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Supreme Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Supreme Industries Q3 FY 2022 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference over to Mr. Aasim Bharde of DAM Capital. Thank you, and over to you, Mr. Bharde.
Thanks, Peter. Good evening, everyone. And on behalf of DAM Capital Advisors, I extend a warm welcome to all of you here for Supreme Industries Q3 Results Call. I would like to thank the management for giving us the opportunity to host them today. From the company's side, we have Mr. M.P. Taparia, Managing Director; Mr. P. C. Somani, Chief Financial Officer; and Mr. Rajendra Saboo, VP, Corporate Affairs and Company Secretary. I will now hand over the floor to Mr. Taparia for his opening remarks. And post that, we can open the floor for Q&A. Thank you, and over to you, Mr. Taparia.
Thank you very much, Aasim. Thank you. I'm M.P. Taparia, managing Director of the Supreme Industry Limited. I, along with my colleagues, Shri P.C. Somani, Chief Finance Officer, and Shri R.J. Saboo Vice President and Company Secretary. Welcome all the participants who are participating in the discussion of our audited, stand-alone and consolidated finance result for the quarter and 9 months ended 31st December 2021. The stand-alone results and the consolidated results are already with you. I'll be brief on the company's product operating performance and other highlights. The company sold [ 91,354 ] tons of plastic goods and achieved net product turnover of INR 1,895 crores during the third quarter of the current year against sale of 111,584 tons of plastic goods and achieved net product turnover of INR 1,766 crore in the corresponding quarter of the previous year, resulting in volume degrowth of around 18% and product value growth of around 7%. The company sold 265,301 tons of plastic goods and achieved net product turnover of INR 5,106 crores during 9 months of the current year against sale of 297,871 tons and net product turnover of INR 4,128 crore in the corresponding 9 month of previous year, resulting in volume degrowth of about 11% and product value growth of about 24%. Total consolidated income and operating profit for the third quarter of the current year amounted to INR 1,948 crores and INR 369 crores as compared to INR 1,848 crores and INR 454 crore of the corresponding quarter of the previous year, resulting in consolidated income increase of around 5% and operating profit decrease of around 19%. Total consolidated income and operating profit for the 9 months of the current year amounted to INR 5,227 crores and INR 985 crores as compared to INR 4,281 crores and INR 850 crores for the corresponding [Technical Difficulty] and INR 528 crores for the first pulling period of the previous year, recording increase of about 20% and 22%, respectively. The business scenario of all the product segment of the company for the third quarter of the current year ended December 31, 2021, as compared to corresponding quarter in the previous year [ headwind edge under ]. Plastic Piping System business degrew by 25% in volume and grew by 1% in value term. Packaging product segment business degrew by 1% in volume and grew by 15% in value term. Industrial Products segment business grew by 6% in volume and 26% in value term. Consumer product segment business degrew by 18% in volume and grew by 9% in value terms. The overall turnover of value-added product decreased to INR 665 crores during the current third quarter as compared to INR 758 crores in the corresponding period of previous year, resulting degrowth of around 12%. The company has cash surplus fund of INR 148 crore as of [ 31 ] December 2021, as against cash surplus fund or to INR 331 crores as of 30 September 2021. Business outlook. The polymer prices were extremely volatile in the quarter. We start in November, PVC prices have dropped by INR 25 that is 15% per kilo. The price of other polymer also swung widely during the quarter. So cash shrinking the prices affected over-all demand for the product. The product, the demand was driven strongly distributors have seen large-scale destocking in the quarter. Due to extended rent for period for [ Indiscernible ], the demand for [ iniquital ] infrastructure was also deferred. Due to supply chain disruption, the company has suffered degrowth in [ CPC Plastic ] system business. There was a steep fall in [indiscernible] plastic piping system, furniture and petroleum products. Overall, the company's volume gone down by around 18%. Its prices have streamlined and on a recovery path, the distributor channel has started functioning normally. The company expects good volume growth in the fourth quarter in most of its businesses. The company progress in putting a plant at Guwahati, Cuttack and [ Indiscernible ] are booming. All these plants will be operational between April to August this year, the start was delayed due to supply chain disruption due to COVID-19 pandemic, the same is now ebbing down. Material handling Division has shown 17% volume growth, company continued to have new product rent and deepened the market reach in this division. Furniture division has shown 18% volume degrowth during the quarter, as the demand was quite weak. The composite cylinder has registered recurring response from Indian consumers, with expected surge in demand from domestic sources and also, from international market, the company is keeping itself ready, double-digit capacity from existing 5 lakh cylinders per annum to 10 lakh cylinders per annum at an existing plant site in Gujrat in a span of 8 to 9 months. The demand for Performance Packaging Film has saw 50% growth in volume, mostly from export market. Due to chip shortage, Industrial Component Business had degrown in the quarter by 3.5% in volume. The company's rental cost has gone quite high and gross limited safe division. The divide-increased prices of complete products have gone into shut, which is time-led only by January 2022. This has affected the margin of the product segment cheaply in the quarter. Therefore, demand restriction in this segment due to lookalike competitor products with quite inferior properties company confident that demand will revive for its product because the candidate will know the real value of look-alike products. Protective Packaging Business has solid degrowth of 10% in volume. The company initiated CapEx plan of INR 521 crores for the current year, including credit for our commitment of previous year is going smoothly. Company initiative of launching of several new products and systems, in which various segments have been issued positively. With a COVID-19 pandemic now moving toward end of it, the company is quite optimistic of good business growth in the fourth quarter and the coming year. This is a brief and overall summary for the quarter and 9 months of the year under reference. Thank you for your presence. Now, I and my colleagues, sri P.C. Somani and sri R.J. Saboo are available to reply to various queries got by all of you. Thank you very much.
[Operator Instructions] The first question is from the line of Sujit Jain with ASK Investment Managers Limited.
I just wanted to check whether we've now lost the market share. And your commentary on CPVC that in terms of supplies, there were supply chain disruptions. Would the other players also have faced the same thing?
No. We don't think that we have suffered any erosion of our market share. The market shrunk in the country itself and supply chain disruption, but relevant to our import of CPVC, the CPVC, India, is a very small quantity produced. The market in India at 15,000 tons per month by local production, it's less than 1,000 tons per month. So most of the quantity are imported from Japan or USA. And there were too much unexpected delay versus in a ship to arrive to the port, which has affected the supply position with other company, and we believe the same team must happen with the other companies also.
But you're saying that the plastics industry, plastic pipes would have degrown by the extent of 24%, 25% and therefore, we've not lost market share? Just to confirm.
No. I told that we have net zero in this quarter, but this is only by dealers -- due to stocks. Now, they have started now replenishing their stock. So I will recover whatever quantity I lost, I'll recover in this quarter.
The next question is from the line of Rahul Agarwal with Incred Capital.
2 questions. One was, is there any inventory loss this quarter?
Sorry.
Was there any inventory loss booked in the quarter?
In the quarter, there has to be some inventory loss. For correct inventory loss, we will calculate and give you, in April only.
Okay. Any approximate idea, sir?
Not much idea because November, December, when the demand of PVC pipe and fitting have eroded so much, our share has gone down. So it could not have affected too much. The loss quarter is not there to come in our books of account. And now, the PVC price has started going up. Relative we can give you in the month of April when we close the final year account that for the whole year, what was inventory gain or inventory loss. Last year, as you are aware, we get INR 200 crore inventory. This year, the third number will be known only in the month of April.
Got it, sir. Sir, second question was on the volume decline. So you were explaining that since you have degrown about 25% in the quarter, right, on plastic pipes. So your understanding is the industry would have also degrown with the same number?
I can't share about the industry. But overall, company was struggling to sell the goods. So company gave a scheme of INR 5 in the month of December and INR 4 in the month of January. So they want to liquidate their stock. Imports are coming down. So definitely, the demand has gone down with everybody. We are getting the working of that other cheap public limited company very shortly, we will know what is their position. We are going to -- we and [ Indiscernible ] are the largest player in PVC piping system in the country.
Got it, sir. So as of now, in fourth quarter, you think the entire loss of third quarter will normalize or all these volumes are actually lost?
We're able to capture the lost quantity.
Okay. And any specific reason for consumer products to decline by 20%, like the demand was weak, you mentioned, but could you build some more color please?
Very poor demand in Tier 2 and Tier 3 terms. Maybe, due to the buying power. And also, the material was also quite slow. There are no large [indiscernible] taking place. No, big waters were functioning. Our furniture are sold in restaurants, hotels and in decor segment and all are going through a very tough time.
Thank you. The next question comes from Ritesh Shah with Investec.
Sir, 2 questions. One is on the volume decline, specifically for the piping division. You indicated around 25%, 26% volume degrowth. Sir, would it be possible for you to give a monthly color on how the decline was? Because what we understood, November was bad because of rain. So if one had to understand, sir, for October, November and December, just to understand how the demand has projected, how it has moved from November to December. That's one. And secondly, sir, you indicated that the channel inventory is very low. Sir, if you can help understand those 2 variables together to better understand the 26% volume degrowth, that would be great, sir. That's the first question.
We lost the volume only in the month of November and December. October, the prices went up. So October, there was already a small growth only. November, our business of PVC pipe has gone down by 70% in 1 month alone. Simultaneously, along we did the fitting sale also has gone down. So we sell pipe systems. We need 2 months and due to extended rainfall, the demand by the infrastructure companies were to lay the polyethylene pipe at completely start. So we had a loss in polyethylene pipe business. In PVC pipe system business. And in CP system also we had degrowth of 3%, with the [ Indiscernible ] so we could not supply the market, the product was we required. So combined of all the PVC pipe and fitting, CP system and polyethylene pipe system, we had de-growth of around 19,500 tons in the quarter.
You indicated 70% volume degrowth for November, sir, December was also degrowth?
Only PVC pipe in 1 month.
And sir, December was also declined?
December decline, but -- It's not decline. Overall decline was 19,500 tons in the 3 months.
Got it. Got it. Sir, my second question is, how should we understand the realization per kg and EBITDA per kg for plastic piping? It has improved beautifully on a sequential basis from INR 27 to INR 33. And the realization has also increased on a sequential basis. Now, if I look at the resin prices, is it a function that there was more element of sales in the first month of the quarter and then basically it declined very, very sharply?
There were less share of PVC pipe.
Okay.
There were less shares of PVC pipe. PVC pipe is a low value-added item.
Correct.
So when the PVC pipe sale was -- volume was lower and overall value should become better, tonnage wise.
Okay. Basically, fittings portion was higher, that's what you are indicating, because CPVC was also degrowth?
PVC prices -- demand was very low. The loss was 17,000 tons alone on PVC pipe.
Thank you. The next question comes from the line of Bhargav Buddhadev with Kotak Asset Management.
Sir, my first question is that your value-added business share has declined to about 34% versus 39% in the second quarter. So what has led to this decline in the share of value-added products?
Cross Laminated Film business. water business we have done in third quarter. [indiscernible] as we removed...
Was how much.
Last year, third quarter -- in this year third quarter, the margins were lower than 17%.
Is it possible to highlight, sir, how much was the decline in the cross-laminated business?
Employ around INR 150 crores business. We did a business of INR 150 crores, but their margins were lower than 17%.
So is it bad?
It is qualified to be value-added item.
Okay. So we haven't been able to pass on the other inflation in this business. Is that the right?
I indicated that, we increased the price what we [indiscernible] price but the increase to effect only from January this year.
So from January, can we expect double-digit margins in the packaging business?
No, double-digit year even earlier, but now, it will definitely go back to value-added item. This is what we are expecting . In the current quarter, it will go back to value-added [ Indiscernible ].
Okay. And sir, you also mentioned that there was some competitors who came with a similar product but inferior in quality. So how should we look into that?
They are coming up, but their prices are 20%, 25% lower. That is only in polyethylene film and move to a roller to give a congregation just like our film. But the properties are nowhere there compared to our properties. So continue we realize that they are maybe getting a 25% cheaper, but it doesn't last, they were there before we came also. They were just here before. They are not having corrugation. Now, they are going for corrugation. They were discovered. They spent money from their hard-earned income.
And sir, just one clarification. You mentioned that PVC prices are on an up move. But as of now, the PVC prices in January have declined by about INR 9 per kg, right?
This month, the drop by net INR 8/kg. So in the first 2 months, we had dropped by INR 25/kg. This month, up to 17 net-net after [indiscernible] gone down by INR 8. And now, after 17, the pressure upward March.
And so from now on, you think prices will go up?
Already started.
Already started.
PVC is strictly short worldwide. The [indiscernible] went very high, so they have to come to a proper level. And the drop only the silver lining is the lower price is the demand will broaden up now. [indiscernible] dropping INR 33/kg great relief to all the customer by product.
Or right. And this sir, reduced channel inventory in December, you think that the channel had one of the lowest inventory for a long time in history? Is that fair to say?
We believe that.
Okay. Great. And I'll come back in the queue. So -- All the very best.
The next question is from the line of Sonali Salgaonkar with Jefferies India.
My first question is regarding the current demand scenario. You mentioned that you expect good volumes across segments in Q4. So what are the key drivers that you are looking out for? And any update on the channel inventory that you can see? Have they started replenishing it back to, say, the Q2 level?
On the demand factor, that is, housing, agriculture, infrastructure are in excellent shape. Now, the price is coming down when the farmers are able to afford. The crops are very good. The rains have subsided. We anticipate good demand now coming from farmers. This is to say the orders were there in the hands of contractors that are working for the passage to come down so that they will start pressing order, we started issuing orders already from the contractors. Also, anyone is running quite well. You all are aware that housing is going through a good growth path. But before there were inventory in the pipeline, with inventory in just now the people are very desperate to get the product. As time passes, we anticipate good demand growth month after month.
Right. So the inventory levels are back to Q2 levels?
No, I can say it definitely immaterial of whatever business we lost, before in this quarter.
I understand. Sir, and on the rural versus urban, how is the rural doing?
Rural, PVC pipes is no issue. That issue I talked about the furniture.
Got it. Sir, my second question is any guidance you would like to give in terms of volumes or margins or probably a sustainable level of revenue growth and margins that you see in the coming years?
We can talk -- we already told on the TV also this year, we anticipate are turned out to be in excess of INR 7,500 crores, and our operating margin should be around 16%.
Understood. Sir, anything on volume growth?
On the growth as of today, I will be happy if you can read the illustrated numbers.
Got it, sir.
Big decline in the volume. Already 32,000 tons less in plastic goods compared to last year, 9 months. We were able to recover 32,000 tons [ in these 3 months ].
Thank you. The next question is from the line of Sneha Talreja with Edelweiss Securities.
My question was related to again, the volume growth part. You also said there was a gross agri demand. Could you quantify in generally in Q3, what is the percentage of sales coming in from agri?
I don't follow. We cannot -- we are not possible to quantify what is a percent agriculture, no way. And by [indiscernible] aware, our time we are sold agiculture by there being used in the housing. So we are nowhere to quantify the percentage of agri system, but we are a small player in agri compared to housing, our main [ Indiscernible ] housing and piping.
So we can largely believe that the drop in Q3 was majority because of the housing and infra led on decline, not much from the agri point of view?
We told the decline was in piping system for 3 reasons, one de-stocking. Secondly, after that, we have rainfall where farmers and in fact, people have deferred the demand. And thirdly, due to supply chain disruption, our CPVC business is shown at degrowth. The 3 regions led volume degrowth.
Okay. And sir, I mean, you also mentioned that you've already started seeing increase in prices. So have that increase already been translated even by the domestic producers in the market, for example, Reliance and all have already started picking agri or you expect that in the coming...
[indiscernible] up till now, but we know the market trend. We believe from 1st February, the price will go up.
So in...
Open market indication, open market, goods that were selling at a discount are now selling at a premium.
Thank you. The next question is from the line of Girish Choudhary with Spark Capital Advisors Private Limited. Please go ahead.
I have a question on your EBITDA margins again. So on a per kg basis, we have seen a sequential improvement of the company from INR 30 to INR 34, INR 35...
Your voice is gargled [indiscernible] and not clear, please.
Just be clear because some [indiscernible] is happening.
Is this better?
Now, better. Please, speech.
Yes, yes.
Can you hear Choudhary?
Yes. We can hear very...
Speech.
Okay. Sir, I had a question on your EBITDA margin. So, we have seen a sequential improvement at a company level, compared from INR 32, INR 34, INR 35 per kg. And despite value-added products going down sequentially and also, you indicated there was an inventory loss. And then overall, we have seen a lower volume sequentially. So I think, what drove this margin performance? And then, also what would be a sustainable margin to look forward to in the coming quarters?
No. We told for the current year, we are expecting 16% margin. The per kg basis for a particular segment of the business of the company. In fact, the business was lower of PVC pipe and fitting, and where PVC pipe principally and polyethylene pipe, where the per kg margins are always lower and those business portion. So for the remaining bit, the margin definitely will go up. I think, this part I will request already very clearly. But more require, so why can't you understand what is more efficient requires.
No, no. This is the right answer because of the product mix, since the PVC pipes have been sold very less and there's a volume degrowth. So that product of the piping division or the product division, which are bringing better valuation has shown that the per kg improved EBITDA.
Okay. Got it. Sir, secondly, on your working capital. So again, we have seen cash balance going down to around INR 150 crores from INR 300 crores. I just wanted to understand the reason for this despite the INR 300 crore EBITDA generation this quarter.
Working given went up so high because this is what we lost, we have prepared product in our plants and from the market. So we had a loss in business of around INR 350 crores. When at 20,000 tons, one company sold less, it resulted into a loss and turnover of INR 350 crores. And the INR 350 crores the ended Asish books in our godown. So that's why our working capital requirement has gone up, we need to restore the goods, there is no demand at the month of November, December.
Got it. Sir, lastly, if you can just highlight the CapEx this quarter?
Sorry?
Will it be money spent for your capacity expansion this quarter?
Up till now, we have invested INR 344 crores. We are paid for. In 9 months, we paid INR 344 crores.
Thank you. The next question is from the line of Sailesh with B&K Securities.
My question pertaining to Supreme Petro. Sir, aftermarket data, we have seen significant expansion in PVC but we have to fully reported improvement. What is the reason, sir? And also, could you please share the...
Can you repeat your because your voice were not clear.
Yes. So as per the market data, we have seen significant expansion in polystyrene and styrene monomer spread in 3Q to last quarter. But we are able to fully witness the steady improvement. So what are the reasons, sir? And also, if you could please share the business looks between spot and contact? What is the average contact period with the customers?
I don't know. For the original equipment producer, we have got annual contract for supplying of polystyrene to them. And for credit market, thereby depreciate requirement. And because around 45% original equipment production and 55% with the trade market [indiscernible] and export.
Okay.
And how the demand is there with the retail equipment position for appliances. The numbers are not before me, but we are getting requirement or retail equipment producer. All the non-branch, we have got an annual contract with them.
Okay. So how is the volume and price intense or now in third quarter?
On polystyrene?
Yes polystyrene and EPS.
Both are fully sold out. We are running plants fully and fully sold out us.
Okay. Okay. Second question, in March, we are going for 2 phase of tension. So what is the total capital you are going to deploy sir? And also, is your -- yes.
Total? What total?
Total capital we are going to deploy in March will be?
Including working capital, well will initiate INR 150 crores increase.
Both the pace the [indiscernible]?
Both the line together with the working capital infrastructure, we invest INR 850 crores up to March 2025, from now. We started investing money now.
Okay. So what's the capacity equation in 3Q, sir? And also, if you could share the volume data for use of the product verticals in 3Q or 9 months would be very helpful.
Polystyrene?
Yes. All the product such as EPS, [indiscernible].
Is the -- okay. [indiscernible] of the product [indiscernible]
What capacity loss number, sir?
As I said, the plant is running fully and we are fully sold out. What the plant can produce, we are producing.
The next question is from the line of Rajesh Ravi with HDFC Securities.
I have a few questions. First, on the channel inventory impact, which is there in Q3. So what could be the impact, if you could quantify in terms of volumes?
For general demand growth, our plastic piping system, we've got 1,247 distributors around the country. Also, we have many big semi-wholesalers and retailers. And the G2 took place throughout the chain, [indiscernible] drop in prices in such a short period [indiscernible] people are expecting that are going to far [indiscernible] is going to cash further and further. And which happened also, the after drop of November, December INR 25/kg prices went on dropping up to 17, January, they dropped further by INR 8/kg.
Okay.
And now, the drop which [indiscernible] in no product will be available, the price in the open market started going up, and we are getting full order out from our customers.
Okay. Okay. So in January, are you seeing that demand numbers picking up? So how has been the commentary for you in January?
First half I said it was the same story after 17 January.
Okay. So until September, 17 January situation as you...
I am talking about the quarter.
No, no, understood. I'm saying, because prices have just now stabilized, you expect the things to recover and the lost channel inventory numbers should get back into the system?
[indiscernible]
Okay. And also, could you quantify how much was the PVC price hike taken during the quarter? What was the price passed into the system?
Prices started rising from the month of June 2021. So it went up over a period by up to end of October by INR 44 per kg. And INR 44 per kg now went down by INR 33 per kg. So now, as you're entering January, they are still higher by INR 11 per kg. Than the prices what they were there in the month of June 2021.
No, I was asking more from the third quarter perspective -- because your realization is impacted because of the product mix change quarter-on-quarter. So just wanted to understand on like-to-like, how much price change was there for the -- on a quarter-on-quarter basis in the PVC segment for your realization?
We've taken into the whole part of the PVC price change. We start from July, the price went on increasing monthly 2x, 3x and went up to INR 44 per kg by end of October. And come first November, they started dropping. For example, INR 79 dropped by INR 33 per kg. It remain INR 11 per kg higher than what it was in the month of June 2021.
Okay.
Now there us no possibility of prices going down for time being, unless the fair rates of goods arriving from Asia to India go down. Rates today are very, very high.
Okay. And one last question.
We are great.
Okay. And sir, one last question on the annual guidance, which you said that in north of INR 1,200 crore EBITDA for the full year. That would imply that in fourth quarter number could be weak year-on-year versus because last year, we have already achieved INR 510 crores of EBITDA.
We have done INR 5,100 crores in the 9 months. 9 months, we did INR 5275 crores.
No, no. In the consol EBITDA you have done INR 510 crores for the last -- sorry, in the March quarter last year, you have done INR 510 crores EBITDA.
Yes, I remind we have [indiscernible] that our data inventory INR 180 crores.
Okay.
Pin the -- last year, last year, third quarter, there was inventory gain of INR 180 crores.
Okay.
When I gave you the number for the full year with the operating margin, you can calculate where I said the profit can be around INR 1,200 crores. For the third quarter, it cannot remain INR 500 crores.
Got it. It has to be lower than that.
It has to be lower. I'm saying, it may be INR 350 crore.
The next question is from Achal Lohade with JM Financial.
My question was -- Yes. If we understand it correctly, till October, the demand was pretty good. November, December, there was a significant deceleration, this is about plastic pipes segment, sir. So -- And is it that the demand...
There are no demand are not quite good. I said the price went to in October by INR 20 pr kg. So that's why October working, there are no loss. The demand was maintained because at such a high price, the demand started shrinking. There was no growth in October, but no degrowth also. Now with this, just disaster.
Right. So is it fair to say that the entire -- I mean, the pressure on volumes for us is more -- or is entirely because of the volatile PVC prices? Or do you think there was a deceleration in the end demand as well [indiscernible] sir?
No, demand with my stock is there. They could be temporary down the bottom. My stock -- could at the stocks. We will go down in the 2 months.
Right. Okay. Understood. Understood. And secondly, any guidance for FY '23? You talked about FY '22. Any color in terms of volume growth margins you would look at on a normalized basis, assuming no further lockdowns or stable PVC prices...
Not today.
The next question is from the line of Abhishek Ghosh with DSP Mutual Fund.
Sir, last time, in the PVC prices were quite high. You had mentioned that the agri demand could get impacted because of people opting for lower tonnage, lower tier pipes. Now, with PVC prices having corrected off, do you think that risk has gone out of the system? Any thoughts?
I told you we are -- we previously shared what demand we have lost we will recover.
Okay. Okay. Okay. And sir, the other thing is in terms of if you can broadly talk about your capacities in terms of individual segments if you can give that.
Somani, can you help me?
The capacity Abhishek open capacity, which was there 697,000 metric tons. Now, unfortunately, our -- all the new plants, the Assam, Orissa and [indiscernible], all 3 have delayed from this point in time, they will come into production, say, some days from March to August or April to August. So with new capacity, what we are contemplating by end of this year will get deferred to be the rest period. And the downfield expansion of whatever we have made, it would result 8,000 tons to 10,000 tons capacity additionally in the current year. So our opening capacity as a 697,000 tons will not go beyond 710,000 tons effective production capacity if you look at current year. With all these new capacities, large capacities are coming up, consisting around 1 lakh tons per annum, will be in place only from August 2022 onwards.
Okay. So first half of FY '23, you should be at least moving to something like 8 lakh tons kind of product?
Yes, because if all these things are there, then yes.
Okay. And we don't envisage further delay in the capacities coming on stream?
No. Now everything is in the line. Teams are working well, constantly...
We believe the COVID pandemic may become an endemic. If we go wrong, as it -- suppose COVID 4th wave, 5th wave come more serious than level 2, then we may go wrong again.
Okay. And sir, you can you just talk about your whole -- because you are broadly -- if you just see the current run rate, you're operating at broadly 50% utilization and next year another one lakh tons of incremental capacity will come through. So how do you look at the utilization from a more 2- to 3-year perspective? What is the achievable number given the overall -- And I'm not talking about quarters, but more from a 2-to-3 year perspective. Any thoughts?
For the error [ Indiscernible ], we've been talk in the month of April next year. This year.
Okay. Yes. Fair enough. And sir, the other thing is, in terms of -- we are hearing a lot of things around the whole BS now implementation, which was to get implemented sometime back again, was pushed back. Sir, any thoughts on that from -- in terms of...
That was not applicable to our company. We made BS product.
No, I was more coming from the, sir, the competitive part. Because the competition, the unorganized would have got weaker. Any thoughts from that perspective of income?
Market also in a market, they will live non-BS and BS both will live together. There are people product and there are people for requiring low application, then people will go for cheap product. Where they sell on kg basis INR 30 per kg, INR 70 per kg basis. Debt market, we also continue to operate. It's a very vast country and all type of buying powers are there. If they will also run, we will also run.
And sir, just one last question. Again, when the PVC prices were elevated, there was a lot of shortage of PVC material, and that is where somewhat the smaller-scale players was not able to procure that. Do you think that with the PVC price correction now and things are availability improve, those players are again coming back in the system? Are you seeing that at the marketplace?
We were not aware that they were not able to get the materials. We are not aware. This was only a new item. We were not aware. Prepare [indiscernible] there in the business.
The next question is from the line of Ritesh Shah with Investec.
You indicated INR 850 crores of CapEx in March '25. Sir, can you indicate how much of this CapEx is already done? How much of it basically will be for next year and year after? And corresponding to that, how actually the capacity will actually be more on a year-end basis? So since you indicated around 8 lakh tons of capacity on March '23 basis, if you can give equal end numbers for March '24 and '25, it will be good.
No, there are 2 investments. We were already in midst of INR 260 crores investment and expanding capital polish charge and expanding [indiscernible]. There is no operational file. That's of Supreme [indiscernible]?
Industry, sir.
Industry. Sorry, sorry, pitch. My apology, please. Yes. You were asking, veracity and supreme industry?
Sir, my final question was, you indicated around CapEx of INR 850 crores until March '25. So I wanted...
Supreme [indiscernible] you gave a double cannot yet start in pipe. Now we say it is supreme industry.
Okay. Sir, so Supreme understand, I think the number was INR 750 crores, if I remember it, right? Is that number right?
Supreme industry -- No, no. Supreme Industry, this year, we are making a commitment of INR 520 crores CapEx.
Investment commitment, but we have invested up out INR 344 crores. That's what I told. And I [indiscernible].
Correct. Correct.
Every year -- To continue the momentum of growth, every year, we'll be required to spend about INR 300 crores, INR 350 crores further.
Maybe even INR 400 crores we can afford to invest now.
Correct. Sir, just to get it right, FY '22, INR 520 crores, of which we have done INR 344 crores. This year, the number that we are looking at is INR 300 crores to INR 350 crores. Is that correct?
No. I just told INR 344 crores, we have already paid for December '21. More money would be invested in the last quarter also. To build a new plant at so many locations, and the plants my colleague, I told you earlier, the plant will be operational by August 2022.
Correct. Correct. So sir, how much is it of capacity on March '24 basis and on March '23 basis?
March '23 basis you can talk now, March'24 basis we are not missing no plan today. We can talk March '23 basis. So I'll tell -- March '23 basis?
Yes, before I mentioned in my earlier answer, our capacity of about 1 lakh metric ton for these 3 plants, which are already under construction, will come by August '22. So our capacity by end of March '23 should be in excess of [ 850,000 ] tons per annum.
Next question is from the line of Madhav Marda with FIL.
Good evening. Thank you so much for your time. I actually did not want a specific number for volume growth in the future. But just any comments on like, if you look at a 2-year view for demand across our various end markets like housing, agri and the government projects around even Mishan, et cetera. If you were to just how -- what's your sense in terms of demand sentiment, if you take 2, 3 of you for the country for the classified [indiscernible]?
Economic rates will grow by 10% minimum by volume next year. It's too early to tell next year. Through the pandemic situation not very clear, better we talk in the month of April.
Thank you. The next question is from the line of [ Muhammed Musaddar ] an investor.
Yes, sir. Sir, regarding Supreme sector, so this new capacity of PS and EPS, which is going to come up in the next quarter or in Q1. So as you said that PS and EPS are currently running at full capacity. So sir, can you just give us a view that how many years can it take for this new capacity to fill up what will be the demand drivers and which industries are you seeing strong demand in?
No. EPS [indiscernible] share new capacity 90,000 tons, out by June, July this year. And it is also by the time and we are going to add 30,000 tons new capacity.
So sir, like, when will it -- how much time do you take it will take to come to full utilization? Like, in terms of like, this current capacity is at operating full capacity?
Once you start the plant, you can run the plant fully depending on how the market develops. So we will be now on not to export market, which we are now exporting lesser quantity, we will move more to export the product.
Okay.
We will see the situation of the economy growth in our country in the year '22, '23. The forecast is good. The economy may work better in the '22, '23 compared to the current year.
And so sir, what would be the current ABS trading volumes if it is possible? And so what is the arrangement between Supreme [indiscernible] and Versalis for this mass ABS technology, if that is possible to share?
[indiscernible] Our company. They are the licensors, we are the licensee.
So sir, any royalty to be paid or what will be the arrangement? And any royalty to be paid?
No, no. We are paying [ license fee ] to them.
Okay. And what would that be if...
Very classified information.
The next question is from the line of Rajesh Ravi with HDFC Securities.
Could you please elaborate segment-wise, what will be the plastic pipe capacity by March '23 basis extensions? And similarly, Industrial packing and consumers?
Sorry?
Plastic piping division, you see with this capacity of this key plant coming into place, as plastic piping would be out INR 575 crores?
Okay. Industrial product close to 85,000 metric tons, which is 71,000 metric tons currently. And packaging products will be close to 90,000 metric tons. Okay. Consumer products, close to 35,000 metric tons.
And sir, is it possible, like, what is the CapEx intensity for all these 4 segments? Like, for every 1 lakh tons capacity in the plastic pipe, what sort of CapEx is required, broad numbers and similarly, for other 3 segments?
CapEx depends on what project we are going to make. So nothing like on tonnage basis. Depends on product to product. Some products may require less capital, some products may require more capital. We cannot quantify it, but how much CapEx required we still not possible the say. We [indiscernible] decide to put forward. Very quite.
Okay. And sir, again, on the same CapEx front, like for INR 300 crores to INR 400 crores CapEx, which you expect to spend annually, that would potentially add what sort of capacity to your company every year?
Still depends upon the downfield of rainfall project because in sales don't get the capacity, but then you have to spend more. But what are we generally say is our CapEx -- new CapEx should go once it is fully operational coming to operation 1x to 1.52x is turnover. Again, company invested, 1.5x to 2x turnover one should want to get.
Okay. This is on fixed capital investment, you're saying 1.5x to 2x?
Correct.
The next question is from the line of Keshav Lahoti with HDFC Securities.
My question is already answered.
Thank you. As there are no further questions, I would like to hand the conference over to the management for closing comments.
Thank you very much for very [indiscernible] question. We thank you for your patience.
So thank you, everyone.
Thank you, everyone. Thank you.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.