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Supreme Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Supreme Industries Q3 FY '19 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Kashyap Pujara from Axis Capital. Thank you. And over to you, sir.
Good evening, everyone, and thank you so much for standing by. It's a great pleasure to have with us the management of Supreme Industries. From the management side, we are represented by Mr. M.P. Taparia, who's the Managing Director; Mr. P.C. Somani, the CFO; and Mr. R.J. Saboo, who's the Company Secretary.Without taking much time, I hand over the floor to Taparia-ji. Over to you, sir.
Thank you, everyone, Mr. Pujara. I'm M.P. Taparia, Managing Director of the Supreme Industries Limited. I welcome all the participants participating in the discussion of the unaudited stand-alone and consolidated financial results for the quarter and 9 months ended 31st December 2018.The stand-alone results and the consolidated results are already with you. I'll give a brief on company's products, operating performance and other highlights. The company sold 100,982 tons of plastic goods and achieved net product turnover of INR 1,406 crores during the third quarter of the current year against sales of 96,736 tons of plastic goods and achieved net product turnover of INR 1,266 crores in the corresponding quarter of previous year, achieving volume and product value growth of around 4% and 7%, respectively.The company sold 284,062 tons of plastic goods and achieved net product turnover of INR 3,950 crore during the 9 month of the current year against sale of 267,961 ton and net product turnover of INR 3,437 crore in the corresponding 9 month of previous year, achieving volume and product value growth of around 6% and 15%, respectively.Total consolidated income and operating profit, excluding construction business, for the third quarter in current year amounted to INR 1,418 crore and INR 178 crore as compared to INR 1,279 crore and INR 207 crore for the corresponding quarter in previous year, recording increase of about 11% and decrease of about 14%, respectively. Total consolidated income and operating profit, excluding construction business, during the 9 month of the current year amounted to INR 4,005 crore and INR 538 crores as compared to INR 3,496 crore and INR 524 crore for the corresponding period in previous year, recording increase of about 15% and 3%, respectively.Net consolidated profit before tax and profit after tax, excluding exceptional item and construction business, for the third quarter of the current year amounted to INR 127 crore and INR 81 crore compared to INR 156 crore and INR 104 crore for the corresponding quarter of the previous year, recording a decrease of about 18% and 22%, respectively. The consolidated profit before tax and profit after tax, excluding exceptional items and construction business, during the 9 month of the current year, amounted to INR 383 crore and INR 251 crore as compared to INR 382 crore and INR 253 crore for the corresponding period in previous year, recording a decrease of about 1% net profit after tax. The business scenario of all the product segment of the company for the current quarter ended 31st December as compared to corresponding period in the previous year [ just ended ]. Plastic Piping System business grew 9% in volume and 20% in value terms. Packaging Products segment business decreased by 10% in volume and 4% in value terms. Industrial Products segment business grew 2% in volume and 3% in value terms. Consumer Products business grew 5% in volume and 19% grew in value term. The share of overall sale in the value-added product has been 38% of the total sale in the third quarter ended 31st of December '18 as against 40% in the corresponding quarter of previous year.Total borrowing on the company stands at INR 391 crore as of 31st December 2018 against INR 248 crore as of 31st March 2018. And the net borrowing level during third quarter and 9 month ended on 31st December came in at INR 329 crores and INR 259 crores, respectively, and INR 326 during the previous year ended 31st March 2018. Average cost of borrowing as of 31st December is 6.6% per annum versus 7.12% per annum on 31st March 2018.The polymer prices during October to December quarter have gone down between 14% to 18% (sic) [ 16% ] in polyethylene, polypropylene and polystyrene. PVC prices remained in the same range as was in the preceding quarter. Going forward, company believes that the polymer prices, excluding PVC, will remain at the current lower level. This augurs well for the company's business prospect for January-March 2019 quarter and beyond.Government policy to encourage the affordable housing construction activities have now started in several parts of the country. Central and state governments have initiated several policy to boost farmers' income. This will ramp up the demand of several products made by the company. And government emphasis on infrastructure activity has boosted demand for piping system. The company expects in the current year to attain volume growth in excess of 10% and value growth in excess of 15%.The company has plans to set up 2 new greenfield locations in this year, and the CapEx is progressing well. Out of the 2 new sites, operations at Giloth in Rajasthan are now running smoothly. Construction and machinery installation work at second site at Jadcherla in Telangana is going in full swing. Furniture and Roto production at that site will go in production before 31st March 2019. Foam products at that site will go in production in April-June 2019 quarter. Company is also expanding its capacity at 11 of its existing locations, and all of which has gone into production except at Khopoli. The performance packaging film at Khopoli will go in production in April-June 2019 quarter.Due to a steep fall in polymer prices, there was erosion in operating margins during the quarter October-December 2018. The competition in XF film products has eroded operating margins by around 5% in that business. The company's operating profit margin, thus, has gone down to 13.16% for the 9-month period ended 31st December 2018 against 14.27% in the corresponding period of previous year.This is a brief and overall summary for the quarter under reference. Thank you for your patience. Now I and my colleagues, Mr. P.C. Somani, CFO, and Mr. Saboo, our Company Secretary, are available to reply to various queries shared by all of you. Thank you very much.
[Operator Instructions] We have the first question from the line of Kunal Shah from IIFL.
This is Avi here from IIFL. Sir, I just wanted to understand -- could you give us some of the inventory loss that we saw in the quarter? One-off inventory loss, sir?
We know that polyethylene and polypropylene and polystyrene prices have gone down between 14%, 18%. So most of the loss we kept in the quarter. Some losses had come in the January-March quarter also because market quantities we booked against oil price level which honor the contract and also we will consume the material in the month of January. So some inventory loss may be still in this quarter. And we have cut down our inventory loss, and, just like we are saying, our operating margin will go down to that extent.
Okay. Sir, sorry, I missed the guidance. You had earlier -- last quarter guided to INR 5,700 crores to INR 5,900 crores revenues and 14.5% to 15% EBITDA margin. What is -- is there an updated guidance on that, sir?
No, our guidance is still -- our turnover will be around INR 5,700 crores and operating margin will be between 14% to 14.5%.
Okay, okay. 14% to 14.5%. Sir, the second question I had was on the packaging solutions business. Now what you -- what I recollect is we had ended the promotions on this segment in the last quarter. And obviously, there was a planned shut -- maintenance which was moving on growth. Now this quarter also, unfortunately, not seen a pickup in growth. Is that pickup missing just because of competitive intensity? Is that the key pressure that is playing out? Or what has happened, sorry?
Fortunately, which are the pressure on cross -- the biggest pressure was on cross laminated film business. Fortunately, our marketing team could compute our volume, but margins will be in -- up to 5% in the business. That's why the value has gone down. When a manager said, will you give me 5% off -- being off -- discount, you have to give it to the sales team. In the performance packaging film, so many plants came all at one time. It's just like making petrochemical where large plants come out together, and the volume and price comes down. So some of these large-capacity performance packaging film comes in the country simultaneously, and you get -- you -- and the volume also, as you see, and the margin also. And so it's the business cycle. So this is definitely -- be spread over next 2, 3 quarters.
Okay, sir. I mean, so then, would you be able to share any update on the new launch in the film side? I mean, how is that going in the market, sir?
New launch of what?
The cross -- the...
Cross laminated film. You see, we were principally in tarpaulin business. Now companies started migrating several new value-added product, differentiated products. Our fantastic film is far superior than anybody is supplying. So we don't want to restrict our business only tarpaulin. We are developing several new application from our film. The production is large in the market. We issued comping success on the product. We believe in 2- to 3-year time, we will be able to restore our margin back by introducing other related product, except tarpaulin, and also by entering into more export markets.
Okay, sir. Okay. So essentially, the focus is there. And lastly, sir, even in the piping and consumer bazaar -- sorry, piping segment in particular, we have seen very healthy growth rates sustaining. You had highlighted there were some pressures in the lower-end segment. How is that market now doing? Is that...
In the piping segment, there's no pressure. In such a market, we get relatively a low margin. If you're seeing that our volumes had grown by 9% and value has gone up by 20%, so we are more and more from -- other than pipe business and piping business. So our margins by...
Okay. So the same strategy we did last quarter?
Our margin, by and large, particularly in piping business.
Okay, okay. So same strategy that we did last quarter. Essentially, you're following on that route only? Focus more on return ratio rather than volume growth?
No, volume growth -- we don't want to chase the volume at the cost of curtailing so many margin.
The next question is from Chirag Shah from CLSA.
My question has been answered.
We move to the next question. Next, we have Sneha Talreja from Edelweiss.
My question was more pertaining to your guidance. You have given guidance of about 10% volume growth. If I look at this growth, if I really want to get -- to make your full numbers, it comes out to be 20% growth. So are we aiming for a 20% kind of a growth in Q4 FY '19?
I will chime. I must compliment to you. You calculate very correctly. And we definitely expect, if we had the volume growth, to justify our 13% -- 10% volume growth for the whole year.
And sir, what will be the segments that will be driving such kind of higher growth?
Principally the increase within piping. Pipe, pipe...
Increase within pipes?
Interior pipe.
Okay.
Pipes currently -- in agriculture and infrastructure.
Agriculture and infrastructure?
Yes. Well, this is the area buying by the government, central -- national government department. And we will be supplying most value -- volume of pipe in the segment from our polyethylene pipe and PVC pipe. And also, polyethylene pipe from every segment where demand is start -- is coming up. So they will be enabling us to enjoy higher-volume growth.
So it's really basically government-led projects which will be driving your piping business?
Government -- basically government led. It's really policy and government monetary policy. Previously, most [ in particularly, in net cash. Particularly in cash ].
I got that, sir. Sir, I just also wanted to understand, what is the reshuffling that we have done in this particular quarter with the industrial packaging division?
I can't follow. What reshuffling?
Sir, in the volumes. So we have restated the volume numbers for packaging and industrial division. All the total volumes comes out, do we see them? Or what is the -- if any...
We had no reshuffling. Reshuffling, we have done nothing. [ Like more or less like ] reshuffling.
So the small one, the composite, which was earlier being shown separately, have been for part -- we made it part of the industrial products. I just want to share.
Appreciated, okay. Yes, yes.
They have small volume, but...
Yes, please.
And sir, I also wanted to understand the piping division growth that you're talking about. How will be the industry growth in this particular year?
I say currently, industry will grow by 12% yearly.
12% in value terms. And then in volume terms, it will be largely similar?
Well, maybe 7% or 7.5%, something like it.
So in this particular sales -- so your sales -- we would have grown our market share at a much higher extent?
Yes, we are definitely -- because we are already increasing our [ plenty share ], you can keep -- we will have better share this year and going forward.
So we -- so do we expect this kind of a double-digit growth of about 14% to 15% growth kind of to continue for FY '20 also?
That'd be -- piping system for sure.
Okay, piping for sure.
Sir, just to include one more question here. In terms of inventory losses, can you quantify what kind of numbers we had in inventory losses for the current quarter?
Not possible. Not possible.
Even if a rough...
I told you already what -- well, the price had gone down. I -- no courage to try to do month-ago number. Maybe we should...
Okay. So it's basically...
Maybe we see our [ margin ] given. Yes. And maybe we see our margin going down by 1%. If you're talking vertically inventory loss, partly some losses are going to be due to fall in the price -- in the operating margin, of course, in [ refilling ]. They return 5%. So we might as well -- well, so if you could repeat [ close to reference ]. So our margins would be eroded by [ 8 crores in ] debt. But after 14% in the growth, extra will not be adequate to justify 110 basis point erosion in margin.
Okay. And you are looking 14% to 14.5% margin for full year?
That's what we are aiming today.
And sir, that is for this year. So if you just -- is this a little bit -- like what kind of margins and growth we are looking, sir, next year?
We'll be done in the month of May when we close the account.
Next question is from Maulik Patel from Equirus.
Sir, I just wanted to -- I mean, you were sounding very bullish on that -- the piping segment in next quarter and a couple of quarters thereafter. What is -- I know you mentioned that the construction activity is picking up. But is the industry as a whole, I mean, organized industry is gaining market share from the unorganized?
It's very difficult to -- I think that the way the government is scared to [ introduce ] to introduce [ ill will ]. And we are not seeing much [ in terms ] to take place from unorganized to organized. But one thing we are now sensing, and here [ clearly also ] tell the people who are making affordable house must be careful about the system. So they are now not interested to buy poor quality product for an entire plumbing system and various other housing requirement also. And we are here to share with you that we are seeing a real boost in demand of -- for affordable housing. Throughout the country, [ certainly people ] has already started to build affordable houses, houses which are below INR 20 [ in Bombay ] and money is [ geared towards income ]. The demand is quite nice. And any house will require a plumbing system, will require housing, sewage and tubular system, will require sewage and drainage system. And that demand is booming. And there, under this era, the [ policyholder ] will buy the product. So generally, people, to protect their reputation, they are buying valued quality product of hopefully our company and other companies also.
Sir, another question is that the overall 4% volume growth you have achieved in this quarter...
On this particular quarter.
Yes, in this quarter. Is it -- is that because of inventory destocking happened because of the fall in the volume or prices throughout the quarter? And now you are seeing this inventory restocking happening at distributor or dealer level?
You see, inventory get -- losses happened to us in the raw material pricing.
And the way I understand, sir, destocking happened at distributor or the restocking is happening? Are the -- then the price of the polymers were falling? The distributors were purchasing less of the material from you because the price...
Generally, distributor don't keep large inventory nowadays. But in this quarter, this is may be due to the effect of Dussehra and Diwali. Lesser demand, lesser volume of buying. Maybe that reason.
Okay. Sir, any thoughts you...
Quarter-to-quarter, preliminarily, difficult to explain also.
Sure. Sir, any thoughts on this DWC, which you are putting the capacity? I mean, how...
DWC today not started in our company. We started to plan, but as we are prepared today, the company -- the people who are supplying to us are supplying lousy product, unfortunately below standards. As there are no proper safety mechanism, the people who are supplying DWC pipe mostly are -- rework material. And reworked material, that if it's pushed, [ it is most ] material. We are not permitted to stop [ BIS ]. But most of the players are putting [ BIS ]. Those -- they are really genuine material. And [ the premium ] material, their [ ramp-up ] prices are 30%, 40% lower than the prime material price, meaning we are kind -- very difficult to enter to the business. We are getting some small orders. We believe that only after 2, 3 years when people start segregating who are making quality products, our business would boom. So it is a good product. And there are very few players who are making quality products in this new system.
Okay. And sir, is this business more driven by the municipalities and the state governments rather than the [ individual people ]...
It's driven mostly by government departments, similar government departments. You are right.
Okay. Sir, last question is that, I mean, the health in the industrial segment performance in terms of profitability and in terms of margins also improved. So what's been driving that business? In the last con call, you mentioned that it's consumer durable segment where the washing machine, [ improving that ] and that kind of [ a style ] are driving the business. If you can share some more thoughts on that.
Again, the view is again, demand is quite okay.
And sir, apart from that, within that segment, do you have material handling and auto? How are these sort of subsegments doing now?
Actually, I might -- we are still doing quite okay.
Okay. So now the consumer durable would be what? 50% of the industrial volume? Or is there any rough number we can have?
No, there isn't, but it is not a big business in our company.
The next question is from Kashyap Pujara from Axis Capital.
Taparia-ji, I have a couple of follow-up questions. Actually, it's encouraging that you have mentioned that you will maintain the 10% volume growth for the full year given the performance that you had so far. But my question was more on the demand front, which you mentioned. You said that you are seeing a lot of traction in agriculture, et cetera, for the -- especially for the fourth quarter.
My first -- again, my...
A couple of quarters back on the call, you had mentioned specifically that agriculture as a segment is not that profitable, and players are not acting in the right spirit of the margins. They are not so conducive, so we are basically deemphasizing that to an extent. So is that scenario changed now? So given that we are re-emphasizing on it, what is your thought on that, sir?
First, I must tell you that I -- [ totally in the listed ] segment. [ I told you ] affordable house. And we are seeing a good production coming in in affordable house, and we are selling -- able to sell you a pipe also in affordable house with a decent margin. We are not seeing any better -- added value business in agriculture. But because our reach is becoming more now after we started a new plant in Malanpur and also in Kharagpur, our current demand today [ is ] that area also. So our [ full end ] and participation in the business has gone much higher than what it was earlier by not only normal pipe but by supplying casing pipes, socket pipe, submersible pipe, which are very functional items, which are [ agriculture ] products where people are willing to pay better price. So [ we decreasing our earlier ] pipe segment. And so we are quite optimistic that our business will grow also and margin [ in total of ] doing the business.
Sure. Fair enough. Fair enough. Sir, one more thing, if I look at it on the margin side, your piping margin actually on a quarter -- or Y-o-Y basis on a per kilo basis is actually better. So -- but if I look at it from an industrial and packaging, we've seen a very, very steep correction in both these segments. So my question was, within the packaging side, at one point, we were continuously enjoying 20%-plus margin. And on a per kilo basis also, it was quite substantial. So is the current margin the new norm, given the competitive intensity that's shaping up? And will it take -- like you mentioned, will it take 2 years for you to get back to the original level? What are your thoughts on that?
In Packaging segment, there are 3 component. And the biggest driver of profit was Cross-Laminated Film product. In Cross-Laminated Film product, our turnover is around INR 500 crore. And where is your margin? Gone down by 5% year-on-year [ especially ] on this segment. We are now entering into 3 activities. One is that we are entering several new markets domestically and also world market. We are also then selling new product, which are not tarpaulin but value -- better product. We are also developing some more value-added products with other features. This may take, I believe, 2-year time to restore the margin to a much better level. But having said that, even today, this business is qualified to be a very good business to our company. They are actually in a good margin, but more pressure to the margin what we enjoyed. Because by decreasing the acceptable margin also, we are now discouraging more and more player to come in the business. And when the player will come, we need to see how they succeed, even we are still not creating bigger success, when they are -- basically, they are 20% lower than us. We don't know between 20% and lower than us and supplying similar product to us whether they will earn anything. We -- they cannot earn any money to our rank. Unless, they are playing with their quality -- if they are playing with the quality, then we're discounting the market.
Sure, sure.
Am I clear?
Yes, I understood that. But in this transition, even at the current point, this margin that we are seeing is also a function of the inventory, the raw material prices, which have come down. So in general, it would be a 17%-plus operating margin given it's a value-added product?
Inventory loss, most have been captured, some small loss we will capture in the month of January only. So inventory loss will no more going forward.
Sure. And in the Industrial side, the steep fall that we are seeing, this -- how much -- this would mainly be inventory or would it also be because you've regrouped the composite into this and there is some loss from composite here?
In the Industry, of course, usually we don't do polyethylene. And polypropylene is a special grade. So there is no inventory loss in Industry division. Low wastage regionally in the packaging film business only. But they are all made from polyethylene in Furniture because we had some margin reduction again in Furnitures also due to loss in polypropylene price.
So that steep correction in the per kilo margin in the Industrial segment on a Q3 last year to Q3 this year, what explains that? I couldn't get that.
I'm not aware. We have Mr. Somani, please.
So it's not what happens, I mean, many of the industrial product what we're supplying are now inbuilt with motor components, which forms part of my cost of material. So your turnover improves because when you are supplying the motor components included into the part. Your turnover improves but your profit does not improve because it's only a pass-through price. Light supply, you're supplying a cooler, so any motor or any switch or any starter, whatever you are assembling, there's only a cost in which you built in the price, sale price. So your top line goes up, but not the margin. So now there are many assembled items which are being supplied to the industrial customers. So the top line is increasing, but not the margin because those products are only a pass-through component.
So this is a product mix issue, which will get resolved?
Correct, correct, correct.
Sure. We have the next question from Nehal Shah from ICICI Securities.
Sir, can you quantify the growth within the Piping division with respect to agriculture and real estate?
Sorry?
Can you quantify the growth coming in from the agriculture pipes versus the real estate housing pipes?
If you recall my annual reply to your analogy, many customer buy either their pipe from us use in housing. So they're very difficult to say.
But has the agriculture segment grown in Q3 or it has de-grown?
It has grown, but now, demand is -- this is a January-March peak season, Nehal. Real demand will start only after Diwali. So demand only maybe is small way, it started coming from December, but now there will be realization continuously up to middle of June.
Sure. And sir, my incremental question are coming -- again to -- sir, basically, within the Packaging Products segment, in SILPAULIN usage, there's a 3-pronged strategy which you're looking at. So one is introducing new products, other is value-added products over the next 2 years, and three is exports. Can you elaborate on each of these 3 strategies? So which are the new products which you are hinting at in SILPAULIN?
There are 100 of major product for many application. These are not single product, major product for application tailored to particular as per requirement, but I'm supplying to industry, government will tell you particular type of equipment. We are customizing the requirement of the industrial fellow. And as per market, we are participating only in 24, 25 countries. There are more than 50, 60 countries, where we are making our big effort to start exporting our product there. We are participating in more and more exhibition internationally. So we're -- everywhere we are going, we are getting some success. These are going to be ongoing process. But our focus is to increase our export business also in big way.
All right. And sir, what about the value-added products you're hinting over the next...
Sorry?
What are the value-added products you're planning to introduce over the next couple of years?
Value-added products, we go entry every day now. Normally value-added product. Value-added product of which -- the overall value-added product?
No, no, no. Sir, value-added products under SILPAULIN brand.
SILPAULIN, they're all value-added product only. These are -- SILPAULIN remain a value-added product even today. Tarpaulin value-added product. That product we are going to add is going to give better margin than what we were getting -- what we are now getting in Tarpaulin. Better margin only. If you've -- as you've seen our margin has gone down in Tarpaulin, so we want to introduce different value product, which can add further different, especially a value to a customer, who is willing to pay better price than what we are getting in Tarpaulin.
Okay. And sir, which will be those products like?
Classified information you are saying.
The next question is from Achal Lohade from JM Financial.
Just had couple of questions. One was with respect to the capacity. What is the capacity as of December in terms of the PVC, CPVC and the other polymers?
I'll request Mr. Somani to tell you please. One minute.
You see our total capacity at this year-end, at the end of December certainties are, yet, we go into production, so it will be closed to...
567,000.
At the end of March 2018, we had a capacity of 567,000 metric ton. End of December, it will be around 590,000 metric ton, but by the end of March '19, it would reach to 605,000 metric ton.
Okay. And is it possible to break it up in terms of the...
We can break up into segment. If we look at the Piping Products, it would be around 419,000 metric ton.
4-9-0?
4-1-9. In the Industrial segment, it will yield 69,000 metric ton. In the Consumer segment, it will be 34,000 metric ton. In the Packaging segment, it will yield 84,000 metric ton.
And how do you look at the capacity by March 2020 or March '21?
It's too early because when we have our CapEx plan made up for the next year, although going forward, our CapEx will be standing at a similar range of between INR 300 crores to INR 350 crores. But then unless we draw it product wise and location wise, then only will be -- probably better we'll at the end of the March '19 when we discuss, we'll be able to better spell it out.
And at least for FY '19, what is the breakup in terms of the CapEx of the INR 350 crores?
FY '19, we have committed CapEx of around INR 425 crores, including the carryforward of the last year. And major CapEx would be in the Piping segment, but the new greenfield plant which we're putting up at Jadcherla in Telangana. Though the CapEx has been committed in operation right now in 11 additional sites and 2 new greenfield plants. Plant at Giloth for Industrial product has already commenced. In Jadcherla, the Roto products and the Furniture products will start in the -- coming this quarter, January-March quarter. And all other brownfield plants say only go into production, except packaging film, which is going at present quarter.
Understood, understood. So of the INR 425 crores, bulk of it is for the Piping business, as you said?
No, it is principally in Industrial also and home division also, all the division.
Understood. And the second question was with respect to the DWC pipes. Sorry, I missed your comment there. Did you mean that, basically, the current supplies are of low quality?
Yes, they're putting various -- they don't justify to put waste, most of them.
Sorry, I didn't get you.
See, you have to put a clear vinyl standard stamping. The standard of Bureau of Indian Standards that you must use only prime material or the rework material generated while you are using the prime material. We are not permitted to use post-consumer waste material. That post-consumer waste polyethylene are abundantly available at 30%, 40% lower than prime material. Nobody can stop you to use it, but then you cannot put BIS on that pipe. Actually you do them, partly people are putting various -- now, this is the problem.
And that is impacting the volume as well as pricing for us?
Not embedded, not started -- might begin not yet started. We're talking, in pending, not started. We have made the investment that is as on today mostly in line, government.
And how much have we invested in...
Around INR 45 crores.
INR 45 crores. And what is the capacity for this INR 45 crores?
Huge capacity, maybe I can supply 1,500 ton per month.
The next question is from Akhil Parekh from Elara Capital.
Sir, my first question is on the SILPAULIN business. Our Challenge-X indicated that there are 2 to 3 players who have entered this segment in last year or so, but the pricing difference versus ours is only 6% to 7%. And they are finding it challenging to get the -- what we say, to sell the product.
Akhil, I've been corrected, there are not 2 or 3 players, there are 9 players in this business. And their prices are lower, mostly within 15% to 20% than our price. We dropped the margin by 5%. And even then, their prices are lower between 15% to 20% customer-to-customer -- supplier-to-supplier.
Okay. And of these 9 players, do we have any Chinese players in there?
Sorry, no Chinese.
Only Indian players.
All Indian companies.
Okay. So how do we see then the competitive scenario shaping up for next year or so? Like, do we see further projects that...
We will be able to grow the market because when they want to sell with no margin, if the market grows, good for the company. We were the very powerful brand or SILPAULIN, a very powerful brand. We will reach throughout the country. Our brand is where you expect it. So the market grows, we will grow and send him out.
Okay. Okay. So we don't see any kind of price cuts going forward?
Akhil, we've already gone down by 5%, it's a big pain.
Okay. But I'm just saying for the next 1-year perspective kind of.
What for? We don't want to drop further margin. What for we should drop? So I don't know if they supply similar products like me between 15%, 20% lower than how can they earn anything, unless, they play with their quality. So I don't believe they will play with their quality. I believe, we will see.
Got it, sir. Sir, second question, coming back on the DWC thing. You said, we have around INR 45 crores of investment, which can generate around 1,500 ton of DWC pipes per month.
So we definitely have business around INR 200 crores annually.
Sorry. INR 200 crore is what we are generating right now? Or this is what expected?
No. We are generating hardly INR 10 crores. I said, potential to do INR 200 crore turnover.
Okay. Sir, is there any specific segment or channels where we are seeing this demand for DWC pipes?
They were mostly used by government and central government departments. We are selling some quantity to some industrial projects where we are getting proper price and we are giving proper quality. So it would appear, we are very confident that people will start being very careful from whom they are buying. The customer wants quality product.
Got it, got it. Sir, in the Industrial Products segment, would you be able to tell the composition of like how the material handling is versus the industrial component is?
Classified information.
Okay. Sir, last question on the Industrial Products segment as the volume numbers, I didn't quite understand, why there has been a number of -- so if I compare it against the 3Q '18 result and if I compare that with today's result, the 3Q '18 volume numbers, why there were difference of almost 1,500 tons?
Industrial volumes, you can indeed presume that low volumes. Last year, there were lot of more units, which were divested this year from 1st July.
Okay, okay. Because of that.
Yes, yes, it was.
The next question is from Sriram Rajaram from Sundaram Mutual Fund.
Sir, a couple of questions from my end. As far as the Packaging Product business is concerned, who are the market leaders apart from you? Like do you have some data over the market share or...
There are 3 products. And particularly, Packaging Product, we are the market leader. In Cross-Laminated Film product, we are the marketing leader. In Performance Packaging, Sriram, we are a very small player. There are many big players. We can give the big name in paper product limited, Huhtamaki. There are many, many players. We are not a large player. As on today, we have no plans to be a large player. That same segment, I've given the story.
Yes. On the Cross-Laminated Film, who are the other players, sir?
The leader. We are the leader. There are more 8 -- 9 more players are there.
If you will give the top 2 players or top 3 players?
Not very much top, they are all more or less equal capacity. I'll give you the 9 names -- just I'll check and then give you very shortly the 9. I'll give you the names just now. The name of 9 players are: Time Technoplast Ltd., Mumbai; Hi-Care, Ludhiana; WorldStar Group, Mumbai; Internex Poly Private Limited, Silvassa; Shivam Plastic, Nepal; Bag Poly International, Karnal, Haryana; Honey Enterprise, Panipat, Haryana; Shalimar Paints, Mumbai; Taneja Enterprises, Delhi. They are the 9 players who have come in last 2 years. Hello?
Fine. Yes, sir. That's helpful. And one more question is on the -- on your Piping business, so sir, we've seen many players now entering the Piping business because of the attractiveness of the industry. Now how do you see the -- do you see any pressure on the pricing front? Or how do you see, sir, on a 1 to 2 years' perspective?
Yes, we are confident player who are very -- actually, there are good players who are coming. They entry their application further. But still there are many new application to be won from the conventional material, and their market is growing also. And may each of them -- more and more market from unauthorized players. There may have further deeper penetration. So market will go on growing, India is a huge market.
And sir, one more thing on the DWC thing, so where do you see the application coming in terms of like -- which product that is replacing?
The biggest replace is sewage and drainage system in DWC.
Yes. What is it replacing, sir?
Conventional material. There are many type of conversional material being used for sewage and drainage even today in our country. SSC, RCC, so many material pipes are used. We require pipe to carry any sewage and drainage also from the household or from the industry.
The next question is from Abhishek Ghosh from DSP Mutual Fund.
Sir, I just missed the debt numbers, you could repeat that?
Debt numbers? Our average debt for 9-month INR 258 crores, again [ INR 350 crores. ]
Okay. And sir, in terms of this quarter, how has been the working capital? Has it deteriorated, remained stable? How has that been?
Working capital had been highlighted in the end of the quarter, we always looked at -- last year was 30 days working days, -- working capital requirement. This year, it came down from that to 29 days. We believe it will come down to 24 days when we close the year.
Okay, okay. And sir, if you can just help us understand what's the outlook for Supreme Petrochemicals? And how are we looking at that part of the business?
Supreme Petrochem business had a -- within -- due to the big fall in the price of Australian monomer. In a 3-month period, the prices have fallen by $500 per ton. And for Supreme Petrochem, Australian monomer is 100% imported. Apart from fall in the prices of Australian monomer, there's also -- [ relative ] demand due to the bond used in several onetime product, principally in the state of Maharashtra, followed by Tamil Nadu, followed by some part of -- so there were demand erosion. So overall, the polyester market had a degrowth of 3%, 4% in the year in the first 9-month, and due to the drop in the Australian prices, big inventory loss occurred to the company.
Okay. So going into the fourth quarter also will there be the losses? Or how do we look at it?
The price have dropped too much, they're trying to come free from $1,450 per dollar price per ton, it has come down to $950. Current price is around $1,020.
Okay, okay. And sir, just in terms of composite cylinders, how are we looking at that? Any kind of pick up in that?
Composite cylinders up till now Government of India made a sharp plan to the OMC, oil marketing companies. They made a sharp drop, very small way. So up till now Government of India has still not decided to launch in a big way. So until witnessed, we are getting it of through mostly international market. But it will be very superior, but it takes time to maintain, it took us a little longer time than what we thought.
Next question is from Srinath V from Bellwether Capital.
Sir, if you could give us flavor of the -- in the Piping segment, if you could give the flavor of the intraplate HDPE and CPVC? What are the kind of -- are they growing above the 9% volume growth we have posted? And just give us flavor of how these markets are doing, sir.
All the markets in high density polyethylene, there's a good demand coming from central and state government for drinking water supply. We're getting a good demand for -- from bore well application, from sprinkler systems of polyethylene pipe. PVC pipe, we are seeing good demand coming from housing, agriculture and infrastructure. CPVC, demand is coming to our company, most of them are housing. Up till now, there's not a big interest in fire sprinkler system, though we are the pioneer in fire sprinkler system. So CPVC and PVC is restricted to plumbing system. And plumbing, there is more and more penetration to go to CPVC than using -- anywhere where they are using even PVC pipes or using steel pipe, they're now moving to CPVC pipe.
Are these 2 segments, HDPE and CPVC, growing faster than the 9% we are reporting for the segments, sir?
HDPE growing fastest.
Okay, okay. Sir, I just wanted to find out what would be the market size of the DWC that's the large sewage pipe in terms of value?
No idea. No idea.
The next question is from Ronil Dalal from AMBIT Capital.
Yes. So my question is that, earlier, we had quantified your value-added products -- the value-added products, there margins were around 17% and above?
17%.
Yes. Yes, 17%. So do you still stand by that?
Yes, exactly, it is not diluted.
Okay. Secondly, so now you've seen some drop in value-added production from...
Value has not dropped, in absolute quantum, it has gone up only. Only percentage gone down. For the 9-month period, our value-added product turnover has gone up from INR 1,253 crores to INR 1,389 crores. Even in the third quarter, the overall quantum has gone up from INR 504 crores to INR 528 crores. Percentage wise because our turnover has gone much more, so percentage wise, gone down in the third quarter from 40% to 38%.
Right, right, right. So it's gone down in percentage-wise. So would you see that even going ahead, this would drop like as a percentage of revenue?
If that grow overall value turn are much faster, then percentage value may go down.
Right, right, right. So also that you were very bullish on pipes, so what would you say like...
Now, we are bullish on all the segment where we are operating.
Right, right, right. So what would you say that your pipe revenue share, how do you see it growing as a percentage of your total revenue maybe over the next few years or few quarters?
Our pipe nearly gone down -- gone up by 18% in 9 month. It's gone up by 18% 9 month. And for the full year, it may go up by 20% in the full year, this year.
No. Sir, I'm asking more in terms of as a percentage of revenue, the share -- the revenue share, like, -- so do you see it going to 60% or maybe coming down to 40%? Or how did...
To see a turnover of INR 5,700 crores this year we are planning. And this business maybe around INR 3,470 crores. What percentage, may be 60%. I'm guiding net revenue of INR 2,727 crores x 20% starting to come.
INR 3,300 crores.
Of the INR 5,700 crores, how many it becomes?
57%.
We made 57% this year.
57%. No, no. I'm aware of that. So do you see this going to 60%, 65%? Or would you remain at...
We are not controlling that business to grow also. We are not controlling, we are not restricting, we are investing money in other business also. I expect the demand of that particular segment. These businesses also are growing.
Right. So in Industrial segment, your realizations were up, but volumes were fallen -- volumes had fallen. So any reason for this like...
I request Mr. Somani to explain it.
As I mentioned, because of the one unit which we had divested through joint venture effective July, so there's an impact in volume.
Okay, okay. Right, okay. And sir, how do you see like auto demand like basically auto sales were low for October-November. Has that had a big impact on your Industrial segment?
Yes, certainly. October-December was not a good quarter from auto demand point of view, but which is not -- but, which is not again picking up in the current quarter.
Thank you very much. Due to time constraints, we'll take that as the last question. I would now like to hand the conference back to Mr. Kashyap Pujara for closing comments.
Thank you, everyone, for being on the call. And thank you to the management of Supreme for patiently answering all the questions. Thank you, Taparia-ji, and look forward to the next quarter.
Thank you very much, Avinash -- to you, Kashyap. Thank you very much.
Thank you.
Thank you very much. On behalf of Axis Capital, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.