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Supreme Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Supreme Industries Q4 FY '22 Earnings Conference Call, hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Aasim Bharde from DAM Capital. Thank you, and over to you, sir.
Thanks, [ Dani ]. Good evening, all. And on behalf of DAM Capital Advisors, it is a pleasure having you all on Supreme Industries Q4 Results Conference Call.
As usual, we have the senior leadership of the company on this call, and I will hand over the floor to them to take you all to the Q4 results. Thank you, and over to you, gentlemen.
Good evening, everyone. I am S.J. Taparia, Executive Director of The Supreme Industries Limited. Every time, you interact with Mr. M.P. Taparia, Managing Director of the company, but today, he is a little unwell and advised rest. Hence, myself, along with my colleagues, Mr. P.C. Somani, CFO; and Mr. R.J. Saboo, Vice President, Corporate Affairs and Company Secretary, welcome all the participants who are participating in the discussion of the audited stand-alone and consolidated financial results for the quarter and year ended 31st March 2022.
The stand-alone results and the consolidated results are already with you. I will give brief on company's product operating performance and other highlights.
The company sold 128,607 metric tons of plastic goods and achieved net product turnover of INR 2,519 crores during the fourth quarter of the current year against sales of 111,238 metric tons of plastic goods and achieved net product turnover of INR 2,049 crores in the corresponding quarter of previous year, achieving volume and product value growth of about 16% and 23%, respectively.
The company sold 393,908 metric tons of plastic goods and achieved net product turnover of INR 7,625 crores during the year under review against sales of 409,109 metric tons and net product turnover of INR 6,177 crores in the previous year, resulting in volume degrowth of about 4% and product value growth of about 23%, respectively.
Total consolidated income and operating profit for the fourth quarter of the current year amounted to INR 2,566 crores and INR 461 crores as compared to INR 2,091 crores and INR 580 crores of the corresponding quarter of the previous year, recording increase in consolidated income about 23% and decrease in operating profit about 21%.
The consolidated income and operating profit during the year under review amounted to INR 7,793 crores and INR 1,446 crores as compared to INR 6,372 crores and INR 1,430 crores for the previous year, recording increase in consolidated income and operating profit of about 22% and 1%, respectively.
The consolidated profit before tax and profit after tax for the fourth quarter of the current year amounted to INR 409 crores and INR 324 crores as compared to INR 528 crores and INR 450 crores for the corresponding quarter of the previous year, resulting decrease in profit before tax and profit after tax about 23% and 28%, respectively.
The consolidated profit before tax and profit after tax during the year under review amounted to INR 1,232 crores and INR 968 crores as compared to INR 1,212 crores and INR 978 crores for the previous year, recording increase of about 2% in profit before tax and a decrease of about 1% in profit after tax.
The business scenario of all the product segments of the company for the year ended 31st March 2022 as compared to the previous year has been as under: Plastic Piping System business degrew by 7% in volume and grew by 23% in value terms; Packaging Products segment business degrew by 1% in volume and grew by 17% in value terms; Industrial Products segment business grew by 16% in volume and 35% in value terms; Consumer Products segment business degrew by 6% in volume and grew by 14% in value terms.
The overall turnover of value-added products increased to INR 2,911 crores as compared to INR 2,480 crores in the previous year, achieving growth of 17%.
The company has cash surplus funds of INR 518 crores as on 31st March 2022, as against cash surplus fund of INR 759 crores as on 31st March 2021.
Considering optimistic business growth potential, the company has incurred capital expenditures of INR 259 crores during the year under review. The entire CapEx has been incurred towards ramping up the capacities in plastic pricing system, introduction of new products in various business segments, automation and replacing some old production equipment with new technology machines.
Company has also incurred CapEx for increasing captive generation capacity of solar energy apart from balancing equipment in various locations. The entire CapEx has been funded through internal accruals only.
The company has plans to commit CapEx of about INR 700 crores, including carry forward commitment of INR 280 crores at the beginning of the year. The committed proposed CapEx is primarily for: to complete and put into operation the ongoing project work at Assam to manufacture PVC Pipes and Roto & Blow Moulded products; putting a plastic product complex near Cuttack and Odisha and near Erode in Tamil Nadu, where work is going on in full swing. First phase of both the sites likely to go into production by August, September 2022.
To double the capacity of composite LPG cylinders to 1 million pieces per annum at the existing site at Halol, Gujarat; establishing additional capacity to manufacture olefin fittings and to put PEX piping system at Jadcherla; expanding capacities and product range of its bath fitting products at Puducherry; adding varieties of new injection molded fitting products in its plastic piping products; to add new models of injection molded furniture, crates and pellets in the company's range of furniture and Material Handling Products; to increase capacities of Industrial Component molding at various locations in view of increased business opportunities; to add necessary equipment at its Protective Packaging and performance packaging division; to install rooftop solar energy generation plants at its various locations; to install balancing equipment at various locations.
The entire CapEx and increased working capital requirement shall be funded from internal accruals of the company.
Business outlook. The year began on a gloomy note with the second wave of COVID, which affected the economy in general and the rural economy, in particular, in a very severe way. The first quarter of the year, this normally remains most business-friendly for the company, considering its product profile, witnessed quite a weak demand for most of the product segments of the company.
Polymer prices also witnessed relentless upward march, which continued up to middle of November 2021. Subsequently, prices fell quite steeply, especially in PVC resin, which virtually destroyed the demand of Plastic Pipe Systems, albeit temporarily.
Even in such extreme adverse circumstances, company maintained a positive outlook for its growth plans. It persisted with its large investment plan with full confidence that business will be quite promising in the year '22, '23 and beyond.
The company continues its objective to aggressively grow Plastic Pipe System business, where the company is a leader in this segment as it has the largest portfolio of products, which is being continuously expanded to offer more systems as required by the market it caters to.
The government at the center and states have put the priority focus on Jal Jeevan Mission, Swatch Bharat Abhiyan, Sanitation, affordable housing and many more such initiatives, which all would boost demand for plastic piping products. The company is implementing brownfield expansion, launching new application systems and continues to enlarge its product basket from 3 new manufacturing sites where work is going on in full swing. This will give required impetus to the division to grow faster and recap the lost business opportunities due to pandemic in last 2 years.
The business of Cross Laminated Film products was impacted the most due to one of its product, tarpaulin, being seasonal in nature with peak season between April to June. Business also got impacted by fierce competition from look-alike products as well as higher polymer prices, which could not be passed on to the product in an appropriate manner. The thrust in the current year will be on promoting non-tarpaulin products, finding new applications, targeting new customers in existing markets and reaching new markets. Company expects the exports to grow further in the current year apart from increasing the sale of made up products. The company has also expanded its capacity to 30,000 metric tons per annum.
The company continues to remain a market leader in the premium range of plastic furniture. The company's furniture range is sold on various e-commerce portals and retailers who are being serviced through company's network of 1,306 channel partners. The company has launched its own portal for showcasing to its consumers its wide range of premium products and made it available for them from the comforts of their home.
With economy opening up, the company plans to launch variety of new models during '22, '23, which will help in overall growth in the current year.
In Industrial Component division, the year was marked by huge supply chain issues at all its customers due to shortage of imported material because of shipping and logistics issues, nonavailability of containers, shortage of semi-conductors, et cetera. This led to typical scenario of high demand but no supply. Supply chain was also affected by rising commodity and fuel prices during the year.
Business conditions have started improving and looking at positive demand scenario in various sectors of appliances like washing machines, air conditioners, coolers and refrigerators, segments where the company has good presence. The company invested in capacity expansion at various locations. This has started yielding results and will help the division going forward.
In Material Handling division, company has shown good growth in essential commodities, retail, industrial sector, fruits and vegetable segment, e-commerce, FMCG, fisheries jumbo crates, dairy segment and Injection & Roto moulded pallets and dustbins. The company is highly focused to constantly improve its product quality and the timely delivery of products to its customers. The division has been able to add many new customers all over the country and will strive to continue enlarge its customer base.
In Composite LPG Cylinder division, repeated orders from existing as well as new customers stood testimony to the excellent quality of the current product offering. The Company has successfully participated and received Letter of Intent for supply of 735,186 numbers of 10 kg capacity.
Composite LPG Cylinders valuing about INR 170 Crores from Indian Oil Corporation Limited, one of the leading government oil marketing company. The volume of business is large, which surpasses the existing installed capacity.
The company has taken effective steps to install a new plant on a war footing in the same premises to double the capacity and the same is likely to be operational by November 2022, which will enable the company to make around 1 million numbers per year.
In Protective Packaging division, business conditions were good and there was growth in all its application segments viz. packaging, insulation and civil. It has also started doing good business in its consumer products, sports goods, yoga mats and kids puzzle & toys. Good growth is shown in export markets as well. Buyers have reduced their dependency on China and exploring opportunities in India. The Company expects good business for the division in the coming year.
Performance Packaging Film being part of intermediary to essential product category has done well, particularly in dairy and oil industry. Continuous efforts to develop new products will help the division grow better and add more value-added products in its fold. Exports have shown positive growth and received good response from countries in Middle East, Africa and Europe. Other markets are now being explored in parts of Europe and USA. With improved product mix and focus on increasing customer base, the company expects to achieve volume and value growth in this business in the current year.
Most of the business segments are now showing improved demand prospects. The company continues with its investment plans vigorously. The company envisages good business growth opportunities in all its segments going forward as the impact of pandemic has ebbed and several initiatives are being taken by the government to put the country on higher growth path.
This is brief and overall summary for the quarter and year ended under reference. Thank you for your patience. Now I and my colleague, Mr. P.C. Somani; and Mr. R.J. Saboo are available to reply to your various queries raised by all of you. Thank you.
[Operator Instructions] The first question is from the line of Rahul Agarwal from Incred Capital.
Congratulations. I'm very happy to see a great recovery from what we saw during October to December.
Just hold on please. We are unable to hear you. Sir, if you can proceed with your question now.
Sorry, can I go ahead?
Yes. Yes, sir.
So sir, congratulations and very happy to see a great recovery from what we saw during October, December. A few questions from my side. Firstly, on the gross margins. If I just look at the net revenue reported minus the cost of goods sold, which is basically the cost of raw materials, it looks like the number are weaker on a quarter-on-quarter basis. It's gone down to almost 28%. Any specific reason? I mean, did we have some inventory losses here. That is why the gross margin has gone down? Or it's purely because of the mix? That's my first question.
No, no. You are comparing with the last corresponding quarter, isn't it?
No, I'm comparing with the sequential quarter, October to December 2021 to the fourth quarter of fiscal '22.
Yes. So ultimately, the price of raw material, which is volatile, is making the impact. And of course, the product mix continues to remain changing. So otherwise, there is no reason.
Okay. So because the normalized levels generally are about 34%, 35%. Obviously, PVC went up and hence, we came down. But could you give some sense as in how should we look at this number going forward? Let's say, next 6 months, at least based on assuming that the PVC resin prices remain flat at where they are currently?
The normalized level, I think if you look at here in their goal, then you can see whatever we have received this year would be on an average normalized level. Here, at quarter level, if you just compare the things as a year as a whole.
So that's 31%, right?
Yes.
Okay, so that should stay similar?
Correct.
Okay. Got it. Secondly, sir, if you could just make us understand some color on how's the demand side of the situation. Both on the plumbing side as well as on the agriculture side, could you help us understand what is happening on the ground? And could you give some sense on what to expect over the next 6 months purely from a demand angle?
We believe the demand to be much higher compared to previous years. As I said, the various government schemes as well as the housing sector, that all will grow. So there is a good prospect for growth in our piping division. Apart from the new products, which we'll be introducing and material available from different locations also will add to the growth of the business.
Also demand scenario is quite positive. But the year has just started. But since we are continuing our local expansion in the greenfield projects, so we have got optimism on the order demand.
Moreover, the PVC prices are showing a downward trend. The lower PVC prices, that definitely gives boost to the demand, which will be healthy, and we expect prices to remain in the range bound, which will help the market to grow.
And besides all I may add here, like we are also like increasing our presence in more [ test areas ] and like we are also increasing the number of retailers. So this also should give an impact. And like new products -- application of products or new applications are also being developed. Like there is a plan for introduction of about 280 products in the year -- going in the current year. So this will support the existing growth actually.
Got it, sir. Sir, basically, we degrew on volumes for pipes about 7% this year. Obviously, the pace is very low. Would you put a hard guess here that we should be like upwards of 20% on volume purely because the base is distorted for fiscal '23. Would you agree to that?
The overall minimum, I think, 15% volume…
Minimum 15%. Yes, we are very conservative in our approach and…
We expect minimum 15% volume growth.
That's for pipes, right, sir?
Piping division, as a company also as a whole, we expect good growth. I mean minimum of 15%.
Got it, sir. And lastly, could you throw some more color on the agriculture demand, what is really happening? Because last 2 seasons were very bad. I think we also get about 1/3 of our pipe business from agriculture. Anything on that, sir, please? That's my last question.
Well, demand is now good because as -- the demand basically in November, demand was very badly affected. But since then, our retail demand is reasonable and we -- last year April, May, June, also because of pandemic, things were not good, but we are expecting agricultural demand to grow much better.
The next question is from the line of Sujit Jain from ASK Investment Managers.
So I just wanted to check the competitive proposition that you typically give the number for the full year in terms of PVC consumption for the industry vis-à-vis Supreme, if you can give that number?
No. In fact, the whole India data is still not available. It may take some more time.
Would you believe that you would have not degrown more than the industry?
No, I don't think so. We have not -- I'll have to -- we'll have to check. I will get back to you. We will get back to you.
And similar data for CPVC?
CPVC, we have grown, the industry has also grown. The -- this is -- and not to be [indiscernible] CPVC, there has been a growth for us. The industry also has grown, but I don't have really figures for CPVC.
And what is the current differential between PVC and CPVC pricing?
It will be almost 35%, 40%. CVPC is higher than PVC.
If you can give the absolute prices for both currently?
You see ultimately, it is that PVC…
We have seen some fluctuating…
Yes. I think put these together.
The combination of system would [ let the defense ]. But from the PVC, CPVC, all 30-odd-percent higher.
Right. Right. So you're saying 150 and then 40% over that would be CPVC pricing currently?
Yes. But the prices are so -- see it was -- I mean what we talk on 1st April, price will be different. The way we -- so much of volatility and the downward trend in the PVC prices and all the CPVC availability was an issue, but now there is no issue. China, there is more availability from China. That's why PVC -- more PVC is coming in the country from China. And Chinese business is slow. So there is good availability of raw material. Earlier PVC as well as CPVC, both availability was also an issue both of logistics and overall shortages.
Sure. And you said certain issues, which you had alluded to in the last quarterly con call in CPVC. Have they been sorted out in terms of supply chain?
Yes, it has been improved. Now we are getting improved supplies and proper volume has been tied up for this financial year for CPVC. It was only affected last year because of nonavailable CPVC.
Your suppliers are typically from which players? Kaneka or [indiscernible]?
We get from Kaneka.
The next question is from the line of Mr. Achal Lohade from JM Financial.
My first question is in terms of the pricing, you said PVC availability has improved. There could be slight moderation, further moderation in PVC resin price. What I wanted to check, a, how is the channel inventory? And b, does that also mean there would be impact on the primary end from the company to the dealer distributor?
In our case, general element does not remain in longer run. Yes. With the year-end and the prices being moderate, there could be some inventory in the channel, but not only on the fast-moving items. In general, you can say generally it will be very normalized, and since the price has started softening, which will be made available to them also.
Yes. So I was just coming to the next question, sir. We saw a INR 6 decline of reduction in the PVC resin price. Has it already been passed on to the channel or only part of that is partial?
That has been passed on to the channel. And there is a -- the prices should go down further or for whatever the indications available. So it will be -- that will boost the demand with the lower prices. The new bookings, what you are getting is showing that blended price will be much lower than what it is today. But the material will come maybe in July or thereafter. So overall, there is a softening attitude towards PVC prices.
And this is because of China, as you mentioned?
That’s because of China, mainly because of China.
Understood. And sir, if you could help us with the capacity as of March '22 and the utilization for FY '22 for each of the segments, please?
For March '22, the capacity is close to 725,000 metric tons. The breakup of that is plastic piping about 525,000; Industrial Products, close to 80,000; Packaging Products, about 90,000; and Consumer products, about 30,000.
Understood. And your utilization in terms -- sorry, in terms of the likely capacity for March '23 for each of the segments, sir?
March '23, you see, our CapEx plan, which is right now only crystalizing into place, we should somewhere reach about close to 8,000 -- 800,000. And the major capacity, this will be in the plastic piping only.
Okay, understood.
525 to 585, 590.
Okay, understood. And just last question, sir. In terms of the value-added products, the definition is basically 17% plus margins, right?
Yes. EBITDA margin, yes.
EBITDA margin, 17%. So if I look at FY '21 fourth quarter, we had a significant inventory gain. So part of the PVC products, pipe products also would have been classified as part of value-added products, right? Is that a fair assumption?
Principally, no, because you see ultimately, agri price, in spite of the inventory gain, they will not go to the higher-value grades, certain categories which are there, which is not classified as a value-add product. So the agri pipes will not fall into that kind of system.
Right. Okay. And just a clarification. In terms of the agri mix, how much would that be for the fourth quarter or for the full year, sir?
There are especially -- you can't really make it out which site is going for agri, which site is going for plumbing.
I know. Ballpark? Like is it upwards of 30%? Is it less than 20%? Any number, ballpark number if you could help us, sir?
So the value, it could be around 20% to 30%.
The next question is from the line of Bhargav Buddhadev from Kotak.
Congrats on a good volume recovery. My first question is you alluded to the fact that the inventory situation, raw material availability situation is improving and also prices are likely to fall. Then what was the reason for this increase in inventory as on the balance sheet date? We see almost a INR 500 crore increase in inventory.
Yes. Feb to June is a peak season for most of our products, particularly the [indiscernible] and the plastic piping. See, we have to gear up for that seasonal demand.
Okay. Okay. So in anticipation of the strong demand, we've built up on inventory. It's not just for safety reasons, right?
Yes.
Okay, understood. Secondly, would it be possible to share how has been the performance on volumes for the cross-laminated films and the CPVC business in the fourth quarter?
We don't share those data now.
Okay. But has there been a growth in CPVC or it's on a…
If we look at the [ year gone ], definitely. Country has also grown. We ourselves grow.
Okay. In terms of free cash flow generation, if we look at for the full year, it has been sort of fairly negligible, led by a rise in working capital. So the INR 700-odd crore CapEx, which we are planning to sort of incur in FY '23, are we also looking at funding the same for internal accruals? Or we'll resort to taking debt for this?
All CapEx will be funded from internal accruals.
Okay. So this weak cash flow generation is only transient in nature, right? It will come back?
The working capital, which has been deferred now, one is the increased value of the polymers because it's been better [indiscernible] for [indiscernible] season. So it will not [ help summer ] to deployment in that way. It will get released in the cost.
So maybe by September, we should see a significant improvement in cash generation.
In any case our own generation will be sufficient to make even the present requirement of the CapEx and the EBITDA.
Okay, understood. And lastly, in the press release, you mentioned the increased focus on this non-tarpaulin product. Can you elaborate a bit on this?
There are various major products for different applications. So whether it's a scooter cover or various product coverage, those are the major products, what we call. And for different applications or different products, we are developing and this is good demand for those.
The next question is from the line of Sonali from Jefferies.
One clarification regarding CapEx. You are guiding for INR 700 crores in FY '23. And most of that is towards expansion in piping. Is this correct?
Piping as well as expansion in cylinder as we mentioned also.
There are various in piping. Of course, there'll be a major portion. But other than piping, also on various other divisions [ product quotes ]. So this is the...
So what could be the number of the CapEx that we should look in FY '22? I mean considering that INR 700 crores is in FY '23. Are we less to expand substantially in FY '24 as well?
FY '24, it was not yet planned up that way. But it's our 3 greenfield projects. [ Diasam ], Orissa is old. [indiscernible].
There will be -- for the composite cylinder, there'll be -- there is a substantial sum, INR 50 crores, INR 60 crores for expansion of cylinder capacity, plus these 3 greenfield projects and the various other ongoing projects or brownfield expansion of various capacities and adding new product range.
So various malls in different divisions that is required. Protective Packaging division also is including the terms of energy efficiency or solar energy. So all total, the INR 700 crores includes all mixed CapEx. that will be pipe. Piping system will take the maximum.
Got it, sir. So my second question is regarding CPVC. Now in the past few quarters, we have seen very good growth in your CPVC segment. Could you share an update as to how was the growth this quarter?
CPVC, we only can say, we have grown...
We have grown well. I can say that.
Got it, sir. And lastly, would you be able to quantify the inventory loss that we could have incurred in piping system in Q4 because of the volatility in PVC?
No. Quantifications become very difficult, even when the prices are rising. Also, you cannot pass on immediately. So you see, last year, we have -- whatever we have quantified, it was not the inventory loss or gain for the change of prices, but we could realize additional gain because the low-cost material was in hand. We only covered the imported material below cost, which that side -- that material could be used for production.
But in [ gumming ] business, it's very difficult to quantify because prices move every week.
Got it, sir.
And in the running, there is a gain, there is a loss, so it's very difficult to quantify. But last year, it was clear cut inventory gain. And that's how the additional which was shared earlier also of around INR 180 crores or INR 200 crores, which company gained because of inventory.
And prices, they went one way. Last year after other -- the price, it went one way only. This year, it is all over our process.
Got it, sir. And from 1st of April, what is the cumulative decline in PVC?
INR 6.
The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.
Sir, just wanted to understand the recovery in the pipe volumes that you have seen in fourth quarter. Is it largely to do with agri coming back, which has been absent for some time? Or is it like Nal se Jal, those kind of machine kind of coming out? Some color will be helpful, sir?
Yes, I can only say that in the month of March, we have the highest dispatches in overall PVC piping system. But would like to avoid giving breakup but the highest-level dispatches, this I can share for the month of March. We had very robust demand and good growth in all the piping segment, whether it is CPVC, whether it's agri, whether it is plumbing or all types of products in the pipeline division.
Got that. And sir, even with the -- typically, we see when the PVC prices kind of correct, you will see channel destocking happening. That is something we have not seen in the month of April. Is similar momentum is kind of continue?
Sorry. Sorry, can you repeat, please?
In the month of April, we have seen about a INR 6 per kg kind of a price drop in PVC. And typically, there's a tendency for the channel to kind of destock, right, when -- in an anticipation of lower PVC prices? But that is something that you're not seeing. I think the demand momentum continues to be robust in April as well is what I was trying to understand.
Yes, demand is reasonably good in the month of April also. And going forward, there is not much inventory in the channels. So there should be continuous buying in the system. Lower prices certainly will increase the demand.
See, going in this, there could be certain losses, but that is -- that gets covered. It is a part of the business. But at the present, there's the raw material prices, especially for PVC, would be low. Just [ offers ] what you are getting for imports, which is lower offer.
Okay. Okay. And sir, the other thing is in the composite LPG cylinder part of the business, what will be the total overall capital employed? And what can be the peak revenues out of that in maybe whenever you complete this expansion?
You see the expansion, which is as you mentioned, about INR 55 crores to INR 60 crores another CapEx and the capacity will be doubled. So when the full capacities is in place, it could be a revenue of about INR 200 crores to INR 250 crores per annum.
Got it. And sir, the other thing is in the Packaging segment, if we look at it. While your margins have kind of come back on a sequential basis, it's kind of swiftly recovered. But there seems to be an element of lower growth. So is it because you took the price hikes and you could pass it on? Because of the increase in polymer prices you had to face competition? Some color there will be helpful in the Packaging part of the business.
In Packaging, the prices -- passing on of the prices takes some time. And as you said, that volume degrowth has affected. So overall, margins were lower, but we do certainly pass on the prices, but the lag is a little longer this time. For different products, it is different. But ultimately, prices do get passed on.
Okay. And is that -- and your endeavor is to get into those non-tarpaulin part of the segment to be able to cater to since the price points have become a lot higher. You also want to have products at lower price points to be able to tackle competition and offset the impact of competition. Is that the thought process?
Certainly, we would be there, but those who want good quality product because there are so many new entrants and [indiscernible]. But by and large nobody's quality matters, true good quality. But because of the lower price, that's the register. We can compete to a certain extent, but otherwise, we stay away from the participation for these low-priced products and try to develop more products, which gives the proper value addition.
Got it. Got it. And sir, just one last clarification. You've mentioned the CapEx of almost about INR 259-odd crores. But when I glanced through your cash flow statement, the purchase of property and plant and equipment, it's close to INR 469 crores. So what's the...
You see, look at mix shift, this has been -- you're not going totally. But 258 [indiscernible] is the actual edition which has gone into production, which has been capitalized, the CW IPO, INR 156 crores as on 31st March '22. And there is a capital commitment, orders already made of INR 280 crores. So even for those orders, you have to make the payment certain part of the payment advance. And the last date, the last they paid for capital [indiscernible] which were are there, about INR 127, they have been paid off, and we have very nominal, [indiscernible] ourselves, INR 34 crores, INR 40 crores of the [ caters ] now. Altogether it's [ all put toward ] intervals.
So sir, just to understand the total INR 700 crores that you have mentioned is the CapEx for FY '23 broadly?
Including the INR 250 crores.
Which will carry over this year.
Yes, total cash outflow will be lesser is my limited point.
Yes, obviously. Obviously.
Yes. Okay. Okay. So it's broadly INR 1,000 crores over the last 2 years. FY '22 and '23 combined will be total cash outflow, INR 1,000 crores.
Yes, that's right.
[Operator Instructions] We have a question from the line of Sneha Talreja from Idea Securities.
Sir, just one question from my end, from the plastic pipe business, firstly. Last quarter also, we had some amount of inventory losses. This quarter also, you contributed. There are some inventory losses. What could be the incremental reason because of which we have seen quarter-on-quarter margins declining for this segment? Is it more of agri volumes? Or would you like to highlight that the concept of inventory losses in this particular quarter will be higher?
No, there won't be any inventory losses during this quarter as such. The reason of lower margin is because the product mix in October, December, the business was very weak for plastic piping. We have lost the volume -- a lot of volume in the next quarter. And when the volume has recovered, so definitely, volume recovery is there with the agri pipe system.
So despite the CPVC sales this quarter is coming up, agri pipe sales being higher has led to margins fall?
Yes. Yes. You are right.
So that's the product [ mentioned ]. Got it, sir. Sir, secondly, I just wanted to check on the Packaging segment. There, too, again, you are mentioning that you will be now focusing on the non-tarpaulin-based business. If we understand your Tarpaulin-based business was the premium segment where the margins used to be upwards of more than 20-odd percent. With non-tarpaulin business now being the focus or where you launched product, what could be the margin trajectory of the business in the coming years? And any outlook on the volumes in this particular segment? How could we see the volumes shaping up?
The volume is very low compared with Tarpaulin product business. So it's only a direction which we have studied. Yes, apart from Tarpaulin, now we'll be focusing on the non-tarpaulin. So avoid the fierce competition or to have some less dependent on the Tarpaulin itself. [indiscernible] still Tarpaulin will be a major business in this segment.
Got it. But the trajectory of the margins of newer businesses would be lower than Tarpaulin? Is the understanding currently?
It is better than Tarpaulin.
It will be far better than Tarpaulin.
The next question is from the line of Sailesh Raja from B&K Securities.
Sir, my questions are pertaining to Supreme Petrochem. Shall I go ahead?
Yes.
Sir, what will be the contribution of Russia in global polystyrene market supplies? And what is the Russian policy when exposed to global markets? Can you give us some color?
And also, do you, expect given the market tightening with PS and the substrate to remain at this elevated level, sir, for near to medium term?
Well, see, about the Russian thing, I may not be able to tell you. But overall, Supreme Petro was the best performance last year. And the volume -- the growth in overall volume was 16.7%. Plants have also run with full capacity. The overall margins are also good. The company made the highest ever EBITDA and on top of its company also reduced the capital. I mean there are the main highlights of Supreme Petro, that's INR 10 share, INR 6 shares were returned -- INR 6 per share were returned to the shareholders. So their capital -- equity capital reduced now to INR 37.6 crores of Supreme Petrochem.
Any idea of Russia impact?
Russia impact, I said I will not be able to. But the Indian market is growing well. The appliances are doing very well, especially with air conditioners and their good volume growth planned by various ASC companies because of this PLI scheme the government has started. And all the aircons of people have got registration in that. So Supreme Petrochem expects good business growth from refrigerator business.
Otherwise, also, the -- because of the high logistic cost, the imported materials were not cheaper. So Supreme Petrochem material was always in demand. In fact, demand was more than the supply, which could be catered to by the company.
Okay. That was useful, sir. In tonnage terms, we are almost doubling the capacity, including the ABS. By when do you think we can reach the full utilization levels there? And what are the key drivers? And also, sir, today, the exports is 0. So how much you are targeting in next 2 to 3 years?
So exports, there is good demand. Exports will be there because domestic demand was more. So in the first quarter, when domestic demand was less last year, then my exports were better. And then because the domestic demand was very robust and companies started getting materials for the local consumption, the company is expanding the capacity in all their different products. The company has a total CapEx plan of INR 1,270 crores starting from last year for next year 'til 2025. The company is planning to come into mass ABS or 1.4 lakh tonnes and polystyrene capacity, also effective capacity will be increased to 3 lakh tonnes. This is the overall growth plan of Supreme Petrochem.
Okay. So one last question, sir. Can you please share full year product-wise volume, sir, for PS, EPS [ 6PS ] and the [ SMMA ] in FY '22, full year?
I will not and we will not share their classified information. And to be honest, that is not really available at present.
The next question is from the line of Chirag Lodaya from Valuequest.
Yes. Congratulations on good uptick in overall volumes. My first question was on margins. So what should be the sustainable margins in Plastic Pipe division? Last year, there was one-off gain and we recorded 20% kind of EBIT margin. Now going ahead, what one should expect?
[indiscernible] the price polymer prices may get rolled in the margins. So assuming the project prices remain at the same level where they are, then about 15% to 15.5% should be the operating margin. They're already at elevated level that way.
Right. Right. And sir, my second question was on overall volume decline. So last year, you saw around 7% volume decline. If you can help us understand. Is it more to do with agri demand being weak or non-agri also seeing a similar kind of decline?
Principally due to agri. June first quarter last year was a washout from agri point of view.
In November also for agri.
Okay. So is it fair to assume if we exclude agri, then we would have grown overall?
Yes.
And how are the demand trends for agri, sir, this year? Do we expect to recover threefold volumes of agri or it is still far-fetched?
No, we'll definitely recover.
We will recover.
Okay. So sir, then 15% kind of volume growth guidance which you have given. It's just 5% above pre-COVID level. So the number doesn't add up. So I mean -- because on one side, non-agri is doing good. Volumes are going up. And agri, if you are able to recover pre-COVID also, then your volume growth should be much, much higher than what you would have achieved in say FY '19, FY '20.
FY '20, we have achieved 300,000, FY '19, '20.
Correct.
There was just 300,000 [indiscernible] plastic pipe. This year, we have achieved total 74,000.
Correct. So sir, 15% growth is just 3 lakh 15,000. So if I compare with FY '20, then it is just looking 5% higher?
First, let us assume because that's a minimum 15%. What we have given is that's a minimum we expect. And we said there is a product mix change also now because [indiscernible] we have that tank business also, which is going to be growing on a bigger scale. It's a mix of the products also, which is [indiscernible].
Right, right. So these higher prices, you are seeing now agri demand coming up so that is the key thing. I just wanted to get at that.
And so it's just beginning of the year. Let's see how the quarter goes. When we talk in July, we'll be better placed.
[Operator Instructions] The next question is from the line of [ Naitik Mohata from Sequent Investments ].
Just a couple of questions on my side towards the cylinder business. So what is the kind of traction that we are seeing for the cylinder business? Are there any new tenders that are getting issued by OMCs or gas companies or have you applied for any? Just a light on that?
Sorry?
It's on the cylinder business.
Cylinder? Sorry, can you repeat your question, please?
Yes. I would just like -- like can you just throw a light on traction on the LPG cylinder business?
The cylinder business, as informed to you, Indian Oil Corporation has decided to launch and they have already launched composite cylinders. And they are being sent to all over India. They have made a soft launch, but they will -- once the reasonable volume reaches at all the places, then they will start campaigning and they are very committed for using this.
I would say the other companies are watching the performance of this and my gut feel is that other companies also will have to come in composite cylinders. It's a question of time when they come, and that's why we are expanding our capacity is even to meet IOC requirement alone, whatever they have projected, we need to have capacity for this.
Okay. And what are the kind of EBITDA margins that we see from this project?
It is a value-added product.
So somewhere around 15%?
It will be over...
More at about 17%. That is our [ epithelial ] product.
Okay. Okay. And this business in future turn from B2B towards B2C as well?
No, no, it cannot come 2B. Our customer have to be gas marketing people, especially for domestic use. You cannot sell to anybody. We are not the -- we don't have a gas bottling plant. We don't fill the gas. It's just the containers for filling of the gas. So there are private bottlers also. It should also come. Some very -- I would say, a few bottlers have started with small quantities, private bottlers in India. But mainly the oil marketing companies, there are 3 government companies, IOC, HPCL and BPCL. And out of these 3, IOC enjoys 50% capacity and others who have 25 percentage of the total household domestic -- for domestic use LPG.
The next question is from the line of [ Hemang Kotari from Anvil ].
Yes, congratulation on the volume recovery. I just wanted to know on the absolute terms operating profit per plastic piping. So that is around INR 30 per kg. So how you will see that number being -- support the [indiscernible] value like even at around this level. So what does the number look like for FY '23? Because percentage margin is not actually our proper way to access the company actually. So just wanted to have some light on the operating profit per kg for [ PVIT ] per kg for PVC Piping?
Yes, it depends upon the product mix [indiscernible] also. And what we have given guidance kg, the overall number for the year, it is INR 30, INR 31 per kg. That should be maintained and it can be improved depending upon the change in product mix.
Due to time constraint, this was the last question. I now hand over to the management for closing comments.
Thanks. Thank you, everyone. Thank you very much for your questions and for the intelligent questions and well, wish everyone that this current year is good for all of us.
All this pandemic should be behind and geopolitical situation, hopefully, should come to a conclusion or should come to an end. So that Indian business should be on good growth track. And with the present dynamic leadership, we are very optimistic for good growth for Indian business and including for our host companies. Thank you.
Thank you.
Thank you very much. On behalf of DAM Capital Advisors Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.