conditions in the market for mainly for Plastic Pipes and Packaging, is it still healthy as things are progressing right now? Or what would the outlook be for the next 3, 4 months, maybe like how is the consumer demand.
We expect demand for packaging will go and increasing month after month in normal conditions going forward. We expect demand to grow month after month in the normal circumstance plastic piping also. But this is based on everything going smoothly. But everything going smoothly, we can forecast. We have not found anybody who can forecast.
The next question is from the line of Kashyap Pujara from Axis Capital.
Taparia-ji, just a couple of questions. There have been quite substantial number of price hikes on the PVC front during the year. Just wanted to check whether we have kind of passed on all the hikes to the channel or the industry has kind of passed on all the hikes because what I was getting from channel checks is that there is still -- we still haven't passed on all the hikes and maybe some hikes might happen in November. So any idea on where the industry is on the -- on passing on the PVC prices?
We are -- I can talk only on behalf of our company. This time price increase is so severe and happening with such a great temperament. So we are moving quite low. Normally, we increase the price in 1 or 2 days gap. Now we are waiting for 2 to 3 weeks to reflect the price increase. Today, I can say, in many markets, we are not given to increase in effect. In some market -- or all over the country, we have not given one increase price in effect. We will start giving some effect in November, maybe 1 time or 2 times. And some increase, we may do it in December also because we expect price to go up again in the month of November. So we have decided to go slow so that our customers are not put to great strain. It is not only the question of get a customer to buy the goods, but a question of financing their operations, and we keep full control on our credit period. We are very happy to inform all of you that our credit days remain around 21 days for sale in spite of such a high price.
Fair enough. Fair enough. And Taparia-ji, you mentioned on the CNBC interview today about real estate also showing up firmly. Well, I understand agri doing well because monsoons have been very well spread out, and there is pent-up demand from rural site for laying agri pipes, but real estate has been a bit of a surprise package. And so could you basically just guide us as to this housing -- demand from housing, which is coming, is it more of a semi urban, metro or rural, where is this housing demand kind of coming from? And is it sustainable according to you? I mean if things -- if COVID -- there is no second wave of COVID and things stay as is, then do you think that this housing demand is sustainable and can improve.
Today, I can say that barring the city of Bombay, Greater Bombay area, the housing -- demand for housing product is coming from the whole country. Only Greater Bombay, which is surprising, the demand is still weak in housing. And whatever demand is coming now, we are being advised that is going to broaden further. The government has extended incentive for affordable house, the cost of affordable house gone down, cost of money has gone down. And certain states, their stamp duty also has go down. And with the EMI basis, people are now capable to pay the EMI for affordable house. The trend is going more and more to affordable house and continues more housing. So we remain quite optimistic on housing demand going for over next 5 months.
Helpful. And finally, Tapariaji, we've had a very good set of numbers coming in from our associate company, Supreme Petrochem also. And they have also generated substantial cash with now, I think, more than INR 400 crore cash on balance sheet. So how do we kind of -- what is -- what are your thoughts on the performance of the Supreme Petchem? And do you think that we are kind of structurally moving towards the right direction as a company.
Supreme Petrochem has already announced an investment plan of INR 246 crore. All the 3 train of polystyrene are now put to full use. Now the company started already taking action to put fourth train, which is around 60,000 tonnes per year. And we will be having -- sorry, 80,000 tonnes per year, and we'll be having fourth train of polystyrene up and running by December 2021. Apart from that, we are expanding capacity of our EPS plant at Nagothane and at Manali. We are also now working on a ABS plant. So with all the investment plan and also seeing more and more product mix moving into our specialty polymer compound and our insulation business, we believe that all the verticals are now making positive contribution. So we remain quite optimistic on growth in business of Supreme Petrochem.
[Operator Instructions] The next question is from the line of Sneha Talreja from Edelweiss.
Congratulations on great set of numbers. Sir, we have only seen around 2% sort of a decline in terms of plastic pipes business. What I would like to understand is what would be the industry growth or maybe degrowth actually during this period? And what do you expect this industry growth to remain for maybe 2 to 3 years. This is only in terms of plastic pipes?
I can say that plastic pipe majorly use PVC resin. The whole country, in the first 6 months, PVC resin consumption gone down by 25.5%. Among the PVC resin, 76% PVC resin are used for making plastic piping system. Our company in 6 months had a degrowth of 7.5%, which necessarily enabled us to increase our market share in plastic piping system. As the companies who are making PVC resin, they believe that by end of the year, the demand for PVC resin may go down between 12% to 15%. Because they are also finding very -- great difficulty to give annual forecast precisely. But based on today, they say, for the full year, the demand may go down between 12% to 15% of PVC resin. And apart from 76% resin being used for plastic piping system, the other applications are wire and cable, PVC profile and various packaging going into pharmaceutical business. So this is their forecast today. We believe that as the economy grows properly in the next quarter, October-December, then it may grow. Degrowth may be lower than what they are forecasting today. Of course, these are dynamic numbers.
Sure, sir. In that sense, we've already gained a lot of market share. And if PVC resins demand decline is less than 12% to 15%, I'm sure that Supreme in that sense would be reporting a good growth number for plastic pipes.
Thank you for your good wishes.
And my second question would be related to your Consumer business. So we had read in your AGM speech that the segment was actually not doing that well and it only reached normality in the month of August. However, in that particular segment also, we've seen flattish growth. So what kind of growth have we started seeing in the month of September. And do we see that as something related to pent-up demand or that we see continuing?
No pent-up demand. September was a normal growth period. October, again, we are seeing -- now 27 days have passed. We are seeing day to day basis, our business was better than last year, but can't forecast for the next 5 months. If the things becomes normal, definitely, we'll be growing every month in our consumer products. Because consumer products, we make only one item, that is furniture. And because our furniture is of large variety, it is not only produced by injection molding process, we also produce by blow molding process, and we are going to launch rotomolded furniture also. So our revenue is becoming bigger and bigger, our dealer network is becoming more extensive. So our business will go on growing subject to country remain peaceful and not attacked by COVID-19.
Right, sir. And that way, if I'm not wrong, your all the segments have already started seeing growth, right, sir, from month of September, October?
In the month of October, now, today, I can talk. In the month of October, because 27 days have passed, every segment with the company in the month of October up to today are doing better than last year October.
The next question is from the line of Achal Lohade from JM Financial.
My first question is, what would be our, broadly, market shares for the plastic pipes business for last quarter or for the last 6 months.
We will discuss market share in April 2021.
Right. Market share gain that is evident, is it also that you're seeing the competitive intensity coming off from the smaller players or some of the other players which are seeing...
As on today, I can say, because we are appointing more distributors, we are increasing more range and we are penetrating more tehsil where we were not present, we attribute our increase in market share for these 3 reasons. Our reach which was not there, now we have reached that market, appointed more distributor and added more product range to our portfolio.
Got it. Would you be able to give the numbers, number of distributors as of March and as of September?
Somani, can you give?
Yes. In piping system, as of March 31, the numbers were 1,214 distributors or channel partners, which have risen to 1,300 as of September, September 30. About 86 numbers have been added in the last 6 months in plastic piping system.
Understood. Understood. And with respect to the CPVC segment, any -- have you seen the normalization of volumes even for CPVC? Or CPVC remains somewhat under stress, given there is no agri mix there?
In first 6 months in CPVC, there was degrowth in our company. This month onward, we are seeing growth.
Right. And just last question, if I may, sir. Broadly, on an annual basis, what is our broad mix in the piping business from agri and non-agri.
No, we don't have the number because we have experienced people buy from me agri pipe and use in housing.
Right. Right. And just last question, if I may. You talked about you seeing kind of improvement in the housing demand in the affordable segment. So how much of our mix would be coming from affordable segment, given our pricing vis-à-vis the other players, essentially smaller players.
I guess, but we can't say. We supply system. We supply system, which is good for affordable house. We supply systems, which are good for premium house. We supply all types -- we supply 32 systems.
The next question is from the line of [ Hardik Doshi ] from White Whale Partners.
Hello? Can you hear me?
Yes.
I can hear you, please.
Yes. Just one question. On the Silpaulin business side, in the previous call, you mentioned that few players were not able to sustain the COVID and a few small players were coming into the industry and disrupting the market. So can you just give us an update there?
Sorry, What question you raised? I didn't follow you.
Silpaulin business, sir?
Yes.
In the previous call, you mentioned that some of the payers were coming and disrupting the market by lowering the prices. And 2 of the players were -- you said were on sale. So any update there?
No, I only said that we don't have a severe competition from so many new competitors who came in the business. Because their quality -- many of the players quality was not comparable to the product of Silpaulin. So our product is getting, again, more penetration, and we are able to increase our market.
[Operator Instructions] The next question is from the line of Manoj Bahety from Carnelian Capital Advisors.
Sir, my question is mainly, in fact, a few years back, we spoke about shift and industry consolidation. And in recent times, we have seen like many of the weaker players, they are either going out of business or they have significantly curtailed their capacity production. So in such a scenario, where like demand is there across all business segments, are you seeing a significant industry consolidation happening? And with, like, Supreme kind of brand, balance sheet, discipline and product reach across all the parameters, how you are strategizing this opportunity for growth. So if you can give, like, some color on industry consolidation as well as Supreme strategy going forward on this.
Our strategy is to go and putting plant at more and more location. As on today, we are present only in 11 states in the country. There are 29 states. If we are able to start Orissa, then it will be 12th state. So we have a long way to go to penetrate throughout the country. This is the strategy we like to follow.
Manojji, one point more also, I would like to add. We also have a strategy to increase the share of the branded value. Because of the consolidation, that is also one of the possible outcomes, which happens, like increasing the share of the branded share in the overall sales. Right now, we have more than -- about 82%. We tend to increase further.
I don't -- even today, like when we see the CapEx, still I think we are doing the CapEx, which we were doing for years and all. But if this kind of opportunity is there, don't you think that there is a need of hour to accelerate the CapEx on the side or like you have a different part of this.
I didn't follow properly. Somani, have you followed the question, please?
Yes. No, what he is asking whether opportunity comes and can we increase our CapEx? Definitely yes. See, Manojji ultimately, within the parameters of our operations, if we find something very attractive which we want to pursue, the CapEx can always be increased. So there's no...
Money is not a constraint to grow now.
It should add value to the business. That's what we are trying to say.
Sir, anything on inorganic side you are pursuing, like there are a lot of capacity which may be available for grab. So that is another thing which...
We are open. If any worthwhile project, we are always open.
The next question is from the line of Nehal Shah from ICICI Securities.
Congratulations on a very good set of numbers. Yes, sir, a couple of questions. Sir, first is the overall capacity utilization in Q2. And secondly, can you give us an update on the composite cylinder business?
Can you please cover the capacity utilization, please?
As you know, our annual capacity is close to 535,000 in the beginning -- 635,000 at the beginning. And we have done close to 1 lakh metric ton. So that way it is still...
Around 65% -- 60%, 65%. That's what we always told. But we sold 94,836 tonnes in the second quarter, close to our 65% capacity. This is the normal trend, is anywhere between 60% to 70%.
So basically, we have already come to our normal capacity utilization post-COVID.
Because this is seasonal time, some of the demand is very weak.
Sure, sure. Yes. And sir, secondly, on -- an update on the composite cylinder.
Composite cylinder. We are very glad to inform all of you that our quality is extremely fully perfected. We made some small export to 3, 4 countries that is very well accepted. But unfortunately, even today, we are not able to make a breakthrough in our country. They purchase some quantity for educational purpose, but thereafter, we were nothing from the government on refinery for marketing the composite cylinder. So unless we get some big orders, we are not able to utilize the capacity. But we have got satisfaction that we are able to perfect the product. And we are optimistic that very shortly we will start getting bulk orders either from India or from other countries.
And sir, any news from the refinery side?
Indian refinery up till now, they have not given any indication what was their plan, whether they are going to offer the consumer the composite cylinder as a alternative product apart from the steel cylinder. Our product can save life. It is already proven that more than 3,000 people die every year due to explosion in the cylinder. Plastic composite cylinders will only burn out, there's no danger to human life. But unless you make it offer and the offer come from government refineries, it cannot go in a big way. Country buys more than 2 crore cylinders every year. Our capacity is only 4.5 lakh [ machine ] per year. But government machinery is going quite slow.
[Operator Instructions] The next question is from the line of [ Vipul Shah ] from Sumangal Investments.
Sir, what is the volume of CPVC pipe in current quarter?
It is classified information.
[Operator Instructions] The next question is from the line of [ Subrato Sarkar ] from Mount Intra Finance.
My question is regarding Supreme Petro. Just 2, 3 questions. One is, sir, the spread between the styrene monomer and polystyrene has increased drastically in the recent period. So what is your view on that, sir? And whether it is sustainable? Number two, what is our current polystyrene capacity and total capacity. And by next year, after this 80,000 addition and ABS addition, where we will reach? And third is regarding ADT. Whether it is already implemented and once implemented, what will be the impact you are expecting?
Dear friend, you have put so many questions together. So I may forget, I've ask you to say again. The first question you said, the delta between polystyrene and styrene prices has widened. The reason is several plants surrounding our country, in China, Egypt, and more countries, they have closed down. We remain committed to our business. Our quality is very good. So we are enjoying good price in the international market. Our current capacity effective with our product mix, but we make grades where if the product plant get great damage, penalty also. It's at 225,000 tonnes around per year. With the new plant, which is going to be operational by December 2021, our effective production capacity will go around 280,000 tonnes to 290,000 tonnes per annum. There are 2 questions I replied. I think you had more questions. If any questions remain unreplied, you can ask me again.
Just -- sir, those 2 questions, sir, now what is the outlook on this spread, sir, delta? You are expecting this to sustain?
Sorry?
Between this styrene monomer and...
Dear friend, your line is not clear. The voice is cutting.
Sir, delta spread between polystyrene and styrene monomer, are you expecting these to sustain. Sir, this is one question. And second question...
I like to sustain if delta in my -- if it is in my hand. But after all polystyrene can be produced by any other company in the world. So we can't track what is going to happen. Normally, if the delta is very accretive, it is likely that more competition may start putting a plant. So maybe after 2 years, there may be more competition. But it takes time to put up the plant.
[Operator Instructions] The next question is from the line of Karan Bhatelia Asian Market Securities.
Sir, want some clarity on the Orissa..
Sorry to interrupt. Karan, sir, we would request you to speak a little louder, please. We are not able to hear you.
Am I audible now?
Yes, sir.
Sir, wanted some clarity on the Orissa piping project. So by when can we expect revenue contribution? And what is the total CapEx and the total installed capacity?
Orissa, land should be in our fold by next month end. Capacity, Somani, Can you tell what is the capital we are planning there?
Yes, there, we are planning the PVC pipes, polyethylene pipes and the rotomolded products. The total capacity for the project would be around 45,000 metric tons. But it may come in because in power industry, you can start with the first phase, and you can continue to expand. The total project cost, what we are investing there is about INR 135 crore over a period of 2 years. Now once we get the land in hand...
INR 135 crore?
Pardon?
INR 135 crores?
Yes. INR 135 crores over a period.
Over a period of 2 years. Okay. Okay. Okay. And sir, we've mentioned that also we are looking for land parcels in Tamil Nadu and Assam. So is it for the pipe industry or for others also?
It is for piping industry.
Okay. Okay. Okay. So roughly, we can estimate INR 200 crores kind of CapEx every year from FY '21 onwards?
Sorry.
So is it fair to estimate total CapEx at the company level to be around INR 200 crores per year?
INR 200 crores is too small. See, we are talking of only piping, but we have packaging, we have consumer.
We will be investing money in all -- most of the segments of our company.
Okay. Okay. And sir, if you can broadly throw some light as to how the packaging business has done? Can you like share how has been the volume growth in Silpaulin, performance packaging, some ballpark number if you can share? Because Silpaulin was doing well in last 2 quarters. So have we continued that run rate?
Actually, we are giving an overall packaging product increase. In fact, individual, like, in the segments, in the Packaging segment, performance or protective packaging, cross-laminated, we are not sharing actually the specific numbers.
The last question is from the line of Arun Baid from BOB Capital.
Sir, just wanted to understand. How do we look at the PVC Pipe business from an absolute EBITDA per kg perspective because that number varies every quarter based on how...
Sorry to interrupt. The line for Mr. Taparia was disconnected. We would request you to please stay connected while we join him back.
Cany you connect Mr. Taparia, again?
Yes, sir, one moment. We have Mr. Taparia reconnected.
I was just trying to understand, sir, how should we look at the PVC Pipe business in the sense that EBITDA per kg, what is -- as per you, the sustainable number, I know, every quarter, it varies. I'm talking on a yearly level. So what should be the broad range in which that EBITDA per kg we should look at?
EBITDA. We can try EBITDA, very difficult to give any forecast about EBITDA.
No, no, no, sir. But normally, sir. Forget right now, because things are very volatile, PVC prices are going up and down -- are going up right now, at least now. I'm saying normally in this business, what should be the steady state EBITDA per kg we should look at?
Maybe if you have a number, Somaniji?
Yes. No, no. I think your question is correct. But in kind of product lines or product SKUs what we have, you see you have pipes, you have varieties of fittings, you have varieties of polymers with PVC, CPVC, polyethylene, PPR, tank, bath fitting. So all put together, arriving a one number per kg would be very difficult to compare as a industry? That's how we see. We normally say in piping sector -- on piping, it should be between 8% to 10% or 8% to 11% operating margin. But for the other product SKUs, it could be 15%, 17% margins. So the blend of product mix will change the scenario. So per kg number is really not feasible just to give you straight way for a plastic piping system or division.
Okay. Sir, because historically, if you look at, you used to be in that 15% to 17% band. Last year, we did very well. We went up. So I was just trying to understand from that perspective. Is that, that is the band which is a normalized number? Or things have changed because of whatever measures you mentioned, there have changed for the better, permanent? That was the context in which I actually thought of asking the question.
No, our product business is continuously changing, and we will continue to upgrade with more and more value-added products.
Okay, the trend will be upwards, sir, like you're trying to say that?
Yes, yes. It has to be upward from that perspective.
Due to time constraints, that was the last question. I would now like to hand the conference over to Mr. Kashyap Pujara for closing remarks.
Thank you, everyone, for being there on the call and thank you to the management of Supreme for patiently asking -- answering all the questions. Apologies for certain questions which couldn't be answered due to time constraints, and please feel free to write to Mr. Saboo or myself on any of the questions which are unanswered. Thank you, Tapariaji, Somaniji and Sabooji for being there on the call.
Thank you, Kashyap. Thank you.
Sorry. Hello?
Thank you, Tapariaji.
Thank you. On behalf of Axis Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.